The head of a Montreal-based real estate firm that recently acquired two office buildings at Lansdowne Park says the company is eyeing more properties in the National Capital Region in a bid to expand its footprint in a “great market.”
“We’re really pro-Ottawa,” Michel Léonard, the president of BTB Real Estate Investment Trust, told OBJ on Wednesday. “It’s sustainable, it’s strong, it’s got great tenancies. We’re looking at everything (in) Ottawa basically.”
BTB, which was founded in 2006 and trades on the TSX, made its first local acquisition in 2012. Its portfolio in the National Capital Region now includes more than 650,000 square feet of total space at nine office buildings and one industrial property.
In the past, BTB has targeted mainly suburban properties in Kanata, Nepean, Ottawa west and Ottawa south. But earlier this week, the company announced it pulled the trigger on a $38-million deal to buy two office buildings at Lansdowne Park from Minto Group – easily the firm’s highest-profile acquisition in the capital to date.
Léonard said the REIT jumped at the chance to snap up the properties at 979 and 1031 Bank St. when broker CBRE put them on the market last fall.
'A vibrant environment'
The veteran real estate executive raved about Lansdowne’s mix of retail stores, pubs and restaurants and entertainment venues such as TD Place, the home of the CFL’s Ottawa Redblacks.
“It’s a vibrant environment,” he said. “Everything is there. It’s work, play and eat. It is really well-located and a property that is going to definitely stand the test of time.”
The Bank Street spaces are about 95 per cent leased to an eclectic mix of tenants that includes BMO Nesbitt Burns, executive search firm Boyden, the Canadian Internet Registration Authority and cybersecurity software company Field Effect.
"It used to be that Ottawa was basically (government) based and most of the acquisitions were done in (government) properties. But when you look at it today, it’s totally diversified."
Léonard, who regularly brokered deals in Ottawa when he worked at Colliers’ Montreal office two decades ago, said that tenant roster illustrates a dramatic shift in the capital’s real estate market, which is no longer the one-trick pony many observers assume it to be.
“It used to be that Ottawa was basically (government) based and most of the acquisitions were done in (government) properties,” he said. “But when you look at it today, it’s totally diversified. Lansdowne is an example. There are no government tenancies in Lansdowne.”
Léonard sees acquisition and development opportunities across the city, citing the firm’s $22-million purchase of an office building near Highway 417 and Greenbank Road two years ago as an example.
The four-storey, 77,500-square foot building, located just off Pinecrest Road near a future LRT station, is fully leased, with engineering consulting firm WSP as the anchor tenant.
As part of the deal, BTB also acquired a parcel of land next door that’s zoned for up to 60,000 square feet of additional office space. The REIT is now putting out feelers for potential tenants to occupy a new building it hopes to eventually construct on the property.
No downtown deals
Farther west, the firm owns buildings on Menten Place, in what Léonard calls a “happening” Nepean neighbourhood near the new headquarters of the Department of National Defence, and on Brewer Hunt Way and Teron Road in Kanata.
“If you look at Kanata … if we were able to acquire more properties in Kanata, we would do so,” he said. “There is potential everywhere in Ottawa.”
One area the company continues to steer clear of, however, is the city’s core.
While Léonard is convinced all offices – whether they’re in the heart of downtown or in the far-west tech hub of Kanata – will experience a renaissance once the pandemic abates, he’s particularly bullish on suburban sites.
Léonard says downtown office space, with its higher cap rates, tends to be pricier than suburban properties and costs too much to finance. Instead, he’ll continue to cast his net outside the greenbelt, where he believes commercial properties have a bright future and will deliver better long-term value to his unit-holders.
“I strongly believe in the future of suburban office properties,” he said. “People are fed up with being stuck in (traffic), and we’re seeing more and more offices being decentralized. Yes, (tenants) are going to have office space downtown, but maybe not lease as many square feet as they have in the past. Employees that have tasted working from home are going to be reluctant to go back in their cars and drive for an hour in order to get to downtown properties.”
Whether its next buys are in Nepean, Kanata, Orléans or elsewhere, one thing is clear: BTB appears to be all in on the Ottawa market as it strives to expand its growing portfolio outside Quebec.
Currently, about 80 per cent of the REIT’s $1.1-billion worth of property is located in its home province, with the remainder in Ontario. But Léonard said that ratio is changing as the firm accumulates more assets outside Quebec.
“Are we going to eventually get to 50-50?” he said. “I couldn’t tell you, but it’s certainly going to be more than 20 per cent in the province of Ontario.”