Freed Developments Unveils $800 Million Toronto Project

Plan Calls for Luxury Hotel Rooms and Condominiums

Toronto-based real estate company Freed Developments is planning what it says is an $800 million skyscraper in the downtown core that will include condo units and high-end hotel rooms.

The Freed Hotel and Residences tower at Adelaide and Duncan, just west of the University, will be designed by Chicago-based Adrian Smith + Gordon Gill Architecture, known for the Jeddah Tower in Saudi Arabia and the Central Park Tower in New York.

The plan includes 100 luxury hotel rooms and 400 condominiums with a sky bar and restaurant on the 63rd floor, a boutique spa, and a 10,000-square-foot Katsuya restaurant on the second floor.

Sam Nazarian’s SBE, a hospitality company that develops, manages and operates restaurants, lounges and nightclubs, is behind the first Katsuya restaurant in Canada. This will be the 12th location globally.

The development is expected to launch in the fall of 2028.

“This project is a testament to my profound love for Toronto,” said Peter Freed, founder and chief executive of Freed Developments, in a statement.

Freed Developments has a 30-year track record in Canada’s largest city, specializing in condominium developments, food and beverage ventures and hotels and resorts.

Nazarian is the founder of SBE. In 2020, he sold the remaining 50% of his hospitality brand and management platform, which included over 100 hotels, more than 150 restaurants and lounges and luxury residential sales to Accor. He had sold a 50% stake in 2018.

The chairman and CEO of SBE has been focusing on the the company he founded in 2020 known as C3, Creating Culinary Communities. C3 is focused on a new way to approach food halls, ghost kitchens and mobile delivery via culinary talent and technology.

The Freed Hotel and Residences is scheduled to begin sales in March 2024 and will be located at 240 Adelaide Street West. Units will range from 270 square feet to over 9,800 square feet.

Source CoStar. Click here to read a full story.

Lower Borrowing Costs Seen Lightening Debt Burden on Canadian Real Estate Industry

Analysts Cite Cause for Optimism, Even As They Acknowledge Possibility of More Rate Hikes

Canada’s commercial property investment landscape shows some signs of what analysts say is slow improvement after the Bank of Canada raised interest rates to 5% last July.

Some real estate brokerage analysts are finding cause for optimism in the growing spread between capitalization rates and borrowing costs in the fourth quarter as a recent decline in rates has offered investors some room to maneuver.

But the findings in a Colliers report also warn that long anticipated Bank of Canada rate cuts are not certain and that further rate raises remain conceivable as “persistently high inflation, especially for staples like food and housing, have some analysts even suggesting further hikes are possible.”

Colliers touts itself as Canada’s largest commercial real estate services firm. It focused on the situation in 12 major Canadian urban centres in its 22-page report.

The authors note investors can expect some challenging times early this year, notably in hospitality, as well as for most of the apartment and retail markets, while about half of industrial markets face flat cap rates indicating a lack of increase in projected annual yields.

As for bright spots, Colliers notes Canada’s 5.8% unemployment rate has remained significantly lower than in past recessions, while a rapidly increasing population is expected to prove economically beneficial for some assets, including housing and industrial space. Owners of grocery-anchored retail can also expect to be left undamaged by the challenging economic conditions.

The report broke down certain situations in Canada’s urban areas.

  • In Toronto industrial and multifamily showed strength in the fourth quarter, while grocery-anchored properties also attracted investors. Industrial vacancy rates in the greater Toronto area increased slightly to over 1%, and asking rents dropped slightly.
  • Montreal’s commercial real estate had some softening in the industrial sector, where vacancy rates have risen to over 3%, as many investors are standing on the sidelines until financial conditions improve.
  • Vancouver posted almost no large transactions in 2023 until a busy fourth quarter. Cap rates have remained historically low for the urban area.
  • Calgary’s cap rates increased due to high demand for housing, while retail also remained strong. The Calgary office sector remains a weak point.
  • Edmonton is also undergoing a population increase that is propelling multifamily demand. The report expressed optimism for Edmonton retail properties as well, and it projected positive cap rates.
  • Ottawa saw few major transactions, while some major national multi-family owners sold off mid-sized and large-sized assets in 2023.
  • Winnipeg showed positive results in the industrial sector but a dearth of transactions made it difficult to determine a larger trend.
  • Halifax’s industrial real estate sector slowed while suburban office space showed some strength.
  • Quebec City’s industrial property sector posted positive results, as did Moncton, but both were hampered by a struggling office sector.

