KPMG weekly real estate newsletter — May 31

The following information was obtained from newspaper articles appearing in the Globe and Mail and the National Post for the week ending May 31, 2009<

The following information was obtained from newspaper articles appearing in the Globe and Mail and the National Post for the week ending May 31, 2009

According to commercial real estate experts at least half a dozen transactions involving office buildings in downtown Vancouver have taken place to date in 2009, including the $300-million purchase of the Bentall V office building from SITQ by Germany’s DekaBank GmbH. Oxford Properties Group Inc., owned by Ontario Municipal Employees Retirement System, recently sold one-third of its interest in 1138 Melville St., a 158,000-square-foot office tower in downtown Vancouver, to an undisclosed buyer for $80-million. Grosvenor Americas Ltd., a Vancouver-based real estate company, has agreed to sell the 1040 West Georgia St. office building to a company owned by Vancouver investor Joseph Segal for an undisclosed amount, pending closing of the deal.

LaSalle Investment Management purchased 1045 Howe St., a B-class office tower, from a private local investor for $33-million at the beginning of 2009.

CB Richard Ellis reported that the office vacancy rate in downtown Vancouver increased to 4.2% in the first quarter of 2009, the second lowest office vacancy rate in Canada, from 2.3% at the end of the third quarter of 2008. The office vacancy rate in Metro Vancouver rose to 7.2% from 5.4% during the same period. Capitalization rates in the Vancouver office market have now increased to 6% to 7% now from 5% to 6% at the peak of the market a couple of years ago. According to Colliers International, sublease rates in Vancouver’s downtown office market have now increased to 1.8% since some tenants have returned office space to the market.

RioCan Real Estate Investment Trust reported that the occupancy rate for its properties is currently 96.6%, compared to a record low of 94% when it did not have as stable a group of major tenants. RioCan REIT does not plan to increase, nor decrease, its distribution in 2009. The REIT is currently distributing 110% of its funds from operations, but considering on cash being retained because of the dividend reinvestment program, RioCan is effectively distributing 86% of funds from operations. RioCan had a 25.7% negative return in the past year.

Toronto City Council approved a new bylaw that will require green roofs on new residential buildings in Toronto constructed after January 31, 2010. The new rules will apply to new residential buildings that are at least 2,000 square metres and least 20 metres high (six storeys). The new bylaw also will require that new industrial buildings in Toronto constructed after January 31, 2011, set aside either 10% of the roof or 2,000 square metres, whichever is less, for sod and other eco-materials.

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