Land Rush: Latin Americans, looking for security, put cash into U.S. real estate - Real Estate

Latin Trade, Dec, 2001 by Mary A. Dempsey

Mortgage broker Jeff Flick arranges financing for luxury residences in south Florida. Real estate developer William Bedzow sells pricey condominiums in trendy Miami Beach. Realtor Veronica Cervera specializes in upscale condos for clients with demanding taste.

All three owe their livelihoods to a single group of increasingly affluent investors: rich, worried Latin Americans.

For decades, wealthy Latin Americans have picked up second homes or vacation properties in the United States. In recent years, however, it's become as much an investment as a convenience--and south Florida is quickly becoming the preferred geographic location.

Most buyers these days are Colombians eschewing investments in their violence-torn nation, or Venezuelans diversifying away from a fickle stock market. Argentines, too, have turned to U.S. real estate to protect assets as their country founders. Brazilians once played a big role in the real estate scramble, but the devaluing real has diluted that, brokers say.

Money laundering was common in the first waves of Latin money in the '70s and '80s, says Philip Spiegelman, president of real estate consulting firm International Sales Group in suburban Miami, but economic uncertainty, political repression or both have contributed to increased capital flight.

From the early to mid-1990s, Latin Americans accounted for a quarter of Spiegelman's sales. Today, he says, they represent nearly half. Colombians often pick up property with an eye on residency in the United States.

"Sometimes they feel compelled to cut ties with their countries when their friends or families are kidnapped or ransomed," Spiegelman says. "Many people are willing to take whatever they can liquidate and start a new life here. They represent a growing market."

The investment angle is a big draw, especially in the U.S. housing market of late. Unlike Wall Street, real estate is pretty close to a sure thing, says Bedzow, president of international real estate developer Groupe Pacific. And, it's safer during unstable economic times at home. "You can buy these properties for half a million dollars before they are built and, when they're finished, they're worth US$600,000," Bedzow says.

Soft sell. So sought-after are Latin American buyers that Flick Mortgage Investors customizes its procedures around them. "U.S. loans require proof of income from tax returns or pay stubs," CEO Flick says. "We understand that tax returns in Latin American countries may not be equivalent so we'll accept letters from an accountant explaining what the person does and what their income is."

Spiegelman's team works with real estate brokers in the region's cities, especially Bogota and Caracas, hosting twice-monthly cocktail parties and real-estate seminars. Developer Bedzow trains in-region real estate brokers and investment advisers in his bid to attract property-hungry Latin Americans. Condo-seller Cervera, a partner at Cervera Real Estate, markets residential condos linked to a new Ritz-Carlton hotel in Miami. Prices range from $300,000 for a one-bedroom to more than $2 million for a large apartment. "The Latin player is the No. 1 addition to the profit line," she says.

Why Miami? "Choice location, language and the wonderful weather. Also, people in Miami understand the Latin culture," says Cervera. South Florida gets points, too, for being an air gateway and trade hub for the United States and Latin America. Investors are captivated as well by rising property values.

It is too early, brokers say, to predict whether terrorist attacks will affect Latin Americans' thirst for U.S. property. Fear and an economic slide could scare off some. Dropping interest rates, however, makes real estate more attractive.

Spiegelman remains optimistic, and U.S. interest rate cuts, for now, back him up: "The real estate market isn't nose-diving."