Pension Funds Said Seeking $617 Million for Vancouver Offices

  • Ivanhoe Cambridge, HOOPP sites each worth about C$400 million
  • Sale comes amid record high pricing in the hot market

Two of Canada’s largest pension funds are cashing out of some of their office properties in Vancouver as prices for work space soar amid an influx of offshore capital.

Healthcare of Ontario Pension Plan, or HOOPP, is selling Willingdon Park, an almost 1-million-square-foot (92,903 square meter), nine office-tower business park in Burnaby, a 30-minute drive from downtown Vancouver, according to people familiar with the deal. In the same area, Ivanhoe Cambridge, the real estate investing arm of Caisse de depot et placement du Quebec, Canada’s second-largest pension manager, last week brought to market Metrotower 1 and 2, the people said, asking not to be identified because the negotiations are private.

The funds are seeking about C$400 million ($310 million) for each property or $617 million total, the people said.

HOOPP couldn’t be reached for comment, and a representative for Ivanhoe Cambridge declined to comment, as did brokerage CBRE Group Inc., which represents both pension funds in their deals.

Vancouver’s office buildings are a hot commodity, with deals driving valuations beyond other North American cities this year. Transactions include Brookfield Property Partners LP’s sale of the Royal Center for C$428 million, and the purchase of the Bentall Centre, which was valued at more than C$1 billion, by Anbang Insurance Group Co. of China.

Capitalization rates, a measure of yield on property investments, have fallen to as low as 3.5 percent in downtown Vancouver from 4.3 percent a year ago, according to a second-quarter report from Colliers International. That’s one of the lowest in North America. The cap rate, or net income divided by property price, drops as buyer demand rises.

The surge in commercial valuations come as residential prices also soar, prompting the provincial government of British Columbia to impose earlier this month a 15 percent tax on foreign investors in Vancouver’s housing market.

Willingdon Park, whose tenants include McDonald’s Corp. at its 28-acre (11-hectare) business park, opened in 1985. HOOPP purchased the remaining 50 percent stake in the property in 2004 for C$80 million. Ivanhoe Cambridge is looking to sell its remaining stake in the three-tower Metrotower office complex, after selling a building to Metro Vancouver, the regional government, for C$205 million last year. Metrotower 1 and 2 are 28 stories and 30 stories tall, respectively, and have about 616,000 square feet.

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