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Monthly Archives: June 2014

Canadian Buyers Ivanhoe Cambridge and Canada Pension Plan Investment Board Announce Separate Joint Venture Deals for Manhattan Office Towers

Canadians were the biggest foreign buyers of commercial property in America last year and the second-largest in New York, behind the Chinese, according to global commercial real estate and data firm Real Capital Analytics Inc.

Year-to-date Canadians having already purchased over $1 billion worth of property in NY and more than $7 billion the Americas. Today, Canada’s two largest pension funds announced separate deals to buy Manhattan office towers.

Ivanhoe Cambridge Inc., the Montreal-based real estate unit of pension fund Caisse de depot et Placement du Quebec, agreed with its joint-venture partner, Callahan Capital Partners, to acquire a 49 percent interest in 330 Hudson St. for about $150 million, according to a statement today. Canada Pension Plan Investment Board, the country’s largest pension fund, is taking a 45 percent stake in 1 Park Ave., controlled by Vornado Realty Trust.

Zara Owner Purchases $255M Toronto Building as Activity in Canada Increases

Zara founder Amancio Ortega Gaona is reportedly in the process of closing a $255 million deal in Toronto’s upscale Yorkville commercial district for a 270,000 square foot mixed retail and office building located at 150 Bloor St. W. With a real estate portfolio consisting primarily of high-end properties throughout Europe and the U.S., this would be Ortega’s first acquisition in Canada.

According to data from Real Capital Analytics (RCA), a global research firm focused on commercial real estate transactions, Ortega’s real estate holding company Ponte Gadea SL has obtained $5.9 billion in acquisitions since 2001, primarily in the U.S., Spain, and the United Kingdom.

The deal takes place alongside increasing foreign interest in Canada’s commercial real estate market, a contradictory trend from recent years, where high transaction fees and low returns steered most cross-border investors elsewhere.

“Canada looks expensive for foreign buyers,” observes Dan Fasulo, Managing Director of Real Capital Analytics.

However, with activity from REITs slowing, pension funds and private investors (including high-net worth families) looking to secure long-term returns are expected to be the most active buyers in Canadian real estate in 2014.

Seoul Office Market Outpaces Singapore by more than $1 billion; KKR Acquires K-Twin Tower

Office prices in Seoul, Korea rose 11 percent in the year to April 30, with yields of 5.67 percent according to global commercial real estate data and analytics firm Real Capital Analytics. In fact, Seoul was Asia’s most-active office market outside China and Japan in the last 12 months, beating Singapore by more than $1 billion with $4.33 billion of sales, RCA data shows.

KKR & Co. has recent acquired the K Twin Tower, a skyscraper in downtown Seoul, within walking distance from properties owned by the wealth funds of Azerbaijan and Singapore.

Majority Stake Purchase of 1 Park Avenue Shows Cross-Border Transactions from Canada Continue to Rise

Canada Pension Plan Investment Board is in the process of purchasing a 49% majority stake in 1 Park Avenue, a 20-story, 925,000 square foot prewar office tower in Manhattan owned by Vornado (VNO) Realty Trust. The transaction is said to be valued at $565 million.

“The purchase by Canada’s largest pension fund would be the latest demonstration of that country’s demand for U.S. real estate, particularly in New York City,” says Dan Fasulo, Managing Director at Real Capital Analytics (RCA), a global research firm focused exclusively on commercial real estate data and analytics.

Data from Real Capital Analytics shows Canadians are the top buyers of U.S. commercial properties, with cross-border transactions from Canada reaching $11.4 billion in 2013. RCA data also shows that Canadian transactions are the second largest source of cross-border capital for the U.S, following behind $2.4 billion in deals from Chinese investors last year.

Of the $11.4 billion from Canada last year, $1.4 billion accounted for New York City properties.

“Canadians, particularly institutional money managers, REITs, pension funds, are flush with capital due to the strong environment in Canada, and frankly they’ve run out of things to buy,” Fasulo states. “It shouldn’t surprise anyone that they would look to the U.S. to allocate some of that money.”

“There’s a theme of Canadian investors partnering with some of the savviest guys in the business,” Fasulo adds.

Distressed Loans Pool Grows Smaller

A 10-story office building located in Wilmington, DE is looking for a new name. The buidling was acquired by Gearing Capital Partners and Castlelake L.P. in March 2014. The troubled asset has nearly 100,000 square foot and was originally purchased in 2005 for $11.8 million.

Nationally, there were an estimated $412 billion in defaulted loans in the commercial real estate sector, according global commercial real estate data and analytics firm Real Capital Analytics. In the past five years, all but about $140 billion of those distressed loans were resolved. These properties are “no longer a significant factor weighing down market trends, but will remain a part of the marketplace through 2014 and into 2015,” stated US Capital Trends, Real Capital Analytics market report on US commercial real estate trends.

Cross-Border Capital Drives UK Investment Volume to £42 Billion

Enthusiasm towards the UK commercial property market has been flourishing worldwide, with cross-border capital being the largest contributor to price gains. Data from Real Capital Analytics (RCA), a global data and analytics firm focused exclusively on commercial real estate transactions, shows that total investment volume to UK commercial properties reached £42 billion in Q1’14, the highest since its 2007 peak.

Data from the RCA/PD UK Commercial Property Price Indices (RCA/PD UK CPPI) shows that asset prices in the UK are up by 11% year-over-year, coinciding with sharp drops in yield.

The rising popularity of the UK market can be attributed to a number of political and economic factors. Political stabilization from within the nation coupled with a recovering economy has helped spur more affordable prices and lower interest rates, a win-win factor for a great deal of foreign investors searching for yield. Meanwhile, low returns from equities and bonds has helped shift investors towards investing in commercial properties.

Institutional investors looking for longevity are likely to see greater potential in global markets such as London, where the potential for long-term returns are strong.

HSBC Headquarters in London Poised for Record-Setting Sale

HSBC sold its London headquarters in the spring of 2007 in the single largest real estate transaction in British history. The building is now for sale again and analysts predict the price could surpass the 2007 record of $1.8 billion.

It traded right at the top, and then again at the bottom and now it’s right back up at the top,” said Simon Mallinson, managing director of Real Capital Analytics, a company that tracks global real estate transactions. “The tower is reflective of where the city is.”

Prices for London office buildings, not adjusted for inflation, have surpassed their previous high point reached in 2007 by 10 percent, according to Real Capital.