VANCOUVER - News that the Bentall 5 building in downtown Vancouver had been sold to a German investment firm for $300 million dropped like a bombshell in the city's commercial real estate sector Wednesday morning.
It is the highest price paid for a single building in Metro Vancouver in at least the past decade and the second highest in Canada since the end of 2007.
And buyer Deka Immobilien Investment GmbH came forward with an unsolicited, all-cash bid to entice owner SITQ, the real estate subsidiary of the Quebec pension fund Caisse de depot et placement du Quebec, into selling.
"For sure it's the largest [sale] in Canada this year," said Tony Quattrin, an executive vice-president in Vancouver for the commercial realtor CB Richard Ellis, Deka Immobilien's broker in the deal.
The Bentall 5 sale ranks as the biggest transaction Metro Vancouver has seen for the decade Paul Richter has been researching the market.
"[The sale] is a bit of a surprise in that you don't see deals anywhere near this [magnitude] generally in this market," said Richter, western Canadian manager for the property research firm RealNet Canada Inc.
He said in an interview that he fielded several e-mails Wednesday morning that included a lot of multiple exclamation points in their punctuation.
"Something coming in at $300 million has caught a lot of people's attention," he said.
The surprise, however, is "tempered a little bit when you think about the property and how high-end it is and how tight the office market is," Richter said. "It's just a gem in the office market."
Located at 550 Burrard downtown, the 33-storey, 583,000-square-foot tower was built by Bentall Properties LP, which is owned in part by SITQ, in two phases. The first opened in 2002, the second in 2007.
The sale comes at the same time tight credit conditions have dampened commercial real estate purchases and the news from U.S. markets is about foreclosures on major assets.
Avtar Bains, senior vice-president at Colliers International, said the fact that Deka Immobilien found an owner in Vancouver willing to sell was the startling part.
"What's somewhat surprising is that it is rare that opportunities like this come up in downtown Vancouver," Bains said in an interview.
Quattrin said the Bentall 5 building is Deka Immobilien's first purchase in Canada. He said the purchase speaks to the confidence the firm has in the Canadian market, which is surviving the recession better than other locations in the world.
"And I think Vancouver's [office-market] fundamentals, regarding its comparatively low vacancy rates, limited new supply [of office construction] and probably better prospects for growth, I think Vancouver becomes a priority."
Quattrin said Deka Immobilien, one of two open-ended property investment funds controlled by the 19-billion euro DekaBank Group, moved quickly when it decided to invest in Vancouver. He said the firm sent an advance team to scout the city last October.
The deal to buy Bentall 5, Quattrin added, was put together over the past 60 days.
Tony Astles, senior vice-president at Bentall Real Estate Services, said Deka Immobilien will retain Bentall as manager of the building.
TOP 5 METRO VANCOUVER OFFICE SALES
1. $300 million: Bentall 5, Vancouver, May 2009.
2. $246 million: Central City, Surrey, August 2007.
3. $209 million: Crestwood Corporate Centre, Richmond, August 2008.
4. $151 million: Telus Tower, Burnaby, May 2006.
5. $140 million: HSBC Building, Vancouver, September 2005.
Source: CB Richard Ellis, Vancouver Sun