The ING Group, though Dutch in origin, is another example of an already entrenched global company with a strong hand in multifamily, including via its U.S. ING Clarion operation. Like Hines, the company stresses the value of local managers and developing joint ventures with local partners. In 2007, for example, ING Real Estate Investment Management announced that it would invest $35 million in a joint venture residential project with Longhu Real Estate Development in Chongqing, China. Also in 2007, the division announced successful closings of new funds to invest in residential properties in France, as well as in Central and Eastern Europe. In September, ING’s development arm broke ground on a 16-building, mixed-use redevelopment project to include apartments on former docklands in Hamburg, Germany.
“There are some promising markets in parts of Europe where the rental stock is outdated and where there is currently a very limited number of modern apartments coming onto the market; examples include German and Dutch cities,” says Tim Bellman, global head of research and strategy for ING REIM.
Two takers are Fortress and Cerebrus. These two U.S. equity funds already have snapped up tens of thousands of units of government-owned apartments in the former East Germany, with the hope of realizing healthy returns from higher rents and, perhaps, eventual condo conversion. Since 2005, multifamily developer Archstone-Smith has spent more than $1 billion on European apartment acquisitions, including more than 8,300 units in Germany. Tishman-Speyer, which closed its acquisition of the Archstone-Smith Trust in October 2007, also has been stepping up its acquisitions in Germany.
THE NICHE PLAYERS Big-time developers and investors aren’t the only companies capitalizing on the trend. Firms specializing in real estate management also have found a welcome mat in foreign countries. After a successful 2005 joint venture with a local Chinese company on an 840-unit condo community in Beijing, Seattle-based Pinnacle, an American Management Services company, created Pinnacle Realty Management International.
Based in Beijing, the new Pinnacle operation is launching sales and management activities—just in time for the Olympics—for Chevalier, another mammoth Beijing complex with 636 units in five residential towers.
“With the massive amount of development in Beijing, we saw a great opportunity for Pinnacle to combine our proven management expertise with local Chinese partners,” says Eric Schwabe, PRMI chairman.
Schwabe adds that the Chinese are looking for Western partners who can bolster the comfort level of investors. There’s also a growing hunger for all things Western. Case in point: a sprawling new residential community called Jackson Hole, which is located in a mountain area about two hours from Beijing. Pinnacle will handle the sales of the units, priced from $150,000 to $250,000. And Pinnacle’s next target is Shanghai, the Chinese city most open to Western influences.
Smaller players have a shot at the opportunities as well, says Torto Wheaton’s Nechayev. “There should be plenty of opportunities abroad for entrepreneurial multifamily companies with strong expertise in niche markets such as senior housing, luxury units, or even lower-income projects,” he explains.
Wayne Vandenberg, chairman of the privately held TVO Realty Partners in Chicago, is developing condos in Central and Eastern Europe that cater to that region’s growing ranks of well-paid skilled workers. “These people want something better than the substandard housing that was built during the Communist years,” Vandenberg says. Typical is his firm’s mid-rise condo project in Prague, dubbed Central Park. The 900-square-foot units are selling for about $440 to $588 per square foot.