Foreign investors are returning to the US commercial real estate market for one simple reason- their respective currency’s US buying power as a result of the decline in value of the US dollar. Fueled by the search for higher returns and the need to pay a reliable dividend to shareholders, foreign investors are increasing their US commercial real estate holdings and mitigating risks by further diversifying their holdings. Given the unprecedented upside to acquiring US real estate, foreign investors have the opportunity to purchase assets, depending on the current exchange rate, at a 25-40% discount (1 euro= $1.47 dollars).

This buying power has preempted foreign investors to acquire properties around the US that offer stable and predictable returns while also maintaining a positive upswing in profits once the US dollar rebounds, which is inevitable.

The appetite for risk runs counter to a standard foreign capital real estate strategy, which has predominately been capital investments into stable or “core” downtown office buildings in major 24-hour markets such as New York, Washington, D.C., and Boston. Not only are they increasingly investing in smaller markets like Nashville, Tenn., and Richardson, Texas, but they’re also developing new projects and buying underperforming properties for turnaround plays.

Foreign investors poured $163 billion into U.S. commercial real estate in the first half of 2007, a 37% increase over the first half of 2006, according to real estate services provider Jones Lang LaSalle.

Nowhere is the shift more pronounced than among German funds, historically the largest source of foreign capital in U.S. commercial real estate. In the first half of 2007, German investors spent $2.26 billion — nearly as much as they spent in all of 2006 — even though they still remained net sellers by $1.4 billion.

But times have changed. Yields in the top-tier markets are too tight for foreign investors, and they’re realizing they can buy other products in other markets. It’s now acceptable to go to

Charlotte, NC., Nashville or other cities where they haven’t invested before.

Change in Strategic Focus

The US currency situation has not only sparked an interest in reative investment strategies, but ultimately enticed overseas investors to invest aggressively and, given the foreign buying power in the US, acquisitions of stabilized Class A & B apartment and retail properties are in high demand. For example, a Class A apartment complex, requiring a 20% cash investment assuming the property is financed with 80% of debt) and in a stabilized market can yield a steady 6-7% US dollar cash-on-cash return. Take into account that a foreign investor has the ability to provide the equity portion at a 33% discount and the cashoncash return based on their home currency increases 200 to 300 basis points. The flip side to this scenario is when the US dollar rebounds, commercial real estate values increase, thus increasing total returns to investors. The potential currency play is tremendous for the foreign investor.

Wereldhave, a publicly traded Dutch real estate investor, and HGA Capital, a German closed-end fund manager, have begun to chase properties that have traditionally been off limits to foreign investors. In late June, for example, Wereldhave acquired its first property ever on the West Coast, paying $210 million for the 380,000 sq. ft. Broadway 655 office tower in downtown San Diego.

Wereldhave also has begun to develop a $180 million mixeduse project in San Antonio, Texas, and a 600-unit apartment complex in suburban Dallas. HGA Capital, meanwhile, purchased nine apartment complexes in the Houston area and two in Gaithersburg, Md., in December for $160 million. Company officials say they have been focusing less on investing in office properties in markets such as New York and more on investing in apartments in regions with growing economies and populations. It seems that apartments are becoming the investment of choice for foreign investors, due to their stability and a long history of high occupancy.

Deep market Requirement Moreover, German and other European funds have become more focused on buying in the U.S. after forays into other global markets became less appealing. Driven out of the states by initial yields of around 6% — and as low as 4% in New York — over the last couple of years, German and other European funds sought better returns in places like Eastern Europe and Asia, but those markets simply lacked the same depth of quality office assets that exists in the U.S. The deluge of capital quickly compressed yields in such foreign markets to around 5% or 6%, which is beyond the reasonable risk/reward equation for the locations.

As a result, foreign fund managers returned to the U.S. and have begun analyzing rent and job growth more intently as part of their due diligence on markets. Ultimately, the funds have billions of dollars of capital to place and are justifing paying higher prices for assets in the U.S. and are doing so in increasing numbers.

They know they need to be more aggressive than they have been in the past. Experts state that the current credit crunch should benefit foreign investors in U.S. real estate — even in the pricey major markets, which the foreign investors realize.

Relying on US Investment Firms

In addition to direct commercial real estate investment, German and other European funds are increasingly funneling capital into U.S. opportunity funds and partnering with experienced real estate investors in the States to increase capital placements. Commercial real estate syndicators, which acquire properties and sell fractional ownership in the property in order to raise the equity requirement, are becoming a large driving force behind placing foreign capital. Typically, equity syndicators with a respectable track record are able to locate and structure transactions and allow investors the ability to pick their investment. Alternatively, investors can invest in a pool and have the investment manager acquire properties as they see fit, which may or may not be advantageous depending on the investor’s preference.

