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Exterior photographs of the Bay Adelaide Centre (building in centre) and the KPMG signage on the side of the building on June 02 2011.Fred Lum/The Globe and Mail

Brookfield Properties Corp. has put a key piece of Toronto's financial district on the auction block.

The major Canadian commercial property owner is seeking as much as $1-billion for a 50-per-cent stake in the Bay Adelaide Centre, according to people familiar with the matter, as the company retools its portfolio amid a multiyear boom in commercial real estate.

The sale is being offered as a passive investment, the sources said, which will allow Brookfield to continue managing the property. Bids are due over the next week.

Brookfield, which owns 257 properties in the Americas, Asia, Australia and Europe, is using its financial arm – Brookfield Financial – as well as Royal Bank of Canada and Toronto-Dominion Bank to help sell the stake, sources said. RBC, TD and Brookfield declined comment.

The Bay Adelaide Centre sale is taking place amid a prolonged bull market in commercial real estate in Toronto and Vancouver. Nine office towers are currently under construction in downtown Toronto, according to commercial real estate group CBRE.

In the most recent quarter, the vacancy rate for offices in Toronto was 4 per cent followed by Vancouver at around 5 per cent, according to CBRE. Those two cities had the lowest rates in Canada and the United States. San Francisco was third at about 6 per cent.

The Bay Adelaide Centre consists of two towers and covers an entire block. It is home to tenants such as accounting firms Deloitte and KPMG and law firms Borden Ladner Gervais and Fasken Martineau.

The building's prominence in the skyline represents a sharp contrast to its beginnings in the early 1990s, when it became known as "the stump" after construction on the original office tower stopped in 1993 amid an economic downturn and left Toronto with a large concrete block for more than a decade.

Now, Bay Adelaide Centre could rank among the city's most expensive office tower transactions if Brookfield is able secure its targeted sale price.

One lucrative office building deal in Toronto was Bank of Nova Scotia's sale of Scotia Plaza for $1.27-billion in 2012. In another deal, Cadillac Fairview Corp. sold a 30-per-cent stake of the Toronto Dominion Centre for $880-million, in 2015

The Bay Adelaide Centre sale may be part of Brookfield's so-called capital recycling strategy, which includes divesting certain assets and using the proceeds to invest in other properties. For example, Brookfield recently sold a 51-per-cent interest in a Manhattan skyscraper for net proceeds of around $689-million, according to its most recent quarterly report, and used funds from various sales to invest in a handful of U.S. malls and a residential building in California.

Brookfield already shares ownership in other top buildings in Toronto. It co-owns the First Canadian Place skyscraper with two Canadian pension funds. The company has 11 properties in Toronto, the majority of which are downtown.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:15pm EDT.

SymbolName% changeLast
BNS-N
Bank of Nova Scotia
+1.21%51.78
BNS-T
Bank of Nova Scotia
+0.94%70.07
RY-N
Royal Bank of Canada
+0.48%100.88
RY-T
Royal Bank of Canada
+0.29%136.62
TD-N
Toronto Dominion Bank
-0.43%60.38
TD-T
Toronto-Dominion Bank
-0.63%81.75

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