Canada Mulls Sale of 327 Government Buildings

TORONTO-Canada is mulling the future of its real estate portfolio. The government’s public works and government services agency is preparing an RFP for studying the future of 327 government-owned office buildings. The portfolio totals 35.25 million sf and has a book value of CA$3.3 billion.As a first step, they agency is seeking input from industry and other stakeholders on a draft RFP to look at the parameters of a real estate study. After considering this input over the next 30 days, the agency will then issue the formal RFP. A contract will be awarded this summer, probably in August, and the results of the study are expected early next year.”This new approach is not about selling government buildings to achieve short-term savings,” says agency minister Scott Brison. “We will look at a broad range of options, such as sale-leaseback, public-private partnerships and real estate investment trusts to determine how we can best manage our real estate holdings while saving money for taxpayers.”Brison says he wants to assess the most cost-effective and efficient way to accommodate public servants while promoting important policy objectives, such as energy efficiency. “The status quo is not acceptable,” he says. “Key decisions need to be made about our aging inventory. We want to show respect for taxpayers dollars and get the best value for Canadians, provide better services and help contribute to our government’s greening agenda.”The 327 buildings in the study–which will not include historically significant structures–are on average 43 years old and will require some $2 billion of deferred maintenance over the next five years to preserve their value and remain operational.In a speech Tuesday before the Economic Club of Toronto, Brinson said the goal is to find $1 billion of savings in its office building portfolio over five years. Initiatives include reducing the amount of space per employee in its buildings, outsourcing maintenance and surpassing national or international targets for environmental sustainability.”Our overall goal is to become a more efficient, cost-effective and environmentally friendly landlord for the more than 200,000 federal employees we now accommodate across the country,” Brinson sais. “Our studies show that the federal government spends 20 percent more on a per square foot basis to operate our real estate than the private sector average.”In the speech, Brinson made mention of private sector companies such as CIBC, Royal Bank, Bell Canada that have decided to get out of the business of being landlords or owners in favor of concentrating on their core businesses. If a decision is made to privatize the portfolio, Brinson said Canadian taxpayers could retain some interest in the buildings and still benefit from the discipline and value creation of the private sector by having public sector pensions funds hold an equity stake in the buildings.”There is no doubt there are studies showing that if a larger organization uses a company that specializes in managing properties, there can be reduced costs as well as more efficient and effective use of office space,” Brinson said. “Obviously commercial real estate management is not a core function of government.”If you ask Canadians ‘Do you want the Government of Canada to invest your tax dollars in commercial real estate?’ some of you might say yes. However, if you instead ask: ‘Do you want the government of Canada to manage your investment in commercial real estate?’ I expect the response would be overwhelmingly no.”