The University Health Network (UHN) is extending its reach with the acquisition of 522 University Ave. in Toronto, one of the three largest office building sales in the city in 2024.

The transaction will both allow the hospital network to expand its capabilities and remove a chunk of aging office space from the downtown inventory.

The 15-storey, 210,000-square-foot tower known as the National Life Building will be repurposed to accommodate UHN’s expansion of cancer care, medical research and training. Its location puts it within a short walking distance to several neighbouring hospital facilities, subway and transit stops, the University of Toronto’s downtown campus, and the MaRS Discovery District.

“The addition of 522 University Ave. increases our capacity to drive innovation and research in cancer prevention, early cancer detection, diagnostics and treatment, as well enable the introduction of new and expanded programs at UHN," Kevin Smith, president and CEO of UHN, said in Friday's announcement.

UHN is a research hospital affiliated with the University of Toronto, consisting of sites such as Toronto General Hospital, the Princess Margaret Cancer Centre, and the Michener Institute of Education.

The acquisition means a drastic shift from a plan filed by its previous owner, Industrial Alliance Insurance and Financial Services Inc., a subsidiary of Quebec City-based iA Financial Group. It had proposed transforming the building into a 64-storey, mixed-use development of 579 residential units and over 226,000 square feet of office space.

RENX has learned the transaction was valued at approximately $80 million, placing it at the higher end of values for this type and quality of office property.

What UHN plans to do at 522 University Ave.

With its latest property, UHN expects to support its programs at the Princess Margaret Cancer Centre and Toronto General Hospital, and serve as a training ground for health care professionals from the Michener Institute of Education and partnered academic institutions.

The Princess Margaret Cancer Centre has reached capacity, UHN said, with approximately 19,000 new patients per year. With rising demand for cancer diagnosis and treatment, the UHN sought more space for research in treatments and care.

UHN said possible services at 522 University Ave. could include:

• enhanced supportive care;
• an early cancer detection program;
• a new prostate cancer centre; and
• a hosting a digital intelligence team to “optimize care through advanced data analytics and artificial intelligence.”

The hospital network is acquiring the office building at a time when downtown Toronto office vacancy hit a 24-year high of 15.3 per cent after the first nine months of 2024, according to real estate advisory firm Newmark in its Q3 market overview.

After a year of few significant office sales in downtown Toronto, the sale is also significant because it will help establish pricing for other potential deals, a Colliers spokesperson told RENX in an exchange of emails about the transaction. It also continues the trend of private and other buyers (in this case institutional health care) acquiring these properties as opposed to traditional owners such as large REITs or pension funds.

There is also recent interest from owner-occupiers who can capitalize on the higher-vacancy office market to acquire properties at more reasonable price points, the spokesperson wrote. While the current market can deter investors worried about leasing and financing downtown office buildings, that’s not a concern for public sector owner-occupiers.

A significant change of plans

The change of hands for the property will mark a dramatic shake-up for what was originally planned for 522 University Ave.

Initially, the intent was to demolish the concrete structure and replace it with a 13-storey office building that would have a 49-storey residential tower on top, according to Urban Toronto. But the City of Toronto designated the property as having cultural heritage value, pushing iA Financial and WZMH Architects back to the drawing board to preserve some of its features.

It was reworked into retaining 60 per cent of the existing structure and increased to 64 storeys from 62. The original plan for 611 housing units was decreased to 579 — consisting of studio (11 per cent), one-bedroom (51 per cent), two-bedroom (27 per cent) and three-bedroom (11 per cent) units.