- What The REIT is in talks to sell the Markham office complex to a foreign investor
- Why The valuation works out to $174/sq ft
- What next Slate Office REIT has been selling assets to pay down its $1.16bn of debt
Slate Office REIT is looking to offload the Gateway Centre in Markham, Ont., for $42.5m, Green Street News can reveal.
The REIT is in talks to sell the two-building office complex to a China-based investor. The valuation for the 243,000 sq ft asset works out to approximately $174/sq ft. RBC and JLL have the marketing assignment. A deal with a different foreign investor fell through in recent weeks.
The listing comes as the distressed office REIT attempts to wrestle down its debt load. As part of a portfolio realignment plan announced in 2023, the REIT has been selling assets to reduce debt. However, in June, it defaulted on $158m of debt.
Last week, The Globe and Mail reported that chief executive Brady Welch and his brother, Blair Welch, have accused activist investor George Armoyan of making inappropriate bids for the company’s properties and trying to gain more control. For his part, Armoyan claims the Welches have enriched themselves while the value of the company has declined. All three are trustees of the REIT.
The price of the REITs shares on the TSX have been falling all year and closed at 35 cents apiece on July 31.
Gateway Centre is at 3000-3100 Steeles Avenue East. The Class-A towers have a vacancy rate of 17% and a weighted average remaining lease term of 4.8 years.
Tenants of 3000 Steeles Avenue East include Hung & Hwang LLP, Newbridge Mortgage and ParaMed. The seven-storey property was built in 1980 and has three passenger elevators.
Cushman and Wakefield, Easton’s Group of Hotels and Prime Hires lease space at 3100 Steeles Avenue East. The 11-storey building was completed in 1988 and has four passenger elevators.
The buildings share 707 surface parking spaces and 102 underground parking spaces. Delimark Cafe is on the ground floor of the complex.
At the corner of Woodbine Avenue and Steeles Avenue East, Gateway Centre is close to Highways 404 and 407. Several TTC bus routes connecting to subway Lines 1 and 2, York Region Transit and GO Transit are also nearby.
According to Colliers, the Highway 404-Highway 407 submarket had a vacancy rate of 12.3% in Q2, on par with the GTA average of 12.6%. Weighted average asking net rents in the node were $18.58/sq ft.
Slate Office owns about 50 properties in Canada, the U.S. and Ireland. As of Q1, it had $1.16bn of debt and total assets of $1.7bn.
Slate Office REIT is externally managed by Slate Asset Management, founded by the Welch brothers.
