The latest acquisition by the German fund confirms an appetite for direct investment in the US
German open-ended fund Difa has agreed to fund a 23,000 m2 office and retail development in Washington DC, US, in a joint venture with Hines Interests Limited Partnership. Difa will invest around DM 123m in the scheme, which is three blocks from the White House, on the basis on an initial yield of 7.8%.
A firm of lawyers has agreed a pre-let on half of the 21,000 m2 of offices in the development, taking a 15-year lease.
It is the second large investment Difa has made for its Difa-Grund fund in the US in the last year. Last summer it paid $60m for an office building in Atlanta, Georgia.
In contrast to their Dutch counterparts, German investors are increasing their direct investment in US property, according to the Washington-based National Association of Realtors. Germans invested a net $120m in the US during 1994, the latest year for which NAR figures are available. In the same year, Dutch companies were net dis-investors, to the tune of $300m. This reflected more a switch to indirect investment in the US, rather than away from the market altogether however.
The NAR is confident that foreign direct ownership of US real estate is on the rise, after falling sharply from its 1990 peak of $45bn to around $28bn in 1994. “The revival of commercial real estate in the US is causing foreign investors to take a second look,” said NAR president-elect Russell Booth.
But he added: “The trophy properties that so many European and Asian investors were seeking in the 1980s are no longer the targets. Most investors are looking for medium-sized properties that are strong, consistent producers.”
These were more likely to be in fast-growing cities such as Charlotte, North Carolina, and in locations in Texas and Arizona, that are benefiting from increased trade with Mexico as a result of the North American Free Trade Agreement.
