An Ivanhoé Cambridge Inc. venture has agreed to buy a Manhattan office tower from Blackstone Group LP for about $2.25-billion (U.S.), extending a surge of demand for prime U.S. properties, two people with knowledge of the deal said.
The Ivanhoé group signed a contract Monday to purchase 1095 Avenue of the Americas, a 42-story building on Bryant Park, said the people, who asked not to be named because the transaction is private. The sale would be the largest of a whole U.S. office property since a group led by Boston Properties Inc. bought the General Motors Building in New York for a record $2.8-billion in 2008, according to Real Capital Analytics Inc.
Stable, well-leased U.S. real estate has attracted investors from around the globe seeking higher yields than bonds and a way to benefit from the recovery in the U.S. economy. Canada has been the biggest foreign buyer of American commercial properties since 2010, Real Capital data show.
"The New York market alone has more office inventory than the entire country of Canada," Adam Adamakakis, executive vice-president for U.S. investments at Ivanhoé Cambridge, said in an interview last year.
Ivanhoé, a unit of pension fund Caisse de dépôt et placement du Québec, has been working in a venture with Chicago-based Callahan Capital Partners to boost its real estate holdings. The Canadian investor has plans to accelerate a U.S. expansion over "the next several years," Adamakakis said in the 2013 interview.
Sébastien Theberge, a spokesman for Montreal-based Ivanhoé, and Peter Rose, a spokesman for Blackstone in New York, declined to comment on the 1095 Avenue of Americas deal. Doug Harmon of Eastdil Secured LLC, the broker on the sale, also declined to comment. The agreement was reported Monday by the Wall Street Journal.
The Bryant Park tower is located between Times Square and Fifth Avenue. The building is almost fully occupied, said one of the people with knowledge of the sale. It is home to Verizon Communications Inc.'s headquarters and offices for MetLife Inc. Whole Foods Market Inc. has leased retail space.
Blackstone acquired the skyscraper in its $39-billion takeover of Sam Zell's Equity Office Properties Trust in 2007. The world's biggest real estate private-equity firm completed about $300-million in renovations.
The property, also known as 3 Bryant Park, attracted interest from domestic and foreign investors, including sovereign wealth funds and real estate investment trusts, said one of the people with knowledge of the deal.
The sale to the Ivanhoé venture is being done at a capitalization rate of about 4.5 per cent, said the people with knowledge of the investment. Cap rates are a measure of investment yield used in real estate. They are calculated by dividing net operating income by purchase price.
The transaction is expected to be completed close to the end of the year or early in 2015, said one of the people.
Canadian investors bought stakes in properties worth $8.3-billion this year through Sept. 24, after $11.1-billion of deals in all of 2013, according to Real Capital, a New York-based research company. Blackstone in September sold a group of Boston office buildings to investors led by Oxford Properties Group, a unit of the Ontario Municipal Employees Retirement System.
Ivanhoé had more than $35-billion of assets as of Dec. 31, according to its website. The company owns mainly shopping centres, office buildings and apartment properties in Canada, the U.S., Europe, Brazil and Asia.
Last year, the families of Chinese real estate developer Zhang Xin and Brazilian banking billionaire Moise Safra bought a 40-per-cent stake in the GM Building in a transaction that valued the 50-story tower at about $3.4-billion. The two bought their stakes from a Goldman Sachs Group Inc. fund that invests for the sovereign-wealth funds of Kuwait and Qatar, and from Meraas Capital LLC, a Dubai-based private-equity firm, a person with knowledge of the sale said in June 2013. Boston Properties retains a 60-per-cent stake in the GM Building.