TORONTO, June 1, 2006 — Insolvency specialists at PricewaterhouseCoopers Inc. (PwC) are taking advantage of a hot Toronto real estate market — and the expertise of the company’s real-estate practice — to introduce innovations to the court-ordered sale of a 13-story Don Valley office building. In a departure from standard practice, PwC is taking the building to market with a $16 million “stalking horse bid” in its back pocket, and an invitation for other prospective buyers to top the $16 million — in effect creating a virtual auction.
“The stalking horse bid process is a relatively new addition to Canadian restructurings” said Hazel Claxton, a corporate advisory and restructuring partner at PwC.
“We’ve used it with great success on other files selling business assets and the process lends itself well to the sale of commercial real estate,” she said. “PwC is able to use the combination of its restructuring and real-estate industry expertise to get creative about generating the best price for the building at 150 Ferrand.”
Under a plan approved by the Ontario Superior Court of Justice last week, PwC has set a July 12, 2006 deadline for qualified bids exceeding the existing $16 million unsolicited “stalking horse bid.” Senior PwC real-estate staff is using the firm’s extensive network to generate bids.
If more than one bid is received, all qualified bidders have the opportunity to top the highest offer. This process repeats itself until no new offers are put on the table, at which time the building is sold to most-recent high-bid. If no buyers come forward in the first round, PwC falls back on the "stalking horse bid" and executes the sale.
Claxton said this approach to selling 150 Ferrand takes advantage of the growing investor interest for quality real estate assets and the renewed focus on Toronto office towers partly driven by the looming squeeze on downtown office space and growing demand for commercial space on the perimeter of Toronto’s downtown.
“The big players have already reacted to the current market with major new downtown office projects moving from the drawing boards to recent commitments to proceed with large core tenants in hand,” said D’Arcy Smith, Vice President with broker Cushman Wakefield LePage. “But completion is still two or three years out — in the meantime buildings on the perimeter are entering a sellers market for offices leases.
The 13-story office complex — formerly known as “The Blue Cross Building” — is located near the intersection of Don Valley Parkway and Eglinton Avenue East, and is visible from the Parkway. The building was constructed in 1971 and underwent a $10.8 million upgrade seven years ago, shortly after being purchased by the current owner in 1998.
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