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Foreign real estate investors funnel millions toward Tampa Bay as South Florida market overheats

Published Feb. 21, 2014

TAMPA — When developers broke ground this month on Tampa's newest apartment skyscraper, they defined their goal as a portrait of homey domestic splendor: neighbors "sharing dinner on a Friday evening, looking west over toward the ... sunset."

But to get there, SkyHouse Channelside's developers had to look in the other direction, toward the Far East. Up to $15 million of the tower's $68 million price tag will come from the American arm of Tokyo-based Kajima Corp., one of Japan's most powerful construction conglomerates.

"The more (developers have) constructed, the more comfortable the Japanese have felt — and the more they have invested," said Steve Gardner, the Tampa real estate attorney with Gardner Brewer Martinez-Monfort who helped seal the financing deal.

As development hot spots such as Miami overheat, market watchers say foreign investors are increasingly spending their yen, yuan and loonies in Tampa Bay — even as the source of their spending remains largely hidden from view.

"Tampa is becoming as popular as South Florida with foreign investors, and many of the same retailers and companies in both markets," David Sobelman, a managing partner of commercial real estate brokerage Calkain Cos., wrote last year in a report to investors. Tampa Bay, he added, is arising "as a more slow and steady alternative to the rest of the state."

The Sunshine State's reputation as bait for foreign spenders and snowbirds is legendary. One in four foreign buyers of American homes, townhomes or condos last year chose Florida, spending more than $6 billion, Realtors' data show.

About $370 million of that was spent in Tampa Bay, mostly from buyers in Canada, France and the United Kingdom. And to win over foreign buyers, who almost always pay in cash, Realtors here have done everything from hosting social outings for Russian prospects to chartering tour buses for Chinese buyers hoping to scout out suburban homes.

Deep-pocketed overseas investors are not interested in buying one home at a time. They look less for summer homes and more for consistent returns from strip malls, apartments and investment real estate.

Brokers say that spending has boosted South Florida's skyline, fueled a new boom for waterfront condo skyscrapers — and led prices there to soar. By last month in South Florida, developers had proposed or begun building more than 25,000 condos across 187 towers from Jupiter to Key Biscayne.

But that fervor has also persuaded many investors to look elsewhere. A report last year from commercial brokerage Marcus & Millichap said "an influx of cash-laden foreign investors, especially from Canada and South America, are targeting assets in Tampa Bay for lower entry costs and higher initial yields" than are available elsewhere in the state.

"In New York, you trade stocks. In Miami, you trade condos. This is not a 'family of four living the American dream' kind of market," said Peter Zalewski, owner of Condo Vultures, a Miami real estate consultancy. "These are really rock-star prices, and they're pushing the foreign investor away from Miami to other markets. I would suspect Orlando and Tampa should really be the ones who are benefiting the most."

Few Tampa Bay projects boast East-meets-West deals the size of SkyHouse's agreement with Kajima. The firm, which built Japan's first modern skyscraper, posted revenues over the last year totaling nearly $19 billion.

But advisers here say foreign investors have helped fill in the gap left by big American banks, which have limited the amount they're willing to risk on developments since the condo bubble burst. More than $1.3 billion in bulk multifamily deals for apartments and condos were sealed across Tampa Bay last year, a 30 percent jump over 2011, Real Capital Analytics data show.

It's hard to quantify just how much money flies into local development or transactions from spenders outside our borders. Investment advisers here say foreign money is typically tucked inside shell companies or equity funds.

"Foreign capital is oftentimes very secretive," said John Stone, the director of multifamily housing and foreign investment for commercial real estate brokerage Colliers International. "They don't trust easily."

Canadian investors, brokers said, still power many of the big trades. Southwest Properties, a Nova Scotia investment firm, owns more than 600 Florida condos, bought in bulk from complexes such as Tampa's The Place at Channelside and St. Petersburg's The Sage.

And Venterra Properties, a Canadian investor that bought St. Petersburg's Calais Park Lofts & Apartments for $30 million in April, said it has grown 20 percent in the last year, swelling past 15,000 units.

But advisers and U.S.-based "syndicators," who help foreign investors establish safe havens and manage their investments, say investment has also jumped from places like China, Brazil and Israel. Spurred by growing prices in their homeland, Israeli investors have become the second busiest group of foreign investors in Florida's apartment and condo market, Colliers International data show.

Commercial brokers said the stream of foreign cash toward Tampa Bay will likely continue as investors, both foreign and stateside, look for dollar signs outside the "sexy six": New York, Los Angeles, San Francisco, Boston, Seattle and Washington, D.C.

As competition in those gateway markets for real estate has intensified, financiers have turned toward cities like Tampa, where the investment stone has yet to be squeezed dry.

"There are only so many deals in the big city," Gardner said. Once those are taken, investors start saying, 'Where else do we go to get the returns we want to see?' "

Contact Drew Harwell at (727) 893-8252 or dharwell@tampabay.com.

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