Richard Collier, principal in the VanderKloot Co., a real estate consulting firm, told a recent Housing Roundtable Forum that developers should look to foreign markets for capital. Following are excerpts from his speech.

Let's talk about Europe very briefly. What I was told was that the softness of some of the European economies and the lack of investment opportunities there, particularly in housing, are making some of those investors look elsewhere as to where they can put their money, and the U.S. is still their preferred alternative. Secondly, there are large sums. Two money managers said to me, "Billions of dollars are waiting to come back to the U.S. when the time and opportunities are right. "It was interesting that in some instances I ran into cases where they did feel it was right in the multifamily sector, and they were now really starting to get serious about making multifamily investments here. They preferred existing over development, but wouldn't necessarily dismiss new construction entirely.

It's clear the very bad U.S. press about the state of the real estate economy and the state of our financial markets has not helped foreign investors make the case that they should come back and look again now. On the other hand, they tend to look at country-by-country risk factors, and in that balancing act, the U.S. comes out very well.

We talk a lot, and we hear a lot about European capital flowing to Eastern Europe. Every single money manager or investment person that I asked said Eastern Europe is not competition for the U.S. The country risk factors are so different that the competition for Eastern Europe is underdeveloped Southeast Asia, North Africa - places like that. It is not the U.S. You do not have that to worry about. We're a different risk profile.

Individual countries were interesting. There's not a lot of capital in France, but I talked to two very interesting people there. One said, "We are seeing an entry into the real estate markets in the U.S. through acquisition of major shares in insurance companies."

It was made clear to me by this person, who was a party to it, that the major investment by the French in Equitable was after a very had look at the Equitable property portfolio, which was a factor in making that decision. There was also a lot of lack of confidence in the local French economy, and so they are starting to look elsewhere.

Another interesting thing is the French have a fairly developed infrastructure of home building, similar to ours. We know there are several American companies building in France. There are even some French companies who have come over here. There is an understanding of our business, which doesn't always exist in some of the other European countries.

From the standpoint of capital, it's probably not very large, but there seems to be more interest from talking to the French than in most of the other countries that I've talked to, particularly the Dutch. The comment that I got from one Dutch merchant banker was "We're frozen still. We have very much a hurt mentality, and we're locked up with our own problems. I would think it's a great mistake to talk to us." And so I didn't.

Germany is interesting because the German economy is the competition for the American economy as far as the European dollar is concerned. The only money that I could ascertain in Germany was what I would call "private capital," the private-money manager who is looking for a higher yield instrument, who has had experience investing in America before, may even have an office here and isn't intimidated by it. Clearly, however, they don't know much about the U.S. housing industry.

The U.K. has a bad economy, too. Their home-building industry is pretty much in the tank. They understand our industry kind of like the French do, and we know there are British home builders that have been in the U.S. for a number of years. The main message that I got was nobody is bringing anything to them.

The message of the opportunity in housing here has not come through. Many of them weren't even aware of the recovery that we have seen - of the opportunity Some of them in multifamily were aware of the opportunities to buy existing properties, but the case needs to be made that in some markets new development can also be worthwhile. So I found that the U.K. sat back and said, "Where are you? We aren't really focused on this as an idea for investment. We need to know more."

On the other hand, Asia boils down clearly to a case of the "haves" and the "have-nots," and Barbara [Alexander, managing director, Dillon, Read & Co.] said, "Right now the Japanese are the ~have-nots'." I did talk to two Japanese investors. One is a trust banker who does a lot of agency business, and they do have individual Japanese investors who have cash and don't need to borrow. If they need to borrow, they're dead. They are looking for multifamily and single-family investing in certain markets and if the returns are attractive. But they're very market-focused, and they're not a deep or very reliable source.

The bottom line that I got on Taiwan and Korea, form somebody who does a lot of business with both of them, was that they're terribly opportunistic and not strategic, and that they're basically driven by factors that may not have anything to do with the economics of the industry: geography - we want to put money into Southern California or put money into Las Vegas - and things like, does it have a golf course or not? Their reason for doing an investment in housing doesn't always make a lot of sense.

Again, it is misleading for anybody to think that they're a source to replace the public markets when they start to dry up.

With regard to the rest of the Pacific Basin, you hear that the Indonesians are doing something, and the Australians are doing something. If you can find it, great, but it's not anything I would rely on.

The interesting aspect here is the Middle East. The people that I talked to who cover the Middle East, and having been there myself, say that these people are deal buyers. They really aren't strategic investors. You can appeal to them on the basis of a specific situation. They like debt structures. They don't like to invest in equity because of tax reasons. They have more of a private capital way of looking at investments, but they have an institutional style of decision making.

So they tend to miss out on a lot of attractive opportunities, and the key is to find ways to get to these people with an intelligent story to speed up their decision-making process.

The message that I got was "We could be a player: We've got lots of money; we love America; and we like land." Those are three important components.

They understand that while in their countries home building is not an important business, most of these guys went to school in the U.S., and they understand that home building here is an important industry.

So there's a message that has to be gotten across to these people. Over time, they could be educated to be more of a player.

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