Fourteen $1 bn single asset deals and counting

Real estate investors have acquired 14 single real estate assets worldwide for over $ 1 bn each so far this year - the same number as for all of 2006, and almost five times the level of 2005, according Jones Lang LaSalle's International Capital Group. Earlier this week, Quinlan Private's founder Derek Quinlan and Propinvest announced the acquisition of Citigroup's European headquarters in Canary Wharf, London for £1 bn (about EUR 1.4 bn), marking the latest example of investors' increasing appetite for large trophy assets.

The Citigroup sale-and-leaseback deal was the second-largest single asset deal in the UK. The record is held by Spanish property company Spanish Metrovacesa which acquired the global head office of HSBC bank, also at Canary Wharf, for £1.09 bn (about EUR 1.59 bn or $) last April. The transaction prices in both deals far exceeded the $1 bn benchmark set by JLL. In dollar terms, the acquisition of the Citigroup headquarters (114,000 m2) comes to just over $2 bn and the HSBC sale-and-leaseback of the 102,000 m² property is equivalent to $2.2 bn.

JLL's International Capital Group said that in the first six months of 2007, seven buildings traded hands for more than $1 bn in New York, as did five in London, one in Paris and one in San Francisco. 'In addition, a significant number of trophy assets in London, Frankfurt and in major US cities were sold for amounts just below $1 bn. During 2006, nine assets valued over $1bn were traded in the US, three in Japan, one in the UK and one in Singapore. The entire Cape Town, South Africa, waterfront development (a single block) was also traded for over US$1bn.

Padraig Brown, associate director at Jones Lang LaSalle’s International Capital Group, commented: 'Investors continue to allocate significant funds to real estate investment and face intense competition for quality assets. The ability to place a significant volume of funds in a single investment can be attractive to many investors - especially when rental growth for prime assets is forecast to outperform.' 'A number of the trophy assets traded in the past 18 months have come to the market in sale-and-leaseback transactions - becoming available to institutional investors for the first time,' Brown noted.

Trophy assets sold for over US$1bn over the past three years:

Three single asset transactions over $1bn during 2005:
US - 2
Japan - 1

14 Single asset transactions over $1bn during 2006:

US - 9
Japan - 3
UK - 1
Singapore - 1
South Africa - 1 (contiguous bloc)

14 Single asset transactions during 2007:

US - 8
UK - 5
France - 1

Click on the link below for more on the the Citigroup deal.