Public Service Alliance of Canada BC

Feds receive bids for purchase of Sinclair Centre, other sites; Ottawa yet to decide if it will proceed with sale and leaseback of buildings

Potential buyers have submitted bids on Vancouver’s historic Sinclair Centre and eight other federal buildings across Canada, though Minister of Public Works Michael Fortier says no decision has been made to sell.

Speculation is that properties together would be worth more than $1 billion, but government officials have not revealed what prices bidders are willing to pay.

• Read John Gordon’s letter to Stephen Harper re the sale of government buildings
• Video: Stop the sale of government buildings - rally in Ottawa

Public Works and Government Services Canada did hire the real estate divisions of BMO Capital Markets and RBC Capital Markets to advise it on the potential sale and leaseback of 40 government-owned buildings, from which nine were singled out as good candidates.

And those advisers have put that list of nine properties, which includes the Sinclair Centre and the government office tower at 401 Burrard Street, out for offers and were actively marketing them between May 1 and June 12.

However, Fortier said the government won’t make a decision on the potentially controversial sale until after it receives an independent, third-party assessment on the merits of such a deal.

On Thursday, Fortier announced that Public Works will spend $1.9 million to hire the international investment firm Deutsche Bank to conduct that review.

“We will not enter into a transaction that is not in the interest of the taxpayer,” Fortier said in an interview. “Never. We won’t do it.”

At the same time, Fortier was adamant that “Public Works wasn’t built to run real estate,” and that he wants some of the risk associated with owning, maintaining and upgrading the government’s office portfolio transferred to the private sector.

He added that successive governments have not given Public Works enough resources to keep up with all the maintenance needed on the federal government’s 300 plus buildings.

“Governments don’t need to own real estate to deliver services,” Fortier said.

There is likely no shortage of buyers who will want to own the portfolio, according to Avtar Bains, senior vice-president of Colliers International in Vancouver.

Bains added that the buildings’ value will depend on what lease rates the government is prepared to pay in its lease-back arrangements, but buyers “would give their eye teeth” for buildings like Sinclair Centre and 401 Burrard.

“They are fantastic locations on beautiful corners,” he said. “And their leases with the best company in the country [with the federal government] would clearly make it the most desirous real estate in the country.”

Not everyone is so enthusiastic about the proposal. The Public Service Alliance of Canada has criticized it, estimating the government could wind up paying $2 in lease rates for every $1 it receives in net proceeds from the sale.

PSAC president John Gordon, in a letter to Prime Minister Stephen Harper, said the government’s process has taken place behind “a heavy veil of secrecy.”

So far, Fortier has not released any details related to the potential transaction. Gordon added that PSAC’s fear is that the results of a third-party review of the possible transaction by a private company will not be released to the public either. He called on Harper to give the job to federal Auditor-General Sheila Fraser.

In a briefing, Tim McGrath, assistant deputy minister in charge of Public Works’ real property division, said Deutsche Bank’s report will be made public, but only if federal cabinet approves a recommendation to go ahead with a sale.

The investment bank will examine the costs and benefits to government of selling, and then leasing back the buildings, versus owning the buildings over 15, 20 and 25-year periods. It is expected to complete the review by mid-July.

McGrath added that if a recommendation to sell does go to cabinet, such a transaction would likely close within several months.

The Sinclair Centre, which dates back to the turn of the last century, is the oldest building on the list of potential sales. At 41/2 years, 401 Burrard Street is the newest. Other buildings include a building on Yonge Street in Toronto, the Thomas D’Arcy McGee Building and Skyline complex in Ottawa, Edmonton’s Canada Place, the Harry Hays building in Calgary and two buildings in Montreal.

source: The Vancouver Sun, Fri 29 Jun 2007, Page H3
photo: flikr user SqueakyMarmot