Multi-residential assets, development land, drive investment market

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Peter Kovessy
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Allied REIT’s acquisition of The Chambers office complex expected to push total sales to $1B

Investment levels in Ottawa's commercial real estate market are expected to finish the year at pre-recession averages, thanks to the anticipated closing of a landmark downtown property later this month.

The Chambers office complex.

The deal involves The Chambers, a four-storey heritage building, fronting Elgin Street between Queen and Sparks streets, as well as an adjoining 14-storey office tower, which collectively total 212,000 square feet.

Allied Real Estate Investment Trust is slated to complete the purchase, worth slightly less than $100 million, before the end of the year, says Nathan Smith, senior vice-president at Cushman & Wakefield Ottawa's capital markets group.

"There hasn't been a large landmark deal up until now," he says.

"It was not a year of significant transactions. It was a year of a lot of small transactions."

Investment levels in Ottawa averaged approximately $1 billion over the past decade prior to spiking to more than $1.7 billion in 2008 and then plunging to around the $800-million mark in 2008 and 2009, according to Cushman & Wakefield statistics.

Mr. Smith says sales in the first 11 months of the year totalled approximately $875 million and that he expected 2011 to finish at around $1 billion.

Of deals already closed, the top two transactions of 2011 both involved retirement residences. While that asset class is likely to remain visible as the population ages, Nico Zentil, a senior sales associate at CB Richard Ellis, says it's residential development land that's grabbing investors' attention.

"There is a lot of buzz in that sector right now," he says.

Residential land typically makes up 10 to 15 per cent of his firm's business; that's up to 25 to 30 per cent this year, Mr. Zentil adds.

With a limited supply of quality assets on the market, investors are increasingly looking for development opportunities, he says.

"It's not only tough to buy real estate today, (but) the stuff you can get your hands on is usually so heavily pursued that the returns have been beaten down," says Mr. Zentil.

"We expect a lot of groups, particularly on the institutional side, to be more active in the development market."

He says his firm is currently advising on approximately $150 million worth of properties, many of which could be brought to market in 2012.

Similarly, Mr. Smith says he expects to see more vendors next year as institutional real estate owners find opportunities to sell assets and pick up new ones.

TOP TRANSACTIONS

Largest finalized deals of 2011 (as of Dec. 2)

2600-2604 Draper Ave. & 100 Isabella St.

(retirement condos, 415 units)

Vendor: Redwoods Ottawa Retirement Community Inc. / Palisades Ottawa

Purchaser: First Leaside Realty II Inc.

Date: Aug. 29, 2011

Price: $44,393,422

 

3501 Campeau Dr.

(158-unit, six-storey retirement residence)

Vendor: The Royalton Kanata GP Inc.

Purchaser: The Royale GP Corp.

Date: April 27, 2011

Price: $41,368,000

 

400 Cumberland St.

(11-storey office building)

Vendor: Multivesco

Purchaser: Dundeal Canada (GP) Inc.

Date: Jan. 17, 2011

Price: $38.3 million

 

5271 Richmond Rd.

(131.6 acres of residential land)

Vendor: Not named

Purchaser: South Kanata Development Corp.

Date: Jan. 11, 2011

Price: $33.8 million

 

130 Slater St.

(13-storey office building)

Vendor: 130 Slater Street Ltd.

Purchaser: Dundeal Summer 2011 Collection (GP) Inc.

Date: Aug. 15, 2011

Price: $29.65 million

 

2370 Walkley Rd.

(316,715-square-foot industrial mall)

Vendor: SREIT(Nuquest Ontario) Ltd.

Purchaser: Richcraft (Walkley) Ltd.

Date: Jan. 18, 2011

Price: $29,000,000

 

Decommissioned military base - Montreal Road

(3,556 acres)

Vendor: Department of National Defence

Purchaser: Canada Lands Co. Ltd.

Date: March 28, 2011

Price: $27.2 million

 

1170 Fisher Ave.

(Nine-storey, 270-unit apartment building)

Vendor: Fisher Avenue Estates Ltd.

Purchaser: 1170 Fisher Apartments Inc.

Date: June 14, 2011

Price: $27 million

 

1165 Kenaston St.

(180,689-square-foot office/industrial building)

Vendor: Kenaston KS Inc.

Purchaser: Artis Kenaston Ott Ltd.

Date: May 27, 2011

Price: $21,500,000

Organizations: The Chambers, Allied REIT, Allied Real Estate Investment Trust Richard Ellis Redwoods Ottawa Retirement Community Department of National DefencePurchaser Canada Lands Co.

Geographic location: Ottawa, Elgin Street, Ontario Montreal Road

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