Slate Office REIT taking over Fortis office and retail spaces after $430-million sale

Ashley Fitzpatrick
Published on May 22, 2015
The Fortis Building in downtown St. John’s.
Telegram file photo

Fortis headquarters will continue in the new Fortis Place building in downtown St. John’s, despite the building’s sale to Slate Office REIT.

Leaders at the purchasing corporation said tenants can all expect a smooth transition, and the same goes for the other 13 properties involved in the $430-million real estate transaction announced this week.

“We think that many of the assets are market-dominant, or best in class in their respective markets,” said Slate Office REIT CEO Scott Antoniak, speaking about the retail and office buildings being acquired in New Brunswick and Nova Scotia, as well as in Newfoundland and Labrador.

The transaction is expected to close in the third quarter.

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The company swooped in to capture the prime properties after Fortis Inc. — also parent to Newfoundland Power — entered a detailed review of its non-utility holdings in fall 2014. The utility-heavy parent company publicly stated the possibility for property sales.

The real estate investment trust was into detailed negotiations by about March, he said, noting the REIT has been open about its own plans to expand its holdings across Canada.

“We’re particularly excited about St. John’s. We think it’s a great office market right now. It has a lot of upside in the future. We’re getting a building — in Fortis Place — that the paint is not even dry on yet. So it’s a brand new, best in class, downtown office building and a bunch of other properties throughout downtown that we’re excited about owning,” Antoniak said.

In the city’s downtown, the sale includes the original Fortis Building, TD Place, Cabot Place, the Fort William Building and Water Street Properties, in addition to, on Springdale Street, the new Fortis Place.

“We have leases in place with a lot of triple A and double A and very high-quality tenants in all of the buildings and those leases have term,” he said, explaining the company’s positivity in the face of negative headlines for the province, tied to the significant drop in oil prices since the autumn of 2014.

“From the research that we’ve done in this process, the downtown office leasing market in St. John’s continues to be strong right now, in the face of some of these headwinds,” Antoniak said, adding the company is taking a longer view and factoring in more than the spot oil price.

“I think, on the whole, we have a very bullish view on the province long-term and on these buildings in particular.”

Prior to the sale, Slate Office REIT had about two-thirds of its holdings in Ontario, mostly in the greater Toronto area, and about one-third in Western Canada, mostly Manitoba and Saskatchewan.

Meanwhile, Fortis Inc. is still determining the future of the hotels of Fortis Properties. The subsidiary controls 23 hotels, amounting to about 4,400 rooms in eight provinces — including this one. The hotels are under established hotel brands, including Delta, Sheraton, Hilton, Holiday Inn, Ramada and Best Western.

When paired with the commercial properties now being sold, Fortis Properties amounted to about three per cent of the total assets of Fortis Inc.

“We’re still working through a review process on the balance,” Nora Duke, president and CEO of Fortis Properties, said of the hotels Friday.

In its annual report, Fortis Inc. said revenue from its properties was comparable year over year and earnings at Fortis Properties were about $23 million for 2014.