14 December 2010

CP Rail Pension Sells Innovapost Office

Kanata Ontario - The Canadian Pacific Railway Co. pension plan, hungry for cash in recent years to cover a mounting budget shortfall, has sold a Kanata office building to another pension fund for almost $11.73 million.
 
The one-storey structure is located at 365 March Rd. and contains roughly 71,000 square feet on an 8.5-acre lot. Built in 1963, the building was renovated in 1998, according to the BOMA Commercial Space Directory.
 
The building is fully occupied by IT services firm Innovapost, which had eight years left on its lease at the time of sale, according to Cushman & Wakefield Ottawa senior vice-president Nathan Smith, who was involved in the transaction.
 
He adds the purchase price represented a cap rate in the low-seven range.
 
Canderel Management Inc. bought the building in late 1999 for $7.75 million before selling it to a numbered company less than two years later for $11.1 million, according to local real estate appraisal and advisory firm Juteau Johnson Comba Inc.
 
Morguard was the property manager and was an advisor to Greystone Managed Investments, which says it invests more than $34 billion on behalf of endowment funds, unions and pension funds, including Canadian Pacific Railway.
 
In January 2009, the Globe and Mail reported the railway company's pension shortfall had almost quadrupled to $1.6 billion over the preceding year. This past September, Canadian Pacific Railway took on an additional US$350 million in debt to reduce the company's underfunded pension position, raising its debt-to-capital ratio to 48.5 percent in the process.
 
Mr. Smith says the property was openly marketed and received several competing bids. The successful purchaser was an advisor acting on behalf of another pension fund, he says.
 
"We saw an anticipated strong level of interest, relative to where we've been over the last year and a half," says Mr. Smith.
 
Peter Kovessy.