Written by

Top 50 US Office Deals of 2016

Commercial Real Estate News, Deals, Office| Views: 2877

Key takeaways:

The U.S. commercial real estate market took something of a respite in 2016, during a year characterized by political volatility. Compared to the previous year, when the market fired on all cylinders, office players were more cautious in 2016, with leasing and sales activity cooling down to more sustainable levels, per most industry reports.

Office tenants were reluctant to make any major moves pending the conclusion of the presidential election, thus lease renewals and consolidations took the stage in the past year. Though office sales activity also decreased 7% year-over-year, according to Colliers, the national transaction volume was still the fourth-highest yearly total in the past 15 years, reaching $140.5 billion.

We enlisted the help of Yardi Matrix sales data to round up a list of the 50 largest office deals of 2016. The results of our analysis aren’t all that surprising: the New York City office investment market remains the most attractive destination for both local and offshore buyers, though other markets also landed a good deal of capital in the past year. The U.S. office market is poised to become even more attractive in the future, especially to foreign investors, if Brexit goes through.

Check out the list of the top 50 largest office deals of 2016 below:

#AddressCityDollar amountBuyerSeller
1Parkway Properties portfolio - 19 assetscross-market$1,950,000,000Cousins PropertiesParkway Properties
2787 7th AvenueNew York$1,932,900,000CalPERSAXA Financial
3388 Greenwich Street & 390 Greenwich StreetNew York$1,767,913,114CitigroupSL Green Realty
4Alecta US Multisector portfolio - 21 assetscross-market$1,700,000,000Blackstone GroupAlecta
51285 Avenue of the AmericasNew York$1,649,000,000RXR Realty + China LifeAXA Financial
623 assetscross-market$1,500,000,000VentasWexford Science & Technology
7550 Madison AvenueNew York$1,400,000,000The Olayan GroupThe Chetrit Group
810880, 10940, 10960 Wilshire & 1100 Glendon AvenueLos Angeles$1,340,000,000Douglas Emmett + Qatar Investment Authority (QIA)Equity Office Properties Trust
915 assetscross-market$1,162,000,000Equity Office Properties TrustHines Interests
101095 Avenue of the AmericasNew York$1,152,970,000Hong Kong Monetary AuthorityIvanhoe Cambridge + Callahan Capital Partners
1163 Madison Avenue & 200 Madison AvenueNew York$1,150,000,000JamestownGeorge Comfort & Sons + Loeb Partners Realty
121221 Avenue of the AmericasNew York$1,030,000,000China Investment CorporationCanada Pension Plan Investment Board
13108 assetscross-market$969,000,000Workspace Property Trust + Safanad + Square Mile CapitalLiberty Property Trust
141211 Avenue Of The AmericasNew York$913,623,081Ivanhoe CambridgeBeacon Capital Partners
1534 assetscross-market$837,900,000Starwood Capital GroupNorthStar Realty Finance
161150, 1201 and 1251 State St. & 3661 N. Plano RoadDallas$825,000,000Transwestern Investment Group + Mirae Asset Global Investments State Farm Auto Insurance Company
175 Times SquareNew York$800,000,000RXR RealtyDavid Werner Real Estate
181 Kendall SquareBoston$725,000,000Alexandria Real Estate EquitiesDivcoWest
197 assetscross-market$704,000,000New York State Common Retirement FundMetLife
201 New York PlazaNew York$700,000,000China Investment CorporationBrookfield Property Partners
213 Blackfan CircleBoston$630,424,951Blackstone GroupBioMed Realty Trust
221250 BroadwayNew York$565,000,000Global HoldingsJamestown
237 West 34th StreetNew York$561,000,000Korea PostVornado Realty Trust
24693 5th AvenueNew York$525,000,000FimalacThor Equities
251 Front StreetSan Francisco$521,000,000Paramount GroupInvesco Real Estate
26200 South Biscayne BlvdMiami$516,600,000Ponte GadeaJP Morgan Asset Management
27Colorado Center - buildings A, B,C, D, E, FSanta Monica$511,100,000Boston PropertiesBlackstone Group
28555 and 575 Market StreetSan Francisco$510,000,000Equity Office Properties TrustJohn Hancock Real Estate
2911 Madison AvenueNew York$480,000,000PGIM Real EstateSL Green Realty
30330 North Wabash AvenueChicago$467,500,000Beacon Capital PartnersRiverview Realty Partners + Five Mile Capital Partners
31850 3rd AvenueNew York$463,000,000MHP Real Estate Services + HNAShorenstein
32885 3rd AvenueNew York$453,000,000Ceruzzi Properties + Shanghai Municipal Investment USASL Green Realty
33101 Seaport BlvdBoston$452,000,000Union Investment Real EstateSkanska
3412181 - 12121 West Bluff Creek DriveLos Angeles$428,900,000Edward J. Minskoff EquitiesJP Morgan Asset Management
35175 N Street NE & 150 M Street NEWashington$422,000,000MetLife Real Estate Investment + Norges Bank Real Estate ManagementStonebridgeCarras + Walton Street Capital
36501 West 30th StreetNew York$420,000,000Allianz Real Estate of AmericaRelated Companies
373000 Olympic BlvdSanta Monica$403,000,500Brightstone Capital PartnersJamestown
3858 assetscross-market$398,100,000Och Ziff Capital Management GroupBrandywine Realty Trust
391001 4th AvenueSeattle$387,000,000GLL Real Estate Partners + Vestas Investment ManagementCalPERS
40760 Market StreetSan Francisco$374,000,000Main Place Liberty GroupThor Equities
412001 8th AvenueSeattle$370,000,000Deutsche Asset ManagementAEW Capital Management
422700 Colorado AvenueSanta Monica$367,648,000OracleInvesco Real Estate
432970 Market StreetPhiladelphia$354,000,000Korea Investment Management CompanyBrandywine Realty Trust
446501 Legacy DrivePlano$353,000,000Dreien Opportunity PartnersJCPenney
45655 15th Street NWWashington$352,750,000Blackstone GroupBoston Properties + New York State Common Retirement Fund
46505 Howard StreetSan Francisco$350,000,000American Realty AdvisorsTishman Speyer
47700 Hidden Ridge Drive & 600 Hidden Ridge DriveIrving$344,000,000Mesirow FinancialVerizon
48321 North Clark StreetChicago$340,100,000Diversified Real Estate CapitalHines Interests
4951-65 Furman StNew York$340,000,000CIM Group + Kushner Companies + LIVWRKJehovah's Witnesses
5014200 Shady Grove RdRockville$337,499,900GI PartnersBioMed Realty

