New wave of foreign capital expected soon.

Greystone Realty Corporation reports a new wave of foreign investors is turning to U.S. real estate. Unlike the Japanese insurance companies and Dutch pension funds which poured billions of dollars into the U.S. in the late 1980s, the current investors tend to represent private rather than institutional capital. And these investors are as likely to come from Southeast Asian countries, such as Singapore, Malaysia and Indonesia, as they are to come from more traditional financial centers such as Germany.

The reasons for this latest surge in foreign capital are as diverse as the countries represented, but the total investments over the next four years are estimated to be at least $15 billion.

"We're expecting upwards of $15 billion to pour into U.S. real estate before the end of the century," said Donald Conover, chairman and CEO of Greystone, "and we've heard estimates as high as $25 billion through organizations such as the Association of Foreign Investors in Real Estate."

Conover notes that German investors, for example, are attracted to U.S. properties by the large premium in current yields available from U.S. properties, as compared with returns on German investments. Current real estate yields in Germany are in the range of 5.5 to 6 percent. In the U.S., these investors are able to acquire institutional quality properties yielding as much as 8.5 to 9.5 percent. An estimated $7 billion to $10 billion will come from German investors and another $2 billion to $3 billion from Dutch investors.

The movement of capital out of Hong Kong in advance of 1997 is well documented, but other private investors from Asia have turned to U.S. properties as a hedge against political, social and economic risks. Unlike their European counterparts, these investors are accepting lower yields than they can achieve in their home markets, where double digit economic growth has fueled tremendous returns on real estate. These investors are attracted by the economic security and political stability offered by the U.S. and they are making a major commitment to the U.S. real estate market. Greystone estimates that at least another $1 billion will come into the U.S. market from this source.

Greystone itself first began to see the foreign influx in 1995 when it created a relationship with SITQ, a Montreal-based investment organization that is an affiliate of Canada's largest pension fund. SITQ has earmarked significant funds for investment in U.S. properties. Greystone, for example, has organized a co-investment between SITQ and New York Life to acquire a major office building in suburban Denver. Anticipating a movement of capital from other foreign markets to the U.S., Greystone then formed a strategic alliance with Atlantic Partners, Ltd., which specializes in accessing foreign capital for property investment in the U.S.

"The foreign players in the U.S. property market in the past have typically been frustrated by a distribution system that results in them seeing investment opportunities only after the U.S. investors have passed on them," said Brad Olsen, president of Atlantic Partners. "But they're now turning to advisors such as Greystone to level the playing field, and it's spurring a new wave of foreign investment. They need the local presence and insight advisors such as Greystone can give them."

Conover and Olsen cited additional reasons for the surge in interest on the part of foreign investors:

* The U.S. real estate market has improved dramatically in the past several years, with occupancy and rents up for most property types and in most markets. Real estate investors - both foreign and domestic - see the market continuing to rise.

* With the U.S. dollar at historically low levels as compared with many local currencies, dollar investment in the U.S. is particularly attractive.

* The non-recourse financing that is available for real estate investments in the U.S. allows investors to leverage their capital in a way that is not typically available in their domestic markets.