INVESTMENT: A Safe Haven for Frightened Funds

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Unlike the Saudis, the aggressive Iranians have been scouting the world for imaginative long-term investments. But although they succeeded in making a deal for a 25% interest in Krupp, the West German heavy-manufacturing complex, they have not pursued any similar investment in the U.S. since their abortive attempt to buy into Pan American Airways in 1975. Lately, Iranian investment money has been appearing in the U.S. in less politically sensitive ventures like real estate, notably in New York, California and Louisiana.

New Patterns. The capital invasion is heartily welcomed by Washington. Commerce Department officials eagerly note that besides helping to offset somewhat the U.S.'s currently huge import bill (TIME, July 11), foreign investments in manufacturing have helped provide jobs (1.5 million by Commerce's reckoning) and broaden the tax base of local governments. Foreigners, for their part, are often surprised by the freedom of operation they enjoy in the U.S. Foreign businessmen find a tolerance of competition that would be inconceivable in their own countries. Example: Lucas Industries, the big British auto-parts maker, dispatched one of its top men to Detroit to announce that it intended to attain sales of $500 million a year by 1980—at the expense of U.S. companies.

By now, the flow of new investment funds from overseas has begun to take definite patterns. The Southeast has been getting the biggest share of corporate money, partly because foreign manufacturers are attracted by the region's relatively low labor costs and non union tradition, and partly because state and local governments there have aggressively pursued them with tax incentives and other attractions (see box).

Private investors, as opposed to companies, are turning up all over the U.S., mostly in search of real estate deals—the traditional haven for nervous money from abroad. Canadians. Iranians, Arabs (sometimes masquerading as Iranians), Germans and Japanese are leading bidders. Kenji Osawa. a Japanese investor, has bought six of the eight hotels managed by Sheraton in Hawaii; Lehndorff Management, the U.S. arm of a Hamburg investment management firm, estimates that foreigners will buy more than $2 billion worth of U.S. real estate this year, with West German investors among the leading purchasers.

Says Lehndorff's U.S. general manager, M. Thomas Lardner: "The enthusiasm of the Europeans for U.S. farm land is unbelievable." In Houston, Banker Richard Reneberg complains that "a problem we're faced with is coming up with enough good property to satisfy foreign investors."

Set Up. With the Communist parties of Italy and France stridently confident about future elections, the flight of capital is bound to continue. Otto Wolff von Amerongen, who heads his own $1 billion steel firm and is chairman of the German chambers of commerce and industry, shudders at the thought of a leftist victory in a Common Market country. Says he: "We cannot digest within the Community a Communist-dominated government." That may be so, although other European commentators are less fearful about Communist participation in Cabinets. Meanwhile, the U.S. Commerce Department has set up a new office of foreign investment to welcome all those well-heeled foreigners.