- What A government department is in the process of acquiring the Class-A office tower
- Why The buzz is the valuation being negotiated would generate a 7.25% initial annual yield
- What next Infrastructure Ontario is an anchor tenant and occupies over 191,000 sq ft
Dream Office REIT has selected a buyer for 438 University Avenue in downtown Toronto, Green Street News can reveal.
Infrastructure Ontario is in the process of acquiring the Class-A office tower for just under $105m. That price translates to a 7.25% capitalization rate. Dream initially sought offers from $105m to $110m in March but upped its goal to $115m after receiving multiple bids in that area.
TD Cornerstone Commercial Realty and CBRE had the assignment.
The agency is an anchor tenant and occupies over 191,000 sq ft. The department recently executed a five-year renewal and told Green Street News it was “aware the property was listed for sale.”
The 323,000 sq ft property hit the block at the start of the year. As of Q1, it was 93% leased.
Deals in downtown Toronto’s office market have been relatively muted post-pandemic, and the impending sale will mark one of the first Class-A high-rise towers to trade in over two years. In April 2022, Crestpoint Real Estate Investments acquired 121 King Street West from BentallGreenOak for $303.5m.
A notable transaction in 2024 is George Brown College and equity partner Halmont Properties’ purchase of Corus Quay from H&R REIT for $232.5m. The deal closed in April and had a capitalization rate of 5.7%.
According to data from CBRE, downtown Toronto Class-A office cap rates were between 6.00% and 6.75% in Q1. Class-AA cap rates ranged from 5.25% to 6.00%. In 2021, cap rates for the property types hovered around 4.4%.
Dream purchased the office tower in January 2008 for $91.9m. Since 2014, the REIT has spent $7.5m on capital expenditures, including upgrades to common areas, the lobby and the elevators.
Michael Cooper is chair and chief executive. As of March 31, the REIT had $2.7bn in total assets and owned 3.1m sq ft of space in downtown Toronto.
This story was updated at 10:48 a.m. ET on June 26 to reflect that Infrastructure Ontario is in the process of buying the property for $105m.
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