Prime City Land Leased at Pennies on the Dollar
If only I had a time machine. The National Post recently revealed that some of the best deals in Toronto real estate belong to a few businesses who signed long term leases for city-owned land in the 1960s, 1970s and early 1980s. Now the city is trying desperately to get out of these agreements or somehow force these businesses to start paying current market rates.
Two shocking examples of the city's conundrum are 2 Bloor Street West and 2 Bloor Street East. The land that 2 Bloor Street West is sitting on is owned by the city and is being leased out for $112,000 a year or about $9,333 a month. 2 Bloor Street East is being leased out to HBC for a paltry $167,549 a year or $2.80 per square foot. Current market rates are at least 10 times these amounts.
When condos are selling across the street for $1000 per square foot and the oldest corporation in North America is leasing land at the same intersection for only $2.80 per square foot, something has got to give.
So what do you think the city should do? Bite the bullet and honor their 99 year leases even at these ridiculous rates, or should they do whatever they can to force the tenants to start paying market value for the land?
Andrew la Fleur is a registered real estate agent and regular contributor at blogTO.
Comments (10)
If Zanta were here, he'd know what to do.
How did these leases get approved in the first place? Was the original idea to provide subsidized rents to businesses like HBC in the first place, or is this the result of terrible (or nonexistant) analysis on the City's behalf?
If the contracts are legal and there was no provrbial skullduggery in their original signing, all the City can do is bat their eyelashes and say pretty please. If the companies say no, then too bad... a contract is a contract.
I would agree with the above comment. It sucks for the city and the taxpayer but a deal is a deal. The city should go after the people who made these deals. No doubt some major bribes were taken.
These deals were made when the real estate market was much cooler - probably made to keep HBC from moving jobs/business out of the downtown core.
I'm sure at the time, people applauded the deals as job saving arrangements.
At the time, many corporate headquarters were planning to move into the suburbs. If it weren't for deals like this, Toronto might look more like Detroit.
You're comparing the price they are paying for undeveloped land on which they had to build a building vs the selling price of completed condo units, hardly an apples to apples comparison. The only mistake if there was one, was not indexing the contracts to inflation but in the late sixties when these contracts were signed nobody could have forseen what was going to happen to inflation in the 70s and 80s. Actually if one took the total lease payments over the 40 odd years they've been made so far and represented them in today's dollars it may not look like the leasees are getting that much of a sweetheart deal, given that all they are getting for the money is the air rights over the subway tracks.
Chester, I wasn't trying to make an apples to apples comparison, it was just to illustrate the point that the value of the land at Yonge and Bloor has increased exponentially since the 60s and 70s when these now ridiculous leases were signed.
I can only agree with Sean here. A contract, after all, IS a contract. However, I think, the City should explore who is responsible for the original contracts. Those responsible should at least be questioned about their movives back a couple of decades ago. Until than - and probably after the process, too - there is not much the City can do but honor the leases even at these ridiculous rates.
VISION,never has been, still isn't the strong suit of the weasling, slobbering, hacks who generally run for and get elected to council in this snotty little hicktown that thinks of itself as world class.
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