Source CoStar. Click here to read a full story.

Over the past four years, 35 cents of every dollar spent by foreign real estate buyers went to purchase industrial assets in the GTA

City Accounts for 56% of All Non-Canadian Property Purchases Since 2020

Over the past four years, 35 cents of every dollar spent by foreign real estate buyers went to purchase industrial assets in the Greater Toronto Area.

Across all four asset classes, Toronto accounted for 56% of all foreign real estate investment since 2020. Montreal was a distant second, accounting for 17% of foreign real estate acquisitions.

Across Canada, foreign buyers have been targeting industrial assets, thanks in part to several large portfolio deals in recent years, including the $5.9 billion Dream Industrial REIT and GIC’s purchase of Summitt Industrial Income REIT in early 2023. GIC is a Singapore sovereign wealth fund.

One outlier has been Calgary. In this market, office transactions dominated thanks to the sale of The Bow for $1.2 billion in 2021. The buyer in this transaction was a U.S. private equity real estate firm, Oak Street Real Estate Capital, which purchased the five-star trophy asset as part of a portfolio deal that included three smaller offices in Mississauga, Ontario. The reported capitalization rate on the transaction was 7.7% and the offices were 100% leased at the time of sale. However, excluding this sale, industrial would have comprised most foreign real estate purchases.

In Toronto, the foreign office transactions included the KDDI purchase of Allied REIT’s downtown office data centre portfolio. The three-asset portfolio sold for over $1.3 billion, accounting for nearly half of the recorded office purchases by foreign buyers in the market. KDDI is a Japanese telecommunications corporation. Allied, a Canadian office REIT, likely decided to sell these assets to raise liquidity in a difficult environment for the nation’s office sector.

In Ottawa, retail attracted greater interest foreign interest compared to other markets. This may be due to both the healthy demographics of the city as well as the importance of the public sector in the local economy, which should support employment — and therefore consumption — even as Canada’s economy continues to slow. The foreign retail transactions included a $42.5 million sale of two neighbouring assets along Cyrille Road near Highway 417 in March 2022. The buyer was U.S. warehouse retail giant Costco. This one transaction accounted for 9% of all foreign purchases made in Ottawa since 2020.

Trends in foreign asset purchases suggest that when international buyers add Canadian assets to their portfolios, they have a Toronto bias. The city, which accounts for over half of all foreign commercial real estate purchases in recent years, represents 20% of the country’s economic output and 17% of its total population. Toronto attracts foreign investors thanks in part to its larger size relative to other areas. But it is still punching above its weight.

Foreign investors likely prize the city not only for its size but also for its liquidity. As the nation’s largest real estate market, Toronto includes the most opportunity for deep-pocketed investors to deploy capital; finding a willing seller of larger assets is easier in Toronto than elsewhere.

Montreal, too, is punching above its weight, representing 17% of foreign commercial real estate purchases, yet accounting for just 11% of Canada’s economic output. Like most other markets, many foreign purchases have been of industrial properties. The most important of these transactions was Pure Industrial’s purchase of Cominar’s industrial assets for $2.04 billion in March 2022. These assets were concentrated primarily in Montreal and Quebec City. Pure Industrial is a portfolio company jointly operated by U.S. private equity behemoth Blackstone and Canadian institutional investor, Ivanhoé Cambridge.

One market that has not been overachieving in terms of attracting foreign buyers is Vancouver. The city represents 7.7% of the nation’s economy but attracted just 6% of foreign deals since 2020. One reason for this could be the economic slowdown in China over the past few years, which likely affected Chinese investors’ ability to deploy capital overseas. Traditionally the city’s real estate sector has attracted interest from Asian buyers, including from China and Hong Kong.

