the New Foreign Aid

SHARON CRISWELL had trouble carrying on a conversation. The drone of bulldozers drowned out her words. Looking out the window of her finished but barely furnished office in the new Regency Center at LBJ and Montfort, a complex she and her husband developed with Greek money, she can count 15 construction cranes piercing the sky.

This year Criswell Development Corp. will start construction on $100 million worth of new projects, all financed in tandem with foreign silent partners who have come up with the Texas-sized caches of cash needed for development. To date, the money behind the company’s two biggest projects, the Regency Center and the Spectrum, has come from Delphinance, a Dallas-based subsidiary of Archirodon Group. Inc., the largest construction firm in Greece.

Archirodon, a company incorporated in Panama, managed in Athens, and financed from Geneva, is owned by “Mr. Big.” an Aristotle Onassis-type magnate with a ruddy complexion, brown eyes, and a balding head. He owns stables in England, a chateau in France, and holdings in Switzerland. The 68-year-old Greek is investing in Dallas real estate because it’s a safe place to diversity his assets. Until he visited Dallas in January, he had only set foot in two places in the States: New York City and his thoroughbred farm in Kentucky.

Sharon Criswell likes the live-and-let-live arrangement. “Silent partners arc an especially felicitous combination. They solve the problem of capital formation which has been a problem for everyone in development. Yet they don’t want to come and be active. They recognize the value of local advice in a local market. And they’re concerned about quality. They’re not just interested in a piece of property that will produce a steady cash flow,” she says.

WHEN CANADIAN-BASED Cadillac Fairview Corp. Ltd. purchased the old Dallas Athletic Club property downtown at Pacific and Elm, the city fathers began to worry. Its proposed 50-story building, First City Bank’s new home, would tower over downtown’s premier park, Thanks-Giving Square, transforming the light and airy haven into a dark and cheerless urban cavern.

Hostile public reaction to this gloomy specter was not lost on Michael Prentiss, president of the CF (Cadillac Fairview) Southern Region, Inc.-the man calling the shots in Dallas. He hired an outside consultant and spent thousands of dollars on a sun-shade study. As a result, the building was moved deeper into the site away from the square, changing the position of the tower. When the Canadian company, the largest real estate developer in North America, presented its final design to the City Council, its office tower blocked only five hours of sunlight a year from the park.

“This is our first development in Dallas,” explains Prentiss, whose firm owns $65 million worth of raw land in the Dallas area. “We intend to be good corporate citizens. We want to prove that every building we erect -from the very first -is an asset to the community.”



THE FAMILY originally came from India. During the Commonwealth years they left their homeland and moved to Rhodesia. They worked hard and made money. When racial conflict caused the government of that southern African country to wobble in 1974, the oldest son filled a suitcase full of money and bought an airplane ticket to Dallas. He had heard about the World Trade Center and wanted to open an import shop there.

But that was before he met Loren Weinstein, a Dallas attorney who represents only small (in dollar amounts) foreign investors. After a careful review, the man bought a motel instead. During the next seven years, the family immigrated to Dallas one by one, each bringing a piece of luggage filled with cash. Today the Rhodesian clan owns half a dozen motor hotels in town.

“What kind of investment can you make if you only have $30,000 and don’t want to go to a bank for a loan? This is the problem facing many small foreign investors,” says Weinstein, whose specialized business is booming. “They want small apartment buildings -25 units, or so, and motels. Many of their purchases are in East Dallas, particularly in the area around Fox & Jacobs’ Bryan Place. Foreigners don’t have the same hang-ups about Dallas that Dallas people do. To them East Dallas or Oak Cliff is still Dallas,” he says. “And it’s Dallas they want.”



YOU MAY HAVE trouble selling your house, but when it comes to commercial real estate, some of the hottest property in the world is located right here. Even a casual observer speeding down LBJ Freeway or strolling downtown dodging cranes can see Dallas is in the midst of an extremely healthy construction boom. What you can’t see is that foreign dollars are paying for a massive part of the boom.

