Goodwin Procter Lawyer Sees Heavy Cross-Border Investment in U.S. Real Estate
12/19/2014 | by Allen Kenney

Ettore Santucci, partner and co-chair of the REIT group with Goodwin Procter, joined REIT.com for a video interview at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT at the Atlanta Marriott Marquis.

Regarding overseas investment in U.S. real estate, Santucci described the amount of cross-border capital flowing into U.S. real estate as “enormous.” These non-U.S. investors are primarily “big game hunting,” according to Santucci: looking for trophy assets and portfolios.

“You would expect that capital to flock to the major platforms,” he said. Those investors are more likely to engage in direct investments and one-off deals, Santucci noted, including joint ventures with major real estate companies in the U.S.

However, Santucci pointed out that there are even more international capital sources seeking out “institutional-quality” real estate. “They’re looking for stabilized, diversified institutional assets in gateway cities,” he said.

Santucci discussed some of the qualities of REITs that are attracting institutional investors. He listed transparency of disclosure, alignment of management, total returns and liquidity as some of the most appealing characteristics.

Turning to the U.S. REIT IPO market, Santucci expressed skepticism that public offerings would turn up in 2015. Companies most likely to go public will either have lower valuations relative to their peer groups or have a unique business model, he said.

“Until we come up with a Martian lodging REIT, there’s only so much real estate you can do,” Santucci quipped. “I would hope that the market is receptive to IPOs that are the old-fashioned IPO: portfolios of size, but not huge, that are coherent in strategy, are managed by a good management team … That’s kind of what we did for the first 15 years of the modern REIT era, and it worked pretty well.”