Re: July 19th Brookfield Properties to Announce Major Develo
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Brookfield to begin T.O. office complex
Jul. 18, 2006. 05:29 PM
RITA TRICHUR
CANADIAN PRESS
Brookfield Properties Corp. (TSX: BPO) is expected to kick off construction Wednesday on a long-awaited 50-storey office tower that promises to transform the heart of Toronto's Bay Street financial district.
The Bay-Adelaide site, located just steps from the Toronto Stock Exchange and skyscrapers for Canada's five biggest banks, will house the downtown neighbourhood's first major commercial development since 1992.
The New York-based firm, the real estate arm of Toronto-based Brookfield Asset Management Inc. (TSX: BAM), said Tuesday the project would "see the landscape of the city's financial district change dramatically" but declined to provide specifics.
Officials have previously said the development will begin with a 1.2-million-square-foot tower on Bay Street, replacing two low-rise buildings. It could also eventually include second office tower along with a hotel and condominium complex.
A source confirmed Tuesday that Phase 1 includes a 50-storey tower with a plaza and tunnel connecting it to nearby Scotia Plaza and the city's underground pedestrian passageway system.
The building, which is expected to be called the Bay-Adelaide Centre West, is slated to open in 2009. The building's anchor tenant is speculated to be a major accounting firm.
Construction costs for Phase 1 were estimated at about $300 million, but total investment costs were not known, the source said.
"There are Phases 2 and 3 as well," he added, noting it was not known when those would begin.
"Toronto is experiencing a really significant development cycle for the first time in a decade. So there is positive demand for high-quality office space."
The Bay-Adelaide property currently has a parking lot and the stump of a building, but has been vacant since about the late 1980s after construction was halted.
BPO Properties Ltd. (TSX: BPP), also part of Brookfield Asset Management, paid about $105 million last fall for the remaining 50 per cent stake in the property. Brookfield bought its half-stake in 2001.
CEO Ric Clark will be joined by Toronto Mayor David Miller and other dignitaries for a "stump busting" ceremony at the site Wednesday afternoon, the company said.
"I think it's really going to be a premier office building and it is evidence of the construction boom that occurring in the commercial real-estate sector," said Gail Misfud, an analyst with Raymond James Ltd.
Bay-Adelaide Centre West is one of three projects that have been recently announced for Toronto's downtown core. All are set to open in 2009.
Earlier this month, Telus Corp. (TSX: T) and Menkes Developments said they plan to build a $250-million office tower to support the B.C.-based telecom firm's Ontario expansion.
The 30-storey tower, to be built next to the Air Canada Centre (TSX: ACE.B), will feature 780,000 square feet of office space. Telus will be the lead tenant, taking up about 60 per cent of the total rentable area.
That followed a March announcement by Cadillac Fairview Corp. Ltd. that outlined plans to build another office tower called the RBC Centre, just west of the city's financial district. The 34-storey building's main tenant will be RBC Financial Group (TSX: RY), Canada's largest bank.
The last time there was any major office construction in Toronto's financial core was in 1992, when Brookfield's BCE Place was completed.
"Fundamentals have shifted in favour of landlords and vacancy rates are declining," Misfud said.
"Rental rates are going to be beginning to move up positively and with that momentum, I think these projects will feed well into that growing demand."
There is about 83.8 million square feet of office space in downtown Toronto, with about 41.9 million classified as Class A or top tier. The overall office vacancy rate is about 8.8 per cent, while the Class A vacancy rate is 9.5 per cent.
Brookfield Properties owns and manages office properties in New York, Washington, Boston, Toronto, Calgary and Ottawa. Its portfolio comprises 67 commercial properties totalling 48 million square feet. It is half-owned by Toronto-based investment company Brookfield Asset Management (TSX: BAM.LV.A), formerly known as Brascan.
In June, Brookfield Properties announced it was partnering with U.S. private equity giant The Blackstone Group to buy Trizec Properties Inc. and Trizec Canada Inc. in a $8.9-billion-US deal. Last year, the firm gobbled up a 25 per cent stake in O&Y Properties.
Its shares gained 55 cents to close at $37.11 Cdn on the TSX.
