It’s official: Ottawa’s Constitution Square sells for $480M

Downtown office complex changes hands in largest deal in city's history
Constitution Square

A consortium of investors closed the largest real estate transaction in Ottawa’s history Monday, buying the Constitution Square downtown office complex for $480 million.

The buyers – Greystone Managed Investments, Canderel and Canstone Realty Advisors –  announced the deal Tuesday. Regina-based Greystone becomes the majority owner of the three-building complex on Albert Street, while Montreal’s Canderel will take on the roles of property and leasing manager and Toronto-based Canstone will act as asset manager of the 1.06-million-square-foot space.

Constitution Square had been jointly owned since 2005 by Oxford Properties, the real estate arm of the Ontario Municipal Employees Retirement System pension fund, and the Canada Pension Plan Investment Board.

In a statement, the new owners called the complex “the largest and one of the most prestigious Class ‘AA’ office complexes in downtown Ottawa,” noting the buildings’ close proximity to the Lyon Street LRT station that will open next year.

With a total value of nearly half a billion dollars, the deal easily eclipses previous blockbuster sales such as the federal government’s $208-million purchase of the former Nortel campus on Carling Avenue in 2010 and Investors Group’s $188-million agreement earlier this year for a 50 per cent stake in Minto Capital Management’s office towers at Minto Place.

CBRE vice-president Nico Zentil, whose firm represented the vendors along with RBC, said all parties involved in the transaction are “elite investors” in the Canadian real estate industry.

“I think it’s testament to the strength of the Ottawa investment climate right now,” he said of the record-smashing deal. “It complements a lot of various investors’ strategy, which is to own very core assets in core markets. It’s a top-three building in the city, and the investment strategy is conducive to owning the top buildings in the top markets.”

‘Stars were aligned’

When Constitution Square was put on the block earlier this year, the property attracted interest from several potential buyers, including real estate heavyweights such as Morguard.

In a statement issued Tuesday, the Canada Pension Plan Investment Board said the strength of the Ottawa market made it an “opportune time to monetize” its stake in the asset. In an e-mail to OBJ, Oxford Properties vice-president of investments Eric Plesman called Constitution Square a “great piece of real estate” but said it “no longer fit with Oxford’s strategy.”

Referring to the transaction as “one of the platform deals of the year” in Canadian commercial real estate, Mr. Zentil said it reflects Ottawa’s reputation as a “safe, sought-after” market.

“The stars were aligned,” he said. “The investment climate was very strong, the debt and equity markets were very strong. Everything just added up to be a pretty iconic sales transaction.”

The first tower at Constitution Square, an 18-storey building, was completed in 1986. A 21-storey highrise was added to the complex in 1992, and the third tower, which is 19 storeys tall, opened in 2007. The complex includes amenities such as a conference centre, fitness centre and a daycare facility.

The complex’s retail podium features a restaurant, while the towers contain a mix of private and government tenants, including Public Services and Procurement Canada, TD Wealth, Scotia Capital and Rogers. Before the sale was completed, Oxford’s website indicated about 84,000 square feet of space was vacant in the three towers.

“Constitution Square represents a strategic opportunity for our institutional clients, and we are extremely pleased that this latest acquisition enhances our significant investment position in the Ottawa area,” Greystone managing director Ted Welter said in a statement. “We believe that Ottawa’s downtown core will benefit from the growth momentum currently under way.”

Recent research suggests Ottawa’s downtown commercial real estate market is indeed heating up.

Colliers International’s most recent office market report said the citywide office vacancy rate was 11.7 per cent at the mid-year mark, down from 12.2 per cent at the end of the first quarter.

One of the big drivers of the decline was the high end of the downtown submarket, Colliers said.

“Class-A assets continue to dominate the interest of tenants looking in the market, a trend that is starting to spill into upper class-B offerings,” the real estate services firm said in a report released in July.

“Millennial businesses find downtown spaces to be the most attractive in terms of amenities and transportation. Smaller companies in Kanata are starting to see this appeal and have begun to pursue downtown options as well.”

Other notable Ottawa commercial real estate transactions

  • Former Nortel campus at 3500 Carling Ave. – $208,000,000 (2010)

  • Minto Place (50% interest) – $188,000,000 (2017)

  • 200 Kent St. – $143,400,000 (2012)

  • Chateau Laurier – $120,000,000 (2013)

  • 100 Kent St. – $111,000,000 (2016)

  • 1600 James Naismith Dr. & 1595 Telesat Crt. – $80,000,000 (2011)

  • 234 Laurier Ave. (50% interest) – $75,750,000 (2014)

  • Investors Group portfolio – $64,875,000 (2015)

Source: Juteau Johnson Comba Inc.