Bank of Nova Scotia, Canada’s third-largest bank, agreed to sell its Scotia Plaza office complex in Toronto for C$1.27 billion ($1.24 billion) to two real estate investment trusts in the country’s largest office sale.
Dundee Real Estate Investment Trust (D-U) and H&R Real Estate Investment Trust (HR-U) agreed to buy the Toronto headquarters of Scotiabank, the lender said today in a statement. The sale is scheduled for completion by June 20. Dundee would own two-thirds of the property, and H&R would have the rest.
The sale would help boost Scotiabank’s capital ahead of 2013 Basel Committee on Banking Supervision deadlines, according to analysts including John Aiken of Barclays Capital. With a Tier 1 Capital Ratio of 11.4 percent at the end of January, Scotiabank had the smallest ratio among Canada’s six biggest lenders.
Scotiabank said in January it planned to sell the complex on King Street in the city’s financial district. The property, constructed in 1988, includes a 68-floor tower that is Canada’s second-tallest office building, after the 72-story First Canadian Place, Bank of Montreal (BMO)’s headquarters.
Scotiabank has a lease agreement to keep the bank as the lead tenant of Scotia Plaza for “a number of years,” Sarabjit Marwah, the bank’s chief operating officer, said in the statement. The complex, with buildings that include the tower at 40 King St. West, has 2 million square feet (186,000 square meters) of space.
‘An Opportune Time’
“Scotiabank is the only large bank that currently owns its headquarters in downtown Toronto, and given market conditions, this was an opportune time to maximize the value from those holdings,” Marwah said.
The transaction will be the biggest office sale in Canada, surpassing the C$850 million sale of TD Canada Trust Tower in 2008, according to Real Capital Analytics Inc., a New York-based property research company.
Office property values probably will rise 20 percent this year in Calgary and about 10 percent in Toronto and Vancouver as low vacancies help landlords raise rents, according to estimates by CoStar Group Inc. (CSGP)’s Boston-based Property and Portfolio Research Inc. Montreal values are expected to gain 4 percent.
Canadian funds including Canada Pension Plan Investment Board, Ontario Municipal Employees Retirement System and Alberta Investment Management Corp. had said they’d consider bidding for the Toronto property.