Toronto's venerable Fairmont Royal York Hotel is being sold for $186.5-million.
InnVest Real Estate Investment Trust and a fund managed by KingSett Capital Inc. have struck a definitive agreement with Ivanhoé Cambridge – the Caisse de dépôt et placement du Québec's real estate arm – to acquire an 80-per-cent stake in the prestigious hotel.
Ivanhoé Cambridge will retain a 20-per-cent interest in the property, built in 1929 by Canadian Pacific Railway across from Union Station in the heart of the city's downtown.
The deal – part of Ivanhoé's strategy to sell most of its hotel assets and focus on its core office, commercial and residential businesses – is expected to close in January.
KingSett will have a 60-per-cent interest in the 1,363-room hotel and take the role of managing partner in the joint venture, while InnVest's share will be 20 per cent. InnVest will become the hotel's asset manager and oversee the property's hospitality operations in tandem with Fairmont Hotels and Resorts.
The partners plan to invest more than $50-million for additional renovations over a two-year period following closing of the deal. The hotel is currently undergoing $100-million in renovation work.
The storied Royal York is located in a lively section of Toronto's financial sector, close to the Air Canada Centre and Rogers Centre sports venues.
"With the nearing completion of the Union Station enhancements, as well as the introduction of the Pearson Airport Rail Link, the Fairmont Royal York's location places it at the commercial, cultural and transportation crossroads of Toronto," InnVest managing director Ed Pitoniak said.
The Royal York, Toronto's grande dame of hotels, boasts an illustrious history. At the time of its opening, the monumental 28-storey structure was the tallest building in the British Commonwealth. It opulent interior included crystal chandeliers, hand-painted ceilings, travertine pillars, 10 roomy elevators and a 50-ton Casavant pipe organ.
Among heads of state and celebrities who have stayed at the Front Street landmark are Queen Elizabeth II, U.S. President Ronald Reagan, French President Nicholas Sarkozy and the Dalai Lama.
The famous Imperial Room was one of the top entertainment venues in North America, with such headliners as Peggy Lee, Ella Fitzgerald, Jim Carrey and Bob Hope.
Ivanhoé put the Royal York, along with the Hotel Vancouver, up for sale in May as part of a move to reduce exposure to the riskier asset class of hotel real estate.
About 90 per cent of Ivanhoé's lodging business has been sold, said Denis Couture, executive vice-president of public and international affairs.
Among the 70 or so properties in Europe, the U.S., Canada, India and Barbados that have been sold are the Fairmont Château Laurier in Ottawa and the Fairmont Empress in Victoria, B.C.
Ivanhoé has decided to hang onto the iconic Château Frontenac in Quebec City and the "W" and Fairmont Queen Elizabeth in Montreal, Mr. Couture said.
The Caisse has an undisclosed stake in the KingSett Real Estate Growth LP No. 5 that is a partner in the Royal York venture, Mr. Couture said.
The Royal York is located in a sector undergoing a major makeover that includes an integrated transport hub at the refurbished Union Station and a new GO Bus terminal.
Ivanhoé is building in the area a $2-billion, twin-tower office complex in partnership with Metrolinx, the province's transit agency.
KingSett Capital, manager of the Real Estate Growth LP No. 5 fund, is one of the country's major private equity real estate investment firms, with more than $5-billion in assets under management.
InnVest is an open-ended real estate trust whose portfolio includes more than 110 hotels across Canada.