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Experts call Scarborough subway funding proposal ‘far-fetched’

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The province’s new pitch to have developers pay for a large part of the Scarborough subway by offering them land is being described by four industry experts as unworkable and “far-fetched.”

The math suggests that in order for developers to cover the cost of building two additional stations for a three-stop subway rather than the planned one-stop extension, the province would need to allow those developers to build two of the largest private real-estate projects in Canada — eclipsing neighbourhoods largely made up of single-family homes.

The corner of Sheppard Ave. and McCowan Rd., site of a proposed station under the three-stop Scarborough subway plan.
The corner of Sheppard Ave. and McCowan Rd., site of a proposed station under the three-stop Scarborough subway plan.  (Andrew Francis Wallace / Toronto Star)

Those experts say there is simply no way that enough demand for that real estate would materialize in time to make those projects financially viable, leaving the province’s proposal dead on arrival.

What’s at stake is that Scarborough residents may be soon left without any rapid transit. The subway is meant to replace the aging Scarborough RT, widely considered to be at the end of its run.

Assessing the government’s plan, James McKellar, director of the Brookfield Centre for Real Estate and Infrastructure at Schulich School of Business, said “Someone must have bought some of that new green stuff … That won’t work.”

Details of how the province proposes that the development industry would recover the costs of building the transit infrastructure remains vague, but Transportation Minister Jeff Yurek earlier told the Globe and Mail it would involve offering developers land and air rights around and over the future subway stations. Yurek said this plan would “not be a cost to the taxpayer.”

Graham Haines, research manager at Ryerson University’s City Building Institute, looked at that plan by asking how much buildable square feet a developer would need to be offered, in order to offset the cost of building just one of the subway stops.

The city is currently moving forward with planning of a one-stop subway extension at the Scarborough Town Centre, which is estimated to cost at least $3.35 billion; a three-stop subway was last estimated to cost, as of July 2016, $4.6 billion. The additional stations would be at Lawrence Ave. and Sheppard Ave. along McCowan Rd. Building the northern Sheppard station would also involve connecting it to the line with an additional kilometre of tunnel.

It’s not clear how the additional $1 billion in costs breaks down between the two stations, so Haines started with the assumption of an even $500 million to build each station.

Market analysts Ben Myers, president of Bullpen Research & Consulting Inc., and Shaun Hildebrand, president of Urbanation, said the price of land per buildable square foot in Scarborough is between $30 to $50 per square foot.

The corner of Lawrence Ave. and McCowan Rd., site of a stations under the three-stop Scarborough subway plan.
The corner of Lawrence Ave. and McCowan Rd., site of a stations under the three-stop Scarborough subway plan.  (Andrew Francis Wallace / Toronto Star)

At that value, the scale of development required to offset the cost of building one station at $500 million would be in the magnitude of 10 million to 17 million square feet.

That amount of development is equivalent to between eight and 13 Aura towers — the 78-storey condo at Yonge and Gerrard Sts., which is for now the tallest residential building in Canada. Looking at it another way, the development required would be equal to 12 to 19 times the Honest Ed’s redevelopment site at Bloor and Bathurst Sts.

Based on typical condo development, that amount of development would be expected to produce some 11,000 to 19,000 condo units. By comparison, only 9,339 residential units were proposed in the fastest-growing part of Scarborough during the five years between 2013 and 2017, according to statistics from the city’s planning division.

Haines did calculations along the lines of Myers’ work, but assumed the land value around stations was much higher at $100 per buildable square foot. That scenario would allow the cost of building just one station to be offset by 5 million square feet of development, or the equivalent of four Aura towers.

That would produce some 5,500 units at just one site — by comparison, the entire CityPlace neighbourhood is expected to be about 7,500 units when completed downtown. Haines said even one of these projects in Scarborough would be one of the biggest development projects in Toronto.

McKellar said the province’s plan would require “the most exceptional demand for condos that ever existed in the City of Toronto” noting no transit station has ever drawn anywhere near that demand, including in the downtown core.

