It's a common real estate fantasy, but a good one. After years of struggling to unload a sinking portfolio, you find an Arabian investor who swoops in on a Gulfstream jet filled with cash and buys up the whole thing, without too much fuss about petty details like valuations.

Like all the best fantasies, the idea doesn't come completely out of nowhere. Middle Eastern investors recently took stakes in the Chrysler Building and the GM Building in New York. In total, they acquired $3.1 billion of U.S. assets in the first three quarters of 2008, just behind Germany, which ranked No. 1 with $3.25 billion, reports Real Capital Analytics.

But such a huge outlay of money is the exception, not the rule. Reeling in an Arabian investor is a longshot at best, especially since Mideast property investment in the U.S. is down sharply from 2007. Still, that Gulfstream has to land somewhere, and experts say some assets are more likely to attract a closer look than others.

Yield is key

“On the whole, yield is pretty important to most Middle Eastern investors,” says Michael Haddock, CB Richard Ellis' director of research for Europe, the Middle East and Africa. At the moment, he says, these prized investors probably won't look at anything yielding less than 7%, a requirement that tends to push them toward Class-A properties.

The 7% yield threshold applies to present — not projected — cash flow. Development deals are often not attractive to investors who need to be compliant with Islamic law, the Sharia. Restrictions against giving or taking interest mean that it's easier to structure Islamic-compliant financing for a deal when the cash is already coming in, Haddock says.

It helps too if you're trying to sell property associated with a business not forbidden by the Sharia, such as gambling, banking, or alcohol, according to MacLaine Kenan, director of Arcapita, a Bahrain-based investment bank with offices in Atlanta. Sharia compliance is “a high priority for many,” he says.

In other respects, Middle Eastern investors may be less particular than U.S. institutional investors. Unlike a U.S. pension fund such as CalPERS, which allocates a set amount for real estate investment, some Middle Eastern sovereign funds don't follow a strict allocation model, Kenan says. That's good news if you're trying to peddle a big bargain.

Familiarity breeds investment

Being located in a first-tier city is a plus. “There's a higher familiarity with bigger markets,” Kenan says. “They would rather [acquire] offices in D.C. than offices in Kansas City.”

Contacts are as crucial in doing business in the Gulf as they are anywhere else — maybe more so. “Having existing relationships is much more efficient and effective because it's hard to create your own road show and go knock on some doors in Riyadh,” Kenan says.

But if one of those doors should open, will your investors have the money? The good news is that although the crazy days may be over for a while, the oil-exporting region isn't exactly broke. Even at $55 to $60 per barrel, Kenan says, Gulf oil remains extremely profitable. And despite the relative cash crunch, there are a few reasons to think Mideast interest will stay strong for at least the next few months.

Property prices in Dubai are falling and investors there may be looking for a safe haven. The fact that oil is paid for in U.S. dollars also makes currency risk a non-issue.

Finally, the coming regime change in Washington, D.C. could help. President Bush is unpopular in most of the Middle East, outside of Israel. An April 2008 Gallup survey of the United Arab Emirates found that only 7% of respondents approved of U.S. leadership. Middle Eastern institutional investors put off by post-9/11 U.S. visa hassles and Patriot Act paperwork could well be more enthusiastic about investing in a country led by Barack Obama, whose first name means “blessed one” in their own language.

Bennett Voyles is a veteran commercial real estate reporter and NREI's Paris correspondent. For questions or comments, readers can e-mail him at benvoyles@yahoo.com.