Foreign investment into American commercial real estate continues to set new dollar value records. Why are foreign investors increasing their U.S. holdings?

• Who are the top foreign investors into American

Commercial Real Estate?

• What are the most popular real estate asset types?

• What are the most popular American cities?

• Can taxes on profits be deferred by foreigners?

Who are the top foreign investors into American

Commercial Real Estate?

Over the last 6 months, there have been countless articles written about foreign investment in US real estate. Such investments by foreigners are increasing in record numbers. In 2007, so far some estimates document over $300 billion in equity has been invested in the US commercial real estate market. Since many transactions are leveraged, that represents possibly close to $1 trillion in US real estate that has been acquired by foreigners year to date.

There are favorable tax treaties between the US and countries such as UK, Ireland, Germany, and Australia. There are also reduced tax treaties between the US and many other countries making investments into the US real estate ever more favorable.

However, increasing number of investors are coming from countries where there are not favorable or reduced tax treaties, yet the investors keep pouring billions of dollars into the huge US real estate market. These foreign investors recognize that, even after paying capital gains taxes on dispositions after many years of holding the investments, the payment of US taxes still makes the US real estate market a secure and profitable holding.

The US is still the worlds largest, broadest and safest economy. It is a country of over 300 million people, the equivalent of several European countries combined. The US economy is no longer national, it is regional. What may happen adversely or favorably in one region, may not effect other regions. It is like 5 to 7 large countries rolled into one, all with their own real estate trends.

Foreigners are flush will US dollars as a result of the ferocious spending habits of American consumers wanting foreign goods.

These foreign entities are re-investing those dollars back into the US at one of the most favorable times for foreigners to own US real estate in over 30 years. These savvy foreign investors are recognizing that the tax consequences of profits generated in the US will be insignificant in relation to the currency play they stand to benefit from besides the profits on real estate, once the dollar eventually rebounds.

A greater number of foreign institutions and individuals are currently owning US real estate, then at any other time previously. Individual investors are buying condos and houses and smaller commercial properties and institutional investors are buying up America’s most prized real estate assets, in insurmountable numbers. Will America be majority owned by foreigners one day? If the trend continues, it certainly may appear to be so one day.

According to AFIRE, the Association of Foreign Real Estate Investment, the most active foreign buyers of American real estate in 2006 were, in order; Australia, Germany, Netherlands, Middle East, Ireland, United Kingdom, Japan, and Singapore.

What are the most popular real estate asset types?

Smaller U.S. real estate investments—such as single-family homes, condominiums, or other personal-use residences are high on individual foreigners’ lists. In certain markets, such as South Florida, an estimated one in five residential purchases of high-end condominiums in 2007 was sold to foreign nationals.

This trend is just accelerating, not decreasing. In many other markets, residential real estate agents are reporting that they are performing more showings to foreigners then ever before.

In major metropolitan areas, trophy office towers and shopping centers are being gobbled up by foreign multinationals and pension plans. Mid sized foreign institutional investors are favoring apartment complexes. The US has asset types to please various investors and investment styles. Investors from the Middle East seem to favor apartment complexes in the sun belt area of the US. AFIRE members noted that opportunities within the U.S. for capital appreciation, secure and stable real estate investments, and risk adjusted potential return on real estate investments all make the U.S. extremely attractive. While many other countries were also considered attractive for real estate investments, the U.S. was clearly the leader in attracting real estate capital, with low risk to investors and a solid legal system that protects investor interests. The U.S. market was deemed the most stable and predictable market worldwide.

While glitzy office properties have historically been the most popular commercial foreign investment of choice, in the third quarter of 2007 we’ve seen a flight toward quality and diversification into industrial assets and secondary and tertiary tier US markets. Corporate bankruptcies abroad and lease rollover risks have forced savvy foreign institutional investors to look beyond the local office tower market and diversify into apartments and retail in the US market. Well-located multifamily apartment buildings are the “new black” for astute foreign investors seeking long term capital preservation and equity growth.

Where are they investing?

There are countless articles in all types of world publications prancing the low dollar and the onslaught of the foreign investor. It’s as though the gates have opened up and the line is clearing out. Foreign investors are everywhere. From coastal and dormant inland cities to twenty four-hour cities, the “top priorities” for foreign investors very. The meaning behind “different strokes for different folks,” couldn’t be more true.

European investors favor Eastern cities like New York, Boston, and Washington, as well as the Carolinas and Florida while Asian investors focus more towards well know western and south western cities like Los Angeles, Las Vegas, San Francisco, Phoenix, Denver and Seattle. Latin American and Caribbean investors also prefer coastal areas but focus more particularly in the southern parts of the U.S., such as Tampa, Atlanta and Dallas.

Other major U.S. cities in strong favor are inland major metropolitan areas with historically powerful economies. The three most popular inland metropolitan areas for foreign investors remain Chicago, Minneapolis and Indianapolis.

Foreign Investment in U.S. Real Estate and Taxes.

Foreigners Can Complete 1031 Exchanges and Skip

FIRPTA withholding? Yes!

In 1980, the U.S. Government implemented the Foreign Investment In Real Property Tax Act (or “FIRPTA”). The law imposes income tax on gains derived by foreign persons from the sale of their U.S. property. FIRPTA imposes an income tax on the sale of any U.S. real property interest . This includes U.S. real estate owned by foreign investors and real estate shares owned by foreign corporations. To ensure collection of U.S. taxes that are due on the sale by a foreign investor, FIRPTA also provides a withholding mechanism under which the buyer, who is the “transferee” of the U.S. property, is obligated to withhold 10% of the purchase price at closing and send it directly to the Internal Revenue Service, the “IRS”.

Who is subject to FIRPTA?

FIRPTA tax is imposed on nonresident alien individuals and foreign corporations.

Foreigners are Eligible for 1031 Tax Deferred

Exchanges:

Section 1031 (“1031 Exchange Option”) of the U.S. Internal Revenue Code affords foreign sellers the same rights as American sellers, which is to avoid recognizing gain on the sale of its property by “exchanging” it for another investment property and thus deferring taxes inevitably. If the exchange qualifies under U.S. law, recognition of gain for the foreign seller will be deferred and no FIRPTA income or withholding tax will be due on the transaction. U.S. law requires, just as with domestic sellers, that foreign sellers use an independent third party, or “Qualified Intermediary” to handle the exchange. Many other rules apply— persons conducting a 1031 should consult qualified counsel well before their sale closes.

In order to qualify to defer capital gain taxes indefinitely, all the foreign investor has to do is name 3 properties that will replace the one that’s being sold within 45 days of the closing and then close on one of the 3 properties within 180 days. It is that simple.

term diversification of their assets by investing in the US real estate and deferring taxes on gains for decades or till the next generation. Such strategy allows for significant long term capital growth. Foreign investors can literarily invest along side their

American counterparts, defer millions of dollars in taxes and increase their portfolio growth exponentially. Since wealth accumulation is accelerated when leverage is utilized and taxes are deferred, the 1031 Exchange Option establishes such a platform, and its available to all foreign individuals and entities.

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 in 2007 for 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%