Place de Ville sold for $350M in second-largest deal in Ottawa history

The Place de Ville office complex has been sold to a pair of Toronto real estate firms for $350 million in the second-largest commercial real estate transaction in Ottawa history.

Crestpoint Real Estate Investments and Crown Realty Partners purchased the 1.17-million-square foot downtown property in a deal that closed last week. The two companies each own a 50 per cent stake in Place de Ville, which will be managed by Crown Realty.

The four-building complex had been jointly owned by the Alberta Investment Management Corp., Brookfield Properties and the Canada Pension Plan Investment Board.

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Crown Realty partner Emily Hanna called Place de Ville a “best-in-class” downtown office property, noting the complex remains in excellent condition after nearly five decades and has floorplates that can accommodate a wide range of tenants.

“Its physical attributes, together with its location, accessibility and connectivity make it a superior offering,” she said in an email to OBJ.

The sale marks the biggest transaction in Ottawa commercial real estate since a consortium of investors purchased nearby Constitution Square for $480 million in 2017. It comes at a tumultuous time for a sector that’s been reeling from the effects of the pandemic as tenants fled prime downtown office space to work remotely.

“I think it’s a vote of confidence in our office sector right now in light of two years dealing with a pandemic … and question marks around a return to office,” said Nico Zentil, senior vice-president of capital markets at CBRE’s Ottawa office, which helped broker the sale on behalf of the sellers along with CBRE’s Toronto office and RBC Capital Markets. 

“I think a transaction like this is a statement-making signal that does reinvigorate the conviction around office (space) from a long-term perspective.”

It’s the second time in recent history the Canada Pension Plan Investment Board has offloaded a major downtown office asset. The Crown corporation also owned a share of Constitution Square before the complex was sold to Greystone Managed Investments, Canderel and Canstone Realty Advisors four years ago.

“From time to time, we evaluate opportunities to realize gains on our investments, including real estate,” CPP Investments spokesman Frank Switzer said in an email.

Opened in the early 1970s, the Place de Ville complex consists of four buildings – three highrises and a four-storey podium – on Queen, Kent and Sparks streets as well as a surface parking lot. 

The 29-storey Tower C at 320 Queen St. is Ottawa’s tallest office building at 367 feet, while Tower A at 330 Sparks St. and Tower B next door at 112 Kent St. are both 22 storeys.

The federal government is the largest tenant, occupying about 85 per cent of the complex. Transport Canada and the Canada Revenue Agency have the feds’ biggest footprints at the site, which is normally home to more than 7,000 civil servants. 

Stable tenant base

Canada Life and Alterna Savings and Credit Union are among the other tenants at Place de Ville, which is one of only three office properties in Ottawa with direct pedestrian links to light rail. An underground concourse that connects to the nearby Lyon LRT station recently underwent a $5-million renovation.

The entire complex is 92 per cent leased, with an average weighted term of about five and a half years remaining. 

According to Crown Realty’s website, Towers A and C are both fully occupied, while Tower B has about 67,000 square feet of vacant space and the podium at 300 Sparks St. has 29,000 square feet of available real estate.

CBRE’s national investment team put Place de Ville on the market in June. Zentil said the buildings attracted “strong” interest from a number of “really high-quality bidders.” 

The veteran broker said Place de Ville was a sought-after commodity for a couple of key reasons. In addition to providing “significant cash-flow security” to investors thanks to its stable roster of government tenants, the complex’s vacant parking lot offers an “enticing” space for new development on a prime piece of downtown land, he explained.

The deal is the biggest foray yet into the Ottawa market for Crestpoint and Crown Realty, which have been aggressively expanding their footprints in the National Capital Region in recent years.

Acquisition tears

In March 2020, Crestpoint purchased a 50 per cent stake in a 26-storey office tower at 234 Laurier Ave. W. whose tenants include Shopify. The company added to its local portfolio with the $50-million acquisition of four class-A industrial buildings this summer and also owns three office buildings in Kanata. 

Crown, meanwhile, has been on an acquisition tear since buying its first Ottawa property, the Carling Executive Park, for $56.5 million in 2019. The company now manages more than 2.5 million square feet of office space at seven sites across the region.

Zentil said the Place de Ville transaction is further evidence that Ottawa’s beleaguered office sector is poised for better days ahead as the economy slowly emerges from its COVID-19-fuelled funk.  

Driven by a 50-basis-point drop in the downtown core, the city’s overall office vacancy rate fell for the first time in nearly two years last quarter. Zentil said at least three more “sizable” office transactions are expected to close in the resurgent Ottawa market before 2021 is out. 

He said the capital’s “really solid fundamentals” make it a “great hedge” for investors who might be skittish about sinking big money into more volatile markets.

“That seems to be a theme that is driving more and more investment activity to Ottawa,” he said, adding he expects that trend to continue.

“When we look at what’s on the docket for 2022, it’s going to be another really busy start to the year, with office (deals) playing a big role in that investment activity.”