Public Works and Government Services Canada

Public Works and Government Services Canada

August 20, 2007 15:10 ET

Government of Canada Sells Office Buildings to Better Use Taxpayers' Money

GATINEAU, QUEBEC--(Marketwire - Aug. 20, 2007) - The Honourable Michael M Fortier, Minister of Public Works and Government Services Canada (PWGSC), today announced the Government of Canada will proceed with the sale of nine federal office properties to a Canadian-owned company.

Following an extensive open, transparent and competitive process, the properties will be sold to Larco Investments Ltd. for $1.644 billion and will be leased back for a total of 25 years. Larco Investments Ltd. is a 100% Canadian-owned real estate company with over 30 years in the industry.

"We sought independent advice on this particular transaction from international financial expert Deutsche Bank," Minister Fortier said. "The analysis concluded that this is a fair deal for Canadian taxpayers, particularly since the transaction was concluded when markets were very favourable."

The transaction will result in long-term positive benefits by:

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

- ensuring the buildings are properly maintained;

- increasing the transparency and predictability of accommodation costs; and,

- providing lease conditions favourable to the Crown.

Canadians will continue to have the same level of access to federal programs and services under the new ownership arrangement. The government will continue to occupy the buildings and display the Canadian flag, and maintain the right to name the buildings. The new owner will be required to respect the government's environmental, health and safety standards.

"Office space is a commodity. We do not need to own it to use it. Most Canadians don't own their office. Other public and private sector institutions have undertaken sale-leaseback arrangements so they can focus on their core priorities," Minister Fortier added.

Leasing office buildings is something the government already does. This transaction will increase the percentage of leased properties in PWGSC's portfolio from 43% to 47%.

The nine office buildings are located in six major cities across Canada: Vancouver, Edmonton, Calgary, Toronto, Ottawa and Montreal.

The government is fulfilling its commitment to be fully transparent and is making the following documents available upon request: the Deutsche Bank opinion letter, the Deutsche Bank report, the BMO/RBC interim report and the draft lease. Please contact PWGSC Media Relations (see below) to request copies.

Photos of the nine office properties can be obtained by contacting Media Relations.

PWGSC news releases are also available on our Internet site at


How the Government of Canada has set favourable conditions for this transaction to make it work for all Canadians

The Government of Canada will ensure the sale-leaseback is a good deal for Canadians over the full 25-year lease period. The leases it is signing requires Larco Investments Ltd. to maintain, operate and repair the buildings to our standards. The new owner is also required to undertake the backlog of capital repairs on the buildings over the next ten years. The government will regularly monitor the landlord to ensure it fulfills its lease requirements and will audit the value of repairs they carry out. If the new owner does not carry out the required repairs, the government would carry them out and reduce rent payments accordingly.

The sale-leaseback will in no way reduce federal presence. The Government of Canada will continue to occupy these buildings for at least the next 25 years, the Canada flag will continue to be displayed and the government will keep the right to name the buildings. Larco will respect federal standards, like those related to the environment, health and safety, security and accessibility. This transaction will be seamless to Canadians and will not affect government services or programs offered in the buildings. For instance, passports, Employment Insurance, Canada Pension, and other services will continue to be offered at the same level of efficiency.

As a tenant, the Government of Canada maintains control of accommodations in the buildings:

- Government set the lease rate it would pay for 25 years, not the buyer.

- Government will approve the annual operating budget for the buildings.

- The Auditor General of Canada will have access to the owner's financial statements, offering a new level of transparency in government leasing.

- The landlord will not sell the buildings within the first ten years of purchasing them.

- Government has the right to sublet should our office space requirements diminish over time.

- Government has the option to extend lease terms by ten-year periods, at a fair market value, for as long as it wants to.

It makes sense to proceed now, when market conditions are favourable. This sale will result in long-term positive benefits by:

- Ensuring transparent and more predictable accommodation costs;

- Transferring ownership risk for major building capital costs to the private sector (operations maintenance, capital expenditures and planned tenant improvements), capital repairs risks (building condition, unexplained failures, building supplies, labour and oversight), and residual risks (market and building condition);

- Ensuring the buildings are properly maintained through private-sector discipline and efficiencies, and

- Providing lease conditions favourable to the Crown.

More information on the Real Estate Initiative is located at:


Chronology of the Real Estate Initiative

In September 2006, BMO Capital Markets Real Estate Group and RBC Capital Markets Real Estate Group Inc. were hired to study 40 Crown-owned assets and a broad range of options to determine the most cost-effective and efficient ways to accommodate federal government departments while generating savings. In their interim report to PWGSC the firms recommended selling and leasing back nine conventional office properties immediately to take advantage of optimal market conditions.

In March 2007, the Government of Canada announced it was moving forward on the first step in a two-step process for the possible sale-leaseback of nine federal government office properties. Step One would be to market the properties to obtain bids. Step Two would be to analyze the top bid to help the government determine if selling and leasing back made financial sense. The government was clear it would do its due diligence and the sale would not proceed unless this analysis demonstrated it would be a good deal for Canadians.

BMO Capital Markets Real Estate Group and RBC Capital Markets Real Estate Group Inc. carried out Step One on behalf of the Government of Canada. They marketed the nine properties from May 1 to June 12, 2007 in accordance with the highest professional industry standards. The government placed ads directing interested parties to the two real estate firms in major media the week of May 1 and on the government's online tendering system (Merx™) from May 1 to June 12. Eighty-four parties requested information from the banks during this marketing period. BMO Capital Markets Real Estate Group and RBC Capital Markets Real Estate Group Inc. evaluated the bids and made a recommendation to PWGSC officials. PWGSC conducted its own evaluation and consulted extensively with outside legal experts and international experts in the real estate industry to finalize the selection.

On June 28, 2007, the government announced it had retained the services of Deutsche Bank to carry out Step Two: Deutsche Bank reviewed the top bid and compared the projected cost of the sale-leaseback with that of the status quo (retaining ownership and outsourcing management of these assets to the private sector). They also reviewed the process used by the two real estate firms to market the properties.

PWGSC received Deutsche Bank's final report in July 2007. The firm's analysis clearly demonstrated that the transaction is fair, from a financial point of view, to the Crown. The firm also found the marketing process had been robust and thorough, and endorsed the top bidder selected by PWGSC.

Deutsche Bank is one of the world's top financial advisory firms. As with BMO Capital Markets Real Estate Group and RBC Capital Markets Real Estate Group Inc., they were not allowed to be financially involved in the sale-leaseback.

After a thorough examination of the bank's findings, the government has decided to proceed with the sale-leaseback of these nine properties: Vancouver - 401 Burrard and the Sinclair Centre; Calgary - Harry Hays Building; Edmonton - Canada Place; Toronto - Joseph Shepard Building; Ottawa - Thomas D'Arcy McGee Building and the Skyline Complex; Montreal - 305 Rene Levesque West and 4225 Dorchester West. The Government of Canada will continue to occupy the buildings and ensure federal visibility in every region of the country.

PWGSC will continue to look at all options to improve how it manages its portfolio of office space and other properties. The status quo is not acceptable. When PWGSC has sold buildings in the past, typically the buildings were worth nothing because they required costly repairs and we received market value for the land only. The government building at 6420 St. Denis in Montreal and the Oliver Buildings in Edmonton are good examples.

More information on the Real Estate Initiative is located at:

Ce texte est également disponible en français.

Contact Information

  • To request a media interview
    Office of Minister Fortier
    Jacques C. Gagnon
    Director of Communications
    Office of Minister Fortier
    Olivier Fillion-Boutin
    Communications Special Assistant
    Public Works and Government Services Canada
    Media Relations