International Real Estate Opportunities – A Discussion with Amstar

Jason Lucas, President, Jeffrey E. Stronger, Vice President, and Norman Glazer sat down to discuss Amstar’s experience investing in real estate internationally. Formed in 1987, Amstar is a real estate private equity company that acquires, develops and manages all property types in the United States and certain international markets. From 1987 until about 2007, Amstar solely invested in the US with a value-add focus. However, as they disposed a significant portion of their portfolio between 2005 and 2007, they found that certain foreign markets had significant potential and shifted their opportunistic mentality abroad, while converting their US investment strategy to core plus. During our hour-long meeting, Jason and his team discussed how they have been able to successfully invest globally and succeed in various complex and dynamic markets.


Strict Criteria

Amstar has been diligent about sticking to strict criteria when investing in new and emerging markets:

  • In emerging markets, the old adage of “Location, Location, Location”, isn’t nearly as important as “Partner, Partner, Partner”. In all of their international opportunities, Amstar joint ventures with a local developer in order to execute the project. Jason mentioned that they spend a significant amount of time and resources investigating which companies to go into business with, and oftentimes interview more than 60 developers for a single project. Ethics is at the top of their desired qualities.
  • Favorable demographic trends. Istanbul, Turkey is one city that Amstar is investing heavily in. Average incomes in Istanbul have tripled in the last few years, the middle class is growing tremendously and households have recently shrunk from 4.5 to 3.7 – all great market indicators for real estate investment.
  • Deep Due Diligence. Certain markets check all of the right boxes and appear to be fantastic opportunities for developers and investors, but buyer beware. Their experiences in India, Vietnam and certain South American countries appear to have all of the right characteristics, however executing their business plans have proven to be extremely challenging due to political strife.
  • Attractive yields. Amstar strives for development yields (net operating income divided by all-in costs) in the low teens with exit cap rates that are 400-500 basis points less than this mark. These significant yield spreads (as opposed to 100-200 they are finding in the United States) allow for a greater margin of error and target returns that are north of 20%.

International Expertise

Guiding the local partner has proven to be challenging at times, but Amstar’s international presence has allowed them to identify trends and be ahead of the curve for many of their projects. “We don’t do that in this market” is a quote that Amstar has heard often, but they refuse to accept the current norms and are diligent about pushing for what they believe is right. By leveraging their international experience, they have been able to persuade their partners on everything from unit configurations to oven sizes. Even more impressively, they are delivering Zlota 44, their 52-story residential project in Warsaw, Poland, in a near-complete condition to buyers versus “core and shell”, which is typical in Eastern Europe.

As proof of their success, Amstar mentioned they are able to raise capital for their international investments at a preferred return of 10 percent, which is only a minimal premium on their United States opportunities at 8-9 percent. Various companies are replicating Amstar’s business model and are commencing similar projects in the same markets directly behind them, which is a positive for both the local market and the real estate industry as a whole.

Victor Alfonso, USD

Victor Alfonso grew up in Los Angeles and received degrees in Economics and Political Science from UC Irvine. He spent 8 years at Westfield and recently joined Brixton Capital as VP Asset Management. Licensed Broker in CA and ICSC member. Victor is an official curator and blogger for MIPIMWorld. Connect with Victor on LinkedIn.


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