Artis REIT Seeking Sale of Alberta Office Towers

  • Company looking for a buyer for some or all 20 Calgary towers
  • Calgary office vacancy rate doubled to 18 percent in a year

Artis Real Estate Investment Trust is seeking to sell some or all of its Calgary office properties in what could be the first major commercial deal in the Canadian city since oil prices began plunging, according to people familiar with the matter.

The landlord has retained Bank of Montreal to find an investor for the buildings in order to raise several hundred million dollars, two of the people said, declining to be identified because the matter is private. Artis has also discussed broadening any potential partnership to include its other Alberta real estate which includes industrial and retail property, two people said. There’s no guarantee that a sale will go through.

Chief Executive Officer Armin Martens, Chief Financial Officer Jim Green, and Director of Investor Relations Heather Nikkel didn’t respond to e-mail and phone requests seeking comment.

Artis is among Canadian real estate companies facing challenges as energy tenants cut employees amid a slide in oil prices. Large companies and money managers, including Brookfield Property Partners LP and Manulife Financial Corp., have said they see opportunity for deals in Canada’s energy-reliant province of Alberta, as long as the price is right.

Vacancy Rises

Artis owns 20 office buildings in Calgary comprising about 2.5 million square feet, or 9.7 percent of its overall portfolio, making it one of the company’s five largest segments, as of Sept. 30, according to company documents. The Winnipeg-based REIT relies on the city for 16 percent of property net operating income. Its buildings in Calgary are 86 percent occupied, one of the lowest rates in its portfolio.

Artis units rose 0.5 percent to C$11.64 at 10:57 a.m. in Toronto for a market value of C$1.57 billion ($1.12 billion). The units have declined 25 percent in the past 12 months compared with a 19 percent decline for the Standard & Poor’s/TSX Capped REIT index over the same period.

Calgary’s downtown vacancy rate jumped to 18 percent at the end of last year from 9 percent just one year ago, according to a Colliers fourth quarter report. Floors are clearing out as more than 40,000 energy jobs have been cut since the oil rout began as the price of the commodity has declined about 70 percent since mid-2014 to about $33 a barrel.

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