CALGARY-Westfield REIT is paying $61.3 million for Heritage Square in south Calgary.

The class A office block, located just across the street from Heritage Square LRT station, has 298,081 sf of leasable space of which 99% is occupied. Tenants include Jacob’s Engineering Group, the Co-operators and Credit Union Central Alberta. The property also includes parking facilities and an indoor atrium which is surrounded by amenities such as a fitness club and a restaurant.

Current rents at Heritage Square range from $10 to $14 per sf and are “significantly below current market levels,” says Westfield chief executive Armin Martens in a statement. The southwest suburban Calgary office market, he adds, now commands rents ranging from $18 to $25 per sf.

“We believe this presents an excellent opportunity to realize a significant lift in this property’s net operating income over the next several years, which will positively impact the REIT’s cash flows and payout ratios for the benefit of our unitholders,” Martens explains. The purchase will be made with cash, a three-year $5-million loan bearing interest at 6% per annum and the proceeds of a new 10-year $39.65-million mortgage. The mortgage interest rate has yet to be fixed but it’s expected to be 5.55% per year. It’s anticipated the transaction will close at the end of June.

After the acquisition of Heritage Square, Westfield REIT’s commercial property holdings total $430 million and represent approximately 2.8 million sf of leasable area, 65% of which is in Alberta.

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