Stuyvesant Town-Peter Cooper Village, a collection of more than 55 buildings, is home to more than 25,000 residents in Manhattan.Mario Tama/Getty Images
Ivanhoé Cambridge is taking Manhattan, one high-rise at a time.
The Canadian real estate heavyweight is making its largest purchase in New York, teaming up with U.S. private-equity giant Blackstone Group LP to acquire a group of apartment buildings for about $5.3-billion (U.S.).
Stuyvesant Town and Peter Cooper Village are a collection of more than 55 red-brick buildings home to more than 25,000 residents. After a decade of change, the buildings are now a mix of luxury units that allow landlords to charge rent of up to $10,000 a month and a dwindling number of apartments offering below-market-value-protected rents for qualified middle-class workers.
New York Mayor Bill de Blasio touts the deal as a way to protect the remaining 5,000 units of affordable housing for families with moderate incomes for the next 20 years and cap rents for other tenants. Ivanhoé and Blackstone agreed to these terms, and to conserve green space and add services for seniors.
Montreal-based Ivanhoé, the real estate investment arm of pension-plan manager Caisse de dépôt et placement du Québec, had considered buying the apartments twice before.
The property aligns with its strategic focus on office, residential and retail real estate in select major cities. But the lingering uncertainty over how New York might crusade for more affordable housing cast a shadow over the asset, and a previous owner's ambitions to attract wealthier families – and threats to push tenants out – had led to tensions in the community.
In 2006, when the U.S. real estate market was thriving, BlackRock Inc. and New York developer Tishman Speyer bought the complexes for $5.4-billion with the idea to improve the popular units and raise rental prices. The recession brought those plans to a halt and the two owners faced legal hurdles, tenant complaints and mounting debt. The owners handed the whole mess over to creditors who have been searching for a new owner.
"I think the agreement with the city is the difference here," said Sylvain Fortier, global chief investment officer at Ivanhoé, of why now was the right time to buy. "As much as it was important for the mayor and the City of New York to protect a certain number of units, it was important for us, as well, to have the support and the backing of the city as well as the tenant association."
Mr. Fortier added that Ivanhoé has been investing in New York for 20 years, so it's comfortable committing such a large amount of capital to the market. He said the property can be tailored to fit changing demands for housing the community may have over time.
In the past five years, Canadian investors have consistently invested more in U.S. commercial real estate – such as industrial buildings, hotels and office property – than any other country, data from real estate research firm Real Capital Analytics shows. Canada's largest institutional investors have been eagerly acquiring prestigious properties in key cities such as New York, Chicago and San Francisco.
Earlier this year, Ivanhoé's acquisition of Three Bryant Park in New York for $2.2-billion, alongside another investor, broke records as the the largest U.S. acquisition of a non-residential property ever made by a Canadian investor, according to data from Thomson Reuters.
The more Ivanhoé invests, the more it has tailored its strategy. "One of the biggest lessons we've learned over the last 15 years [is] we don't do one-off investing any more," said Daniel Fournier, chief executive officer of Ivanhoé.
Rather than opportunistically picking up properties scattered across the United States, Ivanhoé has sought to build a critical mass of properties in a few select cities where it understands the communities, has local partners and can move quickly. "We were underinvested in the United States four years ago, so we decided to try to correct that every opportunity we got," Mr. Fournier said. "We have a city strategy – 15 cities around the world – rather than countries. And New York is the city in which we've invested the most."
Ivanhoé had $48-billion (Canadian) in assets under management as of the end of June.
Ivanhoé also has an appetite to add to its holdings in other countries. Just a few months ago, Ivanhoé made its first investment in Australia in an office tower deal that also involved a partnership with Blackstone.