Oxford Properties, which helped develop New York City’s Hudson Yards, struck a deal to buy out Canada Pension Plan Investment Board’s stake in seven office buildings, valuing the portfolio at $1.5 billion (US$1.1 billion), according to a person familiar with the matter.
Oxford, the real estate arm of the Ontario Municipal Employees Retirement System, agreed to purchase the 50 per cent of the portfolio that it doesn’t already own, said the person, who asked not to be identified discussing private information.
The portfolio is made up of three properties in Calgary and four in Vancouver, including one that’s a recently completed tower call the Stack, the person said. Spokespeople for Oxford and CPPIB declined to comment.
While the North American office market was walloped by the pandemic and the rise in remote work, there’s been some tentative signs of stabilization in recent years. At the end of last year, vacancy rates for Canada’s downtown office buildings inched down for the first time since 2020.
In the U.S., Blackstone Inc. has been seeking a stake in a New York City office tower, Bloomberg News has reported.
While Oxford is digging deeper into the office market with its purchase, other major investors, including CPPIB, have been looking to cut their exposure to those properties.
In 2023, the pension sold stakes in two U.S. office properties at steep discounts, including a deal to offload one in Manhattan for just US$1 plus CPPIB’s share of debt. This year, CPPIB said it sold its stake in a Toronto office building.
Last week, Bloomberg reported that Canada’s second-largest pension manager, the Caisse de Dépôt et Placement du Québec, is looking to sell a Chicago office tower in a deal expected to generate bids 59 per cent lower than its last purchase price about eight years ago.
Omers has not been spared from the pain spurring its peers to get out of offices. Last year, the pension’s real estate portfolio posted a net loss of 4.9 per cent, due in part to declines in the valuations of office and life science building. But the fund manager noted that there were signs of improved office leasing for high-quality buildings.
Along with its Canadian portfolio, Oxford Properties also has exposure to office buildings in cities including New York. The firm partnered with Related Cos. on its sprawling Hudson Yards development on the western side of Manhattan.
Ari Altstedter and Layan Odeh, Bloomberg News