With the Bank of Canada’s monetary tightening cycle likely at an end, interest rates should start to fall in the coming months. When the rate cuts begin, foreign investors — many of whom with dry powder at the ready — may start to deploy capital more aggressively in Canada. Such activity would be welcome news for the country’s real estate capital markets which have seen total sales transactions across the four asset classes fall 23% from $57 billion in 2022 to $43.7 billion in 2023.

Source CoStar. Click here to read a full story.

Crombie REIT Aims To Continue Focusing on Smaller, Quicker Developments

REIT Associated With Sobey’s Grocery Chain Likes Return on Such Projects

Crombie Real Estate Investment Trust is thinking small again for 2024, as the Nova Scotia-based firm aims to focus on more compact developments that offer a solid return and can be completed in a shorter duration.

The chief executive of the REIT which is closely associated with the Sobey’s grocery retail chain revealed the company’s strategy in a recent earnings call. CEO Mark Holly said Crombie remains focused on shorter-term projects that involve modernizing or repurposing existing properties as opposed to largescale ground-up developments.

Such projects come with lower risk and require less time and capital requirements, Holly said. Crombie REIT undertook 24 such projects in 2023, resulting in respectable returns, he said.

“Minor developments are a quick in-and-out,” Holly told analysts on the call. “It’s a good use of capital and the yields have good returns of between 5.5% and 7%. That was our focus in 2023 and will likely be our focus for 2024.”

Crombie REIT’s portfolio is heavily weighted toward the retail sector, with 283 shopping properties spread out over 35 million square feet and having a total value of around $4.3 billion.

However, the REIT also has plans to take on bigger developments that promise to increase its mixed-use residential portfolio, currently consisting of three properties. Crombie is motoring ahead with its Marlstone project that will bring 291 units to downtown Halifax at a development cost of about $134 million. The REIT is also nearing completion of its The Village at Bronte Harbour apartment complex that will add another 481 units to Oakville Ontario.

Holly said that Crombie has canceled plans to build 282 homes in a 10-floor residential project at 1099 Broadview in Toronto and that the REIT plans to sell the property this year. The REIT has also sold its remaining parcel of land at the Opal Ridge project in Dartmouth, Nova Scotia.

2023 was a good year for retail property owners in Canada, Holly said, describing it as a “very strong year for necessity-based retailers due to population growth.” He said that he believes that the positive trend will continue through 2024.

Source CoStar. Click here to read a full story.

Top Sales and Leases Recognized in Canada

TPG’s Purchase of Industrial Portfolio Marks Quarter’s Largest Deal

The $990 million sale of a 75% interest in two business parks in the Greater Toronto Area was Canada’s largest real estate transaction during the fourth quarter, making it one of the top deals recognized in the latest CoStar Power Broker quarterly awards.

Oxford Property Group sold the stake in the Class-A industrial properties to TPG, a global alternative asset management firm based in Fort Worth, Texas.

TPG sees the Greater Toronto Area as one of the most attractive industrial markets in the world. It said the joint venture offered it an opportunity to enter the market on a large scale by acquiring a 5.1 million-square-foot,10-property portfolio that included Brampton Business Park and Vaughan Business Park.

“We have followed the Canadian industrial sector for several years,” said Jacob Muller, a partner with TPG, in a commentary when the deal was announced on Dec. 18.

Oxford continues to manage the portfolio, which is fully leased and includes tenants with strong credit such as Mondelez, Best Buy, Campbells, and Olympia Tile. All are signed to longer-term leases.

“With this transaction, we generate significant capital to reinvest back into Ontario, which includes the million square feet of new [Greater Toronto Area] industrial developments we are set to deliver by 2026,” said Jeff Miller, head of North American industrial at Oxford Properties, in a comment on the deal.

The listing brokers were Peter Senst, Kai Tai Li and Matthew Brown of the real estate services giant CBRE. No broker represented the buyer.

Top Office Lease

Sobey’s Renews Lease in Toronto Suburb of Mississauga

The largest office lease of the quarter was in Mississauga. (CoStar)

The fourth quarter’s top office lease was in Toronto’s suburb of Mississauga, where grocery operator Sobeys signed a 237,000-square-foot lease at 4980 Tahoe Blvd.

