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Vancouver’s Bentall Centre up for sale in a hot market

Demand for downtown office towers will be ‘off the charts,’ analyst says
The Bentall Centre in downtown Vancouver has been put up for sale.

VANCOUVER — The Bentall Centre, with its four distinctive office towers and mall, is being put up for sale by its majority owner, Ivanhoé Cambridge Inc.

The offering, which has not yet been listed but was confirmed Wednesday by Ivanhoé Cambridge, will likely be one of the largest transactions in the Vancouver’s history, according to observers.

The buildings, built between 1969 and 1981 and located between Burrard and Thurlow and Dunsmuir and Pender streets, have long been the epicentre of Vancouver’s central business district; the towers at Bentall 1,2,3 and 4, ranging from 21 to 35 storeys, house many of British Columbia’s established businesses and law offices.

The sale will attract interest from major investors around the world, said Arthur Lloyd, Ivanhoé Cambridge’s executive vice-president of office for North America.

“We believe there is appetite from global institutional investors seeking stable returns in core assets such as Bentall Centre,” he said in a statement.

Ivanhoé Cambridge spokesman Sébastien Théberge confirmed the company was selling the Bentall Centre but declined to comment on the specifics or details.

The four buildings contain nearly 1.5 million square feet of office space, along with 53,000 square feet of retail space underground. The complex is co-owned by Ivanhoé Cambridge Inc. and Great West Life Assurance, one of the original investors in the project.

How the sale will be arranged given the shared ownership is unclear, but such co-operative ownerships usually have buy-sell clauses that require one partner to first offer to the other partners. In this case Great West Life owns 40 per cent each of Bentall 1,2 and 3, and 25 per cent of Bentall 4, according to real estate experts with knowledge of the arrangement.

Calls for comment to GWL Realty Advisors, Great West Life’s real estate arm, were not returned.

The news surprised both the city and commercial real estate agents, who say the property is “irreplaceable” and is coming on the market at a strategic time.

“This is a big deal in a market that has been constrained for offerings like this,” said Kirk Kuester, the executive managing director of Colliers International. Kuester’s company isn’t involved in the listing but he agreed to discuss the impact of Ivanhoé Cambridge’s decision.

“We are in a market that is absolutely devoid of product in general, let alone trophy real estate, irreplaceable real estate, such as this. I mean you just don’t replace this kind of real estate,” Kuester said. “We continue to field inquiries from domestic, Canadian, foreign and international investors looking to acquire this kind of real estate and it just isn’t available.”

Vancouver’s Class A downtown business real estate is largely controlled by “less than half a dozen major institutional investors,” he said. “They are all looking to expand their holdings because economies of scale are ever so important when you own this kind of real estate.”

That demand, he said, will put the Bentall Centre sale off the charts.

“What is more relevant is that it will set a record in pricing — there is no doubt about it. We are at a point in time today where valuations are at all-time highs and supply is at an all-time low and liquidity is at an all-time high,” he said. “There is a massive, massive amount of liquidity in the capital market looking for these kinds of opportunities, which don’t exist.”

Kuester said he couldn’t estimate the total value of the offering.

However, by comparison, in 2009 German investment firm Deka Immobilien Investment GmbH bought the newer Bentall 5 building from a Quebec pension fund for $297 million. Three years later Deka sold it for $400 million to several Canadian pension funds whose investments are managed by Bentall Kennedy, a firm once related to the Bentall family, which built the original four buildings.

That sale in 2012 equated to about $686 per square foot, according to real estate reports. At that rate, Bentall Centre’s 1.53 million square feet would be worth just over $1 billion.

The Bentall Centre includes potential development of a fifth tower. Brian Jackson, Vancouver’s retiring chief planner, said there is unused development potential on the block that would allow a tall tower with a small floor plate.

Jackson was unaware that Ivanhoé Cambridge had decided to sell the block but he noted it is a significant development in the city’s business district.

“It is an enormous component of the downtown office supply and therefore maintaining part of that is very important,” Jackson said. “There is an opportunity for an office tower like the new Oxford tower, with a relatively small floor plate to fit in and among the other towers.”

Quebec-based Ivanhoé Cambridge, which has seen its total holdings jump from $31 billion in 2010 to $48 billion in 2015, has a number of major developments and properties in Metro Vancouver, including the Metrotower buildings in Burnaby and the Oakridge, Metropolis at Metrotown, Guildford Town Centre, Richmond Centre and Mayfair Centre shopping malls. It is also building the new Tsawwassen Mills shopping centre.