Calgary has become an attractive place for commercial real estate investment for Toronto-based Allied Properties REIT.
In fact, the bulk of the company’s Canadian acquisitions in 2013 took place in the city and its president and chief executive says Allied foresees continued growth in its Calgary portfolio.
“The consolidation in Calgary has been very successful for us,” said Michael Emory, president and chief executive of Allied, who was in Calgary this week. “We wouldn’t have expected going in, to be honest, that we’d be able to put together such a good concentration of properties so quickly. But we have. It’s gone very well. We like the market . . . We’ve really been pleased with what we’ve been able to accumulate here.”
Allied’s first acquisition in Calgary was the downtown Lougheed Building in the second half of 2010. Today, it owns 19 properties in Calgary with 915,834 square feet of rentable area. In January, it announced the acquisition of two additional properties which are scheduled to close later this month, increasing the number of properties to 21 and the rentable area to just over one million square feet.
“Basically what Allied does is acquires office property that is either in or very close to the core. That’s number one. Number two, has very distinctive internal and external attributes. And third, is available to our tenants at lower overall occupancy costs. It’s anywhere from 35 per cent to 50 per cent lower than the cost in the conventional office towers,” said Emory.
“If we look at 2013, the bulk of our growth was actually in Calgary and so far this year we’ve announced three acquisitions, two of them are in Calgary. We’ve announced about $90 million in acquisitions and about $60 million are here . . . Our coming here has given the owners of these kinds of assets the opportunity to achieve liquidity and they’ve taken advantage of it. I hope to see continued growth . . . and we’re very keen on the Calgary market.”
A couple of Allied’s downtown Calgary properties are undergoing transformation. The Art Central building, which was acquired in 2011, is set for demolition to begin in July to make room for an office and residential skyscraper.
Fashion Central, which was also bought in 2011, could have its name changed after the concept of several retailers under a fashion theme – by the previous owner – has not worked out.
Fashion Central has 27,183 square feet of rentable area, 18,408 square feet of which is used by retail tenants and 8,775 square feet by office tenants. There are six retail tenants on the main/street level and five retail tenants on the lower level.
“It really wasn’t working well on the second level for retail users. There wasn’t enough traffic prepared to go up to a second level in order to give the retailers the volume of activity they needed,” said Emory. “What we have done is we took the retailers who were up there, who wanted to stay in the building, down to the main level and the level below. Then we basically made from the second floor up office space and it’s a very high-end, high-calibre office environment.”
The change in focus for the building has Emory contemplating a change in the building’s name. A possibility is to call it the Alberta Block, which is the historic name of the building, but Emory said the REIT is in discussions with tenants on their input.
“If the retail tenants think it’s important to continue to name the building Fashion Central, we will,” he said. “If it’s a matter of indifference to the tentants then we’d prefer to change it to the Alberta Block . . . It’s a bit of a misnomer. It isn’t Fashion Central. There are other parts of downtown that might legitimately call themselves Fashion Central. This building can’t really carry the name to be very honest.”
Susan Thompson, business development manager of real estate for Calgary Economic Development, said the older-type buildings typical of Allied Properties portfolio provide tenants with a “funky character space that some smaller creative businesses like.”
“Obviously that’s going to attract a certain type of company,” said Thompson. “They’ll love that price point. And they’ll love the look and the feel of that space.”