The global developers, like the Canadians, have the business acumen to consummate multimillion dollar deals and the international lines of credit to finance them. The first- and third-world citizens, whose countries are held hostage by terrorists or are seething with socialism, are passive investors wanting shelter for their substantial savings. The fleeing emigrant from these same countries arrives with enough “flight money” to get a foothold, using his real estate holdings to liberate his family and start over here. These are the foreign players in Dallas’ commercial real estate game. The one group that could easily afford to buy all of Dallas but which is notably absent is the Arabs. Maan Al-Ubaidi, president of Dallas’ MRA International Co., which is currently publishing a Texas business directory in Arabic to attract business here, says he knows of very little Arab investment in Dallas real estate other than the Plaza of the Americas. “Arabs have billions of dollars here, but they are in the banks. Most of their money is in treasury notes. They rarely purchase real estate,” he says.

The top 10 foreign investors doing business in Dallas collectively own over $2.1 billion worth of properties. And those are just the biggest of the big boys. There are literally thousands of mid-size and small investors, people who are buying up Dallas a briefcase-worth at a time.

“My investors think the United States is the safest place in the world. If anything happens here, the world economy would sink,” says Patricia Tung, a representative of dozens of Far Eastern investors. “Foreigners know real estate values are stable and appreciate here. On the global market, American real estate is the best buy in the world,” says John M. Stone, president of John M. Stone Co., a commercial real estate firm with a large foreign clientele.

The total scope of foreign ownership here can only be estimated. Michael Prentiss of Cadillac Fairview estimates 1 to 3 per cent of Dallas property is owned by foreigners, a figure that “sounds in line” to Desmond Foynes, an international economist at the Commerce Department’s Office of Foreign Investment. George Roddy, president of Dresco, Inc., a real estate research firm that has tracked commercial raw acreage sales in the Dallas area for the last 10 years, says the “detectable” foreign investors are currently accounting for 10 to 15 per cent of Dallas’ annual purchases. But Norma Lea Beasley, chairman of the board of Safeco Title Co., which handles many foreign closings, says, “No one knows just how much foreign money has found its way here. I think the sums are greater than anybody really thinks.”

While there is debate on just how much the foreigners own, there is no debate that they are shaping the way Dallas develops. Foreign developers have seen and seized opportunities that native Texans have simply ignored.

Foreigners, for example, are playing a major role in the downtown Dallas renaissance. “Five years ago, you couldn’t sell a local developer a downtown project,” says Michael Young, president of his own company, which has put together many large deals for Canadian and European investors, including Philippe Junot, ex-husband of Princess Caroline of Monaco. “They were ready to close it up. Companies still officing downtown were considered trapped as everybody else fled to the suburbs.”

Today, try driving down Ross or Elm. Construction has eaten up curb lanes, creating rush-hour traffic on these thoroughfares all day. Except for the few local projects (Tram-mell Crow’s buildings, Arco, Dallas Centre, and Placid Oilprojects), every new building downtown is foreign-owned, observes Mikel Reynolds, a senior vice president with Henry S. Miller Co. Adds Robert C. Feldman, an attorney with Jackson Walker Winstead & Miller, who counts some of the biggest Canadian developers as his clients, “You won’t recognize downtown when the Canadians get through.”

Dallas’ foreign investors are neither greedy carpetbaggers nor just-off-the-boat ignorants. “The Canadian developers aren’t like Attila the Hun carrying hockey sticks,” says Bob Morris, of Morris and Associates, a local public relations firm with Canadian clients. “They’ve come here to settle. They care about Dallas. They want to nourish the local fabric. If Dallas does well, so will their substantial investments.”

And just because they’re foreign doesn’t mean locals can easily take advantage of them. “The one thing a foreign investor can’t abide is the tendency of some Dallas sellers to jack up the price of a property when they learn it’s a foreigner who’s interested. They think foreigners have all the money in the world. But that’s the quickest way to squelch a deal,” says Stone. “Anybody who shirks his homework in dealing with a foreign investor is a fool.”

David Gleeson, a senior vice president with Henry S. Miller, who has negotiated many deals with foreign investors, observes, “They’re shrewd and very astute. They do their homework, they rely on the top professionals in the business for advice, and they’d rather pass up a deal than make a mistake.”

The foreign developers are known for their cash, whether it comes straight from a suitcase or a branch office of their national bank located right here in Dallas. “While we are paying tremendous interest rates on our borrowed money, they have In God We Trust cash. We can’t beat it,” moans Harry Lucas, who spent 20 years with the Vantage Co. before starting his own commercial real estate firm this year. “Because they have the ready cash, they can make decisions quickly. They don’t mess around.” Continues Patricia Tung, “Far Eastern investors are very liquid. They don’t have credit like people in the United States do. When they buy anything, they’re used to paying cash. I have to teach them that real estate deals need some leverage.”

