Luxury Real Estate

Doug Overholt of BC (British Columbia) Hydro's Power Smart New Home Program is the latest official to encourage home owners towards energy-efficient products. Overholt points out the benefits of 'green' homes and insists that energy-efficiency is a factor in resale real estate value. The greener the house, the higher the resale value.

Think Green

Of course, saving energy also translates into more comfort, extra savings in the short and long term, and taking care of the environment. The BC Hydro representative makes a point that we discussed here previously at estaterebate.com. Despite the fact that almost everyone understands the benefits of being green, sometimes we get sidetracked with other purchases. Our earlier post referred to them as "eye candy." Several home owners would sooner pay extra for the gorgeous granite countertop than high-performance windows.

Are 'Green' Homes Worth The Price?

Overholt says that green homes are worth the price. He explains how rising energy costs will cause more homeowners in the future to look for energy-efficient homes. Even though if a homeowner makes simple alterations, they can save on energy bills in the meantime.

"Sometimes new home buyers overlook two important aspects of energy efficiency. First, an efficient home is going to cost you less to operate every month. That's money in your pocket - you can pay down your mortgage faster. Second, we live in an era of rising energy costs. Down the road, a house that's an energy pig won't sell as easily, or appreciate as well as one that costs less to operate," says Doug Overholt of BC Hydro's Power Smart New Home Program.

Sometimes people get off track because they think that green homes will cost more. No doubt, certain features such as heat pumps can come with considerable initial cost. Yet these smart purchases pay for themselves with savings in the long term.

Anyway, everything 'energy-efficient' does not have a high price tag. Usually, extra insulation or air sealing will not break your budget. As well, there are energy-efficiency grants out there to help Canadian and American homeowners. With high energy costs and an economy emerging from a downturn, many people need help and providing energy grants goes in the right direction.

Energy-Efficient Programs

Sometimes the programs may not go far enough, however, in the right direction or the path may be too complicated for certain groups. For example, specific programs encourage homeowners to buy energy-efficient products and receive reimbursement from the government. That plan does not always work for families living on low incomes because they cannot pay the upfront cost. That won't be because they are spending it on "eye candy." Their income covers only (or maybe does not even cover) the basics.

Yet everyone should check with state (provincial in Canada) and federal officials to see if there is an energy-efficiency program to suit your needs. Thinking green can save you money today and in the future.

For resale real estate value, think energy efficiency

estaterebate.com has also provided information in another post about Prince William's new 'green' home at Harwood Park Estate. A few interesting green details here! Let us not forget, however, that every family, regardless of income, should be able to live in a comfortable and energy-efficient home.

At Home with Prince William & Kate Middleton

Are You Planning Energy-Efficient Improvements?

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2011 is shaping up to be the "Year of The Landlord." As many people face the winter winds, we are reminded of a wise old saying.

"It's an ill wind that blows no good." ~ John Heywood (1497-1580)

In the case of the winds of change in real estate, falling house prices and slow sales have challenged many sellers but benefited more than a few apartment building landlords. More people are choosing to rent but others can find no suitable alternative to apartment living. Everyone has their own reason for deciding to rent property rather than buy a home.

Rent or Own

Sometimes renting is the best choice for an individual. Indeed, many renters prefer the apartment lifestyle. After all, renting a luxurious NYC condo does not seem like such a bad deal. Even renting any apartment has its perks such as more flexibility in relocation and less maintenance responsibilities.

Of course, other renters would sooner own a home. Often foreclosure forces homeowners to become renters. Sometimes potential first-time buyers discover that they cannot afford the financial commitment of a home. The Federal First-Time Homebuyers' Tax Credit is no more and not everyone has an "angel investor."

Whether people choose to rent or have no other choice, landlords are gaining tenants. Banks and lenders are also smiling – especially if the apartment building owner had been previously under financial duress. Borrowing has become less expensive with low interest rates.

This effect is noticed with commercial real estate of all types. The low rates have a positive effect on borrowing for office buildings, retail outlets, and company warehouses. The apartment market, however, is the healthiest of the commercial categories – mainly because of cheap financing.

