Few B.C. corporations can make unrelated multiple billion-dollar real estate transactions in the same month.
Insiders, however, say that is what happened in January when British Columbia Investment Management Corp. (BCIMC) sold its Vancouver-based SilverBirch chain of 26 hotels days after one of its subsidiaries announced plans to buy Oakridge Centre.
Values for the transactions were not disclosed but estimates are that each was more than $1 billion. Each would be a massive deal for most companies but BCIMC, which is the pension fund for B.C. government employees, has more than $121.9 billion in assets.
BCIMC executives declined to comment on the two deals, but representatives from SilverBirch and BCIMC’s QuadReal Property Group, which bought Oakridge, say that there was no co-ordinated BCIMC strategy to divest hotel properties while increasing exposure to retail real estate.
SilverBirch looked into selling itself in May, when it retained real estate firm JLL (Jones Lang LaSalle) to review its properties.
Vancouver’s Residence Inn by Marriott is the only Metro Vancouver property that SilverBirch owns. Its other B.C. property is Victoria’s Delta Victoria Ocean Pointe Resort & Spa. The remaining hotels are scattered across the country.
In June, BCIMC announced that it would stop outsourcing the management of its real estate properties and create an in-house real estate investment and property management company: QuadReal.
QuadReal now has about 30 employees in various downtown Vancouver offices, and the plan is for the company to consolidate into about 50,000 square feet of space at Park Place on Burrard Street within the year.
QuadReal executive vice-president Susan MacLaurin told Business in Vancouver that her company plans to expand rapidly by buying industrial, office, multi-family and retail real estate.
She stressed that QuadReal operations are not linked with SilverBirch.
SilverBirch spokeswoman Stacey Morton, in turn, would not discuss QuadReal activities.
(Image: Oakridge Centre is B.C.'s most productive shopping mall ranked by sales per square foot | BIV archives)
She said SilverBirch’s sale to Leadon Investment Inc. has been seamless and that there are no anticipated changes to the company’s 4,100-employee workforce.
“We’re business as usual,” she said. “Our focus is on the guest experience, and the hotels are operating as they always have with the same general managers.”
Real estate brokers who specialize in hospitality properties would not discuss SilverBirch’s sale directly, but they told BIV that demand for hotel properties across Canada is strong.
“Hotel owners divest for a number of reasons,” said CBRE Hotels executive vice-president Bill Stone.
“They may choose to exit an asset class or to sell because hotels require capital or they have financing issues or brand issues or they’re being strategic in taking advantage at a buoyant time.”
(Image: Vancouver's Residence Inn by Marriott is on Hornby Street, between Davie and Drake streets, across from the under-construction One Burrard Place | Glen Korstrom)
Stone said that it is difficult for investors to shift to underperforming real estate asset classes because real estate investments as a whole are doing so well.
The hotel real estate niche is the hottest in terms of growth.
Canada-wide, hotel real estate transactions were estimated at $3.3 billion in 2016. That is 72% more than in 2015.
Stone said retail real estate transactions in Canada totalled $6.7 billion in 2016. That is 47% more than in 2015 and 40% more than the 10-year average.
“The level of hotel transaction activity in 2016 was a record, and we’re seeing the beginning signs that 2017 will be in the same bracket for record activity,” added JLL senior vice-president Mark Sparrow. “Hotel fundamentals across the country are incredibly strong.” •
