Jim Fasone

Friday, 29 July 2005 10:15

Long-distance real estate

The real estate market overseas is constantly evolving, with established companies selling off and closing down operations, and new multinational companies acquiring international facilities.

As U.S.-based corporations consider cost-effective ways to streamline production and distribute products, many extend their facility search beyond U.S. borders. This trend is especially evident in manufacturing industries, where companies are scattering their plants throughout in Asia and Europe.

But border crossing presents challenges for novices to long-distance real estate. A company based in California might struggle to appropriately market a property it wants to sell in Great Britain. And contractual norms differ, as well. For example, in some European countries, a building and the land underneath are is not necessarily a package deal. The land might fall under a 99-year lease — an entirely separate purchase from the structure that sits on the soil.

These nuances can break a deal, and so can inappropriate marketing tactics, poor pricing and ignorance of government regulations. Long-distance real estate requires a single point person who can make local connections, no matter the country.

Besides, without one point person — or one U.S.-based brokerage firm — to manage international brokerage deals, you have no idea who you are working with in terms of quality and service delivery.

Streamlining resources
Companies that trust one international real estate brokerage firm to manage their assets can buy and sell properties more efficiently. The consistency inherent through one point of contact translates into time savings.

When choosing a single broker, look for international experience and knowledge of foreign marketing strategies, the type and quality of prospect contacts, the sales process, and closing and legal issues. A U.S.-based real estate firm that has access to a network of local brokers worldwide will understand how a particular country’s culture, negotiations, regulations and even exchange rate can impact a deal.

Companies without experience in international real estate might overlook the complexity of a deal. Or, they might not understand the time involved in marketing transactions, the variable equity or how a specific country’s marketing efforts will affect the outcome of the process. There are also zoning regulations that could differ from country to country.

It’s important to have local knowledge and relationships. What is acceptable in the United States might not be even close to acceptable in another market. For example, in some situations, a corporate seller might expect a counteroffer, so you start with higher price, expecting to meet a middle ground.

In another country, the seller might not believe in that philosophy and, instead have a take it or leave it attitude. You must figure out the amount of room for negotiation, and often, that is a cultural difference that is best navigated by partnering with a broker based in that country.

Real-estate brokers can counsel clients on how business is conducted in different countries and access professionals around the world who specialize in various real estate transactions.

Going global
Before conducting any type of business overseas — including real estate deals — U.S. companies must understand the existing market conditions for a specific country or region. They must also consider the

time imbalance and its effect on scheduling. A representative in Asia works 12 to 14 hours ahead of a CEO in the United States.

Government regulations can add to the complexity of an international real estate deal. For example, lease terms are 25 to 30 years in Europe, while they are 10 to 15 years in the United States.

By using one source to manage global assets, you can streamline the process and add shareholder value by ensuring that you get the best market deal. Today, manufacturing companies must have global access and an understanding of the culture, regulations and real estate selling process in various countries.

JIM FASONE is principal of Summit Reality Group, a division of the Cushman & Wakefield Alliance based in Indianapolis. Reach him at (317) 713-2100