Investing in Apartments

Obviously, investors are interested in apartment buildings. Actually, 'flipping' properties is coming into vogue again. The practice of reselling quickly for profit is somewhat prevalent at all times.

Yet 'flipping' is as popular now as in earlier thriving economic periods. This practice can have its place - if done responsibly for the right reasons. Illegal flipping, however, is a different matter. It involves scams, disregard for others, and a goal of profit at any cost.

Higher Values

Apartment building values have risen to levels not seen since the middle of 2007. According to the brokerage firm Marcus & Millichap, values of apartment buildings rose 16% in 2010. Green Street Advisors, a research company tracking REITs, say that present values are now within 10% of their 2007 peak value.

Of course, apartment values in major centers such as New York and Washington, D.C., have shown signs of recovery since 2009. Currently, increasing apartment values can be seen in additional markets including Los Angeles and Seattle as well as other U.S. cities. At the end of 2010, TIAA-CREF paid $62 million for the 261-unit Newbury Commons in Stamford, Connecticut. According to Real Capital Analytics, this sale price was 65% more than the amount paid by Seaboard Properties in February 2009.

Apparently, even Las Vegas is seeing the high values. Keep in mind that Las Vegas was affected greatly by the economic downturn. Yet in December 2010, the Croix Townhomes complex in the Las Vegas Henderson suburb sold for nearly $20 million - $143,000 for each unit – a price even far above the national average. The 'apartment advantage' might be the start of the next big trend in investment property.

Housing Woes Fuel Apartment Surge

Will 2011 Continue To Be The "Year Of The Landlord?"

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It is probably not just a coincidence that renowned architect, Richard Meier, designed twin towers near New York City's waterfront. The luxurious apartment buildings were built in 2002 – a year after the World Trade Center disaster. The construction period coincided with a time in which New York City was searching for renewed hope. In fact, Meier admitted that he wanted to bring life back to the area.

Not A Twin

No doubt the two tall Perry Street towers and their location at 173 Perry Street and 176 Perry Street evoked mixed emotions. Yet in reality, the Perry Street Towers cannot be called "twins." The façade on the north tower is not as broad as the west façade on the southern tower.

Of course, the high 'tower design' is not a rarity in the Big Apple – especially in the years since the fall of the World Trade Centre. Obviously, the award-winning designer of these two structures was not just using a similar tower design to attract attention. Richard Meier is an acclaimed architect – a winner of the prestigious Pritzker Prize. He has been responsible for well-known designs from the Getty Center in Los Angeles to the White Plaza in Switzerland. In 2004, Meier designed 165 Charles Street facing the Hudson River - a similar apartment tower to the Perry Street Towers.

Innovative Design

173 and 176 Perry Street are able to grab attention on their own. With their sharp lines and grids, the towers stand out from other structures. The buildings have floor-to-ceiling windows with white steel protruding slightly beyond the structure and green-glass balconies. A Perry Street tower does not just fade into the background. The buildings provide dramatic contrast to the city's older low red brick buildings - another well-known design element in NYC.

In fact, more than one famous personality has discovered the Perry Street Towers and set up residence in this innovative structure. Martha Stewart, Calvin Klein, and NBC Universal President, Michael Jackson have lived in these cutting edge towers. With 11' ceilings, residents have spectacular views of Manhattan, the New Jersey riverfront, and Hudson River.

Luxury Market

Located in West Village, 173 Perry Street has 16 floors and just 16 apartments offering an entire floor as a private oasis. Residents can enjoy concierge service and a first-class fitness center as well as all the usual perks of luxury real estate. If you plan on moving into one of these opulent towers, be advised that a 11,000 sq ft, 5-bedroom, 5.2 bathroom apartment is reported to cost $34,000,000. In a previous real estate report, 176 Perry Street was listed as one of New York City's 20 most expensive apartments. 173 Perry Street was named as one of the top three new residential buildings of the decade.

Dining in Luxury

Yet it is possible for people to get an inside look at these buildings. The South Tower has a 150-seat Jean-Georges Vongerichten restaurant on ground level that is open to the public. Diners can enter by West Street via a bridge spanning a reflecting pool.