“Whether it’s five or 10 million (square feet), it doesn’t matter in that there isn’t the market for that kind of density,” McKellar said.

Myers noted that typically a developer is looking to make 15 to 20 per cent profit on their investment.

“It sounds really far-fetched,” Myers said of the province’s plan.

The corner of Sheppard Ave. and McCowan Rd., site of a stations under the three-stop Scarborough subway plan.
The corner of Sheppard Ave. and McCowan Rd., site of a stations under the three-stop Scarborough subway plan.  (Andrew Francis Wallace / Toronto Star)

On Thursday, Mayor John Tory — who has long backed a subway plan, originally three stops and then the one-stop version pitched during his first term in office — said he was open to the province’s plan to pay for the additional stations with development assuming it was on “acceptable terms,” which he said “means any development that produced the money for that would have to be compatible with the city’s planning guidelines and with neighbourhoods that those transit stations are in.”

The province currently doesn’t own the land where the stations would go, meaning that property would have to be expropriated not only to build the station but also to accommodate the development at each site.

There is little room, for example, at Lawrence Ave. and McCowan Rd. where today there is the Scarborough Hospital campus, several apartment buildings and sprawling, leafy neighbourhoods.

A development of the scale calculated would also conflict with several planning principles in the largely lowrise area.

Hallbank Terrace, very near Sheppard Ave. and McCowan Rd., where the province's proposal might place a new subway station, is filled with the sort of single-family homes and lowrise buildings that might soon exist adjacent huge real-estate developments.
Hallbank Terrace, very near Sheppard Ave. and McCowan Rd., where the province’s proposal might place a new subway station, is filled with the sort of single-family homes and lowrise buildings that might soon exist adjacent huge real-estate developments.  (Andrew Francis Wallace / Toronto Star)

In response to an email from the Star outlining these calculations, the concerns about feasibility and question about how their proposal would work, Yurek’s spokesperson Mike Winterburn reiterated past statements.

“Well-designed land value capture mechanisms, like the sale of air rights, provide ways for private sector builders to decrease the cost of building transit for taxpayers,” he said. “Our government is confident that private sector support will help secure funding that will allow for construction to begin sooner. We will be able to build better transit, faster for Ontarians.”

He said their government is currently working on options to “maximize the value achievable from transit-oriented development.”

The previous Liberal government earlier agreed to fully fund a seven-stop light rail line, completely separated from traffic, to replace the SRT. That project was cancelled under former mayor Rob Ford in favour of the more expensive subway, which is in part being funded through a special tax collected from all Toronto homeowners for the next 30 years.

The earliest a subway extension could be completed is mid-2026. If the LRT project had gone ahead as planned, it was expected to be in operation next year.

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Anglais

‘Business as usual’ for Dorel Industries after terminating go-private deal

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MONTREAL — Dorel Industries Inc. says it will continue to pursue its business strategy going forward after terminating an agreement to go private after discussions with shareholders.

« Moving ahead. Business as usual, » a spokesman for the company said in an email on Monday.

A group led by Cerberus Capital Management had previously agreed to buy outstanding shares of Dorel for $16 apiece, except for shares owned by the family that controls the company’s multiple-voting shares.

But Dorel chief executive Martin Schwartz said the Montreal-based maker of car seats, strollers, bicycles and home furniture pulled the plug on a deal on the eve of Tuesday’s special meeting after reviewing votes from shareholders.

“Independent shareholders have clearly expressed their confidence in Dorel’s future and the greater potential for Dorel as a public entity, » he said in a news release.

Dorel’s board of directors, with Martin Schwartz, Alan Schwartz, Jeffrey Schwartz and Jeff Segel recused, unanimously approved the deal’s termination upon the recommendation of a special committee.

The transaction required approval by two-thirds of the votes cast, and more than 50 per cent of the votes cast by non-family shareholders.

