UrbanToronto sits down with Tom Dutton, Senior Vice President at The Daniels Corporation, to talk about the prolific developer's corporate ethos and its history. Part 1 of 2.
UrbanToronto tends to focus on high-rise residential development, and so most of our readers will be familiar with your condominiums towers around town, especially those near Mississauga City Centre, NY Towers at Bayview and Sheppard, at the Regent Park Regeneration project, the high profile Festival Tower, and now Cinema Tower in Toronto’s Entertainment District. But high-rise is not how Daniels got started. How does the Daniels story begin?
Of course it begins with Mr. Daniels. He’s our namesake. He’s our chairman, and he’s been around in the business since… early! I think John was building our first building when I was still in diapers, so he’s been around for a long time. He was involved with Cadillac Fairview, originally Cadillac Developments. He and some of his partners created that company, and then in the early 70s they made a decision to merge with the Bronfman’s and the Fairview Corporation, and created Cadillac Fairview. It became a blockbuster real estate development company North America-wide. It had many thousand employees, and did a lot of really high profile jobs, most of which I’m pretty sure you’re familiar with, like the TD Centre and Eaton Centre to name a couple here in town, big parts of Houston, and some areas of Los Angeles as well. At Cadillac he had put together a land assembly in Erin Mills and had really started what was the largest new town development in North America, which he worked on for many years.
In the early 80s he made a decision that he was going to move into his own business, and he got together with some partners and ended up purchasing the remaining lands in Erin Mills. They were interested in focusing on the residential landholdings there. So between the various parties that made up the partnership in the Erin Mills Development Corporation, they subsequently built the remaining lands out over - well really, the last phase is just being done right now. So from the early 80s up until today, that land assembly sustained him and originally what was The Daniels Group and later The Daniels Corporation.
John primarily was looking at picking up a few pieces of land here and there from the partnership and he really didn’t think at that point in time that he was going to have a second career, but in '84 Mitchell Cohen joined him. Up until that point in time Mitchell had been involved in co-op housing development and delivery here in Toronto - building co-op and not-for-profit housing was his background - working as a development manager and finding properties and getting them built and turning them over to co-op groups, so Mitchell was quite heavily involved in the non-profit and co-op housing movement.
Similarly, I was doing the same thing in Halifax and elsewhere in Nova Scotia, from about 1980 up until '87 when I came here. I had done about four years of co-op housing and co-op development there after I finished my architecture degree at Nova Scotia Technical College. Mitchell and I had that in common, and that's how he and I came to join the company.
In the beginning stages when Mitchell was there working strictly with Mr. Daniels they picked up a number of townhouse sites in Erin Mills, because the other Cadillac partners were more interested in building single family homes, and they didn’t really want to get involved in building condominiums. So there seemed to be a niche there for Daniels to start to work in a different way, and they developed the first two or three townhouse sites. They went very well; they had taken a very innovative approach right from the beginning. For example, I think that at the first or second townhome community they did, Mitchell decided that what he wanted to do was build the whole community to the R-2000 standard. The R-2000 standard is basically a precursor to LEED. Energy efficiency housing was kind of in its infancy then and it had only been done in single family homes, it had never been done on kind of a mass production basis before, but nevertheless they took it on and not only were they building condominiums and figuring that out, but at the same time wanted to do something that would be more energy efficient. So, the Belair townhomes were done to the R-2000 standard, and was kind of a landmark project really, in the Canadian landscape anyway.
So they had several of these condo townhome projects underway, and up until that point they had been relying on other people to do their construction, so they were working as developers getting all the approvals and selling the units and then bringing someone else in to do the building part of it. They had issues with that approach because it’s difficult to control the ultimate end quality of the product. You promise people you're going to get this and it's going to be this quality, and the industry sort of operates at a different level, and unless there’s a direct connection between the people that are doing the construction and the end user, it's very difficult to control the end product.
In the late 80s in this environment in the GTA it was very difficult to get trades, there was a shortage of manpower, it was a really over-heated marketplace, so it was very difficult to get the quality that they were after, and they decided that what they wanted to do was be in charge of building their own stuff. They looked around, and luckily for me they decided that I was they one they wanted to bring in to start the construction operation. With my architecture background and the little bit of experience I had in construction in the Halifax marketplace we were able to start looking at completing our projects from start to end. Now, from the time that someone walks into our sales centre to the time when we hand over the keys and correct their last defficiency by a year after they move in, we are basically responsible for the entire experience.
