…to have a deal tangled in translation
Jonathan Geanakos, principal of Trammell Crow’s capital markets group
As told to Lauren Elkies
I’ve dealt with foreign investors fairly frequently over the course of my career. The art of translation, or simply, communication and culture, can be challenging.
Certain players, like the Germans and British, have different styles of communication. So while both parties are saying the same thing, concepts like immediacy — or “time is of the essence” — can have very different meanings.
Response time has proven frustrating for me. I tried to bring in a British investment fund to acquire one of the largest central business district towers in Pittsburgh and we ended up losing the opportunity to preempt the marketing process due to their inability to react to the U.S. seller’s time constraints.
Foreign groups have different viewpoints in what they expect in a real estate investment. If you make the mistake of assuming one is the same as the other, you’ll have a problem.
Recently, I was involved tangentially in one of the large office buildings sold on Park Avenue. I was asked to solicit pension fund capital for one of the owners who was contemplating buying out their partner.
The challenge was attempting to convince a U.S. pension fund adviser to compete against the Middle Eastern entity leading the bidding process. It proved impossible because the foreign investor’s view of value was based on an extremely long investment horizon. No U.S. investor could compete with this viewpoint.
Two other issues that frequently present challenges with foreign investors in joint venture transactions is working through the valuation process and addressing operating control.
For example, the Irish and Middle Eastern players typically want 100 percent control of the deal and look to U.S. players as merely managers. With other groups, even if control issues can be resolved, it can get down to the challenge of culture. Can the foreign investor really get along with the U.S. operating partner? For how long? Do they share the same outlook to investment and partnership?