The country’s second-largest grocery chain signed a 10-year lease at the six-storey building, with the ground floor operating as retail and the remaining floors being used for office operations. The start date of the lease was Oct. 1.

Gabrielle Mair of Metrus Properties was the leasing representative contact. Metrus Properties was founded in 1972 and is a member of the Con-Drain group of companies.

Orlando Espinola, vice president of real estate at Sobeys, was the tenant contact.

Top Retail Lease

Altea Active Snaps Up Nordstrom Rack Space

Altea Active signed a lease for its newest high-end fitness concept, Avant, at 1 Bloor St. in Toronto. (CoStar)

The top retail lease of the quarter was in downtown Toronto, where Avant, a luxury wellness and social club and a subsidiary of Altea Active, signed a lease at 1 Bloor Street East.

The company plans to open on the upper level of the former Nordstrom Rack space at the corner of Bloor and Yonge Street. It will have a dedicated street-facing entrance on Bloor Street in a building owned and managed by First Capital REIT.

The lease for 32,000 square feet was signed on Oct. 1. The lease kicks in on Feb. 1, 2025.

Eric Sherman, head of national operations of First Capital REIT, was the landlord and leasing representative. Jeff Flemington, senior vice president, director and broker at Avison Yong, represented the tenant.

Top Industrial Lease

Clorox Renews Warehouse Lease in Brampton

The Clorox Co. renewed its warehouse lease in Brampton. (Linda Cook/CoStar)

The Clorox Co. renewal of its warehouse space in Brampton northwest of Toronto, was selected as the top industrial lease of the quarter.

The global manufacturer and marketer of consumer and professional products agreed to a renewal deal for 334,784 square feet at 150 Biscayne Cres. The company, whose brands include Pine-Sol, Brita and Burt’s Bees, operates in about 25 countries and its products are sold by major grocery chains.

The lease was signed on Nov. 24 and kicks in on June 1, 2025 with a five-year term.

Sean Hoehn with Cresa Toronto Inc. represented the tenant on the deal. Nuspor Investments owns the property and represented itself.

Source CoStar. Click here to read a full story.

Country’s Largest Grocery Chain To Add 40 Stores This Year

Loblaw Companies Plans $2 Billion Investment Nationally

The country’s largest grocery operator, Loblaw Companies Ltd., plans to open 40 new stores in 2024 as part of an investment of $2 billion.

The Brampton, Ontario-based company, whose brands include Loblaws, No Frills and Shoppers Drug Mart, said in addition to the new stores, it will expand or relocate 10 locations and renovate more than 700 others.

“This year, we are investing where Canadians need it most. We will introduce more than 40 new discount stores and 140 new pharmacy care clinics in communities across the country, making healthcare and affordable food more accessible to more people,” said Per Bank, president and chief executive of Loblaw Companies Ltd., in a statement. “These investments in Canada are a catalyst for job growth and the creation of countless opportunities in our stores, in our company and with the many partners who work with us.”

The company said the capital investments are expected to create more than 7,500 jobs.

Loblaw Companies Ltd., majority-controlled by George Weston Ltd., will release its full-year results on Thursday.

The property arm of George Weston Ltd., 61.7% controlled Choice Properties REIT, said during an earnings call this month that it is focused on capital preservation and the development pipeline. The REIT’s real estate holdings are 79% retail, with Loblaws locations accounting for 57% of revenue.

Rael Diamond, president and chief executive of Choice Properties, noted the REIT added 1.8 million square feet of retail, industrial and residential space.

“Our retail tenants continue to expand their store networks,” said Diamond, on a conference call with analysts this month.

The REIT has budgeted for a $479 development pipeline, but 70% of the capital investments are going into Choice Properties’ growing industrial platform.

Michael Markidis, an analyst with the Bank of Montreal, said the REIT trades at a premium to peers but feels it is justified.

“We believe this is warranted given the strength of [the REIT’s] balance sheet and the proportion of income derived from its growing industrial platform,” said Markidis.

Source CoStar. Click here to read a full story.

