DarnDirtyApe
Active Member
Did the province guarantee the loan on the property? I can see it making some sense to buy the building if they would have been on the hook in case of default...
Toronto MaRS Centre Phase 2 | 112.77m | 20s | Alexandria | B+H
TOareaFan
Superstar
The province made the loan....they are the lender. But even if one arm of the province guaranteed the loan that I/O made.....that would be a guarantee on the +/- $225 million loan.....surely whatever arm of the province guaranteed the loan (if that even happened) they did not/would not have guaranteed the private sector real estate firm a $65 million refund of equity? Investing equity in real estate does have some risk attached to it.
for clarity...it appears that the charitable foundation called MaRS still owns the real estate and what has actually happened is that I/O have increased their loan to cover the original loan, about $4 million in debt service payments that were due on the old loan but can't be made, the equity payment out and other costs. The province is still just a lender....albeit to a revised structure where Alexandria have taken their $65 million and gone home.
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yonderbean
Active Member
TOareaFan
Superstar
^is that MaRS reflecting off the OPG building? Cause that is a bit ironic!
TOareaFan
Superstar
Turns out that those appraisals we heard about are nothing more than an opinion letter. From today's star article
I read, on average, one commercial property appraisal a day. They are never a) 1 page in length or b) prepared by accounting firms.
I read, on average, one commercial property appraisal a day. They are never a) 1 page in length or b) prepared by accounting firms.
TOareaFan
Superstar
Yes it would seem that one of the things this announcement does is shed even more negative light on the MaRS issue. When asked about why MaRS went ahead with phase II (on a spec basis no less) the most common answer we get is that with the leasing success of MaRS I they felt the market would be receptive. Now, through the Princess Margaret announcement we find out that the success of phase I was leasing 10 of 13 floors to Sick Kids! So the entire leasing success of phase I was a big local hospital took over 75% of the space and we were able to lease the other 25% so we thought it was a good idea to go ahead with a 300k expansion without any pre-leasing in place!
Also, during the "scandal" at QP over Phase II....Phase I has been repeatedly described as fully leased/occupied.....anyone know when Sick Kids vacated....because it would seem that since that time Phase I has been largely empty too.
TOareaFan
Superstar
As for Phase I's leasing....here is a posting I just made in the Princess Margaret expansion thread that questions some of that.
http://urbantoronto.ca/forum/showth...rgaret-Hospital-Expansion?p=942366#post942366
taal
Senior Member
Now I'd still call phase 1 a success at the time it doesn't matter who leased it or how much space the single tenant took ... its research ... that's the point. Where I'd 100% agree with you is; the sick kids building has been in the works for over 5/10 years, they would clearly have known once it finished they'd move all the space they had in that building, implying the argument mars 1 was full was a stretch to the say the least.
TOareaFan
Superstar
To be clear, leasing a big block to one tenant does not mean Phase I was not successful....but it should make the grains of salt taken with any talk of "well that was easy lets build 300k s.f. more without any pre-leasing" all the larger.
I have know idea how long the Sick Kids expansion was in the works but if it was a long time then, again, the MaRS leasing people might have cottoned on to the fact they were no more than a temporary tenant.
AlvinofDiaspar
Moderator
Well, it's not like any of this is secret - the rezoning and other processes are all public. My suspicion is that at the end of the day they probably gambled that whatever space they build can be retooled and get absorbed by demands from public institutions (e.g. U of T, hospitals).
AoD
TOareaFan
Superstar
A gamble that no professional in real estate fiance would make. Even now, we have $309 million out against a building that a one page letter from an accountant says is worth around that......what is the cost of this retooling to get tenants in? Why would you pay out $65 million to the equity partner when this level of uncertainty is in play? After leasing the phase I building (on, it now appears, a somewhat shaky basis what market studies indicated you should go ahead with a phase II on a spec basis? (see, some of the information is a bit more secret than you think).
AlvinofDiaspar
Moderator
I am not say it is right or wrong - what I am suggesting is that this roundabout way might be a mechanism for getting space that other public/quasi-public partners wanted built under what is ostensibly a P3 scheme aimed at private sector tenants. Note that the original anchors for Mars II are all public (PHO and OICR) to start off with. Though at the same time, I am not sure if the negative press over this kerfuffle is worth more than just dropping $300M straight off.
AoD
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TOareaFan
Superstar
Wait, what, are you suggesting this might have been intentional to get more space into the hands of a government that is, ostensibly, looking for real estate to sell? That makes it better somehow?
AlvinofDiaspar
Moderator
Note I said - 1. I am not say it is right or wrong and 2. having real estate to sell doesn't mean that you avoid purchasing real estate where need exist (though I don't consider this much empty space to speak particularly well of my fanciful scenario either). Anyways, I think I will move this part of the convo back to MaRS instead of this PMH thread.
AoD
TOareaFan
Superstar
No you didn't and sorry if it seemed I was saying you did........what I am saying is that that hypothesis if it were so (and I don't think it is) is just adding a whole other level of secrecy and distrust (IMO).
Even if need exists.....not buying this real estate does not make the real estate disappear. The original loan made by i/o ensured the delivery of this building on a spec basis....that was risky but if it was "we need this kind of space" that decision delivered it. Increasing the public exposure to this building at the expense of letting the equity guy walk with $65 million is the really really poor decision. What do you think would have happened to the building/space if the government had not re-upped and increased their exposure from $224mil to $309mil? It would disappear somehow?