On Monday, Toronto-based Allied Properties REIT announced that it was acquiring an ownership interest in two properties that were developed by Vancouver-based Westbank, in what is the latest chapter in the extensive history between the two companies.
The first property is 400 West Georgia Street, which was developed and owned by Westbank, in part with a $198M loan from Allied. Allied says it will now convert $130.5M of that loan into equity in exchange for a 90% undivided interest in Deloitte Summit. Allied says it will take over management of 400 W Georgia beginning January 1, 2025.
The transaction is based on a total property value of $395M and the property is subject to secured financing in the amount of $250 million.
The 24-storey tower, also known as Deloitte Summit, sits in the heart of downtown Vancouver, right next to the Vancouver Public Library as well as The Post. The Deloitte Summit, which has a distinctive cluster-of-cubes design, completed construction in 2022 and held its grand opening ceremony in February 2023. On Monday, Allied noted that the Class-AAA office tower is 82% leased to Deloitte, Apple, Northeastern University, Spaces, RBC, a cafe, and a restaurant, all with a weighted-average lease term of just over 11 years.
The second property is 19 Duncan, which sits at 19 Duncan Street in Toronto. The property was developed by Westbank and co-owned, in equal shares, by Westbank and Allied. Now, Allied will be converting the remaining $67.5M of the aforementioned loan to Westbank into equity in exchange for another 45% ownership stake, and make a cash payment of $36.3M to Westbank, in order to bring its undivided interest in the property to 95%.
The transaction is based on a total property value of $525.7M and the property is subject to construction financing of up to $295M.
The 19 Duncan project is a 57-storey tower with 464 rental units and an office component that's fully leased to Thomson Reuters. Construction is nearing completion and Allied said on Monday that the residential component is expected to be leased "over the remainder of 2024."
This second transaction is made possible in part from a third transaction that occurred in February, involving the TELUS Sky mixed-use tower in Calgary. That transaction saw both Westbank and Allied Properties REIT sell their respective 1/3 interests in the commercial component of the project to TELUS. Meanwhile, TELUS sold its 1/3 interest in the residential component of TELUS Sky to Westbank and Allied, in equal shares, resulting in Westbank and Allied owning 100% of the residential component and TELUS owning 100% of the commercial component.
Dollar amounts were not provided in Allied's announcement of the TELUS Sky restructuring, but Allied Founder and Executive Chair Michael Emory called it a "win-win," and Allied said on Monday that the amount payable in cash regarding 19 Duncan will be in part funded by the proceeds from the TELUS Sky transaction.
Allied says it expects both transactions announced on Monday to complete in early-April.
Westbank and Allied
The two transactions announced on Monday reduces Westbank's debt to Allied and gives the latter a majority ownership stake in two high-profile properties in two major markets, Allied said on Monday.
Last fall, rumours were swirling within the real estate industry that a notable real estate developer in Vancouver was in financial trouble and many online pundits suspected that it was Westbank, one of the most prominent developers in Vancouver, with ongoing projects such as Sen̓áḵw and Oakridge Park. Westbank publicly denied the rumours, and although eight of their ongoing projects were subjected to liens, as first reported by STOREYS, there was no substantial public evidence of a crisis for Westbank.
Aside from the aforementioned projects, Westbank and Allied remain in ongoing partnerships in both Toronto and Vancouver.
In Toronto, the two are working on the King Toronto project at 489 King St W, with construction currently ongoing.
In Vancouver, Allied is also funding Westbank's office development that's set for 720 Beatty Street, next to BC Place.
In a July 2019 announcement, Allied said that it was providing Westbank with up to $185M towards the site acquisition, pre-development, and initial construction of the project, as necessary, with Allied holding a first mortage on the property and the mortgage bearing interest at 7% per annum. Allied also said that it intends to acquire a 50% interest in 720 Beatty upon substantial completion of the project. Construction is currently ongoing.