“A lot of people have a negative attitude about foreign investment. But you can’t put your building in your briefcase and take it back to Europe,” says Wayne Senecal, vice president of Delphinance Development, which is providing capital for the Criswell Development Co. “Foreign investment is American blood, sweat, and tears, and foreign money.”

Representatives of foreign investors like Senecal are glad to be here. They think Texans should feel the same way. “We’re infusing capital into Dallas that is not generated in Dallas, capital that is creating jobs, utilizing supplies and suppliers in your marketplace,” explains P.L. Gocher, executive vice president of U.S. Lend Lease Inc., Australia’s largest development firm, whose Dallas projects include The Beverly, a highrise condominium on Turtle Creek. An ample supply of capital, of course, is critical to the health of any economy. Adds Young, a transplanted Canadian, “Dallas benefits significantly from an influx of foreign capital, people, and ideas.” As Morris puts it, “The rules of the game have changed. Foreign investment is here to stay.”



THE GLOBAL BUSINESSMEN: They are the big companies with big capital reserves who take big risks to build big buildings. They consummate big deals that make big news. And they’re having a big impact on Dallas’ three current commercial hot spots: downtown and environs, the area surrounding D/FW and the corridor along the LBJ extension (from Stemmons Freeway to the north airport entrance), and the “golden corridor” north from LBJ between Preston Road and North Dallas Parkway.

International real estate capital knows no boundaries. The process of constructing buildings is identical regardless of whether the construction site is in London, Calgary, Dallas, or Jidda. The glob-als punch in the data, receive a computer readout, and look for the best long-term return on capital.

Unlike the passive investors, who prefer to buy existing structures, the international development companies like to erect their own. They search out prime properties -either land begging to be developed, or outmoded architectural fossils crying for the wrecker’s ball. Skyscraping state-of-the-art office towers are their stock-in-trade.

Land has become scarce, and construction costs have bulged, upping the square foot cost of an economically viable project. Only the larger developers have the capital to complete the projects.

The numbers tell the story. According to Young, five years ago developers were building 400,000-square-foot office towers that were costing them $30 a square foot to build. Today, higher densities of tenants needed to produce respectable rates of return require new buildings to be in the one million-square-foot range. And at today’s prices the cost is $100 per square foot. “Suddenly you have $100 million projects. Today’s monumental scale requires monumental companies,” he points out.

That’s why giants like U.S. Lend Lease, the largest development concern in Australia; Archirodon, the biggest construction company in Greece; and the Canadians (they number seven of the top 10 publicly owned real estate firms in North America) are the ones transforming the face of Dallas.

Global investors do business in one of two ways: They either set up shop in Dallas and oversee the project from start to finish or they act as silent partners teaming up with local developers. They supply the capital, leaving the construction to local companies.

The Canadians prefer to do it their way. “Nobody holds a candle to the Canadians in their performance as global businessmen,” says David Gleeson. “They have moved decisively and authoritatively into the market. They decide what they want and they buy it.”

They have their own reasons for setting up shop here. In a very real sense, Canadian capital is flight money. Political insecurity-the threat of provincial separatism and the government’s increasingly socialistic trends -and bureaucratic meddling have precipitated the migration. In 1974, Toronto, one of the biggest markets, passed an edict limiting new buildings to 45 feet-just five stories. (The law has since been repealed.) Moreover, the complexes had to be mixed-use structures including a portion of low-income housing. “Economics doesn’t work like that. As soon as you get a bureaucrat telling you what to build, you don’t build anything,” says Young.

These giants have outgrown their hometown. Canada’s frenzied real estate boom spanned the last decade, then sharply leveled off in the six major urban markets. Growth stagnated. Like Caesar, they went looking for new kingdoms to conquer.. “When I first went back home, I told the major developers, ’You can’t believe the deals we can make there,’ ” recalls Young. “Dallas is a city that’s dead center in the middle of 43 million people. (The population of the 11-state area that’s considered the Dallas market.) There’s no city in Canada that can do that. Dallas is the size of Toronto, is growing twice as fast, and serves a market two times the size of Canada.”