NYC Home to Largest Single-Asset Sale of the Year

787 7th Avenue (Yardi Matrix)

787 7th Avenue (Yardi Matrix)

The priciest office transaction in New York City and the second-largest overall office deal of the year was the $1.93 billion sale of the AXA Equitable Center at 787 Seventh Avenue in Manhattan. One of the biggest investments in pension fund CalPERS’ history, the sale closed Jan. 27, 2016, at $1,179 per square foot. The 51-story, 1.6 million-square-foot tower is LEED certified and includes 49,000 square feet of retail space, a parking garage and access to the underground concourse of Rockefeller Center. CalPERS bought the property from AXA Financial.

Asian Investment Accounts for 15% out of the Top 50 Largest Sales of 2016

Drawn by the array of investment opportunities, the promise of long-term, stable returns and property market stability, foreign investors are now pumping more and more money into U.S. commercial real estate, with a clear focus on office assets. Seven out of the top 50 office deals of the year were closed by Asian buyers, accounting for 15% of the total sales volume. Notable transactions included China Life’s $1.64 billion purchase of 1285 Avenue of the Americas in New York, in a joint venture with RXR Realty; the Hong Kong Monetary Authority’s $1.15 billion acquisition of 1095 Avenue of the Americas; Mirae Asset Global Investments’ $825 million partnership with Transwestern in Dallas; and Korea Investment Management Co.’s $354 million buy of 2970 Market St. in Philadelphia.

It comes as no surprise then that the market has become a haven for offshore investors, who are pumping record amounts of capital into U.S. office assets, especially in primary urban cores. According to JLL research, foreign office investment surpassed $20 billion in 2016, accounting for 16% of the overall acquisition volume. And while, historically, Canadians have been the most active foreign players on the market, Asian and German investors are now stealing the spotlight.

