Foreign investments in U.S. multifamily assets are increasing in frequency, especially from our neighbors to the North.
Starting in the summer of 2011, the Toronto-based Canada Pension Plan Investment Board (CPPIB) began making its presence known in this country with a series of high-priced multiproperty investments. And just like its aggressive burst onto the scene last summer, it's making another statement this year.
At the end of July, the CPPIB announced several partnerships with big-name U.S. companies, to the tune of $355 million. The new deals bring the board's total equity investments in U.S. real estate to $912 million—all in the span of a year—with more than 6,000 units of Class A properties in major metro regions.
This latest activity comes in the form of a 45 percent interest in two San Francisco–area developments alongside partner Palo Alto, Calif.– based Essex Property Trust that includes 772 units. Another deal partners the CPPIB with Chicago-based AMLI Residential, giving the Canadian organization a 45 percent interest in four properties in the Chicago and Dallas areas. Finally, the board partnered with Washington, D.C.–based Multi-Employer Property Trust and Chicago-based Habitat Co. for a 44 percent interest in a 450-unit property in Chicago.
Peter Ballon, the CPPIB's vice president and head of real estate investments–Americas, says these moves won't be the last the organization makes in U.S. rental properties. “As a long-term investor, our strategy is to focus on properties which will hold or increase their value over the next decade or two. Or longer,” he says.
The announcement comes at a time when foreign investors are becoming more bullish on U.S. real estate prospects, most commonly in commercial investments but increasingly in multifamily properties. Global- investor purchasing activity increased 24 percent from the first quarter of 2012 to the second quarter, landing at $108 billion all told, according to Chicagobased Jones Lang LaSalle. The LaSalle report points to an increasing number of foreign investors looking to tangible assets in America as the eurozone crisis continues to cause violent market swings in other global economies.
Ballon says factors such as forecasted population growth, declining homeownership, and the Echo Boom generation coming into its peak rental years have all contributed to the decisions by the CPPIB and other foreign firms to expand their presence in the U.S. market.
“These transactions fully align with our strategy to acquire and develop core properties in supplyconstrained markets,” Ballon says. “We're working with best-in-class partners to build a portfolio of high-quality assets that can deliver stable cash flows over the long term.”
Among the metros the CPPIB is eyeing for future expansion are Boston, New York, Washington, and Chicago: markets that see a lot of foreign investment— and bidding wars. In fact, Boston, New York, and D.C. were three of the top five markets foreign investors pegged as their top cities in the latest survey from the Association of Foreign Investors in Real Estate.