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Ottawa to sell $1.5-billion in federal buildings
Sale is first phase of plan to lease back dozens of properties
ELIZABETH CHURCH AND DANIEL LEBLANC
From Wednesday's Globe and Mail
TORONTO AND OTTAWA — Ottawa is preparing to sell $1.5-billion worth of office properties across the country as part of the first phase of a plan that will see dozens of federal buildings go to the private sector with the government as a long-term tenant, sources say.
Sources in Toronto and Ottawa said nine buildings are likely to go in the first phase of the sell-off, including properties in Vancouver, Toronto and Ottawa.
The deal could hit the market within weeks and would be among the largest offerings of Canadian office properties.
Public Works Minister Michael Fortier refused to comment on the status of the plan, but made clear the government's real-estate portfolio is in for a shakeup.
Among the federally owned properties that could eventually be put up for sale to private landowners is 1 Front St. West in Toronto. (Kevin Van Paassen/The Globe and Mail)
“As we speak, does the state need 372 buildings to offer its services to citizens through its employees? I think that is the most objective way of presenting the issue,†he said in an interview outside the Senate chamber.
The government is expected to use a process known as a “sale-leaseback,†by which it sells the buildings to the private sector and then rents them. The government is expected to use 25-year leases, sources said.
Mr. Fortier argued the government doesn't have the $4-billion needed to maintain adequately its portfolio of 6.8 million square metres of office space.
Under the planned “partnerships,†sources said, the private-sector companies would renovate the buildings at their cost and make money by renting them to the government.
The government's 241,000 employees could thus work in better, more energy-efficient buildings.
“The government has not always taken care of its buildings in the same way as a traditional real-estate owner,†Mr. Fortier said, pointing out that several buildings are in a “precarious†state.
The goal is “to stop the bleeding and to manage the portfolio so that in five, 10, 15 years, we are not faced with an even bigger figure [to renovate the buildings] as we are facing now,†he said.
The plans still have to be approved by the Treasury Board and the cabinet, which will have to decide among a number of options being put forward by Public Works. That decisions will be made next week, but others argue that an announcement is farther away, some sources said.
“The recommendations have been made to the government, but no decision has been made,†said Jean-Luc Benoît, the director of communications for Mr. Fortier.
The process started last fall, when the government hired experts at BMO Capital Markets and RBC Capital Markets Real Estate Group to come up with recommendations for a sample of 40 federal buildings.
The study included properties such as the Lester B. Pearson building in Ottawa, the Sinclair Centre in Vancouver and an office complex in the north end of Toronto.
Individuals familiar with the 35 federal properties put their combined value at about $5-billion. They say the quality of the sites varies greatly, with some in need of vast amounts of work. The government's best sites — the ones that will attract the most interest from investors — will likely be included in the first phase.
Buyer interest in the properties is expected to be high, especially because they come with a guaranteed long-term government lease.
“There is a lot of money looking for a home, so it will be a well-read document,†said one source who follows the real estate industry, referring to the details on the properties.
Over the past five years, interest in the Canadian real estate market has grown dramatically, helped by a huge influx of cash from domestic and foreign pension plans that like the steady income that investment in the sector provides. That buyer interest has sent the price of prime properties soaring.
The federal government has been wrestling for several years with a way to finance the badly needed repairs its property portfolio requires. For years, Public Works has tried to gain funds for such investments, but sources say it has been difficult to drum up interest in building maintenance when other issues, such as health care, have topped the political agenda.
Selling buildings and becoming a tenant is seen as a way to make maintenance someone else's problem.
The previous Liberal government had considered privatizing the government's real estate holdings, but it explored solutions that could be applied to all buildings at once.
The Conservative government has opted to approach the issue much more slowly.
With a report from Sinclair Stewart
Sale is first phase of plan to lease back dozens of properties
ELIZABETH CHURCH AND DANIEL LEBLANC
From Wednesday's Globe and Mail
TORONTO AND OTTAWA — Ottawa is preparing to sell $1.5-billion worth of office properties across the country as part of the first phase of a plan that will see dozens of federal buildings go to the private sector with the government as a long-term tenant, sources say.
Sources in Toronto and Ottawa said nine buildings are likely to go in the first phase of the sell-off, including properties in Vancouver, Toronto and Ottawa.
The deal could hit the market within weeks and would be among the largest offerings of Canadian office properties.
Public Works Minister Michael Fortier refused to comment on the status of the plan, but made clear the government's real-estate portfolio is in for a shakeup.
Among the federally owned properties that could eventually be put up for sale to private landowners is 1 Front St. West in Toronto. (Kevin Van Paassen/The Globe and Mail)
“As we speak, does the state need 372 buildings to offer its services to citizens through its employees? I think that is the most objective way of presenting the issue,†he said in an interview outside the Senate chamber.
The government is expected to use a process known as a “sale-leaseback,†by which it sells the buildings to the private sector and then rents them. The government is expected to use 25-year leases, sources said.
Mr. Fortier argued the government doesn't have the $4-billion needed to maintain adequately its portfolio of 6.8 million square metres of office space.
Under the planned “partnerships,†sources said, the private-sector companies would renovate the buildings at their cost and make money by renting them to the government.
The government's 241,000 employees could thus work in better, more energy-efficient buildings.
“The government has not always taken care of its buildings in the same way as a traditional real-estate owner,†Mr. Fortier said, pointing out that several buildings are in a “precarious†state.
The goal is “to stop the bleeding and to manage the portfolio so that in five, 10, 15 years, we are not faced with an even bigger figure [to renovate the buildings] as we are facing now,†he said.
The plans still have to be approved by the Treasury Board and the cabinet, which will have to decide among a number of options being put forward by Public Works. That decisions will be made next week, but others argue that an announcement is farther away, some sources said.
“The recommendations have been made to the government, but no decision has been made,†said Jean-Luc Benoît, the director of communications for Mr. Fortier.
The process started last fall, when the government hired experts at BMO Capital Markets and RBC Capital Markets Real Estate Group to come up with recommendations for a sample of 40 federal buildings.
The study included properties such as the Lester B. Pearson building in Ottawa, the Sinclair Centre in Vancouver and an office complex in the north end of Toronto.
Individuals familiar with the 35 federal properties put their combined value at about $5-billion. They say the quality of the sites varies greatly, with some in need of vast amounts of work. The government's best sites — the ones that will attract the most interest from investors — will likely be included in the first phase.
Buyer interest in the properties is expected to be high, especially because they come with a guaranteed long-term government lease.
“There is a lot of money looking for a home, so it will be a well-read document,†said one source who follows the real estate industry, referring to the details on the properties.
Over the past five years, interest in the Canadian real estate market has grown dramatically, helped by a huge influx of cash from domestic and foreign pension plans that like the steady income that investment in the sector provides. That buyer interest has sent the price of prime properties soaring.
The federal government has been wrestling for several years with a way to finance the badly needed repairs its property portfolio requires. For years, Public Works has tried to gain funds for such investments, but sources say it has been difficult to drum up interest in building maintenance when other issues, such as health care, have topped the political agenda.
Selling buildings and becoming a tenant is seen as a way to make maintenance someone else's problem.
The previous Liberal government had considered privatizing the government's real estate holdings, but it explored solutions that could be applied to all buildings at once.
The Conservative government has opted to approach the issue much more slowly.
With a report from Sinclair Stewart
