Allied Properties REIT (AP.UN-T) and RioCan REIT (REI.UN-T) are buying Diamond Corp.‘s 20 per cent interest in the office and retail components of Toronto’s The Well for up to $42 million.
The transaction, which is scheduled to close today (Thursday, Oct. 5), means Allied and RioCan will each own 50 per cent of the commercial component of the three million square foot, mixed-use development.
Diamond Corp. will remain as an advisor and co-owner of the residential component of The Well through a portion of the construction phase. Then, that component will also be sold in a separate transaction which has already been announced.
“As we enter the construction phase, it’s beneficial for Diamond Corp. to redeploy the capital it committed to the commercial component and for Allied and RioCan to continue as equal partners with a view to long-term ownership and operation,” said Michael Emory, president & CEO of Allied, in a release issued Thursday morning.
The purchase by RioCan and Allied fits the trusts’ business models – both are in the business of holding long-term commercial assets.
“We are proud to have been associated with Allied and RioCan since 2012 in the creation of The Well and look forward to continuing to work with our partners to see The Well come to life,” Stephen Diamond, CEO of Diamond Corp. said in the release. “The Well will truly be a significant city-building legacy for RioCan, Allied and Diamond Corp.”
“Diamond Corp.’s team has been instrumental in the development of the project’s concept as well as guiding The Well through the planning and zoning process. Together we have been able to seize this opportunity and create tremendous value at this site,” said Ed Sonshine, CEO of RioCan, in the release.
Allied, RioCan and Diamond together acquired the 7.67-acre site on the northwest corner of Front Street West and Spadina Avenue in late 2012 and early 2013 for $170 million.
Last year, the three partners entered into a binding agreement to sell approximately 1.43 million square feet of residential density to Tridel Builders Inc. and Woodbourne Canada Partners III (CA) LP for approximately $180 million.
The sale of the residential component is scheduled to close upon requisite land severances being granted and upon completion of the underground parking structure and building podiums.
RioCan will remain a 50 per cent co-owner of one of the rental buildings, representing approximately 400,000 square feet of residential rental space, through a separate joint venture with Woodbourne. This is expected to occur in 2020.
Parking, loading areas under construction
Existing buildings on the site have been demolished and excavation and construction of the underground parking and loading structure has commenced.
Tridel and Woodbourne will participate in this and other phases of the construction and pay for their share of the underground parking spaces required for the Residential Component in accordance with an agreed formula.
With the addition of Tridel and Woodbourne, the intention is to complete the entire development during one continuous construction period rather than in a phased approach.
The commercial component will be divided between office and retail space in a ratio of approximately two-to-one, with Allied managing the office space and RioCan the retail space.