The chief executive of a Vancouver real estate firm says Amazon’s long-term lease on its new distribution facility in Ottawa was a deciding factor in his fund’s deal to buy a 90-per-cent stake in the massive warehouse, slated for completion later this year.
Concert’s CREC Commercial Fund announced Thursday that it will enter into a co-ownership agreement with Broccolini, the Montreal-based developer currently building the one-million-square-foot facility on Boundary Road. The deal will officially close when construction is finished in mid-2019, at which point the warehouse will act as a distribution centre for Amazon under a long-term lease.
Financial terms of the agreement were not disclosed, though Concert said the acquisition will bring the total value of its property portfolio up to $1.6 billion with more than 9.3 million square feet of industrial and office space across Canada. The fund said its full portfolio was worth roughly $1.4 billion as of December 2018.
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Brian McCauley, Concert’s president and CEO, tells OBJ that the acquisition prospects have “great alignment” with the fund’s priorities to buy, build and hold properties geared towards long-term lease agreements. Though the specifics of Amazon’s leasing agreement have not been disclosed, McCauley says the fund is putting a long-term stake in the e-commerce giant’s Ottawa operations.
“We anticipate having them as a long-term tenant for many decades,” he says.
“We anticipate having (Amazon) as a long-term tenant for many decades.”
Ottawa commercial market booming
The acquisition will be Concert’s first foothold in Ottawa, with the fund’s other commercial properties largely clustered around major urban centres in British Columbia, Alberta and elsewhere in Ontario. The company has another distribution facility of a similar size in the Greater Toronto Area, currently occupied by Canadian Tire.
McCauley says Ottawa’s real estate market has long been on his radar. When he was scouting Ontario opportunities back in 2001, he says he looked into multi-unit residential options in the capital but ultimately passed on the market at the time.
The National Capital Region has seen a number of other big commercial property acquisitions in recent months. Last month a Toronto-based REIT paid $101.3 million for slate of car dealerships in eastern Ontario, most of which were in Ottawa. In October, Morguard Corp. bought a 50-per-cent stake in the Jean Edmonds Towers for $168 million. And last summer Lasalle Investment Management purchased a one-third interest in Minto Place for $135 million.
Observers say Ottawa’s commercial real estate sector has become increasingly popular to investors with a tight vacancy rate in both office and industrial properties. Avison Young reported in August that the sales of a few “landmark properties” in 2017 drove investor interest to the capital; the real estate firm said in a report earlier this week that commercial vacancy rates should continue to fall throughout 2019.
McCauley expects Concert will stick largely to the industrial market in Ottawa – the fund doesn’t lean towards downtown class-A office buildings. He did note there’s space for development around the Amazon warehouse that the company is keeping its eye on – the site is well-positioned along the highway with easy airport access – but that there won’t be an aggressive expansion push at this time.