Rio Tinto eyes new HQ in Montreal

Rio Tinto Alcan is shopping around for a new Montreal headquarters in what would be the first privately funded office tower built downtown in years, The Gazette has learned.

Multiple real-estate sources say the aluminum giant is looking for about 200,000 square feet of prime office space as the key tenant in what could be a LEED （Leadership in Energy and Environmental Design） certified, Class A building – a move away from the company’s earlier plans to invest millions of dollars to renovate its sprawling downtown campus, which has 300,000 square feet of interior space.

Four developers with different, centrally located sites have been shortlisted.

The move to a new office tower is “one option Rio Tinto Alcan is considering,” company spokesperson Bryan Tucker confirmed in an interview.

Should that proceed, the Maison Alcan campus in the heart of downtown Montreal would be sold.

The other option on the table is continuing with a plan to invest between $40 million U.S. and $50 million U.S. to expand and renovate the award-winning Maison Alcan that Rio Tinto announced four years ago.

Tucker would not disclose any details about the process or say much about the sites under consideration.

“We are going to choose the option that is going to help us best achieve our objective of bringing everybody together under one roof and to creating a world-class working environment for our employees,” he said.

Although a deal has yet to be reached, real-estate observers are already excited about the spectre of a new Montreal office building at a time when five towers have been delivered in downtown Toronto during the past two years alone.

But a Rio Tinto Alcan change of address in Montreal could have political overtones.

Indeed, Alcan’s request-for-proposals process was so hush-hush it was given a code name, industry sources say.

The sensitivity springs, in part, out of Alcan’s 2006 power deal with the provincial government and from the takeover of Montreal-based Alcan by global mining giant Rio Tinto in the summer of 2007 in a blockbuster $38-billion U.S. deal, cleared by Ottawa.

During the 2007 debate that enveloped Rio Tinto’s bid for the Canadian icon and jewel of Quebec’s economy, Quebec City specifically highlighted Rio Tinto’s pledge to fulfill Alcan’s promise to transform the Maison Alcan campus, which fronts onto Sherbrooke St. W. between Stanley and Drummond Sts.

That’s why any change to Alcan’s footprint in Montreal or to past promises will be closely watched by critics of those deals.

The Liberal government, however, said yesterday it would have no objection to Alcan moving its head office to another location in Montreal.

“As long as the head office remains in Quebec, it respects the agreement,” said Jolyane Pronovost, a spokesperson for Economic Development Minister Clément Gignac.

The public unveiling of Alcan’s expansion project for its global headquarters on Jan. 15, 2007, was as much a love-in as a corporate presentation and involved federal, provincial and municipal politicians.

The project revolved around the modernization of the award-winning Maison Alcan, which was built in 1983 and consists of four renovated historical buildings on Sherbrooke St. W.

The corporate campus was also expanded to embrace property belonging to the Salvation Army, including its historical sanctuary, known as the Citadel, an architectural jewel of Montreal’s “Golden Square Mile.”

The transformation of the campus would have allowed Alcan employees to be under one roof; about 250 of the 850 Alcan employees at the time were working in leased facilities elsewhere.

The work on the combined sites of almost 300,000 square feet was to begin in early 2007 and to be completed by the end of 2009.

But Rio Tinto acquired Alcan and, as the global recession built into a financial crisis, debt-laden Rio Tinto moved from expansion to contraction mode.

Before 2008 was over, Rio Tinto had slashed expenditures and announced it would cut 14,000 jobs from its payroll.

Major smelter projects in Quebec were slowed.

The Maison Alcan project was “slowed but not cancelled,” Rio Tinto Alcan’s CEO said in December 2008.

A month later, the company announced 800 permanent and 300 contract job cuts – 300 of them in Quebec – and other cost-cutting measures, including the closing of its aging Beauharnois smelter.

Maison Alcan’s transformation was put on ice.

Should Rio Tinto Alcan move to an office tower, it wouldn’t be as a cost-cutting measure because Alcan will be spending the same amount allocated for the campus transformation, Tucker said.

Alcan, which had about 850 employees in Montreal in early 2007, now has about 700, according to figures cited in a recent speech by its CEO.

Today, one reason Rio Tinto is considering new construction is that there simply isn’t such a large block of space available for rent in Montreal’s better downtown office buildings, industry sources say.

The vacancy rate in Montreal’s downtown core dropped to 7.3 per cent during the last quarter of 2010, compared with 8.1 per cent during the same period a year earlier, a recent report by Avison Young said.