Dealmaker: Toronto’s Atrium Changes Hands for C$640M

H&R Real Estate Investment Trust, Toronto, sold 1.1 million-square-foot office and retail complex The Atrium for C$640 million, or just over $480 million U.S.

KingSett Capital, Toronto, purchased the property at a 4.56 percent capitalization rate.

The Atrium, comprising 595 Bay Street, 20 and 40 Dundas Street West and 306 Yonge Street occupies a city block in downtown Toronto at one of the busiest intersections in Canada. H&R purchased the asset from Hines Interests Limited Partnership for C$344.8 million in 2011 and increased net operating income by C$6.5 million annually.

The Atrium, which includes three office towers and a two-story mall, had no mortgage at closing. H&R provided KingSett with a C$256 million vendor take-back mortgage bearing interest at 4.56 percent until January 2, 2020.

“Given the strong investor demand for Toronto office properties and the substantial capital this asset will require over the next several years for redevelopment and intensification, we chose to take advantage of strong market pricing and reallocate capital to both strengthen our balance sheet and to fund our value-creating developments,” said H&R President and CEO Thomas Hofstedter.

H&R REIT is the third-largest REIT in Canada with C$1.6 billion of properties under development at year-end.