Germany’s HCI Capital, for example, last year raised $100 million in its HCI Real Estate Growth USA I fund of funds. The company, a diversified closed-end fund manager that oversees 36 closedend real estate funds, then fed that cash into the Blackstone Group, AEW Capital Management, CB Richard Ellis Investors and Capmark Financial Group, among others.

The goal: to capture short-term appreciation from value-add strategies.

This year, HCI says it plans to launch a global opportunity fund. It also intends to establish the HCI Real Estate Finance Fund, which essentially will make mezzanine loans to U.S. property investors.

Meanwhile, in June this year, German investor SEB Asset Management paid $200 million to acquire an 85% stake in nine neighborhood shopping centers owned by Kimco Realty Corp., a New Hyde Park, N.Y.-based retail real estate investment trust.

Kimco retained a 15% interest and will continue managing the assets. The properties, located in the Baltimore, Richmond and

Philadelphia areas, offer diversification for SEB’s Global Property Fund, a mutual fund launched in 2006, Choy-Soon Chua, an SEB managing director, says in a statement. The acquisition continues a strategy of partnering with U.S. operators and developers, which reduces the risk of investing solely in a project, Chua adds. In 2005, SEB’s Target Return Fund began working with Gainesville, Fla.-based developer Paradigm Properties to invest in student housing projects, the only German fund to focus on the product, according to SEB.

Since then, SEB has placed about $44 million in four student housing assets in Florida. For many overseas investors, the opportunity to invest in a domestic platform where there’s an operating capability and a potential for substantial growth is very attractive. I think we’ll see a lot of those deals over the next several years as the US dollar remains weak.

Credit crunch gives foreign investors an edge Agitation over the subprime residential mortgage debacle bled into the commercial real estate debt markets this summer, effectively strangling liquidity. But that ultimately could level the playing field and mean more opportunities for German and other

European real estate funds, which are returning to U.S. markets after high prices cooled their investment activity over the last couple of years. Many of the foreign money pools typically use between 50% and 70% of debt to finance their acquisitions, which is a lot less than private equity buyers, ambitious and busy investors who in some cases have used upwards of 95% in debt.

The funds simply couldn’t compete with highly leveraged buyers when bidding for properties, experts say. But now the credit crunch makes German and European funds more competitive. A dried-up debt market means more expensive debt, which makes it tougher for highly leveraged buyers to finance acquisitions.

The good news is that there’s going to be less buyers in the market, and the bad news is that the buyers will come from abroad in ever increasing numbers, potentially driving prices further upward. In fact, international investors have closed 46 transactions valued at $5.27 billion in New York this year compared with 28 deals for all of last year, according to Real

Capital Analytics, a New York-based research firm that tracks real estate deals of more than $5 million.

Late this summer, for example, Risanamento, an Italian publicly traded real estate investment firm that owns nearly $7 billion in global property, acquired 660 Madison Avenue in New York for $375 million. Risanamento financed the deal with $275 million in debt provided by Deutsche Bank, which amounted to about

73% of the cost.

The deal illustrates foreign capital’s willingness to get more aggressive on pricing than in the past, too. Typically, European and German funds were looking for initial yields of at least 6% or so. Alexio Pasquazzo, finance manager for Risanamento, says that the company bought 660 Madison at a yield of 3.6%.

But Pasquazzo notes that tenants were paying rents significantly below market. He anticipates that the yield will climb to 6% as leases are renewed at higher rates over the next three years. “For Risanamento, this will be a long-term investment,” Pasquazzo says. “Therefore, we maintain a longterm view on the building and its relevant market.”

America 2030™ Equity LLC is a premier boutique US commercial real estate investment house providing alternative asset investment opportunities for high net worth individuals and institutions. Through our project specific and private funds, we offer fractional and whole ownership of Class A & B apartment complexes, regional retail shopping centers and triple net leased buildings. We focus on capital preservation and maximum growth modeled after historical trends and patterns. Besides acquisition expertise, we offer full asset management for domestic as well as international clients.

America 2030 was founded by Val Sklarov with the sole purpose of offering clients his investment experience and knowledge. Mr.

Sklarov, Chairman and CEO, brings over 23 years experience investing in US commercial real estate and has personally acquired over $200 million in assets using all personal funds.

Our name derives from the fact that the population of the United States will grow by another 70 million people, to 370 million people, by the year 2030. Opportunities in US commercial real estate related to this growth are tremendous, and our goal is to use our success as private real estate investors as a platform for investment products that suit the needs of the most discerning individuals and institutions.

Since 1996, Mr. Sklarov has grown approximately U.S. $1 million in equity to $52 million in equity, representing a ten year Internal Annual Rate of Return, from January 1996 through December, 2006, of 46.5%