81 Metcalfe St., is a 12-storey office tower in downtown Ottawa. Marlin Spring has bought a majority ownership in the property. (Courtesy Marlin Spring/Colonnade BridgePort)

Toronto-based developer and real estate investor Marlin Spring has moved into the office sector, buying a majority interest in 81 Metcalfe St., a 12-storey office building in Ottawa’s Central Business District.

Marlin Spring and Ottawa-based Colonnade BridgePort become co-owners of the tower. Marlin Spring paid $12.5 million for a majority interest in the class-A boutique-style property, while Colonnade BridgePort maintained its interest and will continue as property manager.

Marlin Spring bought its interest from an institutional investor.

“We’re quite excited about it,” Marlin Spring president Ashi Mathur told RENX. “One, we had an institutional partner that was looking to exit. We were quite happy with the transaction metrics that we were able to secure in light of the environment.

“We were thrilled that we have a partner who knows the asset well and has a history with the asset and has a like-minded approach to business. We’re big believers in office.”

The 81 Metcalfe office building

The building at Slater and Metcalfe Streets is leased to tenants from the government, healthcare and professional services sectors. It also includes a ground-level Starbucks outlet.

On-site amenities include conference and shower facilities, and it is situated among many nearby urban amenities including the new Confederation Line LRT.

Built in 1983, the 57,000-square-foot building features floor plates in the 5,000-foot range, which Colonnade BridgePort CEO Hugh Gorman said are popular with many potential tenants in the National Capital Region. He said Colonnade’s continuing investment in the building, and the addition of Marlin Spring, shows confidence in the Ottawa market.

“We believe in the Ottawa CBD office market post-pandemic and for the long term,” Gorman said in an email exchange. “81 Metcalfe is well-positioned adjacent to LRT and the floor plates are right-sized for the typical Ottawa office tenant.

“Marlin Spring shares this vision for the asset and the market.”

Marlin Spring and Colonnade

The partnership with Marlin Spring is the first for the two firms.

“We are excited to begin a new relationship with Marlin Spring on a prominent downtown Ottawa office asset,” Gorman said.

For its part, Marlin Spring already owns multifamily properties in Ottawa and neighbouring Gatineau, but this is its first foray into the office sector.

“When you look at Marlin Spring and who we are, we’ve always been about partnerships and this was our opportunity to get to know Hugh Gorman and his team at Colonnade,” said Mathur, who grew up in Ottawa. “They have great understanding of the office market in general.

“Their headquarters is in Ottawa, their presence is in Ottawa and their scale is in Ottawa. Now (we’ve) got a partner who knows the building inside and out and wants to continue on in their current role continuing to add value to the asset.”

The building is almost fully leased, with one vacancy for which Gorman told RENX “we are currently talking to a number of tenants.”

He also said 81 Metcalfe has received “significant upgrades” since it was acquired in 2012.

Marlin Spring’s move into office

Mathur said Marlin Spring has been seeking to move into the office sector for a while, but lost out in attempts to acquire a couple of other office properties in different markets when it felt pricing was too high.

“We’re OK with that, because at the end of the day we’re pretty disciplined when it comes to our acquisition strategy which is really rooted in purchasing assets below replacement costs, looking at the strategy for that asset and the transaction, and seeing where we can add some value and create value.”

In this acquisition, with tenants Marlin Spring feels will remain stable because they require both a physical presence and to be close to the downtown core, the value-add component is to come from a couple of areas.

“We see some opportunities for capital improvements to further improve the building and we are going to go through that in detail,” Mathur said while adding the building has been well-maintained and constantly upgraded.

“We like the tenant base, the needs-based location that we have, and we continue to see upside between where sitting rents are and where market rents are over the investment horizon as well.”

Although its interests continue to lie mainly in the multifamily sector, Mathur said Marlin Spring is seeking other office acquisitions.

“We’ll grow where our investment thesis has been met, our investor returns can be achieved. This acquisition, we’ve been looking for office assets for a little while and this one fit what we were looking for. We’ll continue to grow with that kind of systematic approach,” Mathur said.

“We’re certainly open to doing more. Being well-capitalized in this type of market allows us to move quickly.”

About Marlin Spring and Colonnade BridgePort

Marlin Spring is a Toronto-based real estate investment firm which acquires, develops, constructs and repositions mainly residential assets throughout North America.

Since 2013, it has acquired over 30 residential projects, consisting of 9,000 residential units in various stages of development, construction repositioning and completion across Canada and the U.S.

Its portfolio of over eight million square feet of residential GFA has an estimated completion value of over $4.3 billion.

Colonnade BridgePort is a full-service real estate company, offering property management and leasing services, acquisition, development, investment management and asset management for commercial and residential properties.