The Bay Adelaide Centre in downtown Toronto. (Image courtesy Brookfield)

The Greater Toronto Area continues to dominate Canada’s commercial real estate landscape heading into 2019 — with investment activity likely to set a record for the sixth consecutive year.

“There’s no shortage of buyers,” said Altus Group’s vice-president of data operations Ray Wong, discussing the Top 10 2018 CRE transactions in the GTA with RENX.

He called 2018 a ”pleasant surprise . . . just based on overall investment volume. We thought 2017 was going to be a record year,” he said.

And it was with $23.5 billion in investment activity, a huge jump from the $17.12 billion recorded in 2016). The 2018 year-end numbers could again hit record levels once the final tally is in.

“It seems like the overall activity for 2018 will at least either match or slightly exceed the volume in 2017,” Wong said, “so it shows you that overall investment demand is still there and the capital is still available for acquisitions.”

The top two transactions

Topping the chart in 2018 was the sale of a 50 per cent interest in downtown Toronto’s Bay Adelaide Centre, owned by Brookfield Properties (BPY-UN-T ). Private firm Dadco investments paid $850 million for its share of the property. 

“That’s one of the best assets in Canada,” Wong said.

British-Canadian businessman Victor Dahdaleh, who heads Dadco, made the investment in March. The 51-storey, 2.2-million-square-foot property takes up an entire city block in the heart of the financial district at 333 Bay St.

“It ranked as the biggest transaction in Toronto last year,” said Wong.

A redevelopment site deal came in just behind, at No. 2. Bombardier sold the Downsview airport site at Dufferin St. and Sheppard Ave. W., to PSPIB Downsview Investments (Public Sector Pension Investment Board) for $825 million.

At the moment it’s unclear if the ICI land will continue to be used for industrial or manufacturing. Wong predicts possibly seeing a mix of commercial, office and retail in the next five to 10 years as the site is redeveloped. 

What’s driving buyers, sellers?

They were by far the two largest transactions during 2018, a year when Wong said investment activity remained at a constant level. He cited three key motivations for investors and sellers:

* Focusing on core assets or core investment strategy. For instance, RioCan REIT (REI-UN-T) has decided to focus its retail and redevelopment efforts in major markets such as Toronto, Vancouver, Montreal, Edmonton, Calgary and Ottawa “and less so . . . on the tertiary markets.” 

* Value-add. Investors seeking real estate or investment properties to which they can add value, such as improving an existing asset. For example, Timbercreek‘s acquisition of an apartment portfolio from the Wynn Group: “They’re looking to invest into those apartment buildings to increase potential rental rates or returns off of those properties.”

* Realizing gains. “They’re acquired this asset over a number of years and they’re looking to take some profit off the table,” said Wong. He offered the $850-million deal for Bay Adelaide Centre as an example: “In that situation, it’s perfect for Brookfield because they still manage the premises and they’re also taking some profit off the table, and they’re still getting the revenue from being able to manage the facility and as well as own half the asset.”

Here are the rest of the Top 10 GTA transactions, according to Altus data:

3. Lakeview Lands

Lucrative South Mississauga lands make two appearances in the Top 10 transactions, including the Ontario Power Generation sale of the Lakeview Lands for $275 million. The buyer was Lakeview Community Partners Limited, a consortium comprised of TACC Construction, Greenpark Group, CCI Development Group, Branthaven Homes, and Argo Development Corporation.

Locally, the brownfield site is referred to as the “Four Sisters,” a nickname spawned by the chimney stacks which stood above the former generating station. Lakeview was one of five OPG coal-fired power plants shut down to reduce the province’s greenhouse gas emissions.

The lands are located at 800 Hydro Rd., east of Cawthra Road and south of Lakeshore Road E. The 177-acre site is being transformed into a mixed-use community with parkland.

4. Queen’s Quay Terminal

Queen’s Quay Terminal at 207 Queen’s Quay West was sold by Brookfield Properties to Quebec City-based iA Financial Group for $261 million. Wong called it an opportunity to “pick up a really good asset” in Toronto.

5. Parkway Place

Tigra Vista Inc. paid $256 million to acquire North York’s Parkway Place from Agellan Commercial REIT (ACR-UN-T). The deal for the office space at 235-245 Consumers Rd. is among a trio of the GTA’s 10 largest transactions which were sealed during the fall. 

6. 55 University Ave.

Back in the downtown, Cominar REIT (CUF-UN-T) sold office space at 55 University Ave. to Investors Group for $195 million. Cominar’s strategy “last year was basically to focus on core assets,” said Wong. 

7. 3575 Elgin Mills Rd.

Pemberton Group acquired 3575 Elgin Mills Rd. in Markham for $187 million in April 2018. The residential land play means “they’re looking to develop those lands down the road,” Wong said.

8. Starlight buys Wynn Group portfolio

The Wynn Group sold the Riverside Apartments in Etobicoke to Starlight Investments for $183 million. The property is at 2737 and 2757 Kipling Ave. “I think they were looking at opportunities to be able to improve that site or improve that asset,” said Wong.

(Riverside is part of the Wynn Group / Starlight Investments’ GTA Apartment Portfolio, which consists of nine total properties — eight in Toronto and one in Brampton. The portfolio was purchased for $402,137,237 and contains a total of 1,527 residential units, representing an aggregate price per unit of $263,351).

9. Dixie Outlet Mall

Cominar REIT made the Top 10 a second time with its sale of Mississauga’s Dixie Outlet Mall. The 406,000-square-foot retail property at 1250 South Service Rd., was sold to Slate Asset Management in a $181 million transaction. The mall is located just south of the QEW between Cawthra Rd. and Dixie Rd.

“They’re probably looking at all different options at this point,” Wong said, to improve the site or increase returns. “Right now, I think it’s going remain retail.”

10. West Lodge Apartments

The Wynn Group sold its West Lodge Apartments in Toronto to Timbercreek Asset Management for $170 million. The properties are at 103 and 105 West Lodge Ave. It was also part of a larger portfolio transaction, which included 21 properties across Ontario.

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