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Bob Young: International Capital in the Commercial Real Estate Arena

Bob Young

For many of us, it is not unusual to know of, and work with, international investor interests in U.S. retail projects, including German groups like IVG at Mockingbird Station or U.S. Treuhand at Victory Park. Deploying capital for targeted returns on bricks-and-sticks is and will be an ongoing investment strategy for foreign concerns—even in the cyclical U.S. real estate market.

Recently, an interesting headline caught my attention: “Billionaire Carlos Slim ups stake in Saks.” (Carlos Slim, of course, is the Mexican business magnate who’s the richest man in the world.) It seems that U.S.-based retailers, like Saks, also have become attractive for international capital and investments.

Saks, as much as any retailer out there, has learned to survive—and thrive—in the current economy. The chain was caught off guard by the drastic drop in consumer purchases in 2008, which resulted in the luxury retailer slashing prices by as much as 70 percent. But today, Saks has mastered inventory control measured against sales growth, so it is able to protect pricing and profit margins. Already this year, the department store chain’s sales are up 8.8 percent, and second-quarter revenue gained 13 percent because of extremely limited discounting.

That know-how is one reason that even with the current domestic economic challenges, successful operators (powerful brands like Saks) are attractive as the U.S. continues its lead role in retail consumption.

All that being said, there is clearly a global market for U.S. retail real estate and successful retailers. That’s good—and yes, there are continued reasons for guarded, yet real, long-term optimism.

Bob Young is managing director of The Weitzman Group. Contact him at byoung@weitzmangroup.com.

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