Toronto-based H&R Real Estate Investment Trust (H&R REIT) has sold the iconic Bow office tower in downtown Calgary, part of $1.67 billion deal that included the sale of its Bell office campus in Mississauga, Ontario.
The buyer is Chicago-based Oak Street Real Estate Capital, a private equity firm.
H&R will retain the management contracts on the Bow and the Bell campus, together valued at approximately $203 million, according to a company statement.
The two-million-square-foot Bow building, located at 500 Centre Street S, Calgary, sold for $1,216,000,000.
“Today's announcement is evidence of our commitment to our strategic repositioning and is a critical step forward on our path to achieving a more simplified structure", said Thomas Hofstedter, president & CEO of H&R. "We appreciate the patience and support of our unitholders as we continue to pursue opportunities to further enhance the value of our units."
The two transactions exceed projected market values by approximately $206 million, with net proceeds of approximately $800 million being used to pay down debt and to facilitate further strategic initiatives, according to H&R REIT.
A company statement added that the Bow sale significantly reduces H&R REIT's Calgary office exposure from 9 per cent to 3 per cent, on a fair-value basis.
Calgary’s downtown office vacancy rate is the highest in Canada, at around 29 per cent, according to industry reports.
H&R has retained the option to repurchase 100 per cent ownership interest in the land and building of the Bow for $368 per square foot, equalling 60 per cent of the total Bow transaction value.
The Bow sale, announced August 9, dwarfs the total Calgary office asset sales during the second quarter of 2021, when eight buildings sold for a total of $57.6 million, according to data from the Network.
“Total investment was well under year-ago numbers of $174 million,” the Network noted.
The previous biggest sale this year was the $16 million purchase of 10325 Bonaventure Dr. SE by 2316135 Alberta Ltd.