Canadian investors see Dallas as the Toronto of the Eighties. “Dallas is a dead ringer for Toronto 10 years ago,” says Young.

The size of the Dallas market also attracted the Australians, says Gocher. “Australia’s size is three million square miles, the same size as America. But it has a population of 14 million, the population of Texas. Besides, we have so much of the market share in Australia, our expansion there was limited.”

The Canadians were able to move quickly into the Dallas market because they are flush with capital. Campeau Corp., for example, was able to assemble the 60 different portions for its Vineyard development because it paid cash for each lot. “U.S. companies would have had to have the whole thing tied up before they could have approached these small landowners.

Campeau, however, was able to proposition each one and say, ’We’re going to pay cash for your house regardless of whether your neighbor sells.’ That way they were able to disguise the fact they were putting together a huge tract,” says Feldman, the company’s attorney.

Where is all this cash coming from? Some charge it is Arab money piped through Canada. “I haven’t met an Arab yet,” says David Davidson, a commercial real estate agent with his own company. Over half his deals are made with Canadian development firms. Many are publicly owned like Cadillac Fairview and Bramalea; if Middle Easterners held a huge chunk it would be a matter of public record. “There’s more publicity than reality about Arab real estate investment in Dallas,” says Stan Miller, who heads Republic National Bank’s real estate investment group. “The talk is more emotional than objective.”

One thing’s for sure. Three big firms – Olympia & York, Block Bros. Development Corp., and Trizec Corp.- have no Arab money. Canada’s Reichmann brothers, who have a controlling interest in all three, are practicing Orthodox Jews. Even in Dallas, where their construction crews come from Mesquite and South Dallas, workers leave early on Friday afternoons because no one who works for the Reich-manns works on the Jewish Sabbath. Bramalea’s chief executive officers are also Orthodox Jews.

Unlike many Dallas developers who generally sell the buildings they complete for a profit, the Canadians keep the complexes in their portfolios. Cadillac Fair-view owns almost every building it has ever built. The rental income from properties over the years generates tremendous cash flows that fuel and fund new projects, helping insulate the Canadian developers from the tyranny of soaring interest rates that bedevil local builders much more highly leveraged.

Canadian builders do borrow, but they have a long credit history with the Canadian banking system, a decided advantage. Texas has about 1400 commercial banks, but Canada has just 12. Such intense concentration means each financial institution has a lot more money to lend each individual customer. In fact, none have an upper lending limit. If one of the developers needs to put together a $200 million deal, the Royal Bank of Canada or the Canadian Imperial Bank of Commerce, both of which have local offices, can readily accommodate it.

Texas developers who have historically relied on local banks can’t easily tap into such large reservoirs of cash. Local banks are hamstrung by a Texas statute that prohibits them from lending more than 10 per cent of their capital reserves and undivided profits to a single customer. At Republic National Bank, that regulation translates into $50 million per corporate customer; at Mercantile National Bank, it’s about $35 million. Gene Bishop, chairman of the board at Mercantile, says those figures are merely the lending ceiling. “It’s very likely a single customer won’t get that much,” he says.

The inequities in the banking systems mean local lenders have to put together a consortium of banks “trying to keep all their balls in the air at the same time,” says Nick Di Guiseppe, executive vice president of the Canadian-owned Wy-cliffe International. “By the time they’ve put together their loan, we are already going on a development.”

Like many of the large Canadian firms, the Australians also have equity capital in hand. Lend Lease is a publicly listed company that currently has a capitalization in excess of $40 million. “Our shareholders supply our capital. That’s why our borrowing is extremely low,” says Gocher.

Because the global investors plan to own indefinitely the buildings they erect, they are sticklers for quality. “There’s no pressure to just get by,” says Young. “They want to build a project that will command top market rentals not only the day it opens, but 25 years later, too.”

Cadillac Fairview’s Prentis adds, “We have to use the highest quality materials and state-of-the-art mechanical systems because they last longer. We have to build a better project because we’re in it for the long haul.”

Cadillac Fairview, one of the largest of Canada’s developers, and its modus operandi is typical of how global investors operate. When the company decided Dallas was the place to build, it moved its personnel to the city and opened an office complete with a multimedia conference room in the First International Building downtown. All the executives relocated here, bought homes, and enrolled their children in local schools.

