US Investors Buying Vancouver REIT for $1.1B

Shareholders get paid, Phoenix gets sold and Wall Street gets one less ticker as the latest public landlord calls it quits in a $1.1 billion take-private deal.

The Vancouver-based City Office REIT has agreed to sell itself to MCME Carell Holdings, an affiliate of New York activist investor Elliott Investment Management and Florida-based Morning Calm Management, CoStar reported.

The sale is, however, contingent on City Office completing the $296 million sale of its Phoenix portfolio, a 1.5 million-square-foot office collection that includes Block 23, Camelback Square, the Papago Technology Center and several other properties in Tempe and Scottsdale. That deal is expected to close Aug. 14, according to regulatory filings.

City Office said proceeds from the Phoenix sale will be used to pay down debt and for general corporate purposes. Raymond James and JLL advised City Office. DLA Piper served as M&A counsel, and Hogan Lovells handled corporate legal matters. The buyers were advised by Eastdil Secured and Gibson Dunn & Crutcher.

Elliott, as of last year, managed more than $72 billion in assets, while Morning Calm oversees a 10 million-square-foot commercial portfolio on behalf of institutional and private investors. The buyer group is betting on long-term recovery for Sun Belt offices even as many REITs trade below asset value.

City Office’s 5.4 million-square-foot portfolio spans Dallas, Denver, Orlando, Portland, San Diego, Seattle, Raleigh and Tampa. Its headquarters is at 666 Burrard Street in downtown Vancouver.

“In light of a challenging environment for the office sector, this transaction delivers immediate and significant value to our shareholders,” said CEO James Farrar in a news release.

City Office is set to go private in the fourth quarter, pending the Phoenix deal.

CBRE’s global head of research, Henry Chin, forecast a wave of REIT mergers and take-private deals last month based on persistent discounts in public markets, according to the outlet.

Morning Calm CEO Mukang Cho said the deal “underscores our partnership’s continued belief in the recovery of the office sector,” particularly in “strong growth markets.”

City Office REIT is one of the first Canadian-headquartered office landlords to be taken private in the current cycle, a potential bellwether as institutional buyers look for bargains in the U.S. office downturn.

— Judah Duke