Public Works and Government Services Canada

Public Works and Government Services Canada

August 20, 2007 15:50 ET

F.A.Q.: Sale-Leaseback of Nine Federal Office Properties

GATINEAU, QUEBEC--(Marketwire - Aug. 20, 2007) -

Q1. Why is the government selling and leasing back these nine office properties?

A1. Canada's New Government is taking action through the sale-leaseback of nine federal office properties as part of its goal to get better value for taxpayers. Office space is a commodity. The government does not need to own it to use it. This transaction is an innovative approach used by governments and companies around the world. The government sought world-class financial advice and undertook an open, competitive and transparent process in concluding this transaction. This transaction makes good financial sense for Canadian taxpayers.

Q2. How does a sale-leaseback work?

A2. It's an arrangement whereby the owner of a building sells it but continues to lease the property. The lease requires the new owner to operate and repair the buildings to agreed-upon standards and the government benefits from private-sector efficiency and discipline. In this case, the government will lease the buildings for 25 years and has the option to extend the lease.

Q3. If it makes more sense to own your home, why sell these buildings?

A3. Owning a home to house a family is very different from owning office buildings. It's like comparing apples to oranges. Responsible homeowners invest in their homes to maintain the value. The federal government, like other governments around the world, has not shown the same discipline homeowners have. In addition, more and more governments and companies around the world are selling their office buildings so they can focus on their core priorities.

Q4. Critics say the government has failed to maintain its real estate assets. Is this why you are selling buildings?

A4. Public Works and Government Services Canada (PWGSC) has a very diverse portfolio of Crown-owned buildings-from office buildings, to labs to heritage treasures like the Parliament Buildings. Different strategies are being used to manage them effectively. The government does not have to own office space to use it. For these nine properties, private-sector advice showed the sale-leaseback option would achieve the best value for the Crown.

Q5. The particular buildings you are selling are in good condition. Why sell these instead of ones that require more repairs?

A5. Independent experts recommended that these nine assets were the most appropriate for sale-leaseback because they are strategically located in major urban markets and would achieve the best value for the Crown. The government will continue to look at ways to deal with office buildings that require extensive repairs.

Q6. Aren't you simply selling off valuable assets to get short-term cash?

A6. The government will still have to pay the cost of accommodating its employees over the long-term. This sale result in positive long-term benefits by:

- transferring ownership risk for major building capital costs to the private sector;

- ensuring buildings are properly maintained;

- increasing the transparency and predictability of accommodation costs;

- providing lease conditions favourable to the Crown;

In addition, private-sector experts recommended selling these buildings to take advantage of favourable market conditions and to achieve best value for the Crown in the case of these particular assets.

Q7. Will the government save money as a result of this transaction?

A7. The cash proceeds from the sale of the buildings are in excess of the amount the Crown will pay for leasing. The Crown has also been able to transfer the cost of major building capital repairs. These potential costs alone are estimated by a third party to be worth several hundred million dollars.

Q8. What will the government's lease payments be over the next 25 years?

A8. Over the next 25 years the government will pay about $1.3 billion in today's dollars.

Q9. How will you use proceeds of the sale?

A9. The proceeds will go into the general revenue fund of the Government of Canada.

Q10. Will the government sell more office buildings?

A10. No decisions have been made on the remaining office buildings in its portfolio. PWGSC will continue to improve how it manages its office space to ensure it achieves best value for taxpayers.

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