According to an Asia Society special report, China overtook Canada as the biggest foreign buyer of U.S. homes in 2015 and is already the largest holder of residential mortgage-backed securities issued by U.S. government-sponsored enterprises. A recent Rhodium Group study further shows that Chinese companies invested a record $45.6 billion in the U.S. economy in 2016, triple the amount recorded in 2015. Most investments came in the form of acquisitions, which accounted for $44 billion, per the study, primarily focused on real estate and hospitality.

Portfolio Deals Making a Comeback

Greenway Plaza in Houston, part of Cousins Properties' merger with Parkway Properties (via Yardi Matrix)

Greenway Plaza in Houston, part of Cousins Properties’ merger with Parkway Properties (via Yardi Matrix)

Though investment was mainly focused on single-asset transactions, there were a few major portfolio deals that made the news in 2016. However, portfolio volumes are lagging behind prior cycle levels, per JLL—in 2006-2007, large portfolio deals drove activity in the office sector, without even taking the Blackstone-Equity Office merger into account. Even so, the largest office sale of 2016 was a portfolio deal, with entity-level transactions expected to multiply in the following years. We thought we’d take a look at the most notable portfolio deals of the past year:

 

  • Cousins Properties, Parkway Properties merge in $2B deal – The two companies struck a $1.95 billion deal in August of last year, to merge and spin off their Houston assets into a separate REIT dubbed Parkway Inc. The Space City portfolio comprised five Class A office assets featuring 19 buildings, totaling roughly 8.7 million rentable square feet in the Greenway, Galleria and Westchase submarkets, according to Commercial Property Executive. The cross-market portfolio also included assets in Florida, Arizona, Georgia, North Carolina and Pennsylvania.
  • Blackstone Grabs Alecta’s $1.7B US Portfolio – In December 2016, Blackstone closed on the $1.7 billion acquisition of Swedish pension fund Alecta’s U.S. real estate portfolio, adding 21 new assets to its holdings. The portfolio included office, retail, industrial and multifamily assets located in top-tier locations such as San Francisco, Chicago and Washington, D.C.
  • Ventas Acquires $1.5B Wexford Science & Technology Portfolio – Back in September, Ventas Inc. made the news with the $1.5 billion buy of Wexford Science & Technology’s 23-property life science and medical real estate portfolio, from affiliates of Blackstone Real Estate Partners VIII LP. The Class A assets total 4.1 million square feet and are leased to leading universities, academic medical center and research companies such as Yale University, the University of Pennsylvania Health System and Alexion Pharmaceuticals Inc.
  • Blackstone Affiliate Nabs Hines REIT’s West Coast Portfolio – As part of its liquidation and dissolution plan, Hines REIT sold a seven-asset, 15-property office and retail portfolio to Blackstone affiliate Equity Office in November. The total price tag for the 3 million-square-foot portfolio, which included assets located in Los Angeles, Seattle, San Jose and San Mateo, was $1.162 billion in cash.
  • Liberty Property Trust Sheds $969M Worth of Office, Flex Assets – In early October 2016, Workspace Property Trust, together with Dubai-based Safanad and affiliates of Square Mile Capital Management, closed on the acquisition of a 108-property portfolio from Liberty Property Trust. The portfolio included office and flex buildings and 26.7 acres of land in suburban markets in Philadelphia, Minneapolis, Tampa, Phoenix and South Florida. WPT shelled out $969 million to acquire the assets, bringing its portfolio to 149 properties totaling roughly 10 million square feet.
  • Starwood Buys Stake in NorthStar Realty’s Healthcare Assets – Starwood Capital Group paid $838 million to acquire 34 of NorthStar Realty Finance’s medical office assets in December. NorthStar Realty looked to divest 20% of its portfolio in preparation for its merger with NorthStar Asset Management and private equity firm Colony Capital, which was completed in January 2017. NorthStar also unloaded a $1 billion stake in its healthcare portfolio to China-based Taikang Life Insurance back in November.