In Canada, Cadillac Fairview has a history of supporting the arts; it felt the policy should be continued here. The company immediately wrote a generous check to TACA, and Prentiss joined the board of directors of the Dallas Ballet. “This is evidence of our commitment to the community,” Prentiss says.

The company goes out of its way to use local talent and services, even when it costs more, according to Prentiss. “We may get our money cheaper from Canadian banks, but the local banker is the guy next door. Since we have been here, we have tried to deal with local institutions,” says Prentiss, who was born in Albuquerque, grew up in the Pacific Northwest, received his MBA from Harvard, and only travels to Canada for business meetings.

The Canadians are the biggest of what have been termed the “active” developers (see “The Ten Biggest Landowners,” page 137), the foreigners who come here and personally get involved in the projects. The Canadians are by no means the only active foreign developers. The West Germans, the British, the French, and the Japanese are all active in Dallas development. (The West Germans own warehouses in the Brookhollow Industrial Park at Stemmons and Mockingbird, the British own the Fidelity Union Life building at Akard, the French have title to 160 acres at LBJ and Stemmons, while the Japanese own warehouses and industrial plants in Las Colinas.)

Using local talent is the basis of the silent partnership, the other method of global investment. That’s where the Criswells and their development company come in.

Sharon Criswell is the stereotypical California girl. Educated at Berkeley, with a law degree from Stanford, she unhappily migrated to Dallas in 1974, when her husband, a real estate agent, insisted they move to “the land of opportunity.”

Today she is a convert, a born-again Texan, thanks to the couple’s successful construction business, now four years old. Its first major project was the Regency Center, an office complex at LBJ and Montfort, which was financed with Greek money.

That money comes from Delphinance Development, a subsidiary of Archirodon Group Inc., the largest construction firm in Greece. Like the Regency, one of Ar-chirodon’s first projects turned out to be a highly propitious one. In the early Sixties, the firm started construction of a harbor in an out-of-the-way place -Jidda, Saudi Arabia. Now one of the richest nations in the world, Saudi Arabia then was just one more underdeveloped country needing development help. Archirodon helped by arranging financing for the harbor. Saudi Arabia does not forget its friends. Today the construction concern is in the midst of $3 billion worth of projects in that OPEC nation, profits from which are being used to build the likes of Regency Center. “It’s the end of the petro-dollar loop,” Senecal says.

Archirodon views its U.S. construction as a means of diversifying its substantial holdings. The company formed Delphi-nance last year to establish a permanent presence in the United States and moved Wayne Senecal into the management slot.

Senecal feels the local presence is critical. “It’s stupid for a foreign company to get involved in real estate development by itself. We don’t presume to know more than the locals,” he says.

Sharon Criswell shares the feeling. “An individual takes responsibility for the projects he invests in. And people can relate to me as a person. I don’t have to produce the largest number of dollars for the stockholders,” she explains.



FLIGHT MONEY belongs to passive investors who have very little interest in becoming corporate citizens of Dallas. They’re alarmed by socialist legislation, terrorist activities, or government confiscation of property in their homelands. They’re the intelligentsia -the doctors, lawyers, and businessmen who are smart enough to make money and astute enough to realize they have to deposit it in a safe place. They seek long-term stability, and they want it in U.S. dollars.

For some investors, getting their money across the border is generally the most difficult part of the transaction. The U.S. has no currency controls, so Americans often don’t realize how difficult it is to get suitcases full of cash out of many countries overseas. The Italian lire, for example, has been restricted for years. Feldman says international bankers half-jokingly say that all Swiss investment is Italian lire that have been laundered.

Stone of John M. Stone Co. has many flight-money clients. Much of the money is “laundered in.” Stone says, “Anyone who goes around bragging about his money in those countries is likely to get his kneecaps shot. My clients avoid making themselves a target for political terrorists and act very, very quietly. When it comes to getting money out of the country, you have to let your imagination be your guide,” he says. He refuses to elaborate, saying, “When you’re dealing with flight money, if you have a loose lip, you will never get repeat business.”

One well-known scheme is to deposit the cash in a Swiss bank account, a good plan for two reasons: Swiss banks have secrecy provisions, and the country has no currency controls. The investor either forms a limited partnership with a Dallas investor or engages an attorney to represent him. He then instructs the Swiss banks to wire the money to a New York bank, which then wires it to the Dallas title company closing the deal. No name. No nationality. Just a check for $80,000 from Citibank made out to the title company.