Schwartz said enhancing shareholder value remains a top priority while it stays focused on growing its brands, which include Schwinn and Mongoose bikes, Safety 1st-brand car seats and DHP Furniture.

Dorel said the move to end the go-private deal was mutual, despite the funds’ increased purchase price offer earlier this year.

It said there is no break fee applicable in this case.

Montreal-based investment firm Letko, Brosseau & Associates Inc. and San Diego’s Brandes Investment Partners LP, which together control more than 19 per cent of Dorel’s outstanding class B subordinate shares voiced their opposition to the amended offer, which was increased from the initial Nov. 2 offer of $14.50 per share.

« We believe that several minority shareholders shared our opinion, » said Letko vice-president Stephane Lebrun, during a phone interview.

« We are confident of the long-term potential of the company and we have confidence in the managers in place.”

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Anglais

Pandemic funds helping Montreal businesses build for a better tomorrow

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Many entrepreneurs have had to tap into government loans during the pandemic, at first just to survive, but now some are using the money to better prepare their businesses for the post-COVID future.

One of those businesses is Del Friscos, a popular family restaurant in Dollard-des-Ormeaux that, like many Montreal-area restaurants, has had to adapt from a sit-down establishment to one that takes orders online for takeout or delivery.

“It was hard going from totally in-house seating,” said Del Friscos co-owner Terry Konstas. “We didn’t have an in-house delivery system, which we quickly added. There were so many of our employees that were laid off that wanted to work so we adapted to a delivery system and added platforms like Uber and DoorDash.”

Helping them through the transition were emergency grants and low-interest loans from the federal and provincial governments, some of which are directly administered by PME MTL, a non-profit business-development organization established to assist the island’s small and medium-sized businesses.

Konstas said he had never even heard of PME MTL until a customer told him about them and when he got in touch, he discovered there were many government programs available to help his business get through the downturn and build for the future. “They’ve been very helpful right from day one,” said Konstas.

“We used some of the funds to catch up on our suppliers and our rents, the part that wasn’t covered from the federal side, and we used some of it for our new virtual concepts,” he said, referring to a virtual kitchen model which the restaurant has since adopted.

The virtual kitchen lets them create completely different menu items from the casual American Italian dishes that Del Friscos is known for and market them under different restaurant brand names. Under the Prasinó Soup & Salad banner, they sell healthy Greek options and their Stallone’s Sub Shop brand offers hearty sandwiches, yet the food from both is created in the same Del Friscos kitchen.

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Anglais

Downtown Montreal office, retail vacancies continue to rise

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Some of downtown Montreal’s key economic indicators are heading in the wrong direction.

Office and retail vacancies in the city’s central core continued to climb in the fourth quarter of 2020, according to a quarterly report released Thursday by the Urban Development Institute of Quebec and the Montréal Centre-Ville merchants association. The report, whose first edition was published in October, aims to paint a socio-economic picture of the downtown area.

The survey also found office space available for sublet had increased during the fourth quarter, which may foreshadow even more vacancies when leases expire. On the residential front, condo sales fell as new listings soared — a sign that the downtown area may be losing some of its appeal to homeowners.

“It’s impossible not to be preoccupied by the rapid increase in office vacancies,” Jean-Marc Fournier, the former Quebec politician who now heads the UDI, said Thursday in an interview.

Still, with COVID-19 vaccinations set to accelerate in the coming months, “the economic picture is bound to improve,” he said. “People will start returning downtown. It’s much too early to say the office market is going to disappear.”

Public health measures implemented since the start of the pandemic almost a year ago — such as caps on office capacity — have deprived downtown Montreal of more than 500,000 workers and students. A mere 4,163 university and CEGEP students attended in-person classes in the second quarter, the most recent period for which figures are available. Border closures and travel restrictions have also brought tourism to a standstill, hurting hotels and thousands of local businesses.

Seventy per cent of downtown workers carried out their professional activities at home more than three days a week during the fourth quarter, the report said, citing an online survey of 1,000 Montreal-area residents conducted last month.

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