Exterior of the Royal Bank Plaza located at the corner of Bay and Front streets.Fred Lum/Fred Lum
Royal Bank Plaza, one of the marquee office properties in the Toronto core, is up for sale.
Oxford Properties (which is the the real-estate arm of the Ontario Municipal Employees Retirement System) and the Canada Pension Plan Investment Board have hired brokers to market the complex. The two organizations, which each own 50 per cent of the property, hope to sell it for more than $1-billion, according to two people familiar with the matter, whom The Globe and Mail is not naming because they were not authorized to disclose the amount publicly.
Royal Bank Plaza has close to 1.5 million square feet of leasable space across two towers on Bay Street, between Wellington and Front streets. It consists of 1.35 million square feet of office space and 125,000 square feet of retail, including RBC’s flagship bank branch. The bank, which has used the property as its headquarters since 1977, leases 40 per cent of the property and has its main trading floor there.
The COVID-19 pandemic emptied urban cores and caused skeptics to question the worth of high-end office buildings. But big money seems to believe that downtowns will be back.
Oxford and a partner, J.P. Morgan Global Alternatives, sold a 409,422-square-foot Class A office building near the Harvard University campus in Cambridge, Mass., last month for US$825.1-million, attracting more than 10 bids from institutional investors in the process. Oxford said the price – more than US$2,000 per square foot – was a record for office properties in the Boston region.
The Royal Bank Plaza sale is being driven by Oxford’s desire to refresh its portfolio by investing in hot real estate classes such as multifamily residential, life sciences and logistics properties, as well as new opportunities in the Greater Toronto Area.
“There is strong institutional demand for core office product, and the sale is part of our rotation of capital for new opportunities,” spokesperson Daniel O’Donnell said. “We’re not building a baseball-card collection.”
Mr. O’Donnell said Oxford’s proceeds from the sale will be used in part to help fund its development pipeline in the GTA, which it estimates is in excess of $10-billion. The projects include Mississauga’s 18-million-square-foot Square One District, the three-million-square-foot Canada Square at Yonge and Eglinton and the 4.3-million-square-foot Union Park on Front Street, located between John Street and Blue Jays Way.
Oxford has owned Royal Bank Plaza since 1999, and CPPIB became a co-investor in 2005. Oxford said it has invested $76-million over the past decade in the building, in part to achieve LEED environmental certification.
“From time to time, we evaluate opportunities to realize gains on our investments, including real estate,” CPPIB spokesperson Frank Switzer said. “Royal Bank Plaza is – and will continue to be – an iconic centre and we have always been proud co-owners.”
CPPIB owns stakes in 16 Canadian office towers, including 50 per cent of Toronto’s First Canadian Place.
Oxford owns the 2.5-million-square-foot Richmond-Adelaide Centre, as well as the two-tower MetroCentre complex flanking Toronto’s David Pecaut Square.
RBC spokesperson Andrew Block said the bank “remains committed” to Royal Bank Plaza, with long-term leases in place for its office space and retail branch. Its naming rights on the building remain in place, he said.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.