RioCan Raises Distribution Amid Strong Demand for Retail Space

Toronto-Based REIT Also Takes Quarterly Loss, Reduces Construction Spending

Canada’s oldest real estate investment trust hiked its dividend 2.8% as Toronto-based RioCan envisions strong growth in the retail sector.

Jonathan Gitlin, president and chief executive of RioCan, said the REIT continues to capitalize on Canada’s short supply of space and strong retail demand.

“We showcased historic operational strength, enhanced efficiency and achieved our financial objectives,” said Gitlin on a call with analysts. “This is the third consecutive annual increase as we provide sustainable distribution growth.”

The REIT saw retail occupancy rise to 98.4% for the fourth quarter that ended Dec. 31. That was up from 97.9% a year earlier. Spreads for new leases were up 13.2%.

RioCan recorded a loss of $117.7 million in the quarter compared to $5 million a year earlier, based on asset writedowns.

The REIT took a fair value loss on investment properties of $450.4 million in 2023 compared to a fair value loss of $241.1 million in 2022. The fair value loss in 2023 was driven by increased capitalization rate assumptions, partially offset by higher stabilized net operating income.

Gitlin told analysts the REIT is “exercising prudence” by reducing construction spending in 2023 relative to the previous year.

“This is a proactive measure. By temporarily scaling down construction spending, we allocate capital to highly productive and accretive uses such as debt repayment, providing third-party mortgages and more appropriate opportunistic acquisitions,” he said.

Residential Business

The REIT has continued growing its residential component known as RioCan Living that has 13 operating buildings representing 2,738 residential units. Eleven buildings are stabilized, and 96.5% are leased as of Feb. 13.

RioCan has slowed down its disposition program designed to focus on major markets and in 2023 it sold $295.4 million in assets.

Gitlin was asked by an analyst with CIBC World Markets what it would take to get the REIT to increase construction. Gitlin noted a lot of their projects are complicated, so decisions are multifaceted

“Interest rates and construction costs are significant elements to it. But there’s also predictability in the timing of the construction process, which we’re working with as best we can to get a little more clarity on that, and then there’s also just decisions around how else to allocate proceeds or funds at this point in time,” said the RioCan CEO.

Mark Rothschild, an analyst with Canaccord Genuity, said the steady growth at RioCan was offsetting the rise in interest rates.

“Operating fundamentals remain solid, and while there are growing concerns about a slowing economy, this does not appear to be a near-term factor in leasing,” said Rothschild in a note on RioCan.

Source CoStar. Click here to read a full story.

Townline Centre Changes Ownership in Multi-Million Dollar Deal

Salthill Capital Sells Courtice Shopping Complex for $28.8 Million

Salthill Capital’s in-house property management and brokerage team arranged the sale of Townline Centre, an 87,346-square-foot, grocery-anchored retail strip centre located in the community of Courtice, near Oshawa, Ontario, as part of a year-end transaction.

The retail property was purchased by a private investor for $28.8 million or approximately $329 per square foot.

Major tenants include grocery store FreshCo, a Chuck’s Roadhouse restaurant, pet supply store Pet Valu, and medical services provider Lakeridge Health.

The property was one of four retail centres in the Durham Region just east of Toronto that Strathallen Capital acquired in 2021 for its Retail Property Fund LP No. 5. Strathallen has since rebranded its company as Salthill Capital.

Source CoStar. Click here to read a full story.

Downtown Toronto Building Home to Uber Up for Sale

CBRE Retained by Credit Suisse to Market Property

A downtown Toronto office tower that is home to an engineering hub occupied by ride-sharing company Uber has hit the market for sale.

CBRE has been retained to market the 16-storey tower once known as the Alliance Atlantis Building, named after the now-defunct media company. CBRE said it does not comment on its listings.

CBRE’s marketing brochure for the building said it is offering for sale a 100% leasehold interest in 121 Bloor St. E, a property that is institutionally owned and managed.

While the brokerage doesn’t list the seller, CoStar data indicates that Credit Suisse Real Estate Fund International has 100% land lease ownership that expires in 2061 with one renewal option for 20 years.

Officials with UBS Group, which bought Credit Suisse in 2023, could not be reached for comment.