I think that was a really significant decision that they made, and for me it's worked out very well. I’ve been able to assemble a great team of people on our construction and customer relations team that we’ve managed to keep over the years, and there’s very little turnover at our senior management level, and we’ve been able to develop very good long term relationships with the trades as well.
By building our own communities it gives us a lot of control over the quality of the end product, but it also gives us insight into what things cost, so that when it comes time to do our next project we already know what’s going to be a great piece of land, and if we can buy it for a certain amount of money we know what it's going to cost roughly to build it, therefore we can assess the marketability of any given community fairly quickly and know what were getting into. It gives us a good advantage in the marketplace being our own builder.
What would have been your first project beyond the scope of a townhome?
Shortly after I joined the company in 1988 we started building a lot of high-rise, not-for-profit and co-op housing for the Ontario Government through various resource delivery groups throughout the GTA. From 1988 to 1995 the provincial government made a policy decision to stop funding social housing, and there was the big recession that hit in 1990, and it lasted until '96. We built about 4,500 units of co-op and nonprofit housing: that’s really where our high-rise group learned its skills in how to build high-rise buildings.
We were very busy because we were building affordable rental housing while many other firms were unfortunately laying off their people, because the condominium market, the high-rise side anyway, was virtually nonexistent for those years. And so in that we were able to assemble a good team. That was one of our strategies as a company - not to be one dimensional - so we started out as a low-rise builder building wood frame single family home townhouses, but then we branched out and started building high-rise. We’ve also gotten into the business of rental retirement communities with our partners at Amica Mature Lifestyles, so we’ve done a number of things over the years that have helped us to have many different things going on at any given time. If there’s one sector that gets a little slower, we are able to focus on the other sectors and still be able to keep our people and our team of talent together.
Without the support and encouragement of Mr. Daniels there’s no way that our team could have grown the company in the direction that we wanted to grow in. He’s a very giving and community minded person and he immediately grasped the notion that creating affordable housing is a really good thing to do, not just from a social point of view but also from a practical reality that there’s a larger market for people who are looking for affordable housing than for people that are looking for luxury high end housing.
We didn’t really do any high-rise condos until 1999/2000 when we started on NY towers up at Bayview and Sheppard. We had a lot of good long-term relationships with our subcontractors and suppliers and we were able to draw on that.
Speaking of NY Towers, NY Place is almost topped off, or it's about to be topped off?
Yeah, the structure is topped off, we’re in a process right now of putting up our exterior wall panels, and the windows are going in shortly, so within the next few months the building will be all closed in and we're on schedule for our occupancy. That was a project that we started construction on with no pre-sells.
That’s something that you do with a lot of your buildings.
We find a really good way to create affordable housing is to start construction without waiting for the market. It gives a number of advantages to the end user. Number one is you have a much better idea of when the project is going to be ready for moving in. Number two is we have a really good idea of what our costs are because it has all been tendered and we are already under construction. I think that it captures peoples' imagination that it's already under construction and we don’t have to spend as much money on sales and marketing. We don’t have to build a big fancy presentation centre, we don't have to do as much by way of paying commissions to outside brokers, and so we can pass those savings on to the end user, and we can enter the market at a more affordable level. This is something we’ve been doing with our First Community Homes, primarily in Erin Mills, but in other communities as well. Our First Home is our stacked townhouse type of home that we’ve built entirely, right to the point where the landscaping is pretty well done and people can move in 30 days. You’ve probably seen the coverage we’ve managed to get in the media about those people camping out in order to get a spot in the line, and that sort of thing. I think we are able to get units out into the marketplace at a preferred rate, and that really attracts a first time buyer.
Now in some of those communities you’ve also partnered with Habitat for Humanity to create some units as well. Has that been going on a long time?
The first project we did with them, really the big one, was in South Etobicoke, which was the residual piece of land that we had remaining from the original land assembly where the old Goodyear plant was, which we built out in the early 90s. There was one condominium site that was remaining that was a higher density apartment building, and we did that again as a prebuild, and we went to the market once construction was well on.
Did Daniels approach Habitat for Humanity to include them in that?
