Canadian Government Completes $1.64 Billion Sale Leaseback of 9 Office Buildings Across Canada

The Globe and Mail - August 21, 2007

The Canadian federal government has sold nine office properties to privately held Larco Investments Ltd., a Vancouver-based real-estate company, for $1.64 billion, under a 25 year sale leaseback agreement. The buildings are located in Vancouver, Edmonton, Calgary, Toronto, Ottawa and Montreal.

Royal Bank of Canada and Bank of Montreal, the investment banks which ran the bid process, initially contacted 91 potential bidders, all of whom were required to be majority Canadian-owned.

Of the $1.644-billion purchase price, $1.567-billion will go to the government. Of this, RBC and BMO will each receive commissions of $5.7-million, according to a government official. There will also be up to $500,000 in expenses for the sale. The remaining $77-million of the sale price will be used to undertake a 10-year capital repair program, while the government will be responsible for other expenses, including maintenance, repairs and other building improvements.

The government has agreed to lease back the nine buildings for 25 years, with payment amounts rising in five-year increments. Lease payments will total $505.3-million over the 25 years, rising from $82.2-million in the first five years, to $122.1-million in years 20 to 25. (This reflects an initial rent of approximately $82 million per year, or a 5.25% cap rate, with increases of approximately 10% every five years). Sphere: Related Content