Hong Kong Monetary Authority, the city’s de facto central bank, has become the latest Asian investor to jump into the New York market after investing $1.15 billion to acquire a 49 percent stake in an office tower in at 1095 Sixth Avenue in midtown Manhattan.
HKMA acquired its stake in the 41-storey building, which is commonly known as Salesforce Tower New York or 3 Bryant Park from Canada’s Ivanhoe Cambridge and Callahan Capital Partners, according to an account in The Real Deal. The Authority made the acquisition through its exchange fund, which it uses to control the value of the Hong Kong dollar versus the US currency.
The Hong Kong government fund’s midtown Manhattan transaction comes less than three months after China Investment Corporation (CIC), the mainland’s sovereign wealth fund, made its first acquisition in the New York market, and less than two months after the UK’s Brexit vote helped to focus the attention of institutional investors onto New York assets.
Chinese Cash Continues to Find a Path to New York
The HKMA’s investment values the 1.2 million-square-foot (111,000-square-meter) office building at $2.35 billion, after Ivanhoe Cambridge, the real estate division of Quebec’s public pension fund, and Chicago-based fund manager Callahan bought the building from Blackstone for $2.2 billion in January of 2015. The building was renamed as the Salesforce Tower New York in March this year after the California-based software provider made the former 3 Bryant Park its New York headquarters.
Neither HKMA nor Ivanhoe Cambridge have commented on the Salesforce Tower New York transaction so far.
The Hong Kong government’s new US asset will be whistling distance from another Chinese investment. Bank of China, one of the mainland’s big four banks, bought 7 Bryant Park –- 160 metres away from the Salesforce Tower – from Hines in 2014 for an amount estimated to approach $600 million.
Brexit Brings Immediate Economic Benefit, Just Not for the UK
Interest in prime New York assets has continued to climb this year after the UK’s Brexit decision made investors more caution about venturing into the London market. CIC, which has been the largest Chinese buyer of global real estate chose to invest $700 million to acquire a 49 percent interest in 1 New York Plaza from Brookfield Property Partners in May, just one month before Brexit struck fear into the hearts of UK real estate investors.
Like CIC, before this year HKMA had invested in the UK real estate market to help put its foreign exchange reserves to work. In 2013 the Authority committed 202 million pounds ($264 million) to a 50-50 joint venture with the UK’s Great Portland Estates to acquire a commercial project in London’s Mayfair district.
Before entering New York market in May, CIC had spent £250 million (then $355 million) to buy a portfolio of suburban office properties in England from Australian real estate developer Goodman in early 2016, after buying an office park at Chiswick Park near London from Blackstone for more than US$1.28 billion in late 2013.
In the weeks following the Brexit vote, TH Real Estate and Aberdeen Asset Management both put major London properties on the market after funds controlled by the real estate investment management firms were beseiged by investors frightened of a declining market.
Analysts at Swiss financial services firm UBS have tentatively projected a fall of up to 20 percent in London office values and 15 percent for British retail values, and this expectation should continue to drive interest in US prime assets, despite compressing investment yields in New York. (TRD)