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A Toronto-based company has reached a tentative agreement to purchase the downtown Medical Arts building with the intention of converting it into an apartment complex, local real estate industry sources say.
The three sources said the purchase of the building by Timbercreek Asset Management Inc. is contingent upon a number of conditions. One of them is likely that a more detailed examination of the 15-storey office tower must show it would be economically feasible to convert it into a multi-family residential complex.
"Typically in situations like this, that is what you would do," one source said.
Another noted such a conversion would be costly because the interior would basically have to be gutted and rebuilt.
"That’s kind of the exercise — (determine) how much rent could you get and how much is it going to cost (to redevelop the building)," he said. "So I guess we’ll have to see how their prices come in..."
He said if the due diligence process determines it wouldn’t be economically feasible to convert the building to multi-residential, then Timbercreek can walk away and the building would go back onto the market.
"Maybe they’ll spend $100,000 on due diligence and if it works out, great. If it doesn’t, that’s just a bit of an investment," he said.
Officials with Timbercreek and Manitoba Liquor & Lotteries, which listed the building for sale in early January, could not be reached Monday for comment. The deadline for offers to be submitted was Feb. 3, and officials with MLL and the brokerage firm that marketed the building on its behalf — the Winnipeg office of Colliers International — have refused since then to comment until if and when a deal with a prospective buyer is finalized.
MLL purchased the building in September 2015 for $7.9 million with the intention of spending about $74 million on renovating and expanding it. The plan was to use some of the space for its new downtown headquarters, and rent out the rest of the building to other tenants.
But the new Progressive Conservative government and a new MLL board of directors shelved those plans last January, saying they were too costly. The board’s chair also said the Crown corporation’s mandate doesn’t include being a property developer and landlord.
The MLL’s asking price was $16 million, which was nearly twice what it paid. One of the industry sources said he was told the corporation got its asking price, or close to it.
The sources said converting the building to another use makes sense because, with a vacancy rate of about 50 per cent, it no was no longer working as an office tower.
"As an office building it was always a challenge to lease out. There are too many other office buildings that are way better... and new inventory is coming online that’s going to be very attractive," one of them said.
"It’s also such a small floor plate," he said. "If you got a major tenant in there, they’d have to take three or four floors... which is not efficient. And then you would have to try and fill a whole bunch of smaller units."
Timbercreek has acquired at least six other multi-family residential buildings since it entered the Winnipeg market in 2010 with the purchase of three highrise apartment towers — 160 Smith St., 33 Hargrave St. and 15 Arden Ave. — from Winnipeg’s B & M Lands Co.
In May of last year it also acquired the three-tower Colony Square apartment/office/retail complex on St. Mary Avenue for $70.25 million and said it would be spending millions of dollars on renovations and upgrades over the next 10 years.
Company co-founder Ugo Bizzarri said at the time that Timbercreek was very pleased with the Winnipeg market, and that it was looking to acquire more properties here.
"We like the downtown and we like the multi-family sector, obviously," he said.
"(But) we’re looking all across the city."
Updated on Tuesday, April 25, 2017 at 7:29 AM CDT: Adds photo
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