Allied Properties to Acquire Mixed-Use Vancouver Asset

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Allied Properties Real Estate Investment Trust, a Toronto-based owner, manager and developer of urban workspaces, is buying 375 Water St., a mixed-use building in Vancouver, Canada, and funding the acquisition with proceeds on a long-term basis from the sale of a non-managing undivided 50 percent interest in two fully stabilized properties from its Montreal portfolio.

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The closing is expected in the early part of the second quarter. Neither the sales price nor the seller of the property was released. But the REIT noted it has entered into a non-binding letter of intent with an unidentified Canadian pension fund. The firm expects to enter into a binding agreement for the purchase and sale and close the sale in the second quarter. Allied also plans to fund the acquisition with its unsecured line of credit. 

Michael Emory, Allied president & CEO, said in a prepared statement recycling capital as a funding source is unusual but expects it to be the norm in the future. He said it represents the first large-scale instance of Allied leveraging its national urban-workspace platform and confirms the portfolio’s institutional appeal. The firm also noted funding the purchase in this manner enhances the geographic diversification of Allied’s portfolio and will recycle capital to a property with significant near-term potential for rent growth.

Building details

Also known as The Landing, 375 Water St. is considered one of the best Class I buildings in Vancouver. It is located at the intersection of the city’s CBD and Gastown, a heritage- and amenity-rich neighborhood. The building has 148,355 square feet of office GLA and 27,115 square feet of retail GLA, along with 53 underground parking spaces. The building is 99.3 percent leased, primarily to knowledge-based organizations and distinctive retail tenants. Allied estimates the current net rents are materially below market and expects to be able to propel rent growth in the near term because the weighted average lease term is 3.3 years.

Growing portfolio

Upon closing, Allied’s Vancouver portfolio will have 12 properties with more than 643,000 square feet of office GLA. It will grow to about 820,000 square feet early next year, when the company completes construction of 400 West Georgia and make Allied one of the leading providers of distinctive urban workspace in Vancouver. The REIT also owns 20 urban properties in Montreal, with about 5.6 million square feet of GLA, including 5445 and 5455 de Gaspe Ave. (969,558 square feet), Cite Multimedia (958,840 square feet) and Nordelec (877,376 square feet). In early December, Allied agreed to acquire 747 Square-Victoria St., a mixed-use Montreal property. In July, Allied closed its acquisitions of 700 de la Gauchetière St. W. and the RCA Building, both in Montreal. The tower at 700 de la Gauchetière (DLG) is in the southern portion of the city’s downtown core, close to Allied’s 425 Viger Ave. W. The 700 DLG building has about 1 million square feet of GLA and was 96 percent leased at the time of sale. The RCA Building, with 343,579 square feet of GLA, was 82 percent leased.