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Posted Aug 30, 2023, 3:26 PM
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Downtown Winnipeg office towers up for sale
Gabrielle Piché
By: Gabrielle Piché
Posted: 6:00 AM CDT Wednesday, Aug. 30, 2023
Quote:
In need of an office tower?
Some of Winnipeg’s most central, near Portage and Main, are up for sale.
There are two buildings off Main Street branded with Bell MTS logos — 23-floor and 13-floor facilities that agents deem the “Bell MTS Portfolio” — going for $33.5 million. Less than 300 metres away is 220 Portage Ave., a 17-storey tower housing the Royal Bank of Canada; it’s listed for $34 million.
<p>MIKE THIESSEN / WINNIPEG FREE PRESS</p>
<p>There are two buildings off Main Street branded with Bell MTS logos — 23-floor and 13-floor facilities that agents deem the ‘Bell MTS Portfolio’ — going for $33.5 million.</p>
MIKE THIESSEN / WINNIPEG FREE PRESS
There are two buildings off Main Street branded with Bell MTS logos — 23-floor and 13-floor facilities that agents deem the ‘Bell MTS Portfolio’ — going for $33.5 million.
The sales are tactical for Artis REIT, the organization behind the offices.
“The buildings are available for sale through Artis REITs (sic) strategic program for the year,” Matt Odger, an associate vice-president with Colliers who’s selling both listings, wrote in an email.
The real estate investment trust did not respond to interview requests by print deadline. In recent years, Artis REIT has sold much of its physical real estate in North America.
In 2021, the Winnipeg-based business unveiled a business transformation plan focusing on value investing, monetizing part of its portfolio and selling assets, among other things.
Since 2021, the organization has downsized from 53 offices internationally to 41, by June’s count.
Many firms are refiguring their investments, according to Trevor Clay, a commercial real estate expert. Artis REIT’s latest listings come during a time of heightened vacancy, interest and inflation rates.
“We’ve seen, certainly, a pick-up in activity from major investors looking at their portfolios and wanting to figure out what they can do to maximize value,” said Clay, a principal at Capital Commercial Real Estate. “(That means) potentially (moving) on from assets that are not strategic for them long-term.”
Clay isn’t selling Artis REIT’s offices and couldn’t comment on their intentions.
“There’s been a general trend of investors wanting to get away from the office as an investment asset class, from a national perspective,” Clay said.
Downtown Winnipeg’s office vacancy rate sits at 17 per cent. The rise in remote work, and tenants’ downsizing of office space, has led many to question the future of traditional offices, Clay said.
“In our opinion… there’s still going to be a strong demand for office,” he added.
However, there’s a “flight to quality,” and more office space than renters. Nearly 20 per cent of downtown Class C offices — the least updated — are vacant.
One trend: converting cubicles to living rooms. It’s happened at 433 Main St., 175 Carlton St. and 233 Kennedy St.
“We expect to… see interest from experienced developers that may look at converting some of these buildings to multifamily or mixed uses,” Odger wrote of Artis REIT’s sites in his email.
The location, views and “building-specific features make some of these buildings higher quality prospects for converting multifamily in the mid-to-long run,” he noted.
All are near The Forks and connect to Winnipeg Square’s underground network.
Both 220 Portage Ave. and the Bell MTS offices — 333 Main St. and 191 Pioneer Ave. — are LEED platinum designated, an industry stamp of environmental achievement.
<p>MIKE THIESSEN / WINNIPEG FREE PRESS</p>
<p>220 Portage Ave., a 17-storey tower housing the Royal Bank of Canada, is listed for $34 million.</p>
MIKE THIESSEN / WINNIPEG FREE PRESS
220 Portage Ave., a 17-storey tower housing the Royal Bank of Canada, is listed for $34 million.
Colliers expects to garner interest from a “relatively large” group of investors, Odger wrote. Bell MTS has occupied the Main Street block for more than 15 years, as has RBC at 220 Portage Ave.
“The tenants would not be materially affected by the sale,” Odger wrote. “Their lease agreements would transfer to the next owner upon a successful sale agreement.”
Paterson Global Foods and Marwest Management Canada are among the other tenants in the buildings.
“Both of these portfolios offer a premium projected yield compared to typical Winnipeg investments should the key tenants choose to renew,” Odger said.
The current economic environment has spurred investors to different actions, Clay noted. For some, interest rate hikes have been “an opportunity to take advantage of a bit more of a buyer’s market.”
His firm recently conditionally sold Wawanesa Insurance’s Main Street building, he said, declining to give details. Wawanesa is building a high-rise in True North Square.
“(Some) properties are being sold at well-below replacement cost,” Clay said. “As long as you have a plan and you know what you’re going to do with these buildings post-acquisition, there’s going to be some pretty amazing investment opportunities.”
For other investors, higher interest rates — and inflation — have led to a redistribution of assets. Mortgage payments can skyrocket once old contracts expire, and it takes more cash for new purchases, Clay explained.
“We’ve seen investors and banks taking a much harder look at long-term cash flow projections,” he said.
Offices accounted for 46.3 per cent of Artis REIT’s net operating income last quarter; its portfolio value was $1.5 million.
Its offices are 86.7 per cent leased, according to second quarter data, and its net operating income has been gradually increasing over the past year.
Both Artis REIT listings include the buildings’ parking lots.
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