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FEBRUARY 20, 2019 || CANDACE CARLISLE

Dallas Firm Opens Doors for WealthyDallas Firm Opens Doors for WealthyGermans Looking to Invest in US Real EstateGermans Looking to Invest in US Real EstateInternational Capital’s Clients Prefer Long-Term Holds and ‘Aren’t the PeopleWho Speculate,’ Founder Says

Christiane Hepfer, founder and chairwoman of Dallas-based International Capital, said sheplans to buy more U.S. real estate. Photo: International Capital

On a busy morning at an of�ce in Dallas, a receptionist with the slight hint of a German accent greets andquickly hastens a guest to an adjacent conference room. When she arrives minutes later with a pot of coffee andvintage-looking cup and saucer, she explains the hubbub at the real estate investment �rm by saying, "OnTuesdays, it’s consulate day."

Each week, International Capital, a boutique �rm for high-net-worth individuals and families, is transformedinto a center for German affairs. Andreas Bremer, the president and chief executive of�cer, takes the lead inadvising more than 25,000 passport-holding German citizens and roughly 20 German corporations or af�liates

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of Germany-based businesses operating in North Texas. A visit with the �rm provides a glimpse into theworkings of a key international player in one of the nation's two biggest regional property investment hubs.

Bremer’s role as honorary consul of the Federal Republic of Germany dovetails into International Capital's corebusiness of representing German family of�ces with investment in U.S. real estate. The business has grownwith the help of referrals and a rise of wealthy individuals seeking a safe asylum for their holdings, saidChristiane Hepfer, International Capital’s chairwoman who started the �rm nearly four decades ago. It hadabout $100 million in transactions last year.

"We have different buckets of investors, some of which buy very stable, predictable properties with long-termleases and others that want to go into something a little bit more high risk and take the gamble," said Hepfer,who was born and raised in Germany but ultimately shed her German citizenship for a Canadian passport. "Wehelp them build an investment strategy that �ts that particular family of�ce and then you go out and look forprojects that �t that strategy."

International Capital is one of at least a dozen �rms in the Dallas-Fort Worth region bringing money to theUnited States from overseas. According to the most recent CBRE Americas Investor Intentions Survey, Dallas-Fort Worth ranked behind only Los Angeles among top markets for real estate investment in North Americaspanning all property types.

Even though International Capital executives are licensed to assist in buying and selling real estate, Hepfer saidthey act more like portfolio managers and acquisition agents rather than traditional brokers. The �rm helpsabout 50 of its longstanding – and undisclosed – clients buy two to three new properties each year. In all, thecompany oversees over 150 entities with ownership stakes in properties throughout the United States. It hasbegun construction on a $575 million mixed-use development in Princeton, Texas, a northern Dallas suburb.

Jim Struble, a longtime Dallas real estate investment executive, said International Capital has been able tocorral “some pretty good investments” from Germany into Texas and other U.S. states. The �rm’s internationalperspective also enriches the Dallas real estate community, he said.

Hepfer sat down with CoStar News to discuss International Capital:

CoStar News: CoStar News: What kind of property do you like to invest in? Why?What kind of property do you like to invest in? Why?

Christiane Hepfer: »Christiane Hepfer: » Of�ces are not our favorite type of investment. We prefer warehouses or even retail. Anof�ce building is great to have on a brochure, but I have never made serious money in an of�ce building. Everytime you have a new tenant in an of�ce building, you have to invest another $25 to $30 per square foot fortenant improvements, and you have to pay commissions. You lose one or two years of rent right there. We havedone our best in warehouses. We do medical of�ce buildings, but those are different because the tenants aremore long term.

What are the cultural differences between European and American investors?What are the cultural differences between European and American investors?

»» Americans like to go and make the fast buck by �ipping or taking advantage of a situation, while Europeansusually go at least 10 years for an investment term. For reasons of their own tax treatment in Europe, investorswant to stay long term and move a certain amount of their wealth to another country and just let it sit there,like a piggy bank. Their investments are usually long-term investments, and they aren't the people whospeculate.

How have International Capital's deals, like its big mixed-use development in Princeton, evolved over the pastHow have International Capital's deals, like its big mixed-use development in Princeton, evolved over the pastfew decades?few decades?

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»» You can't just say, 'It will come to me if I wait long enough,' there has to be something that needs to bepursued. Thirty years ago, we had high interest rates and high in�ation. If you sat on a piece of land longenough, in�ation would bail you out and you'd have a 6 percent to 7 percent value increase without doinganything. But now, and the last 10 to 15 years, there's been a period of low in�ation and it doesn't work thatway. You have to bring some to the table, whether its entitlements, zoning or infrastructure. You have to createvalue. You also have to �gure out what you can sell in the market and work backwards. Affordability, really inthe end, is the limit you hit with all of your developments.

What does the future hold?What does the future hold?

»» In 2019, we are pursuing further opportunities, and we are looking at all kinds of deals. We have no pre-conceived ideas as far as what an opportunity needs to look like. We don't want to limit ourselves. We are doingland and development. But we are also a little in selling mode with some particular projects in Colorado.Economically, right now, I would rather be a little more careful, and I think it's important to hedge risks by notborrowing a lot of money.

Any plans to expand the �rm?Any plans to expand the �rm?

»» Our problem right now is expansion. We have 15 employees, but we have certain positions in which we needbilingual native German speakers. Right now, with the immigration restrictions, we have people who haveapplied for visas, and we cannot get them processed. Sometimes the approvals come after your deadline is�nished and you have to start over. We are looking for people locally with German-speaking capabilities, butthose are hard to �nd and it's not like we have unemployment in Dallas. German is also not an easy secondlanguage. Our investors are an older generation, and we need executives to be meticulous and precise in theirlanguage with them. It's very, very dif�cult. Everything is on hold. So, we have to work around it.