From the Star:
Toronto sells McDonald's site for a bargain
Mar 06, 2008 04:30 AM
Paul Moloney
city hall bureau
The city has decided to sell a prime piece of land on the Bloor St. W. strip for a bargain price and expects the property to be flipped quickly to allow a 100-metre condo tower on the site.
After a closed-door session, city council voted 28-4 yesterday to accept the original offer of $3.38 million made by McDonald's for the site the restaurant chain occupies with a cheap 99-year lease, across from the Royal Ontario Museum.
Local councillor Adam Vaughan said he understands that McDonald's plans to resell the land to Kazakhstan-based developer Bazis International Inc., which is building an 80-storey condo building down the street at 1 Bloor and already owns the lot adjacent to McDonald's.
The chain would get a new restaurant in the building as part of the deal.
Just two weeks ago, a blue-ribbon panel that examined the city's books concluded Toronto could do a better job of managing its massive real estate portfolio, and said the city could realize an extra $150 million a year from asset sales.
Some estimates had suggested the site could be worth $7 million to $9 million, though its desirability could be limited by the long lease McDonald's holds on the land.
Councillor Cliff Jenkins, a member of the government management committee who was among those objecting to the sale, said the city could entertain a higher offer in future while continuing to lease.
"We should be prepared to renew the lease and at least keep it in our hands, and not give it away at bargain-basement prices," he said.
He conceded the long-term lease reduces the value of the property, but not by that much.
"We should not allow it to put a gun to our heads," Jenkins said. "In my opinion, we're not getting a good deal."
But Vaughan said there are advantages to the sale despite the relatively low price, such as being able to limit the height of the proposed development to 100 metres – 20 metres shorter than the 28-storey condo under construction nearby at 1 Bedford Rd.
McDonald's would be part of the street-level retail shops incorporated into the building, with condos above, he added.
"McDonald's simply flows the property through to Bazis and, in return for flowing it through to them at basically the price they paid for it, they get their building demolished and a new building put in place. Effectively they get replaced on site with a better building."
McDonald's was pleased with council's decision, said company spokesperson Louis Payette.
"It has always been our goal to reach a fair agreement with the city on this property and firmly believe this decision is in the best interests of both parties," Payette said.
The government management committee had recommended the city continue to lease the site.
The restaurant chain had been paying rent of just $15,500 a year, which the city had hoped to raise to $195,000 annually.
Councillor Cesar Palacio was another member of the committee who objected to the price, saying that, "personally, I don't think that we're getting the best value for the taxpayers' money."
Vaughan said detractors should look at the overall benefit a redevelopment would bring to the stretch of Bloor west of Avenue Rd.
"On a pure real estate transaction, yeah, the money on the table probably isn't what the land is actually worth," he said.
"The most important thing is what gets built there is a positive contribution to the development of the Annex as it faces Bloor St.," Vaughan said.
"The money has to make sense, but the most important thing is the neighbourhood to the north is protected."
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Who wants the McDonald's site?
Concord-based Bazis International Inc., a six-year-old division of a Kazakhstan multinational company, hopes to develop a condominium tower across from the ROM, on land that includes a city-owned lot occupied by a McDonald's.
"It's going to be amazing," said president Michael Gold. "We think it's important to have a landmark development across from a great site like the ROM."
Bazis was founded in 1991 in Kazakhstan and takes its name from a "collection of family names," Gold said. It owns more than 100 companies related to design, development and construction of real estate and has projects in 12 cities in countries including Russia and Ukraine.
Gold said the local company functions independently and considers itself Canadian. "All our decisions are based here," said Gold.
The company is behind 1 Bloor, an 80-storey condo-hotel project Gold bills as the tallest residential tower in Canada. It is also building Crystal Blu, a 35-storey condo at 21 Balmuto St., and Emerald Park, a condo project Yonge St. and Sheppard Ave. Others are planned in New York and Los Angeles.
Gold promises the development planned opposite the ROM won't be higher than 100 metres.
"The land will be sold to McDonald's (first) and we hope to have a block development there in the near future after consultation with the city and with the community."
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I don't know about this. I think the city should have held on. I guess a 99 year lease is too long, but they shouldn't have been in this position in the first place. Guh.