What these investors want from their real estate investment is a safe deposit box with an inflationary hedge. Since most want to limit their involvement to writing a check, they purchase income-producing properties like apartment buildings, motels, warehouses, and shopping centers, all existing structures with a proven cash flow. They rarely buy downtown and almost never build their own structures.

“The primary goal of safe-haven investors is to preserve capital. Making money is secondary. They almost don’t care about price. And they usually pay cash. After all, that’s the point,” says Reynolds of Henry S. Miller. Adds Young, “They aren’t as concerned about the numbers. They’re hedgers. They want a hard asset and don’t care if it goes up as long as it doesn’t go down.”

One segment of the flight-money faction is highly visible in Dallas: the foreign small-business operators, the people who brought money and stayed. Indians and Iranians are the chief nationalities, but also Chinese, Koreans, and Vietnamese typically buy apartments and motels. U.S. immigration laws largely influence their choice of property.

Any foreigner with a spare $40,000 can be admitted as a resident alien if he invests that money in an American business. Motels are the perfect purchase because they are labor-intensive and that is just what the immigrants want. Family members still left in India or Iran have a much easier time obtaining a visa if they are guaranteed a job in the States. Motels need maids, clerks, and cashiers 24 hours a day and are very economical to run once the whole family gets involved.

“They’ve bought a staggering number of motels,” says Gleeson of Henry S. Miller. (Sources say as much as 60 per cent of all motor hotels in Texas are foreign-owned.) He cites one family, the Patels, an Indian clan, that owns close to 400 motels throughout Texas, with over two dozen in Dallas. Nine of those lie in the southwest sector of the city along Fort Worth Avenue and West Davis, including the Shangrila Courts at 3712 West Davis, Last Frontier at 1736 Fort Worth Avenue, and the Dallas-Oak Cliff Travelodge, also on Fort Worth Avenue. Other holdings include the Rest-a-Day Motel at 11140 Harry Hines, the Lamp Lighter at 9033 East R.L. Thornton, and the Globe Traveler at 8504 S. Central Expressway.

“These buyers negotiate very roughly. They’ll get to the closing table and will take advantage of the seller if they get wind of any misfortune that would force his hand. They’ll nickel and dime him to death. And I’ll submit a property to one group and find out another family member made the purchase. Many brokerage commissions have been left on the table,” complains Gleeson.

Those who merely want to send their money to Texas are much more subtle and discreet. Typically they find an advisor -a lawyer or real estate broker-who knows the lay of the land and who completes the process from selection to closing. Advisors like Loren Weinstein.

Weinstein is a Dallas attorney who represents only small passive investors. Many who seek his services are motivated by fear. Indian and Pakistani physicians now residing in Canada are worried about the specter of socialized medicine. “They’re some of my biggest clients,” Weinstein says. He buys them apartment buildings and unimproved land. “In the backs of their minds they think, ’If things get real bad, I’ll move to Dallas.’ “

There are Europeans, Belgians in particular, worried about the future of the continent as more and more of their neighbors take big steps leftward. “There’s a ton of Belgian money in Dallas,” says Reynolds of Henry S. Miller. Much of that cash comes as a cut from the diamond trade. Many of these other passive investors come from countries contiguous to the Soviet bloc. “Just look at a map and you can see why they’re nervous,” says Gleeson. So they buy plots in Grapevine and condos in North Dallas in case they too are forced to make a rapid escape.

Foreign investment is not foreign to Europeans; they’re used to crossing the border to do business. With the Americanization of these lands – they’ve been drinking Coke and wearing blue jeans for years – it’s understandable why they would turn to America when the tanks start rolling.

The only group that fits into none of these categories is the Oriental investor. They are high net worth individuals who buy real estate to diversify their assets, something very difficult to do in Taiwan, Hong Kong, or the Philippines. Foreign mortgages also ease their tax burdens back home. The Far Easterners who own commercial property in Dallas have done so with the help of Patricia Tung.

Tung represents dozens of passive investors, most of whom are childhood friends. A native of Shanghai, she grew up in Hong Kong and moved to the U.S. in 1967 when she started undergraduate work at the University of Texas.

