The Real Deal New York

Overseas lenders held $72B worth of US commercial loans in Q2

Foreign interest could be seen as a sign of strength in the market
October 17, 2017 12:30PM

Blake Hutcheson and Hudson Yards

Foreign banks held $71.6 billion worth of commercial real estate loans backed by U.S. properties during the second quarter of the year, a sign many point to as proof there’s still confidence in the overall economy and market fundamentals.

That figure is up from $59.3 billion in the second quarter last year and $38.3 billion at the same point in 2015, according to data from Trepp reported by the Wall Street Journal.

Overseas banks have stepped up to fill a void left by domestic lenders dealing with tighter regulations in the wake of the financial crisis, and traditional private equity investors like pension funds that had to write down a lot of assets in the wake of the Great Recession.

Other foreign investors, like Oxford Properties Group, simply can’t push out enough capital in their home markets.

“You can very quickly grow out of Canada,” Oxford Properties CEO Blake Hutcheson said. “Most of our growth has been in foreign markets.”

Overall spending by foreign investors on U.S. commercial real estate increased by 39 percent to $4.1 billion in the second quarter of 2017 from a year earlier, according to Real Capital Analytics.

And over at the Hudson Yards megaproject, which Oxford is developing with the Related Companies and Mitsui Fudosan America, most of the debt and equity capital comes from overseas.

That foreign participation could be read as a sign of “an increased confidence that the business cycle is not likely to roll over and therefore the underlying economics of projects like these remains viable,” said Larry Hatheway, chief economist at the global asset management firm GAM Holding AG. [WSJ]Rich Bockmann