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EC still provides viable opportunities.

The world's economy is experiencing tremendous change, and nowhere is this more evident than in Europe. However, area real estate professionals must understand that these changes may pose as many opportunities as risks. To a large degree, many of the "barriers" involved are more perception than a reality.

Consider that there are 33 countries in Europe; that for more than a thousand years, one country seemed to always be at war with another (and it continues today). Consider that they have always emphasized their differences (language, culture, ethnic heritage), and that their politics, often lacking clear mandates, is organized by coalition. Yet, even with this background, the accomplishments already achieved in creating a unified economic marketplace are remarkable. Even more, they have begun to do this in the midst of serious recession and the unforeseen re-entry of the Eastern countries in the community of Europe.

There is no doubt that the EC is the vehicle for the way business will be conducted in the future. It is driven by governments and the business community, and has already stripped away barriers to inter-country trade. Local firms need to look at the positives and for ways to make overseas projects work. Europe has more than 400 million people -- a potential market that is larger than that in the U.S., in an area that is much smaller. Additionally, the nations of the former Soviet Bloc represent a substantial market in and of themselves, which has yet to be tapped.

Upon entering Europe, Americans need to be concerned with Market Knowledge, Local Contacts and Financing. Market knowledge in such ventures goes far beyond simple demographics. For example, unfamiliarity of business practices can cause unforeseeable problems in pursuing approvals or permits for specific investments or projects. An American firm may follow all of the correct procedures by law, yet, general business practices may dictate further protocol unknown to a novice. It may even be a matter of simply dealing with or through the right person. Business practices differ from nation to nation, and, oddly enough, even the Europeans do not yet know how to do business within each other's nation. They too have to contend with differences in language, local business practices, codes and regulations.

An American company that provides information and management services, and who has an understanding of the markets involved, is an important information source. Additionally, the majority of European nations have trade commission representatives throughout a variety of cities here within the U.S. This is also true for European Chambers of Commerce, who maintain offices throughout the states, as well as Europe. Other American companies already located in Europe will also provide a good information source, as well as networking opportunities. This is especially true for developers making contacts with architects, engineers and other real estate professionals.

Generally, local contacts are the most important resource. They make the entire process more easy and, in many instances, more cost-effective. Either they are able to act on behalf of the venturing firm or can provide the information necessary to understand the various processes in getting a project underway. If the local team has been assembled correctly, these individuals should be familiar enough with what is required that they can provide insights on cutting through the red tape.

Such contacts may also prove beneficial in gaining financing. Probably one of the most difficult aspects of an overseas venture is the procurement of financing for such a project, unless the firm is financing the entire plan itself. The source of financing usually will not be a traditional U.S. lending institution.

Difficulties will also be encountered in attempts to gain such investment from host nations -- this is especially true in the Eastern European nations. Many nations maintain stringent regulations, which may preclude businesses from financing projects with funding from host sources. Outside lenders will also be difficult. Such financial institutions are concerned with "Sovereign Debt," the loaning of funds to finance an asset whose destiny is controlled by the laws and government of a foreign nation. This is particularly sensitive for real estate, due to the intransportability of property. However, given the efforts by the EC and the fact that banks are also seeking investment into growing markets, some financial institutions will provide funding for various projects.

More likely sources include programs focused upon the EC and developing nations themselves. This includes the EC Commission and The European Bank for Redevelopment Construction, which was set up specifically for the purpose of making loans for businesses and projects in Eastern Europe. Another prime source is investment companies. Many such firms maintain operations in Europe and the United States and are continuously seeking investment opportunities in viable projects.
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Title Annotation:Mid-Year Review & Forecast, Section II; unified economic marketplace of European Community will provide opportunities for American information and management services, financing for real estate development
Author:LeGault, Ronald G.
Publication:Real Estate Weekly
Article Type:Column
Date:Jun 23, 1993
Previous Article:Market strong for quality residential product.
Next Article:Agent loyalty key in all market climates.

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