Brookfield unit buys Sheraton hotel in Toronto for $335-million

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A unit of Brookfield Asset Management Inc. has bought the Sheraton hotel in downtown Toronto in a blockbuster $335-million deal that is the largest transaction for a single hotel in Canada.

The alternative asset management giant will buy the Sheraton Centre Toronto Hotel from Marriott International Inc. through a real estate fund in a transaction that marks Brookfield's first major foray into the Canadian hotel market. The company will now have a presence in its home market after having built up a base of hotels in the United States, as well as some short-stay holiday properties in Britain.

It is the most lucrative hotel deal in the country, according to real-estate services company CBRE, which acted as Marriott's broker. The next-largest deal was the Westin Bayshore hotel in Vancouver for $280-million in 2015, and last year's sale of the Four Seasons in Toronto for $225-million.

The four-star Sheraton Centre hotel, with 1,372 rooms, was first put on the auction block two years ago amid a fiery commercial real estate market in Toronto and Vancouver.

"It has escalated over the last three years," said Bill Stone, executive vice-president of CBRE hotels, of the market activity. So far this year, Toronto has accounted for one-third of the country's hotel transactions.

The hotel is close to the financial district and a big mall. It has more than 130,000 square feet of venue space and calls itself the city's largest convention hotel. The Sheraton recently spent $110-million to upgrade its rooms, but the hotel still requires further upgrades and Brookfield is expected to renovate its expansive lobby and other public areas.

The deal is somewhat unusual because the City of Toronto owns the land the hotel is on, and the sale involved a long-term ground lease agreement.

"We think the Sheraton is a unique asset with regards to size and quality, and gives us the ability to invest in what's a strong and growing economic market like Toronto," Brookfield spokesman Matthew Cherry said.

CBRE forecasts occupancy rates for Toronto hotels reaching 80 per cent next year in what Mr. Stone called "one of the strongest periods in recent history."

The sale process was competitive and CBRE has seen particular demand for properties among foreign buyers. Such investors account for the majority of hotel purchases in Canada. Year to date, foreigners were responsible for nearly 60 per cent of the transactions.

"We are seeing continued interest from non-Canadian investors," Mr. Stone said. "That will be Asian groups, European groups and American groups and all are much more focused on the Toronto market today than they have been for a long time."

Earlier this year, British Columbia's public pension fund manager made waves when it sold a portfolio of Canadian hotels to Leadon Investment Inc., a private investor group with ties to Chinese investors. The properties, including Delta hotels in Toronto, Calgary and Halifax, were sold for more than $1-billion, according to sources familiar with the deal.