Do You Prefer Modern Tower Designs Or Older and Lower NYC Structures?

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Many U.S. home sellers saw dollars vanish in front of their eyes during the past year. Although the vanishing act was really an illusion as the money never existed – except in an over-zealous home seller's mind. Pricing homes outside the realm of reality holds no magic; it just ends with disappointed sellers. All the dollars disappear because home buyers move on to another dream (and price) within their reach.

During the past year, no home sellers (upscale residence or small house) were exempt from price reductions. According to the Washington Post, Former Treasury Secretary Henry Paulson had to reduce the asking price for his Washington, DC home. In 2010, the property sold for almost one-third less than the original asking price. The buyer paid $3.25 billion. During 2006, Paulsen had paid $4.3 million for the property.

Chicago Home Sellers

Between March-December 2010, Chicago home sellers saw a widening divide between their preferred price and the actual amount of the home sale. The Chicago Agent magazine examined monthly data for Cook, DuPage, Kane, Lake, McHenry, and Will counties. The price reductions endured by sellers were calculated at $459 million a month.

Despite the size of the area, Cook County sellers led other counties in their average number of reductions (17,335) per month. As well, this county had the biggest cuts (percentage-wise) – almost 6% ($16,000) every time they lowered asking prices. Du Page County ranked second with 3,583 reductions (4.4%).

Chicago Home Buyers

Of course, Chicago home buyers were pleased with the reduced prices. Yet a few home buyers still paid a fine sum for their dream homes.

Chicago's Most Expensive Houses

            • $7.75 million - Barrington Hills (McHenry County)

            • $5.99 million - Lake Forest (Lake County)

            • $4.1 million - Hinsdale (DuPage County)

            • $2.99 million - St. Charles (Kane County)

Chicago's Most Expensive Condos

11 E. Walton Street

Three Condos

            •$7.4 million

            •$6.88 million

            •$6.28 million

Real estate mantra in 2010: How low can you go?

UK Home Sales

The current state of home sale prices varies from market to market. The average price of a home in England and Wales fell 0.2% to 222,827 pounds ($354,000) from November-December, 2010. Many UK home sellers do not want to be involved in transactions in this market. Many UK home buyers cannot get a mortgage. An Acadametrics report showed the number of transactions dropped by 53,000 (approx) in December 2010 – a 33% decline from the same period in 2009.

U.K. House Prices Decline for Third Month as Lenders Restrict Mortgages

What Do Consumers Predict For Home Prices In 2011?

The Chicago Agent magazine asked its readers for their predictions. At least 54% said that housing prices would remain the same as in the past year. Thirty one per cent of responses expected a decline of home sale prices in the coming months.

No doubt, within Chicago and elsewhere, home buyers are hoping for continued price reductions. Of course, home sellers always wish for higher prices. At least 15% of respondents to the magazine survey expected home sellers in 2011 would be getting better prices.

What Are Your Predictions For Home Prices In 2011?

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When developer Ian Schrager, co-creator of boutique hotels, and his partners asked the renowned architectural firm, Herzog & de Meuron, to design 40 Bond Street in New York City, they were choosing a top team. This prestigious firm had designed the Tate Modern Museum in London, the main stadium for the Olympic Games in Beijing, as well as other world-class projects. Schrager made one more top decision.

"I'm taking the penthouse," says Schrager.

Luxury Penthouses

No doubt, building owners and co-owners can have the first chance to live in the luxurious penthouses. Most owners of luxury real estate position themselves at the top. Take Donald Trump and Trump Tower – another co-developer who took the opportunity to occupy an opulent penthouse. Do you ever wonder what life is like at the top?

40 Bond Street

The penthouse at 40 Bond Street makes a sizable impression and comes with a big price tag – a reported $18.5 million. That chunk of cash will get you 6,626 square feet of interior space and 3,529 square feet of exterior space. Of course, you could choose a smaller 3-bedroom apartment for $9,950,000. You could even choose a 2-bedroom unit for the more affordable price of $4,850,000.

