Factors influencing German private equity investment in US real estate

Abstract

This thesis identifies and ranks in order of importance the key factors influencing high net-worth German investors' decisions about US real estate private equity investments. Through research and in-depth interviews with key clients and investment advisors of Taurus Investment Holdings, LLC, each factor is examined based on available data and is ranked in a significance hierarchy according to client responses. Interview results indicate that "Higher Expected Returns in US Real Estate," "Trust in the Investment Advisor/Company," and "Diversification" are the three most influential factors for investor decisions about US real estate investment. Investors reported that exogenous factors such as German and US tax laws, US economic/political climate, and currency exchange rates are not as important. However, these exogenous factors are intimately linked to the more personal factors: both rational (Higher expected returns in US real estate, Diversification benefits) and emotional ones (Trust in the Investment Advisor). Furthermore, investors' decisions to invest in US real estate is crucially dependent on their trust in the investment advisor, regardless of high promised returns or diversification benefits. In a global recession where the sagging US economy and the weakening US dollar have eroded the returns for German investors with US real estate investments, the element of trust is more important than ever. A carefully chosen US investment advisor / partner plays a critical role in accomplishing investment objectives and achieving optimal results for German investors.