Blackstone Group LP is selling real estate holdings, and it's likely there will be significant Canadian interest in picking up prime properties.
The Wall Street Journal is reporting that the Caisse de dépôt et placement du Québec, through its Ivanhoe Cambridge real estate arm, is close to buying Blackstone's half share of a building at 1411 Broadway, in the Times Square neighbourhood of New York. (Here's a look at the building) It would be a substantial increase to the pension fund's New York office portfolio, which at the moment lists only three buildings. The price would value the 40-storey building at $735-million (U.S.), according to the Journal.
Blackstone Group is simplifying its holdings and shedding some assets as it prepares to sell its U.S. portfolio of office buildings, which analysts have valued at as much as $22-billion, the Wall Street Journal reports. While a sale of Blackstone's full office portfolio might not take place for a year or more, potential buyers are already circling, It's likely that there will be more Canadian interest than just the Caisse. Given the amount of investment that Canadian institutional players are currently making in office buildings, and the lack of good completed projects that come on the market, it's pretty much a given that Canadians –including Ivanhoe Cambridge's rivals at the other major pension plans – are part of that pack.
Just this past weekend the Canada Pension Plan Investment Board committed $1.04-billion to a project that will see two office towers built in Sydney, the largest investment CPPIB has ever made in a single real estate project. Last month Brookfield Office Properties, one of the publicly-traded subsidiaries of Toronto-based Brookfield Asset Management Inc., spent $829-million on a portfolio of office buildings in London's financial district. Brookfield also announced that it will begin construction on a second office tower in Toronto's Bay Adelaide Centre. In May, Toronto's Dundee REIT partnered with Calgary's H&R REIT to pay $1.27-billion for Scotia Plaza, the highest amount ever for a Canadian office building.
Dundee REIT has done a deal with Blackstone recently. It bought 29 buildings from Blackstone and Slate Properties – many of which were in Toronto's core – a year ago for $832-million.
Many other Canadian players have close ties to Blackstone. CPPIB, for instance, is a significant investor in its real estate funds.
The New York tower that the Caisse is eyeing is in a prime location in midtown, near transportation links. Its biggest tenant is Jones Group, a company that manufactures clothing, according to Bloomberg News.
The building was built in 1970 and renovated in 1999, according to the web site of Swig Co., which owns the other 50 per cent of the building.
The building has long had a Canadian connection. Blackstone got its share when it teamed up with Canada's Brookfield to purchase the office portfolio of Canada's Trizec Properties.