Interiors

The apartments at 40 Bond Street have all kinds of luxurious features - Austrian smoked oak floors, Italian cabinets with smoked oak and high gloss lacquer, as well as Glacier White Corian walls, and shower floor with embossed graffiti pattern. 40 Bond Street was designed to reflect a version of SoHo commercial loft buildings. The building uses a green glass grid instead of cast iron.

Boomer hotel icon Ian Schrager is far from done

Trump Tower

Donald Trump chose an office and a penthouse in Trump Tower at 721 Fifth Avenue. Angelo Donghia designed this elegant penthouse. Even from the outside, Trump Tower is no ordinary building. Its unique look and unusual layout make an innovative statement.

Interiors

Donald Trump continues to express his individuality with his choice of detailing. From the inlaid Trump Tower seal on the ramp of the entrance to 'T' stanchions and vitrines, it is hard to miss the 'Trump' connection. Developers of luxury properties tend to make their mark with extravagant buildings.

Trump Tower is full of elaborate details. Its 100-foot high atrium features a seven-storey waterfall in front of Breccia Perniche marble in gorgeous colors – peach and orange - pink and rose. Polished granite walls and brass vitrines add an extra glow.

Trump Burns Mortgage At Trump Tower

NYC Penthouses

Life at the top might cost a fair penny but many buyers are willing to pay the price for a luxurious lifestyle. Of course, if you own (or co-own) the building, occupying the penthouse makes it a more probable and personal choice. Yet developers are not the only buyers wanting to move into penthouse apartments.

Despite the recent downturn in the economy, the U.S. luxury real estate market is rebounding in fast order. Upscale markets tend to make a fast recovery from economic woes. Luxury property is seen as a smart investment in the long term.

Luxurious residences and hotels do well in major centers like New York City. Ask Ian Schrager. He just started Schrager Hotels and created two new hotel brands – one luxury model - and one less expensive brand - for those of us who can't afford the penthouse suite.

What Would Be The Best Thing About Living In A Luxury Penthouse?

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After Christmas, shoppers follow Boxing Day sales and all the other reduced prices to be found at year's end. Meanwhile, the real industry is reflecting on the more memorable deals of 2010. Of course, new home owners will be remembering their own private real estate transactions. As well, more than one commercial transaction during this year made a powerful impression.

Commercial Real Estate

The National Association of Realtors (NAR) predicts a more stabilized market in 2011 as well as a decrease in commercial vacancies. When commercial assets reach stabilization, owners are pleased with the outcome. The properties are generating profits rather than eating away at an owner's assets.

Denver, Colorado

This thriving Colorado city saw commercial real estate investments double year-over-year in 2010. In fact, Denver made the top ten list of preferred markets for investment during the past twelve months. Since many Denver commercial assets are stabilized, investors are targeting these properties.

Within this market, buyers cannot expect to find a good deal in terms of low prices. Yet investors are willing to pay a higher price for a stabilized asset. The purchase still adds up to a wise investment in the long term. During the coming year, Denver's commercial market is expected to see more big deals. The anticipated early 2011 sale of the 1800 Larimer building for $400 per square foot will be a record breaker (the 'per-square-foot record' for the sale of an office building in Denver).

Denver Commercial Real Estate Closes 2010 with a Bang

Hartford, Connecticut

In July 2010, Connecticut River Plaza, a well-known office property in downtown Hartford, was sold for $6,666,667 to a limited liability corporation in New York. This sale was one of the most anticipated transactions in the recent history of downtown Hartford’s commercial office market.

Winnipeg, Manitoba

During the past year, commercial property sales and leasing broke records in Winnipeg, Manitoba. This Canadian city can boast about $544.7 million of property sales between January-October, 2010. Winnipeg's yearly average for commercial sales is $300 million. One of the year's biggest sales transactions was the purchase of GEM Equities/B&M Land Co. property (three high-rise apartment blocks) by Toronto-based Timbercreek Asset Management for a reported $100 million.