The CBRE brochure notes the trustees of St. Andrew’s Congregation of the United Church of Canada are the lessors of the land for the 241,969-square-foot property.

Secure Cash Flow

The property, constructed in 1982, was long known as the Alliance Atlantis Building but now has Uber’s logo at the top of the building. Uber leased five floors in the building in 2019, refitting it with amenities that included indoor mini putt, e-scooters and kombucha on tap, according to media reports.

CBRE considers the property part of the luxury Bloor-Yorkville commercial corridor.

The property is 95% leased and, in addition to Uber, is anchored by design engineering firm Arup. Together, they occupy 59% of the space.

The weighted average lease term in the building is 5.6 years. The in-place average net rents are $27.75 per square foot, CBRE says.

“An investor benefits from a stable and secure cash flow that also permits compelling income enhancement opportunities given market net rents are approximately above 15% above contractual rates. As tenant flight to quality persists, Class A office towers at Bloor-Yonge are ideally positioned to capture the accelerating leasing momentum,” said CBRE in its listing.

The building was updated in 2012 with $4.5 million of capital expenditures.

A filing from Credit Suisse in 2020 said the property was purchased by its real estate fund in 2005 for just over $64 million. The fund owns another building nearby at 160 Bloor St. E.

In a report this month, CBRE said the downtown Toronto office market saw vacancy rates hit an all-time high of 16.7%. The real estate company noted rental rates have “paused their downward trajectory” with some uptick for recently completed projects.

CBRE said in a report last month that stabilizing interest rates has improved investor sentiment in real estate.

“While stronger investor confidence will rejuvenate investment activity, much of it hinges on the economy’s continued progress towards lowering inflation, for which the path forward remains shaky,” said CBRE.

Source CoStar. Click here to read a full story.

Crown Realty Partners Buys Office Complex for $25.6 Million in Toronto Suburb

Slate Office REIT and New York Investor Sell Two-Building Complex in Mississauga

Crown Realty Partners said it bought a two-building office complex in the Toronto suburb of Mississauga, a purchase made through its largest fund to date.

Toronto-based Crown Realty did not disclose the price, but property records show the Sheridan Exchange sold for $25.6 million and one of the sellers was Slate Office REIT.

The Sheridan Exchange, a 160,178-square-foot complex located at 2655 and 2695 North Sheridan Way, was 93% occupied at the end of the third quarter, according to a quarterly filing from Slate Office. The REIT owned 75% of the building with New York-based Wafra Inc. owning the remaining 25% stake.

The deal closed Feb. 1, according to property records.

Slate Office’s share price has dropped below $1, a long way from the $10 that the REIT started trading at in 2013. In November 2023, the REIT cut its distribution, but last month Slate Office said it agreed with one of its largest unitholders to boost its debt limits.

Slate Office has indicated it would consider selling assets as it looks to improve liquidity and strengthen its balance sheet.

“We are introducing a portfolio realignment plan to reposition the REIT for the long term. This plan will see the REIT divest noncore assets in certain Canadian markets that are not strategic for the REIT in the long term. Proceeds from the sale of these assets will go towards repayment of the debt and general liquidity of the REIT’s business operations,” said Brady Welch, interim chief executive of Slate Office, during a call with analysts in November.

Slate Office did not release a statement about the sale of the Sheridan Exchange.

Largest Fund

Crown Realty said its purchase of the office complex in Mississauga was made through its fifth value fund, CR V LP, and was the fund’s fourth acquisition. The fund is the company’s largest to date with $260 million of capital committed from institutional investors, according to a statement from Crown Realty.

“Crown continues to seek commercial real estate investment opportunities that align with Crown’s value-add investment thesis,” said Emily Hanna, managing partner of investments with Crown Realty, in a statement.

The company plans to improve the amenities at the Sheridan Exchange. It will revitalize the common areas and the main lobby and initiate its model suites program to create tenant-ready space.

“These assets have had a long history of success with excellent tenants in place,” said Scott Watson, managing partner of acquisition and leasing with Crown Realty, in a statement.

The company’s office portfolio comprises 2.5 million square feet in Mississauga, according to the statement.

Source CoStar. Click here to read a full story.