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CALGARY-Locally based natural gas producer EnCana Corp. has sold its planned billion-dollar Downtown development here for $70 million and will lease long-term for its headquarters a 1.84 million-sf office tower that will be built on a portion of the property. The new owner and developer of the two-block property is Centre Street Trust, a subsidiary of Toronto-based H&R REIT.

The development site is located between 5th and 7th Avenues and between Centre and 1st Street S.E. The north block of the property will be developed with EnCana’s 59-story office tower and be called “the Bow.” In addition to the office space, the building will hold 20,000sf of retail and below-grade parking for 700.

The south block will be home to a multi-level, mixed-use building containing approximately 100,000 sf of retail space, up to 100,000 sf of office and cultural arts space and an additional 700 below-grade parking spaces. As part of the transaction, EnCana has agreed to reimbursement H&R for the cost of the 100,000-sf office and cultural component of the south block development.

EnCana Corporation has agreed to lease 100% of the office space and parking stalls in the north block of the complex for a 25-year term upon its completion. The starting annual triple-net rental rate (excluding parking) will be approximately $31.03 (C$36.37) per sf and will increase by 1.5% annually. EnCana’s rental payment in the first year of occupancy is expected to produce a yield of 6.25% on the north block’s current budgeted cost of approximately $582 per sf (excluding parking).

Construction on the north block is expected to commence this summer. The current budgeted cost for developing the north block is approximately $1.1 billion. A fixed-price construction contract is expected to be secured in early 2007 and the long-term debt financing by the end of 2007.

The overall development will feature multiple connections to the existing 10-mile, “Plus 15″ pedestrian walkway system, which is a series of 57 enclosed bridges situated at approximately 15 feet above street level that connect a majority of the buildings in Calgary’s downtown core. The complex will directly connect to Petro-Canada Centre to the west, Telus Tower, which H&R owns, to the north, and the Hyatt Hotel to the south.

H&R REIT is a TSX-listed, open-ended real estate investment trust that owns 41 million sf in 34 office properties, 115 industrial properties and 143 retail properties. The portfolio’s net book value is $4.5 billion.The Bow was designed by Foster + Partners of London, the firm that designed the headquarters for Hearst in New York, Swiss Re in London, HSBC in Hong Kong and London, and Commerzbank in Frankfurt. The Ledcor Group of Companies, which is based in Vancouver, BC, acted as advisor to H&R on the acquisition.

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