Banner year for property purchases

Luxury Markets

New York City, New York

Throughout 2010, the NYC hotel industry was a vibrant market – the site of tons of transactions and substantial deals. In September, JRK Hotel Group sold the Hotel Roger Williams for $90 million (and $4.5 million in additional costs) to LaSalle Hotel Properties. The luxury hotel market is rebounding and investors have confidence in the Manhattan hotel scene.

Montreal, Quebec

Montreal has a smaller luxury market than New York City. Yet there is a growing demand for high-end condos. The sale of the penthouse at the Ritz Carlton Montreal Hotel and Residences brought in $13 million plus taxes – the highest price ever for a residential property in Quebec.

Distressed Properties

Of course, most real estate deals in 2010 were outside the luxury market. Interested buyers had abundant opportunities to pick up affordable properties. Even investors wanting to buy into the New York City hospitality industry were able to pick up distressed hotels at bargain prices. As well, home buyers across the country were paying discount prices for foreclosures.

Did You Find A Good Real Estate Deal In The Past Year?

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Within the US and Canada, sales of townhouses are 'going to town' (moving ahead in a vigorous manner). The term 'townhouse' has varied meanings in different countries. Historically in the UK and Ireland, 'townhouse' referred to the residence of a member of the aristocracy in a capital or major city. Famous townhouses are 10 Downing Street, residence of Prime Minister David Cameron, or Clarence House, home of the late Queen Elizabeth, the Queen Mother, and now the residence of Charles, Prince of Wales.

What are Townhouses?

Today in North America, this type of housing (either single-family or multiple-family dwellings) has a small "footprint." Usually, a townhouse is within minutes (either walking or with public transportation) of a city's business and industrial areas. Townhouses have been compared to a compromise between a condo and a regular home.

This housing category can include homes in the luxury market as well as more affordable houses. Superb examples of luxurious townhouses can be found in New York, Boston, Chicago, Toronto, Philadelphia, and San Francisco.

Why do People Buy Townhouses?

Part of the current appeal of townhouses is the wide range of prices. There is a townhouse for every budget and all age groups. Townhouses interest everyone from first-time buyers to empty-nesters who are downsizing to a smaller home. A first-time home buyer views a townhouse as an affordable alternative to a detached house. Building fees can cover issues such as snow removal, landscaping, or maintenance of the building's exterior.

Sometimes there is more demand for townhouses than can be supplied by the market. Wendy Jabusch, general manager of Hawthorne Homes, speaks about Canadian real estate and townhouses.

"Recent research shows that available townhome product -- homes started or available for pre-sale -- is only 14 per cent of the new construction market. The remaining 86 per cent of multi-family product is apartments," says Wendy Jabusch of Hawthorne Homes.

What does the Future Hold for Townhouses?

There has been a recent increase in townhouse developments. Construction starts of townhouses counted in at 250 in Calgary, Alberta during October, 2010. According to Canada Mortgage and Housing Corporation, that statistic showed the strongest month in 21 years for townhouse starts. Of course, there were fewer new townhouse constructions in 2009 because builders were working though units already in production.

Home buyers gravitate to townhouses for several reasons. Townhouses offer good value, attractive design, and lifestyle benefits. President and partner Tim Logel of Cardel Lifestyles says that he has found that townhouses have maintained their popularity since Cardel's first development in 2002. Logel is optimistic about townhouse sales in the coming year.

"I expect 2011 to be a strong year for townhome sales as affordability and the job market improves in Calgary," says Tim Logel of Cardel Lifestyles.

City homebuyers go to town

Manhattan Townhouses

New York City townhouses never lose their appeal. It is easier to get financing for a city townhouse than a NYC co-op. Generally, lenders look upon a Manhattan townhouse purchase as a wise investment. If you buy a townhouse as an investment, rental income can take care of the monthly mortgage payment.

Financing A Manhattan Townhouse

Are You Planning To Buy A Townhouse?

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Media and royal watchers were fascinated this week with Britain's most famous, newly-engaged couple – Prince William and Kate Middleton. Everyone was abuzz about the engagement ring and love-struck photos but then it was back to practical issues – but on a royal scale. As with all engaged couples, the question arose – where will the couple live to start their new life? Let us look at the homes at the center of this royal announcement.

