Canadian pension funds snap up New York towers

Ivanhoe Cambridge and Canada Pension boost commercial property holdings in Manhattan

PUBLISHED : Wednesday, 02 July, 2014, 4:49am
UPDATED : Wednesday, 02 July, 2014, 4:49am

Canada's two largest pension funds are expanding their holdings of New York real estate, announcing separate deals to buy stakes in Manhattan office towers.

Ivanhoe Cambridge, the Montreal-based real estate unit of pension fund Caisse de depot et Placement du Quebec, agreed with its joint-venture partner to acquire a 49 per cent interest in 330 Hudson St for about US$150 million, according to a statement.

Canada Pension Plan Investment Board, the country's largest pension fund, is taking a 45 per cent stake in 1 Park Avenue, controlled by Vornado Realty Trust.

Canadians were the biggest foreign buyers of commercial property in the US last year and the second-largest in New York, behind the Chinese, according to Real Capital Analytics.

Ivanhoe Cambridge has made five US office deals through its partnership with Callahan Capital Properties as it seeks to boost its real estate investments.

"Canada has tremendous financial resources with which to invest and they're some of the largest sovereigns in the world," said Doug Harmon, a broker with Eastdil Secured who worked on both deals. "They've had a big head start as far as investable dollars and making friends and relations in New York."

Ivanhoe Cambridge's Manhattan deals include an October agreement for a 51 per cent stake in the News Corp building at 1211 Avenue of the Americas.

The firm's investment in 330 Hudson, located in the in-demand midtown south neighbourhood, values the 16-storey building at US$306 million. Beacon Capital Partners, represented by Eastdil in the transaction, recently led a redevelopment of the 467,000 sq ft tower, including the addition of eight column-free floors.

Ivanhoe Cambridge was interested in the property because of its potential to lure tenants from the technology, media and information industries, said Adam Adamakakis, Ivanhoe Cambridge's executive vice-president for US investments. Those companies have been New York's most active office renters in recent years.

"We like the neighbourhood, we like the asset and we like tenants that it attracts," Adamakakis said.

Manhattan has about 400 million sqft of office space, roughly equal to the office space in all of Canada, helping to lure the nation's investors, Adamakakis said.

Through its partnership with Callahan, Ivanhoe Cambridge was looking to invest in nine US markets, including Washington, San Francisco and Los Angeles, he said.

Toronto-based Canada Pension invested US$108 million to boost its stake in 1 Park Avenue, a 925,000 sq ft property east of Herald Square, to 45 per cent, the company said in its statement. It previously held an indirect interest of about 11 per cent through an investment in a Vornado fund. Eastdil's Harmon and Adam Spies were the brokers on the deal for Vornado.

The investors value the building at US$560 million, including the assumption of US$250 million in debt. New York-based Vornado bought a 95 per cent stake in the tower in 2011, which valued it at US$427 million.

"For us, and perhaps other institutional investors, the strength of New York and the resilience of New York in the long term are very attractive," said Peter Ballon, a vice-president and head of real estate investments in the Americas for Canada Pension. "The real estate conditions right now in terms of fundamentals are very strong and we believe that it's a market that's going to be around for the long run."

Canada Pension's most recent New York acquisition was in 2012, when it bought a stake in 10 East 53rd Street. The majority owner of the 388,000 sq ft tower is SL Green Realty Corp, Manhattan's largest office landlord.