When a large, national Real Estate Investment Trust decided to offload their Alberta assets, they wasted little time disposing roughly $200 million worth of office buildings. These sales come on the heels of writing down $748 million for their portfolio in Q2 of last year.
The decision to sell was likely driven by the large amount of office vacancy in Calgary. Jane Gavan, the REIT’s CEO, thinks the vacancy problem will persist for awhile still:
“Even if the economy recovers, we expect it’s going to take some time for businesses to add people and to require more space”
While much attention has been drawn to Calgary’s vacancy rate and the foreseeable challenges in that market, the REIT also elected to include a number of office buildings in Edmonton into the disposition. Data has started trickling in from a few of the recent transactions and the prices are quite startling.
HSBC Bank Place: 10250 – 101 Street. 324,767 square feet. Sold for $35,000,000. Previously sold in December 2010 for $83,400,000.
Enbridge Place: 10130 – 103 Street. 263,660 square feet. Sold for $25,000,000. Previously sold in April 2010 for $90,850,000.
HSBC Building: 10055 – 106 Street. 118,747 square feet. Sold for $12,250,000. Previously sold in August 2011 for $28,570,000.
Milner Building: 10030 – 104 Street. 177,645 square feet. Sold for $7,500,000. Previously sold in August 2011 for $40,170,000.
Those four buildings alone declined $163,240,000 in a matter of 6 – 7 years. It must be distressing for owners of similar properties, however, we do not believe these recent sales to be indicative of the market as a whole. This was a case where a seller decided they wanted to lower their exposure to a particular market and did so in quick order. It will undoubtedly distort the market for other downtown office towers, but we do not believe it will spill over into smaller buildings or other asset classes.
Chad is a partner with NAI Commercial and has finished as a top 15 producer Canada-wide for the past three years. Chad owes his success largely to his commitment to uncompromising client representation, his active involvement in the real estate and business communities and a lifelong pursuit of continuous learning.
Ryan is a partner with NAI Commercial Real Estate in Edmonton. He is currently ranked nationally as one of NAI’s top advisors in Canada. Having completed his Bachelor of Commerce majoring in Finance, his eye for detail and great understanding of the numbers associated with any business decision makes him an asset to his clients while providing them the highest level of service.
Darcie began her career in Commercial Real Estate after completing her studies in Business Administration. Her personable nature coupled with a results-driven attitude is a perfect match for customers. Darcie understands the importance of delivering a custom, accountable solution for her clients.
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