At Home with Kate Middleton

Although the royal engagement was announced outside the Middletons' five-bedroom home in the village of Bucklebury, this house was not Kate's childhood home. Kate spent her childhood in a four-bedroom home, known as West View, in the neighboring Bradfield Southend – just two miles from her parent's present house. The Middletons moved in 1995 when Kate was 13; they had purchased the home in 1979.

Described as a "charming Victorian villa," Kate Middleton's childhood home was available for rent in 2009 at £1,250 per month. With "light, airy rooms and views of the countryside," this cozy home down a country lane was not expected to remain unoccupied for any length of time. The house has changed hands a couple of times since the Middletons moved to Bucklebury, Berkshire.

Yet Kate's home is much the same today as when she was growing up in West View. The house has been updated somewhat but the basic layout is the same. Kate's parents had built an extension to the ground floor and added a playroom. These additions can still be enjoyed by today's occupants.

Take a peek at Kate Middleton's childhood home.

At Home with Prince William and Kate Middleton

Apparently, the famous couple has been living together for several months on the island of Anglesey off the coast of Wales. Prince William is based at RAF Valley as a Sea King search and rescue pilot. They are reported to be renting a whitewashed farmhouse for £750 a month. Although there are no known plans for a move during the engagement period, there is a new home in the future for the happy couple.

Prince Charles is building a home for his first-born son and future daughter-in-law. It looks like Prince William and Kate Middleton will be starting their married life at the Harewood Park Estate in Herefordshire. The 900 acre estate is situated in prime countryside between Monmouth and Ross-on-Wye. The property in rural Herefordshire is close to the border with Wales as well as Highgrove House in Gloucestershire.

The estate will have a chapel as well as a 200 L rainwater reservoir and stables. The couple's new six bedroom 'starter' home is being built with every available eco-friendly, modern convenience. The 'green' features include a boiler using wood chips from trees on the estate, solar panels, reed-bed sewage system, and walls lined with insulating sheep’s wool.

Water-saving and low-energy appliances will be used throughout and the home will be topped off with a roof made from salvaged Welsh slate. A decision was made to downsize the home from almost 15,000 ft.² to approximately 8500 ft.² and, therefore, improve its energy efficiency. A green and modern home for a prince and his princess!

Prince William and Kate Middleton will live an ultra-green royal fairytale

Will The Royal Couple's Harewood Park Estate Start A 'Green' Trend?

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If you are inside a NYC hotel, you are probably not alone – at least according to industry statistics. During 2010, Manhattan hotels have shown a 90% occupancy rate. At present, the NYC hotel market is favorable to buyer and sellers.

Favorable Market

This market is not expected to lose favor in the near future. Manhattan hopes to welcome more than 46,000,000 visitors by the end of the current year. By 2012, New York City will be entertaining over 50,000,000 guests per year. There was never a better time to be part of the Manhattan hotel industry.

Revenue per available room (RevPAR) in New York City has increased by 7.6% to $135. Yet the national average fell 2% to reach fifty dollars. Major players, as well as smaller entities, are recognizing the potential of the NYC hotel industry.

Recently, the Sheraton opened Brooklyn's first major hotel In 12 years. Hyatt Hotels and Resorts opened Andaz at 485 Fifth Avenue in September 2010. Actually, more than 31 new hotels are expected to appear on the Manhattan skyline between 2010-2011.

Luxury Market

The NYC hotel market is going non-stop with new development and properties changing hands. Even the luxury market is in high demand. Almost 100 transactions during 2010 were for luxury properties with a purchase price of more than $10,000,000.

Of course, all hotel buyers in New York City must be able to handle a high price tag. The 760-room Doubletree Metropolitan is selling for $400,000 per room. The W-New York on East 39th Street sold for $300,000 a room earlier in the year.

