$91 Million South Point Exchange Sale Strengthens BC Commercial Real Estate Market

The largest open-air mall sale in Western Canada to-date in 2010 has just taken place. For a reported $91 million, Grosvenor Americas and its institutional investors sold the South Point Exchange shopping centre in Surrey, BC to a Canadian private investor on August 30, 2010.

The announcement came today in the form of a press release issued by Avison Young, Canada’s largest independently-owned commercial real estate services company. Both Avison Young Principals Bob Levine and Michael Gill, along with Randy Thomson of Sutton West Coast, acted on behalf of the buyer, but the terms of the sale were not disclosed.

What is known though is that the new owner plans to continue operating the property of the South Point Exchange “as a shopping centre in the foreseeable future,” according to Levine. The property is located at 3033-3191 152nd Street in Surrey, BC.

“While there have been larger sales of enclosed malls, this sale is the largest open-air mall retail investment transaction in Western Canada thus far in 2010,” said Levine. “The deal is significant because it marks the largest retail investment transaction with a private purchaser in more than a decade.”

Levine added that, “The size of this transaction represents the upper reaches of what most private investors can afford. Moreover, other large enclosed-mall sales in BC this year exceeding $50 million in value have been bought either by institutions or by public companies.”

The official press release by Avison Young states information concerning the construction, history, and further information regarding the South Point Exchange shopping centre:

The 267,000-square-foot grocery-anchored shopping centre in South Surrey encompasses a series of single- and multi-tenant buildings on a 22.46-acre lot, with one-half kilometre of frontage on Highway 99 (the primary north-south artery that runs between the city of Vancouver and the Canada-U.S. border).

Constructed in phases between 2000 and 2003, and expanded in 2007, South Point Exchange is anchored by Save-On-Foods, Canadian Tire and Staples. The fully-leased mall is also occupied by Winners/HomeSense, Cactus Club, HSBC and 26 other tenants.

“South Point Exchange has performed very well since we completed the final phase of the development in 2007. Given the long-term stability of the property’s cash flow, we felt that the timing was right to sell. We plan to reinvest the proceeds into growing our development and value-added investment activities,” said Andrew Galbraith, Chief Investment Officer of Grosvenor Americas.

“South Point Exchange is considered one of Metro Vancouver’s finest open-air malls with an optimal mix of national and regional tenants serving a highly affluent demographic area,” said Michael Gill. “This sale further underscores the demand for grocery-anchored shopping centres and the popularity of Surrey.”

Surrey is the second largest city in the province of British Columbia and has one of the fastest growing centres in Canada. According to Avison Young, retail property acquisitions and dispositions have driven the BC commercial real estate investment market to record sale transactions on a dollar volume in the first half of 2010.

The press release by Avison Young gives insight into the statistics behind the record sale transactions:

Office, industrial and retail investment sales in BC totalled $1.026 billion in the first half of 2010, up 43% from $715 million in the second half of 2009 and up 60% from $643 million in the first half of 2009. This was the first time in the province’s history that commercial real estate investment volume surpassed $1 billion in a six-month period. As a result, the year-end 2010 total is anticipated to surpass the year-end 2009 mark of $1.36 billion by a wide margin. (Avison Young tracks investment sales in BC greater than $5 million.)

Private investors accounted for 73% (33 of 45) of the first-half 2010 transactions and 53% ($540 million) of the total volume.

The retail sector also led sales activity, accounting for 69% ($711 million) of the total dollar volume in the first half of 2010, continuing a renaissance that began in mid-2009.

The real estate activity in BC is on a continuous positive jump in the commercial sector. The recent sale of the South Point Exchange is attributed to “strong underlying fundamentals, wide availability of capital, fewer credit restrictions, minimal debt loads, and investors rebalancing their portfolios as part of the normal business cycle,” according to Gill.

Levine believes that the continued rise in commercial real estate properties in BC will continue through 2010 and well into 2011.

“We expect deal activity will remain robust through 2010 with more retail assets offered for sale as sellers capitalize on peak pricing,” said Levine. “Buyers and sellers are showing more respect for each other’s pricing levels, and large amounts of cash and equity are in play compared to six to 12 months ago. With a lack of favourable investment opportunities elsewhere and buyers now more confident in the market, we expect to see further large retail property transactions take place in the second half of 2010 and into 2011.”