Allied Properties REIT (TSX:AP.UN) has signed a deal to lease a portion of the building that houses CBC's head office and plans to spend $30 million to upgrade the property before renting it to technology clients.
The trust said the downtown Toronto space will be marketed as places to house computer servers due to its proximity to a key Internet hub for North America just down the street.
Allied Properties president and chief executive Michael Emory said much of the $30 million will be spent to add massive back up power systems, improve the cooling system and install a fibre optic link to 151 Front. St. W., where the hub is located. Financial terms of the agreement were not immediately available.
Emory said the location, high ceilings, floors capable of supporting heavy loads and large freight elevators all make the property attractive to technology and telecommunications clients looking for a place to house their servers.
"It is very well configured for accommodating the kind of equipment that telcom and IT users need to accommodate," he said.
"What made the CBC space uniquely suitable for us was the fact that is has some of the attributes already and we don't have to spend a disproportionately large amount of money to get the remaining attributes in the space."
Allied Properties said Friday the 49-year agreement includes 168,000 square feet or a little more than 10 per cent of the space at the Canadian Broadcast Centre. The trust said the lease term will begin on March 8, 2013, with an extensive rent-free period at the start.
The deal still leaves more than 250,000 square feet still available to lease in the 1.5-million square foot building at 250 Front St. W., near the Rogers Centre sports stadium and CN Tower.
CBC has been looking for tenants for office space it owns across the country in a bid to generate revenue that would help it cover a multimillion dollar shortfall.
Hubert Lacroix, president and CEO of CBC/Radio-Canada, said earlier this week that the TV and radio broadcaster hopes to generate $50 million through various measures that include putting ads on Radio 2 and leasing its unused office space.
The CBC already leases space to Disney and Boston Pizza in its Toronto headquarters.
Fred Mattocks, general manager of media operations and technology at CBC, said the deal helps.
"It takes underutilized space in our broadcast centre in Toronto and turns it into a revenue- generating asset for us," he said.
Mattocks noted that Allied Properties' move to convert the space to house computer servers is a specialized business that the CBC would not be capable of doing itself.
Allied Properties owns several buildings in the neighbourhood that are also connected by fibre optic cable to 151 Front St. W. that includes 340,000 square feet of specialized space for telecommunications and technology tenants.
The trust owns and manages a portfolio of office properties in Quebec City, Montreal, Ottawa, Toronto, Kitchener, Ont., Winnipeg, Calgary, Edmonton, Vancouver and Victoria.
Units in the trust were up six cents at $28.36 in trading on the Toronto Stock Exchange on Friday.