MONTREAL Nov 21 Investors Group and GWL Realty
Advisors are set to buy two Montreal office buildings from
Germany's KanAm Grund Group for around C$415 million ($308.99
million), though the transaction has not been finalized, two
sources familiar with the deal said.
Investors Group is part of IGM Financial Inc while
GWL is part of Great-West Lifeco Inc. Power Financial
Corp is the controlling shareholder of both companies.
Power Corp of Canada in turn controls Power Financial.
The buildings are expected to be sold at a low
capitalization rate for the Montreal market, indicating that
demand for high-quality office buildings is spilling over from
Toronto and Vancouver.
The potential sale of the office towers was reported on
Friday by Reuters.
Power Corp spokesman Stephane Lemay referred a reporter's
query directly to Winnipeg-based Investors Group which declined
to comment. GWL Realty in Toronto and KanAm could not
immediately be reached for comment.
The deal should close before year's end, said the sources,
who spoke on condition of anonymity because terms of the
transaction have not been made public.
The downtown buildings are expected to be sold at a
capitalization rate of just over 5 percent, which is indicative
of a premium asset, said the sources.
Capitalization rates are calculated by dividing an asset's
net operating income by its market price.
According to recent data from Colliers International,
Montreal cap rates for Class A buildings range from 5.50 percent
to 6.25 percent.
"It (a 5 cap) is unusual for the city," said a third source
familiar with both the deal and the Montreal commercial real
estate market, who declined to comment because the transaction
is not yet public.
According to data from CBRE Ltd, Montreal's third quarter
downtown vacancy rate was 11 percent, compared with 10.6 percent
for downtown markets in Canada as a whole.
KanAm, which owns real estate assets in Europe, North
America and Australia, acquired the buildings at 1350-1360
René-Lévesque West, in 2007 and 2008.
The nearly 1 million square-foot property is managed by
Canderel Inc, a Canadian real estate developer. Tenants include
IT services providers CGI Group, Computer Sciences Canada, IBM
and TD Bank, according to its website.
Real estate services firm JLL, which is selling the
properties, declined to comment.
($1 = 1.3431 Canadian dollars)
(Reporting by Allison Lampert; Editing by Andrew Hay)