The $437 billion Canadian pension plan recently sold its 45% stake in 10 East 53rd Street for $7M, a 90% loss from its 2012 purchase price of $57M. The 37-story, 390,000 sf building, extensively renovated in 2015, attracted tenants like Swarovski and Ermenegildo Zegna. This sale marks CPPIB's ongoing reduction in real estate investments, which dropped from 12% to 8% of its portfolio amid market declines. Earlier in 2024, CPPIB also sold another Manhattan property stake for just $1.
Source: Emerging Real Estate Digest
Last month, the Canada Pension Plan Investment Board (CPPIB) continued its trend of divesting from commercial real estate by selling its 45% stake in a Manhattan office building for just $7 million. Originally purchased by CPPIB in 2012 for $57 million, this sale represents a significant loss, with the pension fund taking nearly a 90% haircut on the investment.
The 37-story, 390,000-square-foot (36,200 square meters) Manhattan office building located at 10 East 53rd Street was partially acquired by CPPIB, which bought a 45% stake as part of its strategy to own more high-quality properties in major global cities. This stake was purchased from SL Green Realty Corp, which had just acquired the entire building for $252.5 million.
The apparent discrepancy in the numbers arises from the structure and valuation of real estate investment transactions. New York Commercial Bank provided a $125 million mortgage on the property, leaving $127.5 million in equity. The 45% stake in this equity roughly equates to the $57 million paid by CPPIB.
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Based on rising rentals in the area, CPPIB and SL Green carried out extensive renovations to the building to reposition it as a high-end boutique office property. The works concluded in 2015 and included a facade upgrade, lobby and arcade improvements, creation of green spaces, and inclusion of amenities such as a gym (i.e., Equionx fitness club), concierge services, and improved retail offerings.
Over the years, the building at 10 East 53rd Street attracted notable tenants such as Swarovski, which signed a lease for 17,850 square feet (i.e., 1,660 square meters) in 2015, and Ermenegildo Zegna, which relocated its offices to the building in 2020.
The property was CPPIB's last remaining office property in Manhattan; a decade ago, it owned this plus four others. The firesale by CPPIB was the second such transaction for SL Green this year, which also bought out a partner in another property, 2 Herald Square, for no cash.
CPPIB has faced pressure to revalue its real estate holdings, which have remained stable even as market-valued real estate investments have significantly declined. In May 2024, it reported a 5% decrease in the value of its real estate holdings while reducing its allocation to real estate investments from 12% to 8%. Earlier in 2024, CPPIB infamously sold its stake in another Manhattan office building for $1.
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