Whiterock Wraps Up Purchase of Interest in 1.1M-SF Toronto Office Portfolio

February 19, 2010
By: Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user small

Toronto, Ont.-based Whiterock Real Estate Investment Trust has enhanced its office holdings by acquiring a 49.9 percent equity interest in a $214 million Toronto-area office portfolio. The three-property portfolio encompass seven buildings containing an aggregate 1.1 million square feet.

As per the terms of the transaction, which included the assumption of debt totaling $140 million, the REIT will take on management responsibilities for all three properties. Whiterock partnered with Toronto-based investment firm Return on Investment Capital Inc. to make the purchase.

The West Metro Corporate Centre in Etobicoke is the Class A’s largest property, featuring 613,000 square feet among three buildings. Also in Etobicoke is the 327,000-square-foot Valhalla Executive Centre, which is comprised of three structures. The 135,000-square-foot office building at 2810 Matheson Boulevard East in Mississauga rounds out the group. Located in the Highway 427 Corridor, all three properties are leased to high quality tenants and together boast an average occupancy rate of 98 percent.

The portfolio’s high occupancy level is indicative of the current condition of the Toronto office market, where the average vacancy rate is a respectable 8 percent, according to a fourth quarter report by commercial real estate services firm DTZ Barnicke. And with a vacancy rate of 6.7 percent, the 427 Corridor submarket is faring even better.

“The Toronto office market is quite strong,” Colin Ross, Senior Vice President & Manager of Office Leasing with real estate services firm DTZ Barnicke, told CPE. “There are pockets where five or six landlords control 75 percent of the buildings and they’re all pension funds, so they all have money behind them. They have deep pockets, so the rental rates have stayed firm; they aren’t off by any huge stretch like they are in the States.”

Additionally, after three quarters of negative absorption, the market experienced positive absorption in the fourth quarter of 2009.

As for investment sales, Toronto has seen an increase in activity after a long dry spell in 2009. “A number of buildings have traded hands that would not have three years ago because the market was just so hot then,” Ross said. “If anything, sales are just picking up.”