In 2013, the agency tasked with selling off city real estate didn’t make a sale. This year, it has made one.

Vanessa Lu – Toronto Star

It may be a booming real estate market in Toronto, but the city agency tasked with selling off Toronto’s properties hasn’t closed many deals.

In 2013, it didn’t make a single sale. It reported a $2.1 million net loss in its annual report, compared with a $38.8 million net profit in 2012.

And so far this year, it has made one sale – an office building at 455 Dovercourt Road, north of College Street – for $3.7 million in August, according to the Ontario land title registry office.

Curated Properties, the developer, is keeping the existing office building, which will undergo renovations, and adding 12 two-storey townhomes above the building. Not surprisingly, in a hot neighbourhood, the residential units sold in just two weeks.

Curated Properties principal Gary Eisen praised Build Toronto for how it stick-handled the project, maximizing top dollar while satisfying wishes of the neighbourhood community.

“It wasn’t a simple slam dunk,” he said, calling it a complex process. “What we proposed was nouveau thinking, outside the box.”

Build Toronto, created in 2009, during Mayor David Miller’s term, was touted as the best way to generate long-term value from the city’s unwanted real estate. The agency would have professionals with the experience and connections to get deals done.

Under its mandate, the agency can sell a property to a developer, agree to a joint venture, or prepare a property for sale, complete with detailed plans and zoning approvals, but then sell to a developer.

Build Toronto president and CEO Bill Bryck, who took over last October, declined several requests for an interview, citing the municipal election campaign.

But given the hot real estate market, why isn’t Build Toronto performing better? City councillors asked that question during an executive committee meeting in May.

Bryck told councillors that a strong market in 2011 and 2012 meant some properties were sold sooner than anticipated.

“The land market for condominium sites was very, very frothy in 2011 and 2012,” Bryck said. “I think the company – I wasn’t there at the time – took advantage of that market and moved a couple of properties out faster than planned.

“It left 2013 with some sites that weren’t necessarily ready to bring to the market,” he said.

Bryck added that “a number of properties sold in 2009 to 2012 were the cream of the crop, the low-hanging fruit.”

That leaves intense development projects that might need rezoning, infrastructure improvements or even soil cleanup.

“Down the road, we would expect to bring some significant sites to market in late 2015 and 2016-18,” Bryck said, with total revenue projected over the next five years to be $542 million.

Since inception, the agency has paid the city $30 million in dividends.

Councillor Denzil Minnan-Wong, who grilled Bryck at committee, said in an interview he believes Build Toronto has underperformed, especially given the salaries earned by past executives, including CEO Lorne Braithwaite, who pulled in more than $585,000 in salary and bonuses in 2012.

“They haven’t had to work hard in a hot real estate market. Anyone can sell properties in this type of market,” Minnan-Wong said.

Build Toronto was supposed to be the development arm of the city – managing the hard-to-sell properties, he said. “It’s turning Bs and Cs into As. That’s where the value is,” Minnan-Wong said. “It hasn’t been clearly demonstrated that they have proven their value yet.”

Build Toronto has sold properties in prime locations like the Street Lawrence Market as well as 10 York Street in downtown Toronto, where a 65-storey condo tower is going up on a tiny triangle next to the Gardiner Expressway.

But others have languished, including 4050 Yonge Street, at the corner of York Mills just south of Highway 401, right at a subway stop. The plan for a seven-storey building there was originally touted as an easy sell given its geographic location, and at one point the TTC was looking to use it for a new headquarters, but politicians nixed that idea.

John Andrew, a real-estate professor at Queen’s University, says Build Toronto has to juggle different political masters.

Other levels of government also have agencies to sell off surplus lands, such as the Canada Lands Corp. or Infrastructure Ontario, but they might not be in such coveted locations.

“It’s magnified in Toronto, given the limited available lands and the tremendous value, and it’s probably more politicized,” he said.

Last year, Build Toronto was certainly rocked by controversy over who should replace Braithwaite, the first CEO, who was retiring.

Vice-chair Doug Ford, who is now running for mayor, was reportedly pushing for Michael Kraljevic, CEO of the Toronto Port Lands Co, which manages the city’s properties on the waterfront.

The chair and independent directors of the board resigned. Eventually, Bryck was appointed after a long search.

Former councillor and Build Toronto member Peter Milczyn, who was elected as an MPP in June, believes things are on track now.

Milczyn said Bryck has specifically reached out to city councillors who worry about the city turning into “a greedy developer.”

He noted that Build Toronto’s executive suite has been slimmed down, and a report to city council says restructuring will bring a savings $1.8 million on an annual basis.

Milczyn, who is an architect, says Build Toronto is trying to add value in its projects, whether it’s incorporating affordable housing or family-size units or ensuring office space is protected.

“It takes time,” Milczyn said, adding he expects more results in 2015 and 2016. “It is not just a commercial real estate operation. It has to achieve public goals,” he said. “If it was just about maximizing real estate value, you would hire a real estate broker.”

A case in point would be a 19.7-acre parcel of land on Victoria Park Avenue near Gerrard Street in Scarborough. It’s an irregularly shaped area that once included a quarry, brick factory, municipal landfill and most recently a driving range.

Build Toronto has begun work on readying the property for sale, including environmental remediation. The plan calls for half the land to be used for residential, a quarter for retail and the remaining quarter for a park.

“The number one concern for the residents in the community is tall towers,” said councillor Gary Crawford, who represents the area. While zoning would permit a large condo tower, Crawford said Build Toronto is committed to only permitting townhouses and a low-rise building on the land.

“The majority of people understand some type of development will take place,” Crawford said, given its close proximity to Victoria Park subway station and downtown. “At the end of day, we are making sure it will be developed properly.”

Andrew of Queen’s University says given the size of that parcel, Build Toronto could easily break it up in different pieces and sell it off.

But Build Toronto must walk a careful line, balancing public interests, unlike a private company that will sell to the highest bidder, he said.

“They have a mandate. They do have a certain vision for their properties,” he said. “And that’s a good thing.

“But it does complicate their land disposition or building disposition process.”

He added that some of the city’s properties are very large parcels that would have a limited number of buyers, depending on constraints set out of by politicians, including land use and zoning bylaws.

Add to that any questions about environmental contamination, and some developers may just want to steer clear of the properties.

Andrew believes that in the end, a sale will usually come down to whether Build Toronto and the development community can agree on what a parcel is worth. And if Build Toronto doesn’t want to carve up a large parcel, it will have to be patient.

“And if they have to wait several years – until a pension fund wants to do an enormous development – I’m not sure it’s a bad thing.”

—————————————————————————————————–
Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.
—————————————————————————————————–