In May of 1969, John Lennon and Yoko Ono held a press conference from their rumpled bed at Toronto's King Edward hotel. The “bed-in,” the start of the couple's North American crusade for peace, is woven into the history of the 107-year-old landmark at the corner of King and Victoria Streets – and into its value. “Their room was on the eighth floor,” says Jason Lester, chief operating officer of Dundee Realty Corp. “It wasn't in one of the condominiums or we could probably have tripled the price on that one.”
As a partner in King Edward Realty Inc., Dundee is one of the new owners of the Le Meridien King Edward Hotel, along with Skyline International Development Inc., Serruya Realty Group Inc. and Toronto billionaire Alex Shnaider. King Edward Realty bought the property last March from Lehman Brothers, the bankrupted New York financial firm, in a distress sale for just over $50-million, putting it back in Canadian hands. Dundee and its partners plan a massive rejuvenation of the hotel, including 145 new condominiums on the third, fourth and fifth floors.
Mr. Lester says other groups pursued the King Eddy wanting to put up a tower or even demolishing part of the building, but that's not Dundee's style.
“People are always searching out authenticity and uniqueness,” says Mr. Lester, who notes that 142 of the condos have been sold. “Early on, we approached a historian to dig up as many facts as possible to understand what happened here to help us develop our strategic plan. We work that into everything we do in terms of how we're going to renovate it, how we're going to market it and any other considerations.
“There is only one King Eddy and it's going to be around for a very long time. For historical hotels that were created at the turn of the century, like the Savoy in London, you can only live there one night at a time.” The condos range from $329,000 to more than $1-million for 2,000-square-foot units.
While the celebrity connection is well known – the Beatles, Richard Burton and Elizabeth Taylor also famously stayed here – Mr. Lester notes that many Torontonians have a personal affection for the hotel.
“Because the King Eddy has been around since 1903, it is multi-generational,” says Mr. Lester. “Certain families would have used the hotel for various events, then their kids and their grandkids would have, too.”
With Dundee's total expenditures, including purchase, for the King Eddy project expected to exceed $100-million in the next two to three years, the return on investment will require patience. Dundee has experience, having been a partner in Toronto's Distillery District since 2004, bringing in capital and helping build the three condominium towers there. But Mr. Lester is confident the condos in both projects will retain a higher monetary value because of their historic connections.
“We're able to take a lot more risk out of the project because it's unique,” he says. “If there's ever an oversupply of offerings in the marketplace, there will always be a certain market for this because it can never be replicated.”
Alissa Golden, an urban planner whose firm, Golden Consulting in Hamilton, Ont., specializes in heritage planning and evaluation, confirms that heritage homes will always be in demand.
“There is a niche market for people who actively seek out heritage buildings, not just for their aesthetics but for their cultural and historical value,” says Ms. Golden. “Many people enjoy being in neighbourhoods that have heritage buildings. A lot of it is that Old World feel and a much more human scale of architecture.”
As to whether the heritage factor increases value, Ms. Golden says that context is a big issue.
“A property might be more valuable if it's one of the only remaining buildings of its kind in an area,” says Ms. Golden. “For the most part, the aesthetic value is the biggest thing that drives property values when we're talking about residential properties. You can also make an argument for the preservation of historic buildings in terms of the tourist draw associated with culture and heritage, such as old Montreal.”
With any of the properties Dundee acquires, Mr. Lester says, the company has a vision of how to develop them, although there may not be a lot of details initially.
“With the King Eddy, when we were assessing with our partners whether to acquire the property or not, we evaluated the business plan of converting those three floors into a condominium and the associated risks,” says Mr. Lester. “As an example, we had to sell all these units without any parking. Even though it was a great unique location beside the financial core, that increased the risk. But the buyer who wants to be here probably doesn't have a car. Even in the Distillery District, where we had a requirement that about 65 per cent of the units would have a car, the demand was less than 50 per cent.”
So who's a typical buyer at the King Eddy?
“I would say about 98 per cent are Canadian, a good cross-section of people from their thirties to sixties, “ says Mr. Lester. “They're so excited to move in and proud to have a piece of history. We're selling our corporations, but we're keeping our heritage.”
King Eddy numbers
$6-million: Amount that George Gooderham of the Gooderham and Worts Distillery spent to build the hotel in 1903.
298: Number of rooms, along with 21,000 square feet of function space, excluding the Crystal Ballroom, which was added in 1921 along with an 18-storey addition.
3,000+: Number of Beatles fans who gathered outside the hotel in 1964 to get closer to John, Paul, George and Ringo.
869: Room where John and Yoko stayed in 1969.
33.19: Number of carats in the Krupp Diamond, which actor Richard Burton gave to Elizabeth Taylor when he proposed to her at the hotel, after first scandalizing Toronto by shacking up in the Royal Suite.
1975: Year the building was designated a heritage site.
$300,000s: Starting price for condominiums. They range to more than $1-million. To date, 142 of the 145 units have been sold.
June, 2012: Date that buyers can move in.