The Washington-based Association of Foreign Investors in Real Estate (AFIRE), composed of 200 investing organizations from 21 countries with estimated holdings of $230 billion in the United States and $700 billion abroad, is increasingly upbeat about investment prospects in the U.S.

“During the height of the financial crisis, one year ago, investors could only lower the sails, lash themselves to the deck, and hope to ride out the storm,” reads its publicity for its winter general meeting to be held Feb. 10-12 in New York. “Now, in 2010, investors are back at the helm, taking inventory of the damage, and hoping to steer a course for calmer waters and blue skies.”

In its September conference in Washington, the consensus of experts was that the U.S. commercial real estate market was “down but not out.”  Even then, there was optimism among the 150 participants at the conference that the U.S. commercial real estate market was beginning to rebound and foreign investors were returning to the U.S. real estate market.

Representatives of real estate investment banks from Germany, England, the Netherlands and Canada stated that they have started investing to existing and new customers ahead of American banks.

In a mid 2009 survey of AFIRE membership, two thirds of the 200 members planned to invest in debt or equity in the U.S. real estate market before the end of the year.

Washington and New York were the top cities of choice with offices as the product-type of choice.  The majority of AFIRE members surveyed expect to see a recovery in the U.S. real estate market at the end of the second quarter of 2010.

AFIRE Chairman C. MacLaine Kenan, executive director of Arcapita, raised key issues on whether the real estate market crisis creates opportunities for investors and what is the impact of the federal economic stimulus programs on the real estate market.

In addition to an analysis of the economic and financial aspects of the U.S. real estate markets, the experts discussed policies and strategies for the new challenges and relationships between government and business.

The  global recession in real estate has impacted adversely more the U.S. than Asia, Europe and Latin America, according to William J. Maher of LaSalle Investment Management.  The value of distressed commercial property in the U.S. is estimated at $1.3 trillion.

The loss of commercial property valuation is approximately 25 percent from the time of its peak capitalization during 2006-2007. European commercial values are beginning to increase, followed by Asia and North America.  According to Mr. Maher, surveys show that current investors are interested in lower risks and more balanced returns.

The fundamentals of the real estate markets have not changed but the practices of banks and new financial entities such as hedge funds and derivatives have become complicated to understand and correct, according to Douglas Elliott, fellow of The Brookings Institution.

During the past twenty-five years, banks could lend at lower rates regardless of risk because the government policy encouraged more risk-taking by keeping interest rates low and promoting home-ownership to lower-credit-worthy borrowers. The profitability of the banks had increased to 30 percent from the traditional 12 percent without corresponding increase in the reserve requirements.

At present, the conservatives blame the government (Fannie Mae and Freddie Mac), the liberals accuse Wall Street (excessive profits and compensation, complex securities, derivatives, etc.) and the moderates are looking for more public policy solutions to the financial crisis.  Mr. Elliott recommended the opening of a dialogue between the three groups in order to bridge the gap of mistrust and find a balanced approach to the solution of financial challenges.

The debate between Howard Dean, former chairman of the National Democratic Committee, and Karl Rove, former senior adviser to former President George W. Bush, demonstrated the value of a dialogue at the closing of the AFIRE conference for 2009 as the two opponents sought new solutions to the financial crisis.

Members of AFIRE’s Academic Circle and its research staff are to continue to monitor and publish surveys on the attitudes and trends of international real estate investors.

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C. G. Alexandrides is professor emeritus of management at Georgia State University in Atlanta. He may be reached at (770) 846-1498 or by sending an email to