We had an ongoing relationship with them for quite a number of years, but in this particular site there was an opportunity to do some townhomes for them so we donated a piece of land where they could build some townhomes and we had some of the trades that we had already contracted to do some of the basic work - like the basic framing - and then they took over with their team of volunteers.
Then we started to think how we could expand this program, because there are going to be fewer and fewer opportunities to do wood frame low-rise housing at an affordable rate owing to the land shortage that’s now started to evolve in the GTA partly because of the greenbelt but even Mississauga has built up to its boundaries and its now looking at intensifying so if you’re looking at intensification as the way of the future then how do we accommodate Habitat, say in a condominium high-rise tower? A lot of questions come up right away, how are you going to deal with a condominium corporation? Of course it has to be disclosed that it’s going to be an outside purchaser. How do you get Habitat’s volunteers to come in and work in that environment when really most of the sub-trade work that goes on in a high-rise building is probably more sophisticated, a lot of the building systems are sophisticated, you really can't rely on the volunteers having a deep background in these things: you wouldn’t want them doing that kind of work.
So what we were able to do was still create a program with Habitat where we’ve actually done high-rise condo units, and turned them over to them, and they’ve been able to get their volunteers to come over and do the final finishings, and that kind of thing. We have also gently twisted the arms of some of our sub-trades to give donations on behalf of Habitat! So what we're looking at in terms of our ongoing relationship with them is to still be able to have a unit or units available in some of our high-rise condominium projects that would be designated for them, and so far that seems to be a workable solution. But as I say, it is quite complicated: there are a lot of legal issues you need to sort through in order to make it happen.
There aren’t very many developers that would even bother with taking the time to do that though.
Yeah, I suppose you’re right, but at the same time it all flows from Mr. Daniels' philosophy that we are very blessed to be where we are, to be doing what were doing, to have the success that we’ve had, and if there’s ways that we can give back, then that’s what we'll do. And it’s very good for the people who work in our company, because they feel like when they come to work they’re also part of something that’s bigger.
At NY Place, you’re trying a rent-to-own program for some purchasers.
That’s right. I think we’ve reserved 25 units in that building for a rent-to-own program, and as far as I know I think 20 of them have been subscribed so far.
Is this the first building that you’ve tried this in?
No, we did another one up there at Bayview and Sheppard - I think it was around 2003. We had a small building that was 8 or 9-storeys, I think called Chelsea, which was designated to be a rental building, and we were having a hard time thinking about how to make a rental building work in the economic realities of building, and what people can afford to pay for rents, so it was a bit of a happy accident that we were able to come up with a solution of rent-to-own because what we really wanted to do was to sell the units to people - economically it made more sense to sell - but we had this obligation to the municipality that we were going to build a rental building, it was part of the overall zoning for the site.
And so we hit upon this hybrid where it was rental housing which would be available for people to purchase later on. We launched that program and it was enormously successful. We had people buying in that building who had been renting for 25 years who thought that they would never get a chance to own their own place, and because of this program they were able to save up enough equity. The way that it worked was you would rent the unit for a certain period of time - whether it was one year or two year period - and you had an option to purchase at the end at a predetermined price, but at that point where you decided to exercise your option we decided to give you a portion of your rent back as equity. So that was a way for people to be forced to save to create a down payment they wouldn’t have normally been able to do. That was an idea that came out of our gateway to home ownership program that we developed. Primarily in Erin Mills we have a number of rental townhouse communities that we’ve kept in our own portfolio which we rent out to people, and a part of that program is our home investment offering, which is really a loyalty rewards program that if you come and rent with us, then a certain amount of your rent goes into this loyalty account. Then you’re allowed to accumulate money in there, up to a maximum of, I think, $6,000. Then if you decide at some point you want to purchase a unit from us, in any of our other communities, that $6000 gets counted as equity towards your purchase. So we’ve just kind of extended that at the Chelsea, to allow people to actually purchase the unit they were living in. And now we’re applying that at NY Place. We’re actually looking at few other new projects that we’ve got on the boards right now and we’re thinking of taking that program out further into communities as well.
UrbanToronto's interview with Tom Dutton continues next Thursday as we dig into The Daniels Corporation's unique city-neighbourhood-regeneration project at Regent Park.
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