The transformation of Citi Plaza in London, Ont. from an underperforming downtown mall to a successful mixed-use commercial and educational complex has taken another turn with its recent sale.
Canadian Commercial Workers Industry Pension Plan had acquired what was then known as Galleria London from RHK Holdings Inc. in 2000. The plan sold it in late March to a private investment group from Toronto for an undisclosed price.
“It was non-core to them,” explained Kelly Avison, principal of Avison Young, which in 2013 took over management and leasing of the property from Arcturus Realty Corp. “They’re getting out of the holding game as part of the pension plan diversifying its assets.”
The now-defunct Campeau Corporation spent $175 million to open Galleria London in 1989 on the site of London Eaton Square – Canada’s first enclosed shopping centre, which had opened in 1960 as Wellington Square.
It covered two city blocks — bounded by York, Clarence, Dundas and Wellington Streets — and was the largest shopping mall in Southwestern Ontario at the time. Major early tenants included Eaton’s, The Bay, Harry Rosen, Laura Ashley, Gap and Eddie Bauer.
The history of Citi Plaza
While Galleria London had some success early on, it was 35 per cent vacant by 1993. RHK Holdings acquired it for just $51 million in 1996. Eaton’s and The Bay had left by 2001, when only 20 stores remained open in the mall.
The writing was on the wall and while some retail space remained, much of it began to be converted to offices in addition to a Western University continuing education location, Fanshawe College’s theatre arts facilities and a public library.
Citi Cards Canada leased 114,000 square feet to turn into offices in 2006 and the property was renamed Citi Plaza in 2009. Citi Cards Canada moved out in 2016, leaving its namesake building just two-thirds full.
The pension fund decided to sell Citi Plaza and Avison Young started marketing it almost three years ago. The sale was put on hold to accommodate Middlesex-London Health Unit’s move into the building, which is now in its final stages.
Avison said Citi Plaza was initially under contract to a different purchaser, but that fell through. This new deal for the 622,156-square-foot property took about a year to finalize.
“Trying to close a transaction right in the middle of a pandemic was no easy feat, but between the buyer side and our side we managed to get everything done and closed in relatively short order,” Avison told RENX.
“It’s an institutional-sized sized property in a secondary market. A lot of major institutions aren’t looking at secondary markets, so most of the buyers looking at this were private.”
Citi Plaza’s selling points
Citi Plaza is now 94 per cent occupied, which Avison attributes to a combination of proactive management and leasing. That’s about one-third of the downtown London office vacancy rate, which was 18.4 per cent at the end of 2019.
About 70 per cent of Citi Plaza is now comprised of office space, with the remainder being retail/commercial.
The previous owner and Avison Young spent $4.5 million on upgrades to Citi Plaza’s heating, ventilation and air-conditioning system, escalators, elevators, security and landscaping. About $12.7 million of landlord work has been done to build out tenant spaces.
Citi Plaza has expansive floorplates to accommodate larger tenants and the expansion of those that have started small and grown within the building. PwC started with 12,000 square feet and has expanded three times. Video game developer Digital Extremes has also taken additional space and Avison said other tenants have been considering growth.
“We’ve brought in new tenancies and have also renewed the vast majority of our tenancies,” said Citi Plaza senior property manager Bonnie Wludyka, who was hired in March 2014 and will continue in that role.
“Out of a 625,000-square-foot building, we’ve roughly leased, since we’ve taken over, 480,000 square feet.”
Citi Plaza’s accessibility is another selling point for tenants. It’s serviced by multiple bus lines, is close to London’s Via Rail station and has a decent on-site parking ratio compared to other downtown commercial complexes.
Future plans for Citi Plaza
While Citi Plaza’s new owner has only had possession for a few weeks and is just settling in, Avison said there are no plans at this point to make any changes.
“They want to get the lay of the land and see where things are going to shake out in the next six months in the global economy. But given that we’ve got a very strong tenant base and a very low vacancy rate, they’re sitting in a very good position right now.”
Avison said there have been rent deferral requests from some Citi Plaza tenants due to the economic slowdown caused by COVID-19 and the new owner and property management staff will handle those on a case-by-case basis.
Revitalization in London
Downtown London seems to be undergoing an overall revitalization, according to Avison. There’s quite a bit of construction happening, and the two-tower, 550,000-square-foot London City Centre was sold by Dream Office REIT to Europro in December. That makes two significant office transactions in the space of less than six months, which is a lot for London.
KingSett Capital and Corpfin Capital purchased Westmount Shopping Centre in the west end of London from Bentall Kennedy (now BentallGreenOak) for $31.5 million in early 2018, months after Sears closed and three years after Target went out of business in Canada.
McCOR Management was chosen to oversee managing, leasing and redeveloping the 538,150-square-foot mall, which occupies a 31-acre site.
They’ve spent $25 million on transforming Westmount Shopping Centre and are negotiating with new tenants.
A 26,748-square-foot section of the former Target store became a Fit4Less health and fitness centre last year.
Renovations to accommodate the move were to begin in June, with occupancy scheduled for the fall, but that’s likely to be delayed because of COVID-19 construction restrictions.
Hamilton City Centre mirrors Citi Plaza
Another Southern Ontario city, Hamilton, is also seeing changes to its downtown.
Hamilton City Centre is currently home to primarily down-market retailers, some offices and numerous vacancies. IN8’s goal is to increase density at the 3.54-acre site through phased development of multiple mixed-use towers.
“We’ll see some transformations in certain marketplaces,” said Avison.
“We’re seeing activity in secondary markets, particularly if they’re close to Toronto. Part of that is being driven by the residential market, as people are buying where it’s more affordable, and commercial tenants are going there.”