City looks to purchase former Nortel building with a $70 million discount

The Mary Pitt Centre in Ottawa, Ont. (Google Street View)

The City of Ottawa is set to get a $72.2 million discount on the purchase price of a Nepean business complex if council moves to buy it in its entirety before the lease comes to an end.

In a report prepared for June's finance and corporate services committee meeting, city staff are recommending the committee move to purchase the Mary Pitt Centre, a nine-storey, 6.88 hectare site located at 100 Constellation Drive.

Multiple city departments are located inside the complex, along with offices for the Provincial Courthouse, the Employment and Social Services Hub and the Ottawa Public Health (OPH) immunization clinic. The building is the largest administrative center in the city portfolio and is integral to the city’s accommodation strategy, the report says.

The city has been leasing the complex from its owner, the Arnon Corporation, since 2003 when it took over from former Canadian telecom company Nortel Networks.

An appraisal of the building determined the value of the land and the building to be $84.4 million. The report says "favourable amendments" the city received when signing the lease provided the option to purchase the entire site for a flat price of $10 million, plus approximately $2.2 million in capital expenditures and closing costs.

At that price, the city would get to purchase the property at $72.2 million under its estimated value.

"The option to purchase the Mary Pitt Complex represents a secure path forward to ensure uninterrupted occupancy and service delivery," the report to the committee says.

The city currently pays approximately $6.3 million a year in rent, plus additional operating cost rent of $3.2 million (excluding realty taxes and HST). Staff say despite $1 million in annual expenditures, buying the land would save the city about $5.3 million every year.

The reports warns that council will have to move quickly in giving Arnon a notice of intent to purchase the property, which has to take place during a six month window between Sept. 2, 2024 and Feb. 28, 2025.

After that, the lease will terminate and the city would have to negotiate a new lease agreement with Arnon, but there's no guarantee the city would be given the option to renew.

"Not having a right to renew carries significant operational and financial risks as it would be disruptive and costly to relocate out of the Mary Pitt Center into alternate City facilities and private sector office accommodation," the report says.

The matter will be discussed at the next meeting of the city's finance and corporate services committee meeting on June 4. If passed, the decision would be left up to city council.