TORONTO – Real estate owner Dundee REIT (TSX:D.UN) has struck a deal to buy 29 office properties, in what it says is the largest office portfolio ever acquired by a Canadian property investment trust.
The buildings are located in Toronto, Ottawa, Edmonton and Calgary and have a sale price of $831.8 million, the Toronto company said late Thursday
The company made the agreement with U.S.-based Blackstone Real Estate Advisors LP, part of the New York-based private equity fund that is one of the world’s biggest buyout firms.
Also part of the deal was Slate Properties Inc., a Canadian real estate and assset manager with properties on both sides of the border.
Dundee has also made other deals to sell five of the newly bought buildings to other buyers for $142 million.
The 24 remaining office properties total 2.7 million square feet and are worth $689.8 million, excluding transaction costs. The transaction is expected to close Aug. 15.
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Two of the properties are in Ottawa, five in Calgary, and four in Edmonton. Two are outside of Toronto’s downtown core, while the remaining are in the city’s financial district, with one cluster along Bay Street.
“It is rare that office properties trade in Toronto’s financial core, and the opportunity to acquire 11 such buildings in one transaction is highly unusual,” the company said in a statement, adding that vacancy rates are falling in the city’s downtown core, pushing up rents.
Dundee was halted from trading on the Toronto Stock Exchange pending the news.
“With yet another large accretive transaction, our adjusted funds from operations will grow even faster in 2012 than in 2011,” Michael Cooper, the company’s chief executive said in a statement after markets closed.
Dundee said TD Securities Inc. will finance the acquisition with a secured term credit facility, but Dundee doesn’t intend to use it all because it currently has cash on hand and new mortgage financing.
Neither Slate nor Blackstone said why they were selling the office buildings. But asset managers routinely assess their portfolios looking to cash in when prices are high for real estate and use the money for investments in other high-gropwth areas.
Elsewhere Thursday, Blackstone (NYSE:BX) announced an agreement with Barclays Private Equity and Quadriga Capital to buy German outdoor clothing, footwear and equipment retailer Jack Wolfskin.
The transaction is expected to close in August.
“We have seen consistent growth in the outdoor market, and Jack Wolfskin has played a leading role in this,” said Axel Herberg, senior managing director of Blackstone.
Blackstone also reported financial results for the second quarter, noting its profits or economic net income – jumped to $703.3 million for the second quarter of 2011, an increase of $498 million from the second quarter of 2010.
Assets under management jumped to US$159 billion at the end of the quarter.
“Despite the challenges presented by slowing global economic growth, overall our portfolio companies and real estate investments performed well in the second quarter,” said Stephen Schwarzman, chairman and CEO of the Wall Street firm.
“The carrying values of our investment funds continued to increase, and we once again reported our best quarterly earnings since becoming a public company four years ago.”
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