“All my friends from the Far East have always wanted to invest in the U.S. At first all they’d talk about was California, California, California because they either knew someone or were related to a family who lived there. 1 had to educate them about Texas; until they saw the show Dallas they thought there was nothing here but cowboys,” says Tung, who mastered Cantonese, Mandarin, and two other Chinese dialects to conduct business.

Tung’s buy list currently includes office buildings and 100-unit apartment complexes. “I always recommend North Dallas,” she says. Since her buyers have no interest in day-to-day management of their income-producing properties, she has incorporated her own management company to service the structures her clients have accumulated over the past six years.

They represent one group of passive investors who simply want to ship their money here. They are also Mexicans worried about the possible devaluation of the peso, South Africans concerned about the future of the current government, Italians scared by political terrorism, Belgians frightened by the growing muscle of the Soviet Union, even Canadians prodded by their country’s “creeping socialism.”



EQUITY DEALERS are large financial institutions that buy and sell real estate like they do stocks and bonds. That’s how a blue-collar worker for British Gas Co. owns a share of a Dallas industrial site and a German widow owns a piece of a Dallas warehouse complex. That’s because the gas worker’s pension fund owns real estate here; so does the German insurance company. These huge European financial institutions, like their American counterparts, are diversifying their holdings and becoming Dallas commercial, residential, and industrial landlords.

On both sides of the Atlantic, the prudent man’s rule in pension fund management is simple: diversify. “The manager can buy securities whose performance has been rather dismal; natural resources, which Europeans generally shy away from because of their lack of knowledge; or income-producing real estate,” explains John Stone.

The foreign funds are more aggressive and act more rapidly than their American counterparts. “They’re not bogged down in bureaucracy or red tape like domestic funds. They’re acquainted with the state of the art and have top-notch advisors,” Stone adds. Continues Miller of Republic, “We are dealing with sophisticated money managers. They’re looking for well-built properties with inflation protection, like short-term leases.”

Insurance companies are also large landowners. Fidelity Union Life Insurance Co., one of Dallas’ largest, was purchased by Allianz Verschicherung AG, West Germany’s largest insurance concern. The acquisition immediately gave West German widows a piece of Dallas.

Then there is Lehndorff, a huge real estate company that uses its sizable holdings to pull off real estate deals. It is an umbrella organization for 14 limited partnerships -five in the U.S., nine in Canada. Most of the $180 million used for American investment is West German, but the British Gas pension fund is also a contributor. Besides breaking ground on a 100,000-square-foot office building on Cedar Springs and the Lemmon Park complex where the company headquarters, it has title to 10 commercial properties in the Brookhollow area, and many in the Alpha-Beta sector north of LBJ.



DO WE WANT the new foreign aid? In a word, yes, a sentiment unheard before inflation. “The foreign investors are performing a vitally needed service,” insists John Stone. “They are bringing in money to a capital-starved market. They’re adding their names to the tax rolls. The construction industry would lose its bloom without them. Dallas would have much more significant unemployment if the foreigners invested their money at home. In my opinion, foreign real estate development is something to desire, not something to fear.”

Are they driving prices up? The foreigners do pay a slight premium, but David Davidson explains why. “The foreign investor has seen similar property in Toronto or Tokyo. Based on world prices, the land here is cheap. He pays the price. Meanwhile, the local developer is trying to whittle down a few cents per square foot. For Dallas, it’s expensive. Price is all perspective.”

David Gleeson says the foreign landowners “aren’t breaking the market, they’re making it.” They tend to buy property that no one else would touch, land that’s been on the market for years.

Moreover, these companies view themselves as American and try hard, despite their accents, to fit into the cityscape. “We are an American company incorporated in Delaware,” says Gocher proudly of U.S. Lend Lease. “We don’t perceive ourselves as an Australian offshoot, but as an American construction and development concern.” Gocher hopes his foreign-owned company will be successful enough to go public and be traded on the New York Stock Exchange.

The foreign real estate boom has even prodded some American investors to take a closer look at Dallas real estate. AccordWHY DALLAS HAS BECOME THE GLOBAL INVESTORS’ FAVORITE BUY

MOVE OVER, Manhattan. And Southern California, you’re suddenly passe. As far as foreign real estate investors are concerned, Dallas is their number one choice. Here’s why:

1. Economics. Dallas’ diversified employment base and variedindustries make its economy as recession-proof as you can get.Dallas also has the largest concentration of the three industriespinpointed to fare best during the Reagan years: energy, electronics, and aerospace.

2. Strategic location. Dallas is in the center of the fastest growing and most dynamic region of America. Its central locationallows executives to fly to either coast and be home the same day.

3. D/FW Regional Airport. International businessmen needan international airport. D/FW ranks high on their list. One firmlocated its headquarters here because of D/FW, even though itsbiggest project is in Denver.

4. Good government. The City Council is pro-business. Outsiders say it’s responsible, reliable, efficient, and effective. Redtape is kept in the closet. Since Dallas is not a machine-run city,investors can choose their architects by reputation, not by connections to city hall. Many developers say they actually find it apleasure to deal with the city government.

5. Sizable markets. The global real estate investment firmshave outgrown their home markets. But there’s a lot of elbowroom in Texas. The Canadians are captivated because Dallas isthe size of Toronto with a market twice the size of Canada. Texashas a population of 14 million, so does Australia.

6. Quality of life. A safe city, at least by Eastern standards.And Dallas has an up-to-date system of highways, reasonablypriced homes, sunny weather, and an adequate level of culturalinterests. All are big attractions.

7. Entrepreneurial climate. Texas is seen as the last bastion ofthe free enterprise system. It’s still a place where deals are an accepted way of doing business. It’s also a right-to-work state; construction firms aren’t crazy about unions.

8. Image. Texas chic is at its height, even overseas. Folksbelieve it’s a 21st-century state, a place where the sun alwaysshines and people live happily ever after. Optimism is rampant.The TV show Dallas, believe it or not, added to that imageby bringing home the message that Dallas is a sophisticatedcity. Many Oriental investors thought there was nothing in Dallas but cowboys and pastures until the TV show was dubbed inChinese; then they realized there were big buildings here theycould buy.

9. Down-home atmosphere. From the minute foreigners getoff the plane they feel at home. They’re welcomed by the localsand find it easy to fit into community life. – B.E.R.

THE TEN BIGGEST FOREIGN LANDOWNERS AND WHAT THEY OWN



BECAUSE FOREIGN real estate investment is such a discreet affair, there is no way of knowing for sure who is the biggest overseas landowner in Dallas. No one would even give a ball park estimate of the amount of land owned by outsiders.

But the brokers who cook up the deals have a fairly good idea of the scope of activity. We camped in real estate offices and used aerial maps to piece together foreign ownership, tract by tract. The following is the result of that computation. The dollar amounts are not the purchase price, but the estimated price tag on developments scheduled to be built.

Every developer in the top 10 is a Canadian firm.

1. Cadillac Fairview Corp. Ltd. $450 million committed todevelopment. Properties: the new First City Bank building (1.25million square feet); an office tower, the old Capri Theater site(300,000 square feet); a downtown parking garage; 372 acresalong the LBJ Freeway extension; a 58-acre tract, Preston Roadand Belt Line; offices.

2. Campeau Corporation. $400 million committed to development. Properties: Vineyard-1200 condominiums, offices, andretail space; six acres downtown; two office towers (2.5 millionsquare feet), and a hotel adjacent to the Fairmont.

3. Bramalea Corporation. $250 million committed to development. Properties: two downtown office towers (2 million squarefeet), and a 1000-room hotel near El Centro College.

4. Singer Family Management. $350 million committed todevelopment. Properties: 2500-acre community development onPreston Road in Piano.

5. Oxford Development. $100 million committed to development. Properties: 900-acre residential subdivision in Carrollton.

6. Rostland. $80 million committed to development. Properties: North Dallas suburban office tower.

7. Olympia & York. $75 million committed to development.Properties: 750,000-square-foot office tower at Bryan andHarwood.

8. Wycliffe International and Block Brothers. $65 millioncommitted to development. Properties: 1700-acre residentialcommunity.

9. Trizec. $50 million committed to development. Properties:Prestonwood Town Center.

10. Great-West Life Assurance. $35 million committed todevelopment. Properties: joint project with Las Colinas on 2200acres of the Byer Estate suburban office building, apartments andindustrial sites.

Other detectable investors have $250 million committed todevelopment, which brings the total for such development to over$2.1 billion. -B.E.R.