Behind The Deal: Reliance Buys 1166 W Pender Office Tower
Reliance Properties has bought 1166 W Pender St, a 15-storey office tower on a downtown site offering great redevelopment potential. Colliers VP David Taylor, who repped Reliance in the deal, tells us more.
David is pictured at left with co-broker Dan Jordan, whose relationship with a senior asset manager at Triovest Realty Advisors (repping the building's owner, a pension fund money manager), sparked conversation about the sale of 1166 W Pender. The deal, which closed April 11, was off-market. Reliance last year unveiled plans to build the tallest all-residential tower in Western Canada.
David notes 1166 W Pender's situation is somewhat unique. The 140k SF tower has had the same sole tenant since it opened in the '70s: Canada Revenue Agency, which in 2017 moves to a new HQ at False Creek Flats. Ergo, 1166 W Pender faces total vacancy next March.
The primary motivating factor for Reliance in the deal was the higher density that’s permitted on 1166 W Pender's 18,700 SF site. “You can build a much taller building than what’s there now,” says Dan, noting across the lane at 1133 Melville St, Oxford Properties Group is in the midst of a rezoning application to build a 33-storey tower with 659k SF of office and retail, one of Vancouver’s tallest office buildings (rendered below). “It’s realistic to expect you could get the same height for this site.”
But 1166 W Pender is in fine shape for its age, David stresses, so redevelopment isn’t necessarily imminent. If Reliance wants to fill the tower with new tenants to replace departing CRA, “it certainly has the opportunity to do so." Either way, his client is confident it’s made a good play here. “The amount of potential residual density on this site is significant enough that the deal looks great from a land value perspective.” Speaking of perspectives, David notes 1166 W Pender is on downtown’s western flank, so “you can get nice views once you redevelop it.”
Expect to see a surge in redevelopment and repurposing of aging office properties in coming years, David tells us. Particularly Class-B and C assets, segments that are “pretty weak in terms of vacancies and rents” right now. They’ve suffered in the flight to newer/sleeker towers downtown. Earlier this year David’s team sold CIBC-owned 1745 W 8th Ave, a three-storey office building, to Delta Land Development for $70M. Like with 1166 W Pender, this 1.3-acre corner site in the Broadway corridor presents the opportunity to build taller and better, says David. “It’s the trend of the future.”