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Welcome from the CIPS Family

Welcome from the CIPS Family. Please open your books and read the Course Overview before class begins. EUROPE And International Real Estate. Those Who Benefit. Experienced International Professionals. European Real Estate Investors.

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Welcome from the CIPS Family

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  1. Welcomefrom the CIPS Family Please open your books and read the Course Overview before class begins

  2. EUROPEAnd InternationalReal Estate

  3. Those Who Benefit Experienced International Professionals European Real Estate Investors Considering International Specialization NAR General Membership European Real Estate Financer’s

  4. Getting Started • Networking is a #1 priority • Stand up • Take out business cards • Circulate for 3 minutes • Meet as many people as you can • Exchange cards • Can you help one another? • READY?......GO!!!!

  5. What 3 events facilitated unification?

  6. How many countries in European Union? 25

  7. Is Turkey an EU member? No

  8. Turkey’s major obstacle to EU membership? Cyprus relationship

  9. What is the population of Turkey? 66,000,000

  10. Who is the Global Real Estate Business Facilitator? ICREA

  11. What is the Major Fear of Unification? Loss of identity

  12. Class Notes • Turn off cell phones • Scheduled breaks • Lunch break • Activities • Task groups • Final exam • Let’s get started!

  13. Globalization

  14. Globalization Impact Investor movement

  15. Globalization Impact 60% invest in countries outside their own

  16. Globalization Impact A 12% increase in global investment (2004)

  17. Globalization Impact • International investors expect real estate professionals to have thorough knowledge: • Markets • Economies • Business and social cultures • How to successfully compete

  18. Capital Flow • Underlying forces • Supply and demand • Investment return • German economy performing poorly • Investors going outside Germany • Until German economy improves, German capital will continue moving elsewhere Capital flow impacts international transactions

  19. Currency

  20. Exchange Rates • Provide insights • Country economic performance • Country financial performance • Influenced by trade deficits • Higher deficit = negative impact

  21. Strong and Weak Currencies

  22. Demonstration As the Euro gets stronger It’s exchange rate goes down It takes LESS euros to buy 1 US$ 1euro costs 1.30US$ US$ temperature [exchange rate] goes UP 1 euro = 1 US$ 1 US$ = 1 euro Euro temperature [exchange rate] goes DOWN As the dollar gets weaker It’s exchange rate goes up It takes MOREUS$ to buy 1 euro. 1 US$ costs .766 euro

  23. Investors • A WEAK dollar makes US real estate more attractive. • A STRONG dollar makes foreign real estate more attractive

  24. Market Assessment • Political stability • Population equilibrium • Free market philosophy • Social harmony • Democratic institutions • Adequate infrastructure • Underlying economic strength

  25. Cultural Influences Core cultural values Client expectations Client needs Conducting business Experienced banks International differences Additional Points

  26. Foreign Currencies and Measures

  27. Three Conversion Steps Currency Area Time

  28. Reciprocals • Exchange rates reported in two forms • Foreign units equaling one domestic unit • Domestic units equaling one foreign unit • These numbers are reciprocals • Reflect both sides of currency value • Reciprocals are 1 ÷ conversion factor [exchange rate]

  29. Conversions

  30. Conversion #1 Convert 850 euros to US$ €850 X US$1.23 = _________ 1045.50

  31. Conversion #2 Convert US$15.30 to euros US$15.30 X €.81 = __________ €12.39

  32. Conversion #3 Two years ago the exchange rate was US$1 = €.924 or 1€ = US$ 1.082 What would a $300,000 house cost in euros? US$ 300,000 X _____ = €_________ What would the same house cost in euros today? US$ 300,000 X ________ = € _________ How much difference did the exchange rate make? €___________ or in US$ ___________ .924 277,200 .81 243,000 34,200 42,066

  33. Conversion #4 Use same conversion rates for a €650,000 office building. What was the value in US$ 2 years ago? €650,000 X __________ = US$ __________ What is the value in US$ today? €650,000 X __________ = US$ __________ How much difference did the conversion rate make in these examples? US$__________ 1.082 703,300 1.23 799,500 96,200

  34. Converting Square Meters to Square Feet The Conversion Factors are: 1 square meter (m²) = 10.7639 square feet 1 square foot = .0929 square meters Converting m² to ft² = MORE ft² Converting ft² to m² = LESS m²

  35. Square Meters to Square Feet Formula: Square meters X 10.7639 Mr. and Mrs. Schmidt want a 250 square meter home. How many square feet will it be? 250 meters X 10.7639 = ______ sq. ft. 2690

  36. Square Feet to Square Meters Formula: Square feet X .0929 (1÷ 10.7639) How many meters in 20,000 square feet? 20,000 sq. ft. X .0929 = __________m² 1858 m²

  37. Convert Price Per Unit of Area Formula: Price/Unit of Area X Area Conversion Factor Apartment rents for €1000/m²/month Calculate rent in square feet €1000 X .0929 = €92.9/sq.ft./mo. [Price/m² X Meter to Sq.ft. Conversion Factor(.0929)= Price per sq.ft./mo.]

  38. Convert the Time Period Price Per Month X 12 = Price Per Year Price Per Year ÷ 12 = Price Per Month

  39. Putting it Together Currency:€70.83 X 1.23 = US$87.12/m²/mo. Area: US$87.12 ÷ 10.7639 = US$8.09/sq.ft./mo. Time: US$8.09/sq.ft./mo X 12 = US$97.13/sq.ft./yr.

  40. Key Point Review • Economic affects of globalization • How culture influences transactions • Expertise in market assessment • Currency and area conversion skills • Strengthening and weakening of currencies.

  41. The European Union

  42. Europe as an Economic Region

  43. Europe

  44. Maastricht Treaty--1992 • Common foreign and security policy • Cooperation on immigration and asylum • European police intelligence agency • EU citizenship and a central bank • Development of poorer EU countries • One currency European market

  45. Copenhagen Criteria • Democracy, rule of law, human rights and protection of minorities • Functioning market economy • Accept obligations of membership

  46. EU Constitution Concerns • Dwindling national identity • Rapidly expanding EU • Integration • Shrinking economies • Islamic radicalism • Distrust of powerful bureaucrats

  47. Euro Issue Requirements • Price stability • Sustainable government finances • Stable exchange rate • Convergence in long term interest rates

  48. Common side National side Must have 12 EU stars Greek coins may be made outside Greece E—Spain F—France S---Finland Germany has five mints Mint Codes A Berlin D Munich F Stuttgart G Karlsruhe J Hamburg EURO Coins

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