‘Turned a lemon into lemonade’: Condo tower to be built on dormant city-owned property
The City of Toronto is getting into the condo business, so to speak, as an investor in a proposed 75-storey tower on a triangular parcel of land just steps from Lake Ontario. The “partnership” between construction giant Tridel and Build Toronto, the arm’s-length real estate corporation wholly owned by the city, is the first of many, proponents hope, as the agency seeks to “unlock” the value in surplus properties that are sitting dormant across the city.
The 0.63 acre lot at 10 York St. used to be a car impound lot. This new arrangement will generate more than $40-million over four years for the city, officials said, which is eight to 10 times the value of the land. Build Toronto sold about 80% of the land to Tridel and kept the remaining stake for itself as an investment.
Councillor Doug Ford, vice chair of the Build Toronto board of directors, hailed the deal as the kind he wants to see more often.
“They turned a lemon into lemonade,” Mr. Ford said of a parcel that “no one thought could be built on” at the building’s official unveiling Tuesday.
Leo DelZotto, president of Tridel, said the true profit will only be known once residents have moved in and written their cheques. The project may be complete in six years.
“On a project that takes this amount of time, an outright sale is a one-time gain that day that you close the deal,” said Mr. DelZotto. “But because we have an escalating market, if the market continues to escalate, the city has an opportunity to gain some extra revenue out of a piece of land that they’ve already got a commitment on selling.”
An artistic rendering of the proposed condo partnership between Build Toronto and Tridel.
The 240-metre, 780-suite building, designed by Wallman Architects, will be decorated with projecting glass boxes that reflect light, a motif inspired by the Aurora Borealis. The proposal must still receive zoning approvals from the city.
With the city’s money problems well documented, the pressure is on for an agency like Build Toronto to generate big financial returns. Build Toronto officially launched in May 2010 and sold its first piece of land, at 154 Front St. East, for $19-million. Build president and CEO Lorne Braithwaite said the agency is now looking at the sale or development potential of another 40 properties. It has firm deals on four sites so far this year, and hopes to close another five by the end of 2011, said John Macintyre, senior vice-president of corporate affairs. In the case of 10 York, Build Toronto reviewed nine proposals before deciding to move forward on a joint venture that delivers a cash payment in 2012 and makes it a part owner.
“There is no financial risk because we’ve already got our money out,” said Mr. Macintyre. His Build Toronto colleague, Bruce Logan, senior director of corporate affairs and operations, qualified that somewhat, saying that any development has some risk, but that the agency has mitigated it by taking a minority stake, and leaving the real estate development to Tridel. “Once it’s complete, we’re out,” said Mr. Logan.
University of Toronto economics and real estate professor William Strange described the venture as “a kind of hedge, in the sense the city is going to get a lot money from condos at precisely the time it needs the money for operations.”
He said most of the aspects of the deal make sense. “But I’m a little concerned about selling off a bunch of city assets as a way to deal with current shortfalls,” he said.
It is not yet known how the 10 York profit would be used. Build Toronto said that is up to city council to decide. In 2010, Build Toronto paid the city a dividend of $11-million (on revenues of $21.8-million).
Councillor Ford lauded the plan. “If you were an investor and you had an opportunity to look at nine-times profit over a four-year period, I’d take that any day,” he said, deftly shifting the focus to a more pressing construction need in Toronto: office space. “I’m getting the word out there, all developers, come knock on our door.”