Larco lands Fairmont Hotel Vancouver in $180 million deal

Larco Enterprises Inc.’s hospitality wing has acquired the Fairmont Hotel Vancouver from Ivanhoé Cambridge for...

Checking in

Larco Enterprises Inc.’s hospitality wing has acquired the Fairmont Hotel Vancouver from Ivanhoé Cambridge for $180 million.

A deal for the landmark at Georgia and Burrard streets was no surprise; the Caisse de dépôt et placement du Québec, which Ivanhoé Cambridge represents, announced plans at the end of May 2014 to sell a number of properties across North America, including the Fairmont Empress Hotel in Victoria (which Nat Bosa bought for $48 million) as well as the Fairmont Hotel Vancouver.

Hotels were volatile assets, the Caisse explained at the time, a common sentiment among institutional investors last year as comments at last fall’s Western Canadian Hotel and Resort Investment Conference in Vancouver indicated.

Yet debt and private equity was available for the deals being done, something the two Fairmont sales show. Private local buyers step in where institutions fear to stay, dominating investment activity in hotels as in other asset classes.

Its purchase of the Fairmont Hotel Vancouver boosts Larco’s hotel holdings to 10.

Office activity

Meanwhile, Westbank Projects Corp. paid $47.1 million in April to acquire 1550 Alberni Street, a 100,128-square-foot office block originally built in 1972, from Wicklow West Holdings Ltd.  The deal mirrors the purchase of other West End office properties for their underlying development potential, most notably 1500 West Georgia Street.

“Due to its potential as a prime residential development site near Stanley Park and Coal Harbour, it attracted significant interest from high-profile developers,” said Clare Stevens of Macdonald Commercial, who, with Steve Schweigert of DTZ Vancouver Real Estate Ltd., brokered the transaction. “As such, it will become the site of a trophy residential development in the future.”

While non-trophy offices become residential jewels, the newest office space on the market is shaking up the rest of the downtown core.

With occupancy of 1021 West Hastings Street the first of more than 1.7 million square feet being delivered to downtown this year, Colliers International reports that tenants are finding huge inducements to occupy older properties.

This has helped drive down space available for sublease from 13.4% to 11.7% in the first quarter, while overall demand for space continues to strengthen this quarter.

“The market saw an uptake in demand that indicates the value of subleases in tenants’ real estate strategies,” Colliers reports.

Technology and digital media companies remain the bright prospects for Metro Vancouver landlords, demanding the greatest volume of space. Colliers identifies five tenants accounting for 855,000 square feet of demand across the region. However, “consumer goods saw the biggest increase in businesses requiring space, moving from 14.87% to 22.44% of total demand.”

On good terms

The latest panel discussion commercial real estate association NAIOP hosted in Vancouver focused on the future of land development, a hot topic given the number of investment transactions last year driven by redevelopment potential rather than the property’s existing use.

But if a common element emerged from the discussion, it was partnerships – perhaps not surprising given that panellists included Chris Hartman, CEO of TFN Economic Development Corp., Stef Schiedon of the Fraser Health Authority and Aubrey Kelly, president and CEO of Surrey City Development Corp., which has worked with the Beedie, Century and Townline groups, among others.

The various groups each have large banks of surplus land from which they’re trying to realize value, explained moderator Gordon Harris, president and CEO of SFU Community Trust. Moreover, the constituencies they represent often require “purposeful” and “meaningful” projects with multi-faceted benefits.

“Together we’re greater than the sum of our parts,” Kelly said, with Harris adding, by way of summation: “Partnerships create the opportunity to make the pie bigger for all sides.”