AFIAA strikes its largest US real estate deal

The Swiss investment foundation has made its first real estate investment in New York City in about eight years.

Swiss AFIAA Foundation for International Real Estate Investments has closed on its acquisition of a Class A office building in Manhattan for approximately $150 million from New Jersey-based real estate operator and investment manager Normandy Real Estate Partners.

The acquisition of the 12-story property, located at 119-125 West 25th Street in Manhattan’s Chelsea neighborhood, is the pension fund manager’s largest US real estate deal to date. The building, which was constructed in 1906 and fully renovated this year, has 138,000 square feet of rentable space, 89 percent of which is office and 11 percent of which is retail. The asset will be held in the AFIAA Global fund, which also owns additional US real estate in Austin, Chicago, Philadelphia and Washington, DC.

“The current acquisition marks the first time in about eight years that we are investing in the New York real estate market again,” said Dino Christoforakis, AFIAA’s head of North American transactions in New York. “In our view, the office market currently provides good investment opportunities. We are also seeing further potential for rent increases in Midtown South in particular.”

AFIAA is an investment foundation owned by 45 Swiss pension funds, through which they invest exclusively in Class A foreign real estate assets. AFIAA plans to expand its real estate portfolio to up to SFr3 billion ($2.93 billion; €2.81 billion) by 2021, focusing on core-plus properties in Europe, North America and Australia, according to chief executive Stephan Kloess.

“Properties with a need for refurbishment or vacancy are also interesting for us,” he added. “Our active asset management allows us to leverage this potential in order to secure or increase our long-term yields.”

The AFIAA Global fund had SFr1.5 billion in assets as of September 30, with 46 percent of the portfolio in Europe, 30 percent in North America and 24 percent in Australia.

Normandy acquired the property in July 2013 on behalf of its fund, Normandy Real Estate Fund III, and in partnership with Waterbridge Capital and NTT Urban Development. The purchase price was $54.5 million, according to data provider Real Capital Analytics. The joint venture then embarked upon $20 million in capital improvements that included upgrades to the lobby, new enlarged windows, new elevators, new building systems and a new roof terrace and penthouse, among other enhancements. During the holding period, the parties also signed indoor cycling company Peloton for its new 52,600-square-foot global headquarters.

Adam Spies, Doug Harmon, Kevin Donner and Adam Doneger of Cushman & Wakefield represented Normandy while Samuel Lefkowitz represented AFIAA.