Hedge fund giant Elliott Investment Management is deepening its exposure to the distressed US office real estate sector through a proposed $1.1bn – including debt – take-private deal involving City Office REIT, according to a report by Reuters.

City Office announced on Thursday it has agreed to be acquired by MCME Carell, an Elliott affiliate, in an all-cash transaction. MCME Carell will purchase all outstanding shares not already owned for $7.00 per share, representing a 26% premium to the REIT’s last closing price.

The deal underscores Elliott’s hedge fund strategy of targeting undervalued real estate assets in dislocated markets and making contrarian bets on sectors under pressure. The firm, through its real estate arm Morning Calm Management, has been actively building exposure to office properties, despite ongoing challenges in the space.

Shares in the Vancouver-based REIT surged more than 24% to $6.92, their highest level since March 2023, bringing year-to-date gains to over 25%.

The deal comes amid continued weakness in the US office market, as remote work trends persist and borrowing costs remain elevated. City Office owns 54 office properties across US Sun Belt markets including Dallas, Denver, Orlando, and Phoenix—regions where Elliott and its affiliates believe there is longer-term upside.

A key condition of the acquisition includes the sale of City Office’s Phoenix portfolio, which the company has been marketing separately.

The transaction is expected to close in the fourth quarter of 2025, pending shareholder approval and other closing conditions.