Oxford Properties Group and Canada Pension Plan Investment Board are exploring the sale of Toronto’s Royal Bank Plaza in a deal that could be worth more than US$1 billion, according to a person with knowledge of the plans.
The site at 200 Bay Street is one of the largest office complexes in Toronto’s financial district and includes two towers and a retail concourse with roughly 1.5 million square feet.
Built in the 1970s, the towers feature windows that are covered with 24-carat gold coating, making them two of the most distinctive office buildings in Canada’s largest city. Royal Bank of Canada leases 40 per cent of the complex and says it intends to stay even as most of its employees continue to work remotely.
A spokesman for Oxford confirmed it has hired CBRE Group Inc. and RBC Capital Markets to work on the sale but declined to comment on pricing.
The potential sale is part of a strategy by Oxford, the real estate arm of Ontario Municipal Employees Retirement System, to unload some office assets and increase exposure to life sciences, logistics and apartment properties. Oxford sold an office tower last month that’s leased to Microsoft Corp. in Cambridge, Massachusetts, for US$825 million.
The proceeds from any sale of Royal Bank Plaza would be used to fund Oxford’s development pipeline in the greater Toronto region, which is more than $10 billion (US$7.9 billion), the Oxford spokesman said.
The firms are “exploring the opportunity to capitalize on the strong institutional demand for well-let and well-located prime office assets,” Randy Hoffman, senior vice president for Canada at Oxford, said in an emailed statement. “We’re seeing examples of this strong demand across global gateway markets, including our recent sale of One Memorial Drive in Boston that achieved record pricing.”
Oxford has owned the site since 1999. CPPIB, which bought a stake in 2005, didn’t reply to a request for comment.
Office vacancies in downtown Toronto jumped during the pandemic to 10 per cent, the highest since 2008, with most office workers working remotely, according to CBRE. While executives on Wall Street have pushed to return more employees to the office, their Canadian counterparts have been less aggressive in bringing back staff, citing the success of remote work.
Still, there are signs that demand is rebounding in the city. In May, prospective tenants touring downtown Toronto offices hit the highest level since the pandemic started, CBRE said.
An RBC spokesman said the bank remains committed to staying at the plaza, where it has a long-term lease.
“We are continuing to invest in this important, sought after and ideally situated property, which has been our head office in Canada since 1977, including refreshing our main branch,” the spokesman, Andrew Block said in an emailed statement.