At first blush, 47 buildings in East Harlem might not seem like an obvious choice for a foreign buyer making its first foray into the United States. But that's exactly where Dawnay, Day Group, a London-based real estate investment and services firm with more than $4 billion in assets, established a foothold on American shores earlier this year. The firm forked over $225 million to acquire the 1,137-unit apartment portfolio in the re-emerging area of Manhattan from long-time owner R.E. Group. In doing so, it trumped numerous domestic bidders in the deal. “They outbid the rest of the market on this portfolio by $25 million,” says Alan P. Miller, a senior director at New York brokerage firm Eastern Consolidated, which handled the deal. “It made a really big splash, especially for their first U.S. investment.”

In its announcement of the acquisition, Dawnay, Day said it would establish a broader U.S. portfolio. “The company is currently assessing similar types of U.S. acquisitions that will provide opportunities to create added value,” the firm said. In August, it followed with a $10 million purchase of two more buildings on Manhattan's Upper West Side. “Their appetite has just been huge for buying apartments here in the States,” Miller says.

Dawnay, Day is hardly alone. The foreign firm's voracity for investing in U.S. multifamily product underscores a broader trend in the industry today. Namely, multitudes of foreign investors are now coming to the United States. “This has been the most active year by far in terms of foreign investors purchasing multifamily property,” says Dan Fasulo, managing director at New York-based Real Capital Analytics. “We are seeing all different types of foreign investors who want to establish a beachhead here in the United States. They want to diversify from their home countries and take advantage of everything [this country] has to offer.”

NUMBER'S UP The numbers speak for themselves. Through the first nine months of 2007, foreign investors poured $2.6 billion into U.S. multifamily deals, eclipsing the record $2 billion in foreign-backed deals made during all of 2006, according to RCA. Volume is also up. While there were 53 foreign deals in all of 2006, 93 such transactions had taken place through September of this year. Yet those deals, which come from all over the globe, including the U.K., Canada, Europe, the Middle East, the Pacific Rim, and Australia, also come with a distinct set of challenges.

SURPASSING THE BUCK Right now, the United States offers a lot to foreign money. The dollar has weakened—it's dropped 9 percent versus the Euro since the beginning of 2007, is at its lowest point against the Canadian dollar in more than 30 years, and is at its weakest against the British pound since 1981. This means foreign investors realize an almost instant return on their money.

“They're getting more for their Euro or their Canadian dollar or their Yen than they were just a couple of years ago,” says Chris Finlay, managing principal at Mission Residential in Vienna, Va., who has seen more foreign investment recently in the Sunbelt markets where he operates. For instance, in May, Montreal-based Northview Realty Group paid Denver-based AIMCO $106 million for an 11-building portfolio totaling 2,381 units in the Carolinas. With the loonie trading on par with the greenback for the first time in 30 years, those kinds of nine-digit deals are more manageable for our Northern neighbors.

Combine the dollar's weakness with the relative economic and political stability of the United States amid global credit and liquidity jitters in financial markets, and you have a perfect storm of foreign cash lapping against America's shores. “Any time there's a glitch or concern in the markets, investors tend to revert to places within their comfort zone. We call that a flight to quality,” says Steve Collins, managing director of the international capital group in the Washington, D.C., office of global real estate investment management firm Jones Lang LaSalle. “As far as how you buy and sell property, there is not a more transparent country than the United States. Right now, you're seeing a lot of Australian, Middle Eastern, and U.K. money looking for a place to buy, and the States seems to be that place.”

Foreign investors aren't just putting their money into the shining cities on the coasts, either. Matt Wanderer, principal at Alterra Capital Group, a privately-held real estate investment firm in Miami, says he's seen stiffer competition from foreign buyers in places like Texas, Georgia, Alabama, and Tennessee. “In areas where I was competing mostly with locals before, now I'm seeing German pension funds getting in,” Wanderer says. “And it's not just on core assets, but on D class multifamily as well.”