357 Bay Street

The Challenge
357 Bay Street is a 59,939 SF class "B" office property located in Toronto's Financial Core. Purchased in the 1980's by German investors the property was their sole holding in Toronto and viewed as a hedge against political and economic uncertainty in Europe. In 2003 this was no longer an issue and the two partners sought to sell the asset and maximize the value of the property using CB Richard Ellis.
 
 
The Solution
During the underwriting process CB Richard Ellis discovered that all the leases in the property contained "Sale and Demolition" clauses allowing the property to be offered for sale to both potential users and investors. Both buyer groups view real estate differently therefore to ensure the maximum achievable value the decision was made to offer the property as an unpriced listing with a bid acceptance date.
 
On the bid acceptance date 14 offers were received from private and institutional prospects with significant spread between the lowest and highest bid. The CB Richard Ellis team recommended that four parties be selected to resubmit their offers. A New York based boutique hotel developer won the bidding process with a value acceptable to the vendor. 

The hotel business was negatively impacted by factors including SARS, the war in Iraq and combined with easement delays, the purchaser withdrew from the sale.

During and after the due diligence process CB Richard Ellis negotiated with the adjoining property owner to secure a necessary easement for a fire escape not registered on title and leased the retail area to Kinko’s Copy Centre at strong leasing rates.  

While finalizing the easement’s application to Committee of Adjustments and the new retail lease, CB Richard Ellis introduced the property to York London Holdings who then submitted an offer comparable to the original deal.  

At this time the property's leasing profile had deteriorated significantly despite a new lease deal completed by CB Richard Ellis with Kinko's on the ground floor. Approximately 80% of the tenancies in the property were expiring over the next two-year period.

To facilitate the sale and acknowledge the building’s short term expiration schedule, CB Richard Ellis recommended and negotiated a vendor take back mortgage (VTB), allowing the vendors to avoid the upcoming leasing risk.