FOREIGN INVESTMENT IN FLORIDA REAL ESTATE SOARS.

The Florida real estate market continues to be a strong magnet for investors from all corners of the world.

Since 1992, in South Florida alone (Miami, Fort Lauderdale and Palm Beach), the dollar volume of real estate transactions has surged from $12 billion during 1992 to over $35 billion during 2000. By most estimates, foreign investment constitutes about 25% of this total. The percentage in Miami-Dade County is perhaps as high as 50%. Volatility in financial markets and emerging economies, and the blossoming of South Florida as a world-class place to conduct business, shop, eat and relax, ensure that this trend will continue for the foreseeable future.

The largest source of this offshore investment originates from Latin America, followed by Europe and Canada.

Real estate investments normally take one of three forms: residential, commercial, or portfolio. Determining factors include the intended use of the property, the investor's time horizon, liquidity needs and return objectives.

Residential includes the purchase of either a house or an apartment condominium. For Latin investors, the favorite areas in Miami are Miami Beach, Coral Gables, Aventura, Key Biscayne, Brickell, Coconut Grove and Pinecrest.

Some investors rent out their residences on a seasonal basis, while others keep them for use by family or friends during visits to Florida. A number of new high-rise condominiums are now structured as apart-hotels, which allows the units to be included in a rental pool when not in use by the owner, something that has been popular in Europe and Latin America for many years.

The majority of these investments have appreciated in value over the past 10 years, giving owners significant, unrealized, capital gains. These gains have compensated investors for the lack of cash income.

Latin investors have purchased hotels, office buildings, apartment complexes, shopping centers and warehouses. Unlike residential investments, these commercial real estate properties are attractive because of their predictable cash flow. These investment properties often cater to commercial or export activities related to a key business in the investor's home country.

Here, the real estate investment is passive, usually taking the form of a security instrument whose underlying asset is real estate. It can be represented by an investment in a publicly traded real estate investment trust (REIT), limited partnerships, private REITs, or equity pools.

These investments act much like mutual funds, providing diversification by investing in many different properties and active management by seasoned real estate investment professionals.

In South Florida, there are specialized financial institutions operating in each of these real estate investment segments.

Thomas P. Noonan is the president and CEO of BAC Florida Bank, a bank specializing in real estate investments for foreign nationals.