Toronto's decreasing vacancy and rising rental rates were the drawing cards for the newly formed joint venture to acquire 1670 Bayview Ave., a five-story structure built in 1958 and renovated in the late 1990s and early 2000, according to Richard Recny, Time Equities' asset management director. The tenant roster includes Bank of Montreal, B Street Communications Inc. and Genmark Insurance Services Inc.
"We think the first sales will be the bank branch and a clinic and they'll go to investors," Recny tells GlobeSt.com. "After that, I think a fair number of sales on the upper floors will go to users." He says office condos on floors three, four and five will be marketed for $350 per sf, with the ground-level getting tagged at $600 per sf and the second floor, $400 per sf to $475 per sf.
[IMGCAP(2)]Recny says about $600,000 to $650,000 will be pumped into renovating the elevator and mechanical systems. Basically, he says the building was in ready-to-go shape for the conversion, which was bought through the Bank of Montreal from a German fund that had teamed with a local partner to build a Toronto portfolio in recent years and then pushed it to market earlier this year. The class B building along Bayview Avenue was pulled from the sale stack and re-marketed as a one-off after an institutional buyer said it only wanted the class A stock, Recny says.
Recny says Nova's president Michael D. Butler had been scouring the market for months to find the right building for Time Equities' first condo project in the city. The Bayview building is north of the Downtown in a niche office pocket with less than 3% vacancy and surrounded by retail and upper-middle income single-family residential.
Nova jumped into the bidding, which was weeded to three would-be buyers for the best and final. "I think we were selected because we stood a better chance of getting financing," Recny says, adding the JV floated a short-term, interest-only loan through Alterna Savings & Credit Union in Toronto. Recny and Butler negotiated the take-down and Keith Jameson in the real estate division of Bank of Montreal represented the seller.
Recny credits the building's location with driving interest because it's a favored area that can fend off troublesome commutes into the Downtown. He expects the buyers' mix will be made up of investors and tenants alike.
"I expect before 2009 is over, we will be able to sell off enough to pay off the building, put a hunk of the money into investors' pockets and still have a large amount of the building left to sell," Recny asserts. "It has been many years since office condominiums have been introduced to the Toronto commercial market, but there is an unprecedented demand from foreign investors moving into the Canadian marketplace wanting to own office space."
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