RBC plans new Canadian headquarters

“Our Canadian banking national office has been quite fragmented in different buildings… so we’re going to pick up and create more of a flagship for our domestic retail business,” said Linda Mantia, RBC senior vice-president and head of enterprise services.

RBC will occupy more than half of the 30-storey, 930,000-square-foot property, the price of which is not being disclosed. Based on square footage prices for downtown Toronto, the price tag is estimated to be in the hundreds of millions of dollars.

More than 4,000 RBC employees are expected to move into the new space beginning in the third quarter of 2014.

The employees will move out of seven other locations in Toronto’s downtown, where RBC’s current leases are coming to an end. The bank will hang on to some of those properties, Mantia said.

One of the most attractive factors in Royal’s decision to consolidate in a new space was the lower rent, due to both the location and efficient use of square footage.

“What was cost-effective for us was looking south of Union Station,” Mantia said.

The office tower is being built just south of Toronto’s expensive downtown core and will connect to the city’s transportation hub at Union Station through a foot bridge that traverses the Gardiner Expressway.

The new building, designed with input from Royal, reduces the amount of square footage required per employee as it clusters them in to a “coffee shop” type work environment. Some of its older locations did not use space as efficiently, she added.

A new building was not always what RBC had in mind for thousands of employees when a number of its leases expire in the coming years. It had looked at a long list of options beginning in 2008, and when Oxford Properties approached the bank with its idea to build south of Union Station, its interest was piqued.

“Everything you want in real estate is how do you get good bargaining power and create win-win outcomes with the landlord?” Mantia said.

“When you have 4,000 employees, it gives you a lot of ability to do what we did,” she said, alluding to RBC’s involvement from the conceptual stage of the project.

Royal Plaza, located in the heart of Toronto’s financial district, will remain the bank’s global headquarters, but more employees will be located at WaterPark Place.

Oxford and the CPPIB also jointly own Royal Plaza.

The new project will be the CPPIB’s biggest-ever real estate development in Canada, said Peter Ballon, CPPIB’s head of real estate investments, Americas.

“To have a brand new building with a great tenant like the Royal Bank with a great partner like Oxford in a market like Toronto — downtown Toronto —is a very unique opportunity and we’re very excited by it.”

Although the CPPIB has been busy making office property deals around the world, development projects are a far less common undertaking than acquisitions, Ballon said.

But the board jumped at the opportunity to invest in a core market like Toronto.

“High quality product is scare here in Canada, we would love to do more here in Canada and whenever an opportunity arises, we take that opportunity,” he said.

Commercial investment opportunities are rare in Canada because the market is fairly small, meaning there are fewer properties to compete for and many of the quality properties are already owned by long-term institutional investors, Ballon explained.

Oxford took the lead role in discussions with Royal, and approached CPPIB, its partner in a number of other real estate properties, with the opportunity.

Oxford and CPPIB co-own a portfolio of office properties across Canada valued at approximately $3 billion, and are currently also developing 1021 West Hastings in Vancouver.

Blake Hutcheson, president and CEO of Oxford, which will oversee development and management of the new property, said the project is one of the biggest developments undertaken by Oxford in the past decade.

“It’s a state of the art, very environmentally-friendly building, but it’s a simple and economic building as well, which we think is fitting for the times.”

The development proposal by CPPIB and Oxford for the site adjacent to two office buildings they co-own was the winning bid in a competition held by Royal.

RBC will occupy approximately 550,000 square feet of RBC WaterPark Place, which will have more than 50,000 square feet of retail services and amenities on the lower floors.

Oxford, the real estate arm of the OMERS Worldwide Group of Companies, has more than 1,300 employees and approximately $17 billion of real assets that it manages for itself and on behalf of its co-owners and investment partners. OMERS has more than $53 billion in net assets invested on behalf of more than 400,000 members.

The CPPIB is a professional investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries.