(Reuters) – Canadian investment in U.S. commercial real estate is on track to hit record levels this year, once Canada’s second-largest pension fund closes a US$2.25 billion deal to buy a landmark Manhattan property, according to data from property research firms.
Canadian pension funds and developers have been raising their investment in foreign real estate this year, primarily in the United States, as they seek alternatives to a consolidated domestic market.
The deal by Ivanhoé Cambridge, the real estate arm of Québec’s Caisse de dépôt et placement du Québec, and Chicago-based Callahan Capital Properties, to buy the 42-storey 1095 Avenue of the Americas building in Manhattan from Blackstone Group (BX.N) has not yet closed, two people familiar with the matter said. The Caisse manages Québec public and private sector pension funds and insurance funds.
A final announcement of the purchase may take weeks.
Canadians had already poured more than US$8 billion into U.S. commercial real estate in the first three quarters of 2014, surpassing the US$7.8 billion spent during the same period in 2013, according to Jones Lang LaSalle and Real Capital Analytics. Canadians spent US$11.86 billion on U.S. commercial property in all of last year and they are on target to surpass that in 2014.
“The domestic Canadian market is quite tightly held by the domestic pension funds,” said Lucy Fletcher, vice president, international capital group and capital markets at Jones Lang. “Very few of the assets are trading in the current market.”
Canada has been the biggest foreign buyer of U.S. commercial property for the past four years, according to data from New York City-based Real Capital.
Since 2010, Canadian investors have bought US$43.4 billion in commercial U.S. property – or 1,530 properties – spending four times as much as second-placed China.
The Ivanhoé deal was previously reported in the Wall Street Journal. Upon completion, it will mark the second-highest price paid for an office building in the U.S. since the 2008 sale of the General Motors building in New York for US$2.8 billion.
A spokesman for Montréal-based Ivanhoé Cambridge, which has US$40 billion in assets, declined to comment. The Québec fund’s other New York investments include Manhattan office towers 1211 Avenue of the Americas and 1411 Broadway.
The purchase would be the latest U.S. acquisition by Ivanhoé Cambridge with Callahan. The two formed an alliance in 2012 to expand Ivanhoé’s U.S. commercial holdings.
(Reporting by Allison Lampert; Editing by Martin Howell)
Photo courtesy of Shutterstock