The Canadians are coming for a piece of the U.S. real estate pie.

Since the beginning of the year, Toronto-based REIT RioCan Real Estate Investment Trust formed a $138 million joint venture with Inland Western Retail Real Estate Inc., amassed a 14.3 percent stake in Cedar Shopping Centers Inc. and formed a joint venture with Cedar to invest up to $500 million in grocery-anchored shopping centers in the Northeast and Mid-Atlantic. During the same period, Canada Pension Plan Investment Board (CPP), a Toronto-based investment management firm, formed a $370 million joint venture with Kimco Realty Corp. and Toronto-based Brookfield Asset Management Inc. became the stalking horse bidder in General Growth Properties’ reorganization plan.

The increased activity from the Canadians is no coincidence, industry sources say. Historically low valuations on U.S. retail properties, combined with a strong Canadian dollar, little competition from U.S. players and limited opportunity for growth at home, have made this an opportune time for Canadian firms to invest in U.S. malls and shopping centers. In fact, as the year continues, more Canadians and other international investors may continue to purchase properties stateside, according to Suzanne Mulvee, senior real estate economist with the CoStar Group, a Bethesda, Md.-based research firm.

“I think this is going to be [a trend] where you will see international capital flowing in from all parts of the world,” Mulvee says. “U.S. real estate values right now are 40 percent down from the peak. That wipes out equity for most [domestic] players. A lot of these players have got to recapitalize their properties. Having fresh capital come in from foreign REITs is a great source for that.”

According to a survey conducted by the James A. Graaskamp Center for Real Estate at the Wisconsin School of Business, in the fourth quarter of 2009, 50 percent of global real estate investors identified the U.S. as providing the best opportunity for capital appreciation. The figure was up 27 percentage points from 2006. It was around that time that Brookfield Asset Management made the move to purchase U.S. retail REIT Mills Corp., only to be outbid by Simon Property Group.

Similarly, RioCan attempted to enter the U.S. market through a joint venture with Ramco-Gershenson Properties Trust in late 2006, but then backed out, likely because it deemed the risk too high, according to analysts’ assessment at the time.

However, foreign investors’ interest in U.S. real estate properties has been gradually increasing as valuations have dropped. During the past two years, limited acquisition opportunities and inability to realistically assess property values have prevented many from making a move, according to a recent report from the Association of Foreign Investors in Real Estate (AFIRE), a not-for-profit trade group. This trend has shifted in 2010, as the U.S. economy appears to have turned a corner and banks are starting to work on backlogs of distressed properties sitting on balance sheets.

As a result, two-thirds of respondents to the James A. Graaskamp Center survey plan to increase their investment in U.S. real estate assets this year, including a 62 percent increase in equity and 83 percent increase in debt allocations. Today, multi-family ranks as the most desirable asset class among global investors. Retail ranks near the bottom, after office and industrial properties but before hotels.

But Canadian investors might find U.S. retail particularly attractive because they see limited opportunity for growth on their home turf, says Jason Lail, senior real estate analyst with SNL Financial, a Charlottesville, Va.-based research firm. RioCan’s joint venture with Inland Western, for instance, allows the Canadian REIT to enter a new market in Texas. At the same time, the venture limits RioCan’s investment risk because Inland, a firm that is already active in Texas, will be in charge of managing the properties.

According to the James A. Graaskamp Center survey, in 2010, 14 percent of investors identified Canada as “the most stable and secure real estate investment environment.” That compares to 44 percent of investors who identified the U.S. as the highest ranking country in that respect.

“I think retail ownership in Canada is pretty well saturated at this point and it looks like they are looking for extension growth,” Lail says. “With joint ventures, they are able to invest in assets in markets they are not familiar with through firms that know those markets and have relationships with tenants in those markets. They are able to reduce risk relative to other growth strategies, like ground-up development or diving into a market they just don’t know well.”

Like Mulvee, Lail says he expects to see more foreign investors enter the U.S. real estate arena in the coming months, including both Canadian REITs and Australian limited property trusts.