A Practical Guide for Japanese Investors: Acquiring, Selling, and Refinancing New York City Real Estate

New York City has long attracted investment from Japanese individuals, family offices, and institutional investors seeking stability, liquidity, and long-term value. Whether acquiring a multifamily building, mixed-use property, office asset, or retail property, investors entering the New York market encounter a legal and regulatory landscape that differs significantly from many other jurisdictions.

At Belkin Burden Goldman, LLP (BBG), we have a long history of representing Japanese and other overseas investors in the acquisition, disposition, financing, leasing, and operation of New York City real estate (Fudosan) assets. Our attorneys regularly advise clients on ownership structuring, due diligence, financing, tax considerations, risk management, and post-closing operations that can shape the success of a transaction.

While every transaction is unique, understanding the key issues that arise early in the acquisition process can help investors reduce risk and position an asset for long-term success.

Selecting the Right Ownership Structure

One of the first decisions investors face is how to structure ownership of a U.S. real estate asset. The appropriate ownership structure depends on a variety of factors, including the investor’s tax planning goals, financing requirements, investment horizon, and whether the acquisition will be made by an individual, family office, investment vehicle, or institutional entity.

Foreign investors should also be aware of U.S. transparency and beneficial ownership reporting requirements that may apply depending on the ownership structure used for an acquisition. While reporting obligations continue to evolve, certain federal, state, lender, and transactional disclosure requirements may require investors to provide information regarding ownership and control of an entity. Evaluating these requirements early in the planning process can help avoid delays and facilitate a smoother transaction.

For Japanese investors, these considerations often involve coordination among legal, accounting, and tax advisors in both the United States and Japan. Establishing the ownership structure before entering into a purchase and sale contract can help streamline the transaction and avoid complications later in the process.

Understanding FIRPTA and Tax Considerations

Foreign investors acquiring U.S. real estate should be familiar with the Foreign Investment in Real Property Tax Act (FIRPTA), which can affect the tax treatment of future dispositions. FIRPTA is only one component of the broader tax analysis.

Investors should also consider New York State and New York City tax implications, potential withholding obligations, transfer taxes, and reporting requirements that may apply to the acquisition, ownership, refinancing, and eventual sale of a property.

Japanese investors should also consider how a U.S. real estate investment will be treated under Japanese tax laws. Depending on the ownership structure and the investor’s individual circumstances, Japanese tax considerations may influence acquisition, refinancing, and disposition strategies. In some cases, investors may benefit from depreciation deductions associated with U.S. real estate holdings, which can affect the overall economics of an investment.

Because the interaction between U.S. and Japanese tax laws is complex and highly fact-specific, investors should coordinate with qualified tax advisors in both jurisdictions before acquiring, refinancing, or disposing of a property. Addressing these issues early in the transaction can help inform ownership, financing, and disposition strategies.

Currency Exchange and Economic Considerations

Cross-border real estate investments are influenced not only by property fundamentals, but also by broader economic and currency-related factors. Because New York real estate transactions are generally conducted in U.S. dollars, fluctuations in the exchange rate between the Japanese yen and the U.S. dollar can affect acquisition costs, financing decisions, cash flow, and overall investment returns.

Currency movements may also affect the timing of acquisitions, refinancing transactions, and dispositions.

Investors should also consider the broader economic factors that influence real estate performance, including interest rates, financing costs, inflation, and market conditions. Many Japanese investors are attracted to New York real estate because of the market’s liquidity, transparency, and established market fundamentals.

Evaluating these factors alongside the characteristics of a particular asset can help investors develop a strategy that aligns with their investment objectives.

Due Diligence in the New York Market

Comprehensive due diligence is critical in any commercial real estate transaction. A thorough review may include:

• Title and Survey Matters
• Rent Regulation
• Zoning Compliance
• Existing Leases and Occupancy Arrangements
• Building Violations (Ihan koi), Open Permits (Kyoka-sho) and Regulatory Compliance
• Environmental Considerations
• Property Tax History
• Physical Condition Assessments
• Pending Landlord-Tenant Litigation and Disputes

Issues discovered during due diligence can affect the property’s value, financing, operational flexibility, or closing timeline. Identifying these issues early allows investors to negotiate solutions before closing rather than addressing them after taking ownership.

At BBG, our due diligence reviews are designed to identify issues that could impact a property’s value or future operations before a client becomes contractually committed to a transaction.

Special Considerations for Multifamily Properties

Investors pursuing acquisitions of rent-regulated multifamily properties in New York City should carefully evaluate the impact of rent regulation. Rent-stabilized and rent-controlled units can significantly influence a property’s economics, redevelopment opportunities, and long-term revenue potential.

Reviewing rent rolls, regulatory filings, tenant histories, and compliance records is often a critical component of the diligence process. Understanding these restrictions before committing to an acquisition can help avoid unexpected results after closing.

Because rent regulation can materially impact valuation, financing, and long-term business plans, investors should consult trusted counsel that regularly advises owners, landlords, and investors on New York City’s rent regulatory framework.

Financing Considerations for Overseas Investors

Obtaining financing for a New York acquisition often involves additional considerations when ownership includes foreign investors. Lenders may require enhanced diligence regarding ownership structures, beneficial ownership information, source of funds documentation, organizational authority, and cross-border financial arrangements.

These requirements vary depending on the lender and the nature of the transaction. Addressing financing issues early can help maintain transaction timelines and avoid disruptions to closing. Many of the same considerations may also affect future refinancing transactions.

Preparing for Closing and Beyond

Closing is only one step in the acquisition process. Investors should also prepare for operational and compliance matters that arise immediately after taking ownership.

Depending on the property and transaction structure, post-closing considerations may include:

• Ownership Registrations
• Transfer of Leases and Contracts
• Tenant Buyouts and Possession-Related Matters
• Security Deposit Transfers
• US-Based Bank Account Setup
• Property Management Transitions
• Property Management Selection (including negotiation of a property management agreement)
• Tenant Notifications
• Local Reporting Requirements
• Ongoing Compliance Obligations

Planning for these matters before closing can help ensure a smooth transition and uninterrupted operations.

Final Thoughts

New York City remains one of the world’s most active and transparent real estate markets, continuing to attract investment from Japanese individuals, institutions, and family offices. At the same time, the legal, tax, financing, operational, and regulatory issues that accompany New York real estate acquisitions, dispositions, and refinancing transactions require careful planning and experienced guidance.

BBG regularly advises Japanese and other overseas investors on acquisitions, dispositions, refinancing transactions, leasing, asset management, and ownership matters involving New York City real estate. From structuring investments and conducting due diligence to navigating financing, compliance, and operational issues, experienced counsel can help investors manage risk and execute transactions efficiently.

About Belkin Burden Goldman, LLP

Belkin Burden Goldman LLP (BBG) is a New York City law firm devoted exclusively to real estate law. Since 1989, BBG has represented owners, developers, investors, lenders, landlords, managing agents, and cooperative and condominium boards in some of New York’s most sophisticated real estate matters. With approximately 65 attorneys, the firm provides comprehensive counsel across all facets of real estate law, including transactions, leasing, finance, development, construction, land use and zoning, tax exemptions and incentives, cooperative and condominium law, rent regulation, administrative law, and litigation.

About the Author

Michael A. Mulia is a Partner in BBG’s Transactional Group. He advises clients on commercial real estate acquisitions, dispositions, financing, and leasing matters nationwide, with significant experience representing Japanese and other overseas investors acquiring New York City real estate assets.

Michael can be reached at mmulia@bbgllp.com or 212-867-4576.