This is Part 3 in our coverage of Canadian Investment Review’s 2011 Investment Innovation Conference, held at the Fairmont Southampton in Bermuda.
Read Part 2: Infrastructure investing: A group thing
One asset class that may be a source of strong investment returns in the future is real estate, where opportunities in the U.S. market are proving to be particularly compelling, according to Eric Bonnor, who presented “Investing in Foreign Real Estate: A Market Update and Focus on U.S. Real Estate” at Canadian Investment Review’s 2011 Investment Innovation Conference. He looked at the growth of distressed real estate assets in the U.S., which he noted now add up to US$181 billion in troubled and bank-owned (REO) assets.
“The large number of distressed real estate assets that were acquired by banks and companies at the peak of the cycle now require recapitalization,” he explained, but banks are now seeking to accelerate their real estate divestitures and improve their balance sheets rather than hold and manage real estate.
The increase in capital-starved companies looking for sources of income re-financing will produce some attractive valuations in the market, said Bonnor; however, non-U.S. investors need to tread carefully and understand the tax implications of investing in U.S. real estate.
Watch: Eric Bonnor talks about global real estate opportunities
Bonnor’s presentation also touched on other areas of the world, where differing economic environments have produced a range of real estate challenges and opportunities, especially as the ongoing sovereign debt crisis continues to curb bank lending and has tightened other sources of financing for commercial real estate. As a result, many government-owned banks around the world are trying to shed their real estate exposure, especially in the cash-strapped European market.
Canada’s real estate market has benefited, however. According to Bonnor, its stable economic and political climate have produced positive conditions for investors.
Caroline Cakebread is the editor of Canadian Investment Review. caroline.cakebread@rogers.com
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