CIC’s purchase of a stake in 1221 Avenue of the Americas makes it one of the biggest investors in NYC real estate for 2016
China Investment Corporation (CIC) has forked out $1.03 billion to purchase a 45 percent stake in a building in New York’s iconic Rockefeller Center, a deal which makes the Chinese sovereign wealth fund one of the biggest buyers of Manhattan real estate in 2016.
In a deal announced at the close of 2016, CIC bought the partial ownership of the McGraw-Hill Building at 1221 Sixth Avenue in Midtown Manhattan from Canada Pension Plan Investment Board (CPPIB). CIC made the acquisition of the tower in the registered US National Historic Landmark through Dallas-based real estate investment manager Invesco Real Estate with Eastdil Secured brokering the transaction.
CIC Turns Focus to US
This is CIC’s second deal in New York within a year, after it purchased a 49 percent stake of the 50-storey 1 New York Plaza from Brookfield Property Partners in May for $683.5 million. Together, the two transactions give CIC a total of nearly $1.7 billion of investment in Manhattan real estate in 2016, thrusting the sovereign wealth fund to the top ranks of New York real estate buyers.
This US presence is a new development for CIC, which has long been China’s top cross-border buyer of real estate assets, but one which had not ventured into the US property market until May’s deal with Brookfield.
During 2015 the sovereign wealth fund had focused its attention on Europe and Australia. Late that year CIC had purchased Morgan Stanley-controlled Investa Property Group’s office assets for $1.79 billion in Australia. In Europe the state-backed fund had partnered with AEW Europe in 2015 to acquire a portfolio of 10 shopping centers in France and Belgium for $1.35 billion from CBRE Global Investors.
Chinese Sovereign Fund Now Working With Rockefeller
CIC chairman Ding Xuedong has made CIC into China’s biggest overseas real estate investor
CIC’s second New York deal values the 50-story, 2.6 million-square-foot (241,547 square metre) McGraw-Hill Building at about $2.29 billion. New York-based Rockefeller Group will continue to manage the tower and retain its 55 percent interest, according to a statement from CPPIB.
The Canadian pension fund manager had purchased its stake in the property, which is also known as 1221 Avenue of the Americas, in 2010 from SL Green Realty for $576 million, valuing the 1969 vintage tower at $1.28 billion at the time.
“Valuations in the Manhattan office market have increased significantly since our acquisition of 1221, and we feel this is an opportune time to monetise our position in the property,” said Hilary Spann, head of US real estate investments of the CPPIB, in the statement. “Manhattan remains a target market for us, and we continue to pursue new investment opportunities here and in other key US real estate markets.”
One of four towers added to the Rockefeller Center complex in the 1960s and 1970s, amenities of the site include an auditorium for meetings, a fitness centre and restaurants. The building is reported to be 93 percent occupied, with major tenants including White & Case, Morgan Stanley and Comcast. Its former anchor tenant, McGraw Hill Financial, moved from the building in 2015 and re-branded as S&P Global last year.
NYC Deal Part of Strategic Shift for CIC
CIC, formed in 2007 as a way for China to diversify its massive foreign-exchange holdings, is closely watched both as a major source of capital for projects as well as a glimpse into China’s perspective on the world economic outlook.
The Beijing-based sovereign fund, which Reuters reported in July had $814 billion of assets under management, has been diversifying foreign investments away from stocks and bonds and into assets including infrastructure and property to fit its long-term investment horizon.
The need for that change in strategy was underlined in 2015 when the fund recorded a loss on overseas investment for the year, its first negative net annual return since 2011.
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