Government Operations Committee on March 20th, 2007

[Mary Chaput]

Because $26 billion is the book value.

[Garth Turner, Conservative, Halton, ON]

Okay, so it would take much more than $26 billion to recreate what is probably a national treasure, which begs the question, why the hell are we selling it?

[Mary Chaput]

Remember, the sell and leaseback initiative, if that's what you're referring to, relates to nine buildings.

[Garth Turner, Conservative, Halton, ON]

Right, nine buildings, but you said it was a trial to see if this was a project that we would go further on.

Where would you say we are on the real estate cycle at the moment--at the top, bottom, or middle?

[Mary Chaput]

I'm not a real estate expert.

[Garth Turner, Conservative, Halton, ON]

You own 46,000 buildings.

[Mary Chaput]

The Government of Canada does. I don't. But my understanding is that the real estate cycle in Canada is at the medium to high level, I'd say closer to medium. I know that people who are more involved in this than I am have a close eye on the U.S. economy and the downturn particularly in the housing industry. There is typically a lag after which that begins to migrate and gravitate.

[Garth Turner, Conservative, Halton, ON]

So what my question relates to is, if you're into a pilot project now of selling nine buildings--and presumably that's going to take a year or so to get rolling, to sell them and get bidders and lease them back--it strikes me that we may be getting into a fairly dangerous part of the real estate cycle in which we're selling our national heritage and our treasure portfolio, which we've already determined we can't buy back again. Does that make sense?

[Mary Chaput]

It certainly wouldn't make sense if we were indeed selling low and buying high. But those details are to be determined. The other factor that has to be considered when one asks where the real estate cycle is has to do with what is the readiness among investors to put money towards real estate.

[Garth Turner, Conservative, Halton, ON]

Right. I have a last question, if I can.

Selling a portfolio of buildings and selling individual buildings are definitely two different things. In terms of determining what we're going to get in value for money if we actually do that, what's your opinion? Are we better to hive off nine buildings, or have nine different sales?

[Mary Chaput]

You mean selling it in a group versus selling--

[Garth Turner, Conservative, Halton, ON]

In a portfolio versus individual properties, because I gather we're looking at portfolio divestiture.

[Mary Chaput]

My understanding is that the initiative will be to put nine buildings on the market at the same time, but not necessarily nine buildings to the same bidder.

[Garth Turner, Conservative, Halton, ON]

Why would we sell nine buildings at the same time?

[Mary Chaput]

The timing of the initiative again, I understand, has to do with the market conditions and the fact that there's a belief that there's money out there.

[Garth Turner, Conservative, Halton, ON]

Who's driving that?

[James Moore, Conservative, Port Moody—Westwood—Port Coquitlam, BC]

There are not really nine separate RFPs. If one portfolio manager, or conglomerate, or teachers' pension fund wants to bid on two buildings in Toronto or one in Montreal, they're free to do that. Why hamstring the entire process? That limits things.

[The Chair, Liberal, Diane Marleau]

Thank you.

[Garth Turner, Conservative, Halton, ON]

I was just asking.

[The Chair, Liberal, Diane Marleau]

Before we go to the next speaker, I have one little question.

I happen to know that we have leased buildings now. The Government of Canada has office buildings that are leased. How well run are some of these buildings?

I'm told that some of them are probably owned by almost slum landlords. The roofs leak; there are all kinds of problems right now with leased buildings. There are problems right here in downtown Ottawa with some of these leased buildings.

What guarantee would we have that after selling off these buildings we would actually have employees who are better served than they are now? I don't think there are any guarantees. You can put it in a contract, but that doesn't always mean they'll honour it.

I've been the Minister of Public Works. I've seen some of these buildings. They're awful.

[Garth Turner, Conservative, Halton, ON]

Why didn't you do anything about it?

[The Chair, Liberal, Diane Marleau]

I'm asking because, to me, it's all well and good to sell off buildings because we can't afford to fix them, but what if the people who buy them from us and lease them back to us at inflated rents don't fix them? We're no better off; we're worse off. And you're right—

[Garth Turner, Conservative, Halton, ON]

In Sudbury?

[The Chair, Liberal, Diane Marleau]

I don't think so. I don't know. I don't recall that one.

[Mary Chaput]

Do you want me to answer that?