Brookfield’s Canadian REIT Grabs Bay Adelaide Centre East in Downtown Toronto

Brookfield Canada Office Properties announced plans to buy Bay Adelaide Centre East office tower in downtown Toronto from its parent company, Brookfield Office Properties.

Bay Adelaide Centre

Brookfield Canada Office Properties (TSX: BOX.UN; NYSE: BOXC) announced plans to buy Bay Adelaide Centre East office tower in downtown Toronto from its parent company, Brookfield Office Properties Inc. (TSX, NYSE: BPO).

The sale of the 44-story, 980,000-square-foot project currently under construction is based on a value of C$635 million (nearly $610 million) at stabilization ($C602 million or about $577 million net of an imputed return on BOX’s equity investment).

BPO is selling the asset to BOX on an “as-if-completed-and-stabilized basis” and will retain development obligations including construction, lease-up and financing.

At closing, BOX will pay its parent company C$170 million (approximately $163 million) representing the amount invested and value created to date in the project. Additionally, BOX will commit to fund C$26 million (nearly $25 million) for upfront equity and C$350 million ($335 million) for the initial mortgage building loan. The company will make a final payment to BPO of C$56 million ($53.7 million) on stabilization for an aggregate total investment of C$602 million/$577 million.

“This acquisition is strategic for BOX as Brookfield’s vehicle for the ownership of its premier Canadian office assets,” said Jan Sucharda, president& CEO. “Today’s announcement affirms BOX’s growth strategy and its commitment to adding value for its unit holders.”

Designed to achieve LEED Platinum certification, Bay Adelaide Centre East will be completed by the end of 2015. The property is 60 percent pre-leased to anchor tenants Deloitte and Borden Ladner Gervais.

The new high-rise will be part of the Bay Adelaide Centre, which includes the 51-story West tower. The 1.2-million-square-foot office structure opened in 2009 and is 95 percent leased.

Bay Adelaide Centre North will be the third and final phase of the Bay Adelaide Centre project and could accommodate a new development of up to 500,000 square feet.

Brookfield Canada Office Properties owns interests in 28 premier office properties totaling 20.7 million square feet in the downtown cores of Toronto, Calgary, Ottawa and Vancouver. Landmark assets include Brookfield Place in Toronto and Bankers Hall in Calgary.