Pensions sell 2 Vancouver office towers in $300-million deal

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Millicent Wong
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Bloomberg News

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CPPIB, Oxford Properties had originally sought to receive around $350 million for the properties

Bloomberg News

Ari Altstedter

Published on February 5, 2024 • Last updated 2 hours ago • 2 minutes reading time

Two Canadian pension funds have struck a deal to sell two downtown Vancouver office buildings with tenants including Amazon.com Inc. for about $300 million.Two Canadian pension funds have struck a deal to sell two downtown Vancouver office buildings with tenants including Amazon.com Inc. for about $300 million. Photo by Kazuhiro Nogi/AFP via Getty Images

Two Canadian pension funds have struck a deal to sell two downtown Vancouver office buildings with tenants including Amazon.com Inc. for about $300 million.

Germany's Deka Group agreed to buy the towers at 402 Dunsmuir St. and 401 West Georgia St., according to two people familiar with the deal who asked not to be identified because the details are private.

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The Canada Pension Plan Investment Board and Oxford Properties Group Inc., the real estate arm of the pension fund for Ontario's municipal workers, put the buildings up for sale about six months ago. Spokespeople for Oxford Properties, CPPIB and Deka Group declined to comment on the sale, which has not yet been completed.

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The funds' initial goal was to raise about $350 million for the properties, sources familiar with the sales process told Bloomberg News in June. But it's been difficult to accurately price office buildings lately with few major properties trading globally, which is one reason the Vancouver Towers sale has been so closely watched both in Canada and abroad.

High interest rates and the shift to remote work have led to continued uncertainty about the value of such assets. Office landlords are facing a rise in borrowing costs, putting downward pressure on valuations, coupled with a decline in demand as more employers implement work-from-home policies.

While these concerns have been weighing on the office real estate outlook for some time, the severity of the office downturn became even clearer last week when banks in the United States and Japan were forced to stock up on reserves to cover potential office real estate losses.

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In Canada, Allied Properties Real Estate Investment Trust, a major owner of office buildings in cities like Toronto and Vancouver, also announced a $500 million writedown last week.

With central banks in both Canada and the U.S. now signaling that they are likely done raising interest rates, the Vancouver transaction could be the latest sign that clearer financial conditions are helping buyers and sellers prepare for the price to agree. Another Canadian landlord, Dream Office Real Estate Investment Trust, announced the sale of a Toronto building last month for $135 million and began marketing another building shortly thereafter.

Bloomberg.com

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