Our close ally to the north is usually the top foreign source of capital in U.S. commercial real estate deals. The first half of 2019 was no exception.
Canadian companies spent an estimated $43.6 billion in the acquisition of 781 properties during the 12-month period through this past June, according to Real Capital Analytics (RCA). Canada also was the No. 1 investor in the previous 12 months spanning from July 2017 through June 2018.
To put the country’s recent dominance into perspective, the overall capital investment by Canada into the U.S. exceeded the combined total for the rest of the world ($35.4 billion) for the 12 months ending this past June, according to RCA data. The No. 2 foreign source of capital during this period was Germany, whose investors placed $6.2 billion into 47 U.S. properties. Canada also was No. 1 among other countries in dollars invested in the U.S. during second-quarter 2019, spending $3.7 billion on 86 properties.
According to RCA data, however, Canadian investors pulled back in the first half of 2019 after going on a spending spree in the latter half of 2018. Much of the acquisition volume during the year ending this past June was driven by the Toronto-based global investment company Brookfield Asset Management Inc., which aggressively bought and sold a variety of top-flight assets in the U.S. in 2018.
In July 2018, for example, Brookfield announced it was acquiring a portfolio of office, retail and multifamily properties by purchasing Forest City Realty Trust. That deal made it the largest commercial real estate landlord in New York City, where its $32 billion in assets represent 20% of its worldwide real estate portfolio. As part of the reported $11.4 billion deal that included debt, Brookfield also acquired large-scale projects in New York, San Francisco and Washington, D.C, according to Reuters.
Brookfield invested about $30 billion in 360 U.S. properties during the 12 months through June 2019, RCA reported. The company was the second most-active cross-border seller of U.S. properties during the same period. Brookfield made another splash in Manhattan last year when it signed a 99-year lease with the Kushner family to take over a struggling office tower on Fifth Avenue.
In second-quarter 2019, however, the company’s activity slowed considerably. Brookfield’s acquisitions during those three months totaled only $383 million, while the properties it sold were valued at a combined $1.3 billion, RCA reported.
Proportionally, Canadian capital was responsible for 30% of the U.S. investment activity from foreign sources in second-quarter 2019. That lagged well behind the 54% share the country represented during the 12 months ending this past June.
Other major investors that have been active recently in the U.S. commercial real estate market include the Quebec City-based pension fund CDPQ, the Toronto- based pension fund OMERS and Tricon Capital Group, a Toronto-based rental- housing investment company.