A small office tower — the 212,000 square foot United Kingdom building, which might best be described as a B class structure — in the heart of downtown Vancouver sold for $122 million on Monday. The deal has yet to close, so details remain scarce other than that the buyer of 409 Granville St. was from mainland China.
“It sold for more (than) $600 a square foot,” said one source, who said that might be 50 per cent more than the going rate for similar office buildings in the area. “When I heard the number, I thought ‘no way.’ But the thing is it’s right on top of a SkyTrain station. I think the Chinese are buying the land for speculation as much as the building.”
Quietly, Chinese investment in the Canadian commercial market is heating up. Reuters reported in August that Anbang Insurance Group Co. Ltd., a Beijing-based company with a reported $114 billion in assets, which made a splash in New York’s property market last year by buying the famed Waldorf Astoria for US$1.9 billion, purchased a land lease that gives it control of the HSBC building in Toronto’s financial district.
Sources told the Financial Post the land lease for 70 York St., which gives the buyers ownership of the building for a set period of time, was purchased from Brookfield Office Properties for about $110 million — one of the highest recent valuations for a building in Toronto.
Chinese investment in Canada is still a small part of the overall foreign investment in the country. Over the past five years, not including these two recent deals, only about US$192 million of Chinese money has bought Canadian commercial property, a paltry amount of the the approximate US$10.5 billion invested in the country during the period, according to data from Real Capital Analytics.
Like the residential world, tracking of Chinese commercial real estate investment can be difficult because deals can be done through numbered company and investors represented by a Canadian law firm.
But more and more Chinese entities are popping up in some key transactions. In 2014, a Chinese company bought the Fairmont Le Château Montebello in Quebec for $28.8 million. The decision by Shanghai-based Greenland Holdings Group Co., one of the largest real estate development companies in the world, to buy into a condo/hotel project in Toronto’s entertainment district helped legitimize Canada as an investment opportunity.
Paul Finkbeiner, chief executive of GWL Realty Advisors, said there is little doubt there is a growing interest from Chinese buyers in Canadian commercial property.
“We got beat out by the Chinese on 70 York. We came in second to them, I think,” he said referring to the Toronto office deal won by the insurance giant Anbang.
According to another source, Anbang has privately told real estate people it is ready to invest another $1 billion in Canada and is looking for more acquisitions.
A litmus test for foreign investment in Canada, specifically from China, could be the the largest transaction ever expected in the Vancouver marketplace. Ivanhoé Cambridge Inc., the majority owner of the Bentall Centre which has four towers, said Wednesday it will sell its stake in a deal expected to top $1 billion.
“There is a lot of Chinese interest and they’ve bought some property,” said Michael Gill, a principal at real estate company Avison Young. “There is no question the mainland Chinese investors are more on the scene than ever.”
Even small investors seem to be getting more interested in Canadian commercial property, as they look for alternatives to residential. Nick Yanovski, managing director of capital markets with real estate firm Cushman & Wakefield, said he closed a deal this week for $7 million for small strip mall in Brantford, Ont.
“There are local Chinese Mandarin-speaking agents dealing with (overseas) clients looking for investment in a stable market and they see anything in around Toronto as something they like,” he said, referring to the mall, which has about a dozen stores and one major bank as a tenant.
Ross Moore, national research director for CBRE in Canada, said the size of some of the recent deals is turning heads, and may result is higher prices in some markets.
“Some of the prices being paid by Chinese investors are exceptional,” he said.
Financial Post
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