interesting article in today's Globe contains info on this site....
A man with the rezoning touch
Article Comments TERRENCE BELFORD
Globe and Mail Update
May 5, 2009 at 6:00 AM EDT
He developed a reputation as Toronto's top legal wizard for helping clients gain rezoning and development approvals.
And now Stephen Diamond is putting that track record to use in a new venture: an innovative real estate investment fund that instantly drew the backing of some of the biggest players in Toronto's real estate sector.
Even in the midst of the economic meltdown, he and his backers say they have faith in both the vision and the timing.
Mr. Diamond's Whitecastle New Urban Fund – launched last fall with $70-million raised from big industry players including RioCan Real Estate Investment Trust and Sterling Silver Development Corp., as well as Mr. Diamond's own family venture capital firm – is a real estate investment fund with a distinct difference. Its aim is to identify urban properties in Toronto where the zoning can be changed to permit much higher use, shepherd those zoning changes through the complicated approvals process, and then either sell the property at a substantial gain or develop it on its own or with partners.
The fund has already made its first acquisition: a block of century-old storefront buildings with extra land behind them on the southwest corner of Yonge and St. Joseph streets in Toronto. Once rezoned, the plan is to restore those storefronts to their former glory, providing 35,000 square feet of prime retail space, and then build a 49-storey, glass-walled condo tower behind them.
What promises to be Mr. Diamond's competitive edge is his successful career as a municipal affairs lawyer. For 20 years, he was the go-to guy when developers needed a deviation from the official plan, increases in permitted density or a change in zoning for projects.
First with his own firm, Diamond Fairbarn, and then with McCarthy Tétrault LLP, Mr. Diamond stick-handled city council approval for super projects in Toronto such as the Four Seasons Hotel & Residences at Bay and Yorkville streets and Minto Midtown at Yonge and Eglinton.
He has guided his clients through the mangrove swamp of zoning and official plan changes such projects required, and patiently negotiated a consensus among stakeholders, such as ratepayer groups, local merchants, city planners and ward councillors. He has brokered deals that allowed heights well beyond previously established official limits, and persuaded city council to increase density to the levels where developers could build projects that turned a solid profit. His work on behalf of developers helped to change the face of the city.
Mr. Diamond grew up surrounded by key players in the development industry. His father was A.E. Eph Diamond, founding partner and later chairman of Cadillac Fairview Corp. and one of the most respected men in Canadian real estate.
Mr. Diamond, 57, flirted briefly with retirement when he left his partnership at McCarthy Tétrault two years ago. His wife got tired of him using her computer and told him to get out of the house and find an office, he says with a laugh.
He did indeed find one with his younger brother Carey, 54, who runs the family firm, Whitecastle Investments Ltd. Then he went much further by launching the new fund.
His vision and his reputation as the master of rezoning applications were so strong that the fund was oversubscribed within days. Units were snapped up by some of the leading names in development.
RioCan, one of Canada's largest shopping mall developers and the country's largest REIT, took a $10-million stake, and Sterling Silver, which has a substantial portfolio of apartment buildings and develops industrial and commercial space, also took a sizable chunk (it will not disclose how much), as did Whitecastle Investments. The remainder went to other private investors. The minimum stake was $2-million.
“We see it as the way of the future,†says RioCan president Edward Sonshine. “Steve knows exceptionally well what can be done with urban properties and how to create substantial value through the rezoning process. I always told him he stayed practising law too long and this is what he should be doing.â€
Sterling Silver president Ronald Faust is equally full of praise.
Mr. Diamond “has this ability to work through extraordinarily complicated situations like with the Four Seasons project. He has this wonderful commitment to quality and a terrific insight into what the city wants. That makes all the difference in projects like this,†Mr. Faust says.
“He knows 100 per cent what can be done. We have wanted to work with him for some time and this is a great opportunity. Steve is simply a class act.â€
A class act with a concept that promises to reap considerable financial rewards. Whitecastle projections call for investors to earn a return on their investment of at least 15 per cent a year over the fund's seven-year lifespan.
Perhaps even more important, they get first call should the fund decide to sell its newly rezoned properties or take in development partners.
“It will provide us with a feeder stream for new urban projects, something we are very interested in,†Mr. Sonshine says. “The fund is also very strong because it has terrific cash-rich investors.â€
Cash-rich and solidly supportive investors play a vital role in the success of the fund, Mr. Diamond admits, especially in these days of a severe credit crunch.
While the fund's approach is to purchase properties with perhaps a 20-to 30-per-cent down payment, and a vendor-take-back mortgage for the balance, it has a commitment from its partners to provide financing should the vendor balk at offering a mortgage.
“We think the resources we have now are enough to do between five and eight projects over the life of the fund,†Mr. Diamond says.
He is not concerned about the current global recession. In fact, what seemed like a good idea when the economy was booming may prove an even better one when it is sagging.
“The rezoning process will take about two to three years. By the time it is done and we are ready to sell or develop the site, today's tough times will very likely be behind us,†he says.
“When recovery comes, we think there will be solid built-up demand for both residential and retail because almost no new projects will be launched during the recession.â€
Mr. Sonshine agrees. “There is always a risk with land. If projects like the St. Joseph one were coming on stream today, there would be no market for them,†he says.
“But I think the timing – two to three years for therezoning – is going to work perfectly for us.â€
