Globalization of capital
For some time, international investors have seen the United States as a desirable destination for capital investments in real estate.
For U.S. fund managers working with foreign investors, there are a number of regulatory hurdles and other challenges to overcome. Compliance with the Foreign Account Compliance Tax Act, the OECD’s Common Reporting Standard, and U.S. nonresident alien reporting and withholding requirements put forth by the Internal Revenue Service require documentation and risk management. But the outlook for global investment is positive, and new exemptions passed by Congress are designed to encourage the flow of certain non-U.S. capital into U.S. real estate.
While it remains unlikely that these exemptions will fundamentally alter how non-U.S. capital is invested in U.S. real estate, it is important for funds to develop systems, policies and procedures to manage the risks associated with these requirements and to pay attention to new global reporting obligations.