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Five things we learned about selling a billion-dollar tower (specifically, Scotia Plaza) from Canadian Business

(Image: End User)

When Scotiabank announced in January that it would sell its red granite skyscraper, analysts speculated it would go for well over a billion dollars. If they’re right, that would be the most ever paid for a single office complex in Canadian history (and would make CIBC’s $618-million sale of its Commerce Court complex in 2000 seem puny). So, why exactly is Scotia Plaza worth so damn much? A recent Canadian Business feature both profiled the tower and explained exactly how one goes about selling a billion-dollar building (hint: it’s not quite the same as selling your house).

The magazine’s top five behind-the-scenes insights about the sale:

1. Selling a landmark tower is more work than your average real-estate deal
There are dozens of people involved on both the buying and selling sides, including a bevy of experts to assess environmental, structural and financial concerns and future demand for the space. Commercial brokerage giant CBRE, which is handling the sale with Scotia’s real estate group, will prepare a confidential market document likely to run more than 50 pages—if you don’t include leases, which add thousands more to the file. Plus, there’s primping to be done: new furniture for the lobby, or an extra window cleaning, for instance.

2. Scotia Plaza is pretty luxurious
The downtown building is nothing short of opulent: its exterior and parts of the interior are made of 28,000 pieces of red Napoleon granite, which was cut and polished by craftsmen near Pisa, Italy. Then there’s the 11-foot mural of a waterfall in the lobby, the largest indoor mural in Canada. Better yet, the building’s sawtooth pattern offers up 22 corner offices per floor instead of the usual four—allowing corporate tenants to mollify many more executive egos.

3. It’s also a prize to be won
“This is the jewel of the Canadian real estate industry,” an executive at real estate brokerage DTZ Barnicke told the magazine. Scotia Plaza is 99.5 per cent occupied, and commands an estimated $35 per square foot, well above the $23.30 average for prime space. Then there are the physical claims to fame: the 68-storey skyscraper is the second tallest in Canada, and has the deepest basement, which houses Canada’s only bullion bank.

4. This could be one heck of a bidding war
Scotia’s books went out in the middle of last month to “qualified bidders” (i.e. no riff-raff). Canadian Business thinks the building will likely go to a big Canadian pension fund, since they’ve picked up most of Canada’s biggest properties (such funds are believed to own a staggering 90 per cent of the city’s downtown commercial space). CPP and OMERS have already expressed interest, Alberta Investment Management Corporation and Brookfield are both expected to take a look and large real estate investment trusts or foreign buyers may also get involved in the bidding.

5. Scotia has several reasons for deciding to sell
Real estate brokers have been trying to coax Scotiabank into selling for years. The bank has finally acquiesced, in part because of Toronto’s ridiculously hot property market. More importantly, it needs money to raise its capital levels, and to fund ambitious plans for international expansion. Last fall, for instance, Scotia acquired a majority stake in Colombian bank Banco Colpatria for—conveniently—a billion.

• Commercial real estate: Scotia Plaza goes on sale [Canadian Business]

 

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