Goldman selling 3 NYC hotels

Corporate and Leisure Travelers

Investors are willing to take the chance on NYC hotels. Manhattan is expecting many more leisure and business travelers in the coming months. In particular, the corporate traveler is driving this activity. As a growing number of companies regain strength and revitalize their corporate travel practices, the NYC hotel market will reap the benefits. Regardless, New York City holds such an appeal that vacationers will continue to fill Manhattan hotels.

Inside NYC Hotels

Want a peek inside a New York City hotel? Besides the Andaz at 485 Fifth Avenue, another Andaz opened on 75 Wall Street in January 2010. The boutique-style rooms begin at $220 and offer a Hudson Valley-sourced restaurant, bar emphasizing 'Pullman-style mixed-at-your-table' cocktails, and spa allowing guests to order services in 15-minute increments.

Multi-sized bamboo panels in the lobby mirror the old lock boxes of Wall Street. The Andaz is a condominium/hotel with condos on its upper floors. The smallest rooms in the hotel start at 345-square feet. They have window seats and 11-foot high ceilings as well as double-paned glass with automated sleep shutters. In addition, guests can enjoy 42-inch LCD TVs and iPod docking stations.

The downstairs space houses the gym and casual conference rooms with their own kitchen facilities and espresso machines. The most lavish rooms feature peek-a-boo tubs and rotating closets. Restaurant lamps resemble pearls. Arching woodcuts in the ceiling display watermark detailing from the dollar bill. It looks like dollar bills will be changing hands fro a long time to come in the NYC hotel industry.

Andaz Wall Street opens with rooms from $220

Are You Planning A Stay In A New York City Hotel?

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You probably know someone who has moved to Washington. Of course, it is not surprising that so many people would make the move. The city is the nation's capital – the heart of the country.

Granted, many people just make a temporary move to Washington. The politicians account for many 'back and forth' moves. Even a few politicians choose to stay on in Washington after politics. Washington attracts political types – and not just from the US – and not even just for politics.

Canadian Buyers

Washington has just attracted the attention of the Canada Pension Plan Investment Board (CPPIB) – not for its policies – but for its real estate. The CPPIB invests funds that are not required for immediate use by the Canadian Pension Plan. The board is planning to buy two impressive office buildings in Washington, D.C.

They describe the market as being "more attractive" than a few years ago – and they are not referring to the state of the property. The "very, very, attractive" prices are the reason for the board's interest in Washington. The CPPIB is planning to pay $237 million for a 45 percent stake in the two properties - 1299 Pennsylvania Avenue (the Warner Building) and 1101 17th Street NW.

The figure includes $91 million in equity and $146 million of the outstanding mortgage debt. This Canadian board is making an expensive purchase – even if it is more attractive than before. Peter Ballon, vice-president and head of the Americas division of CPPIB's real estate investments, agrees that it is a whopping sum. Yet he thinks that now is a good time to invest in key markets like Washington. New York and Los Angeles have also been identified as key markets because they are more stable than the rest of the nation.

In case you are wondering, yes, the CPPIB has heard about the damage from the recession. They know about the foreclosures and unemployment. Ballon explains the board's reasoning.

"We are not concerned by the debt market in the U.S. if anything we see it as an opportunity because we are typically an equity purchaser and do not need debt to make acquisitions," says Peter Ballon, vice-president and head of the Americas division of CPPIB's real estate investments.

High Stakes

Now, of course, the CPPIB is not doing all this on their own. The board has Vornado Realty Trust (NYSE:VNO) as a partner in this latest acquisition. Vornado Realty Trust owns 55% of this venture. No doubt, it is quite the venture – with an implied value of US$526 million. Vornado will manage and lease both buildings.

High Style

Last May, the CPPIB announced that it would pay US$663 million to buy a 45 percent stake in two Manhattan office properties including a 51-storey skyscraper in the Rockefeller Centre complex. If you wonder why a Canadian board would not seek out investments in Canada, the answer is – a smaller market. The CPPIB is looking to invest and Washington seems like a fine place to make a deal. It looks like Canadian business is moving into US real estate – in high style.

CPPIB seizes on low real estate prices in U.S. to buy stake in D.C. buildings

Are You Planning To Invest In US Property?