Saudi Arabia, the largest country on the Arabian Peninsula, is quickly rising to become a major foreign player in U.S. commercial real estate. It’s an indisputable fact that much of Saudi wealth, along with the country’s economy as a whole, is inextricably linked with its vast oil reserves. Of late, however, many Saudi investors have been looking to diversify their holdings, with much of their attention focused on American assets.
During the four quarters ending in second-quarter 2021, funding sources that included Saudi investors placed $2.82 billion into U.S. real estate assets, according to data from Real Capital Analytics (RCA). That’s good for fourth among all foreign sources of capital into the U.S. during this time frame, leapfrogging nations with strong overseas investment records such as Germany (fifth place), the United Kingdom (sixth) and Switzerland (seventh). Even more notably, this level of investment activity represented an astounding 320% year-over-year increase in dollar volume. Much of this movement happened during the first half of 2021, putting Saudi Arabia on pace to continue its improvement among countries for inbound investment from 19th in 2019 to 11th in 2020, according to RCA.
Recent Saudi investments have been spearheaded by the Olayan Group, a decades-old conglomerate that has been placing money into key global markets such as New York and London since the 1950s. In February 2021, Olayan America, the company’s U.S. branch, joined Pennsylvania-based Morgan Properties in acquiring a portfolio of 48 apartment complexes from Star Real Estate Ventures for $1.75 billion
. Known as the North Star Portfolio, the purchase encompassed some 14,400 units across 11 states. It was one of the largest multifamily transactions of the year and added five states to Olayan’s already broad footprint in rental housing, including lucrative footholds in Texas and Florida.
According to CBRE, the transaction helped to push Saudi Arabia into second place among cross-border sources of U.S. multifamily investments during first-half 2021. Saudi Arabia, with 29.3% of the international volume from January through June of last year
, trailed only Canada’s share of 33.3% during these six months. And it wasn’t Olayan’s only big move in the past 18 months as it teamed with Morgan Properties in October 2020 to acquire an 18-property, 3,256-unit apartment portfolio in the Carolinas for $323 million.