Top Destinations for US Office Investments in 2016

New York City Still Main Target for Office Investors
11 Madison Ave., New York (via Yardi Matrix)

11 Madison Ave., New York (via Yardi Matrix)

It should come as no surprise that the New York City office investment market was the main target for office buyers in 2016, accounting for $16.3 billion out of the top 50 largest sales alone. 18 out of the top 50 office deals closed in the Big Apple last year, and the buyer composition paints a very colorful picture. Alongside local and national buyers, offshore and cross-border investors pumped big money into the market, including Ivanhoe Cambridge, The Olayan Group, the Hong Kong Monetary Authority, China Investment Corp., China Life, Korea Post, Fimalac, HNA, Shanghai Municipal Investment and Allianz. A big chunk of deals closed in NYC were also partial stake interests, such as the 49% interest sales of 1095 Avenue of the Americas, 1211 Avenue of the Americas, 1 New York Plaza and 11 Madison Ave. Though 17 out of the 18 NYC transactions in our top 50 closed in Manhattan, one Brooklyn sale also made the cut: the $340 million sale of Jehovah’s Witnesses headquarters at 25, 30, 50 and 58 Columbia Heights and 55 Furman St. The purchase of the 2.3-acre site by CIM Group, Kushner Cos. and LIVWRK was one of the largest office sales to ever close in the borough.

Cross-Market Transactions Steal the Spotlight

There were 8 major cross-market transactions in our top 50 that closed in 2016, totaling in excess of $9 billion in sales volume. The priciest portfolio sale was Cousins Properties’ $1.95 billion buyout of Parkway Properties’ portfolio, which included a total of 19 office assets across 6 states. Blackstone’s $1.7 billion deal with Stockholm-based Alecta followed closely, while the third largest cross-market deal was Ventas’ $1.5 billion purchase of Wexford Science & Technology’s portfolio.

Boston Office Market Draws in Big Bucks in 2016
1 Kendall Square, Boston (via Yardi Matrix)

1 Kendall Square, Boston (via Yardi Matrix)

The Boston commercial real estate market also managed to draw in a good amount of capital in 2016, with 3 office assets fetching a total of $1.8 billion on our top 50 list. The largest one was Alexandria Real Estate Equities’ $725 million purchase of 1 Kendall Square, a 9-building office and retail campus, from DivcoWest. The second-largest deal to close in Beantown was the $630 million sale of 3 Blackfan Circle to the Blackstone Group in January. Last but not least, 101 Seaport Blvd. was acquired by Germany-based Union Investment Real Estate for $452 million.

Los Angeles Tops List of West Coast Office Markets
The Bluffs at Playa Vista - 12121 W. Bluff Creek Drive, Los Angeles (via Yardi Matrix)

The Bluffs at Playa Vista – 12121 W. Bluff Creek Drive, Los Angeles (via Yardi Matrix)

Los Angeles’ office market reigns supreme as the main target for investment on the West Coast, though only 2 local office deals made the top 50 list. The partnership between Douglas Emmett and the Qatar Investment Authority was all over the news in 2016, closing the largest office deal of the year in L.A. County–the $1.34 billion acquisition of 10880, 10940 and 10960 Wilshire Blvd. and 1100 Glendon Ave. Another notable transaction closed in October, when Edward J. Minskoff Equities closed on the $429 million purchase of 12181 and 12121 W. Bluff Creek Drive from J.P. Morgan Asset Management.

Blackstone Crowned Most Active Office Player–Again

A recent CommercialCafé and Yardi Matrix analysis showed that the Blackstone Group was the most active player buying and selling on the Los Angeles County office market in 2016. The company cashed in $1.3 billion on the Wilshire Boulevard and Glendon Avenue portfolio sale to Douglas Emmett and QIA (the county’s largest office sale of the year), a sale which included some of the remnants of its $39 billion buyout of Equity Office Properties Trust in 2007.

Center for Life Science, 3 Blackfan Circle, Boston (via Yardi Matrix)

Center for Life Science, 3 Blackfan Circle, Boston (via Yardi Matrix)

Now, Blackstone emerges as the most active buyer on our top 50 nationwide office sales list as well. The private equity giant closed 5 separate deals (2 as Equity Office) for a total of $4.35 billion across the U.S. The largest deals closed by Blackstone were cross-market, portfolio transactions: the $1.7 billion, 21-property deal with Alecta and the $1.162 billion, 15-property acquisition of Hines REIT’s West Coast portfolio. Blackstone also acquired 3 Blackfan Circle in Boston for $630 million, 555 Market St. and 575 Market St. in San Francisco for $510 million, and an 80% interest in 655 15th St., NW., in Washington, D.C., for $353 million.

 

Methodology:

  • Database: Yardi Matrix sales data and proprietary research
  • Transactions recorded until Feb. 28, 2017

Comments are closed.