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Today we present another guest post from Dean Macaskill, Senior Vice President at Lennard Commercial Realty. Dean has worked as a commercial realtor since 1980 and has years of industry insight into the Toronto real estate market. Having been through three cycles in the business, he has seen the highs and lows. He shared some of his insider information and insights with UrbanToronto on a semi-regular basis.
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Well, as I write this report, it’s the middle of the third quarter, so I thought I’d take a look at sales to date in the high-rise sector to gauge activity. In two words – not promising. As I’ve mentioned in other reports, I normally see around 45 transactions per quarter for the high-rise land sector. To date, only 10 properties have transacted since July 1, and one of those might be suspect as to whether it’s really a high density sale versus a medium density transaction as it will likely be developed as townhouses.
The most interesting sale over the past 6 weeks pertains to 354 Yonge Street at the corner of Elm. This little, 0.173 acre property sold for $40,800,000. The site is improved with your typical two to three storey street retail buildings offering 75 feet of Yonge Street frontage, just a block south of Gerrard. On an equivalent basis, the selling price works out to just under $236,000,000 per acre, rather astonishing.
So who would pay this kind of money? The Pemberton Group, the owners of the adjacent property. Pemberton acquired a similar size lot when they purchased 8 Elm Street in 2016 for “only” $10 million.
So does this demonstrate that land values have quadrupled in two years? Not necessarily, although I could probably locate similar situations in Toronto over the last few years that come close. What likely really bore pressure on the selling price was the fact that Pemberton are under significant pressure from area residents and businesses who arrived two years ago at a “town hall” meeting with pitchforks in hand to fight Pemberton’s proposed 80 storey development at 8 Elm Street. This development, although not too greatly out of character height wise with other neighbouring proposals, sees Pemberton taking the brunt of community concerns given the sheer scale of the development that would see 45.5 times coverage on a postage stamp size lot with minimal setbacks that caused concern. Further, the development would see the historic building on site taken apart brick by brick and rebuilt into the new development. That was also concerning. Elm has successfully maintained its heritage presence and the neighbourhood wasn’t too pleased to see that the rebuilt structure wouldn’t actually match what was there previously, as loading had to be incorporated into the site.
Although the fight is being taken to the OMB, sorry, LPAT, with a hearing in October, it is likely the acquisition of 354 Yonge allows an expansion of the site thereby allowing Pemberton to spread the density over twice the area and, hopefully for them, provide some relief from the neighbourhood concerns.
Assuming Pemberton doesn’t increase the proposed development density of 322,541 square feet, the price goes from an initial $31 per square foot buildable on the 8 Elm property alone to $157.50 per square foot on the combined site with a total investment of $50,800,000.
So as astounding as it may seem that the price per square foot buildable will now, potentially, increase 5 times from the original plans, the price of $157.50 isn’t out of character to what we’ve now grown to accept for high profile locations within the city, thus justifying the $40 million paid on Yonge. This, my followers, is the new math!
