Desjardins’ DGAM Canadian Private Real Estate Fund and the Desjardins Group Pension Fund have acquired an 80 per cent stake in two of Avenue 31’s industrial buildings in the 88-acre National Capital Business Park in Ottawa for $77 million.

The Desjardins real estate and pension funds will also acquire majority stakes in additional buildings in the multi-phased business park once those properties are stabilized.

“Ottawa was very high on our list” for industrial acquisitions, Richard Dansereau, the vice-president and head of real estate investments at Desjardins Global Asset Management (DGAM), told RENX in an interview. “From our perspective, there’s no better developer in that sector than Avenue 31.”

The two buildings were completed in 2022, and total 293,547 square feet, with 32-foot clearances. They are fully occupied, and tenants FedEx, Carrousel Packaging, Red Bull, Canteen Canada, Pizza Pizza, Golden Palace, Reliance Home Comfort and Fastfrate Group have weighted average lease terms of seven years.

The National Capital Business Park is located on Crown land at Highway 417 and the Hunt Club Road interchange in Ottawa’s east end.

Benefits for both Avenue 31, Desjardins

Michel Pilon, president and CEO of Avenue 31, told RENX the plan has always been to secure an institutional partner for the park to provide liquidity to Avenue 31 and its high-net-worth limited partners, which provides the developer with an opportunity to recycle capital into future development projects.

“We need to start tapping into institutional capital. This allows us to do that.” 

Dansereau said the Desjardins real estate fund was underweight on industrial – the fund is also focusing on office, food-anchored retail strips, and multifamily residential – and found Ottawa’s industrial market is likely the most stable in Canada, with higher occupancy rates than in other cities.  

“We’re looking for industrial, yes, but we’re not looking for any industrial,” said Dominic Poulin, head of real assets at Desjardins Group Pension Plan. “The quality of the buildings for us was paramount. We toured the Ottawa market and the level and the quality of those buildings are almost unmatched in the Ottawa region and Canada generally.”

Desjardins’ real estate fund is acquiring a 60 per cent stake in the two properties, its pension fund is acquiring 20 per cent and Avenue 31 will continue to hold 20 per cent.

The deal “establishes a relationship with a coveted partner and equally importantly, it allows us to capture opportunities with Avenue 31 in this market as assets stabilize over time,” Dansereau explained.

Desjardins has an agreement with Avenue 31 to acquire stabilized properties in the business park and hopes to acquire this fall a fully leased, 145,000-square-foot building on the site. A fourth 202,000 square foot building in the park, completed in October, is currently 61 per cent leased.

"Long-term relationship"

“This is a long-term relationship that will allow us to team up with a best-in-class partner,” Dansereau said, “and it’s not just this park, it’s other areas that Avenue 31 is exploring, not only in the Greater Ottawa region, but other regions.”

Pilon said the National Capital Business Park in Ottawa has a total buildout of approximately 1.2 million square feet and is in the planning stages for three additional buildings of 200,000, 265,000 and 15,000 square feet.

Avenue 31 is working with Hydro One to build a sub-station at the business park that would generate enough power to attract a data centre user. 

Based on recent market activity and absorption to date, the park could be finished by 2030, he said.

Average rents in the park are in the $17.50 per square foot range, although Avenue 31 has recently closed on deals at $19 and $18.25.

According to Pilon, other than Vancouver, Ottawa has the highest rents of any industrial market in Canada because of a lack of available land.

National Capital Business Park and the NCC

Pilon said Avenue 31’s deal with the National Capital Commisson (NCC) to lease the business park land represents the NCC’s largest-ever land lease and provides the commission with long-term cash flow.

“It’s the last large piece of industrial land in Ottawa inside the greenbelt, at an interchange with heavy industrial zoning in place with lots of power,” he said of the business park's location.

The site features several sustainability initiatives including dark sky lighting for protection of fauna, bird-friendly building materials, naturalized bio-swale for flooding mitigation and water management and naturalized landscaping with non-invasive, native and drought-tolerant plants.

“We’re nine years old now and by the time we finish the park, after taking the big Broccolini-Amazon deals out of the stats, we will have become the largest industrial landlord in Ottawa,” Pilon said.

Elsewhere, Pilon said Avenue 31 has spent $3 million on site clearance work at Camino, its largest site under development. Among its plans for the 680-acre property along Highway 401 west of Cornwall, Ont., the company is working on an energy strategy aimed at attracting a data centre user.

New tenants for 70 York in Toronto

In November, the DGAM Canadian Private Real Estate Fund and Desjardins Group Pension Fund teamed up to buy the 17-storey 70 York St. in downtown Toronto from KingSett Capital for $134.6 million. 

The building “is achieving (net) rents that are well above what we underwrote initially,” reflecting a corporate appetite for high quality assets downtown, Poulin says.

More than 10,000 square feet of space has been leased since acquisition and there are ongoing discussions to lease up to 15,000 square feet, which would bring occupancy to about 95 per cent, he says