Toronto Pinnacle One Yonge | 345.5m | 105s | Pinnacle | Hariri Pontarini

Okay, if we assume $150 million of the purchase price went towards the Toronto Star office building (seems high to me) which will not be demolished, that leaves $105 million for the actual building space. Using the $75 per sf land cost that AHK quoted, the developer would need to build 204 floors at 8000 total sf per floor (including common areas, mechanical, etc.) to cover that cost.

So three residential towers at 60s (~210m), 68s (~238m), 76s (~266m)?
 
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I also think $150 million dollars is on the high side for a beat up 24 or 25 storey office tower. But if the rents are estimated at $14 mil a year over 10 years, with the building having zero value at the end of those 10 years. I can see it making sense.
 
Actually, assuming 5% annual average interest over the coming 10 years, that $14 million per year would be worth only $112 million right now. The difference of $38 million must be the expected value of the land the building is sitting on, minus the cost of demolishing the existing building in 10 years.
 
These types of buildings are generally valued by capping the existing rent flow - taking into account exIsring lease extensions etc.

If the rent is $14 million annually the valuation looks pretty good.
 
LeftCoaster on SSP has done a basic pro forma analysis of the deal. I cannot speak for its accuracy, but it seems quite reasonable at first glance:

So I ran a proper proforma on the thing. I made it in a few hours so it's nowhere near perfect but its actually a proper financial analysis not just some random speculation not grounded by reality.

So the office building is valued at $173 million. This incorporates the following assumptions:

• GLA of 600,000 (actual)
• Net Rents of $19.50 (actual)
• Operational efficiency of 100%
• Going in cap rate of 6.75%

This leaves 82 million as the purchase price for the land

In order to find the developable area we are going to have to make a couple key assumptions and work backwards.

Key assumptions:
• $650/sf sales price (conservative)
• $250/sf hard costs [including parking]
• 75/25 LEV at a blended WACC of 5.5%
• 30 month interest capitalization term
• Building efficiency of 85%

With these assumptions we can solve for an unlevered ROI of 20-25%, which is a decent benchmark

Given these parameters the GFA of the project would be roughly 1,200,000

Assuming an 8,000sf floor plate that would allow for 3 towers of 50 stories (assuming no podium outside tower footprints) or 4 towers of 38 stories.

Of course there are MANY assumptions here and I can only take my best educated guess as to the most logical figures. If the sellable figure rises then the size of the building necessary to make our returns would drop dramatically. Just as an example if the project sold for $700/sf (quite reasonable) a 20-25% return could be had at 1 million sf, or roughly 3 x 40 storey buildings.

Pinnacle could also opt to build one signature tower and 2-3 smaller towers

This is by no means exactly what will be built, it is however a much more appropriate and measured barometer than what has been thrown about so far.
Click to expand...
 
The one intangible that Leftcoaster left out was the desire of a developer to create a name for themselves by building a landmark tower.

Perhaps try and squeeze some additional ROI out of the project with more floors??
 
Yes, these would be the MINIMUM areas to make a decent ROI from the purchase. There would be nothing stopping the developer from going bigger, if they are allowed to by the City.

By Leftcoaster's own calculations, they would need at least 150 floors at 8000 SF each to reach the desired ROI. What about two towers at 65s and 85s? Or instead of 150 floors at 8000 SF each, how about 200 floors at 6000 SF each, in three towers of 55s, 65s, 80s?

What is clear to me is that the 1 Yonge project will be HUGE, larger than the MLS complex, the ICE complex, or the 60 Harbour or 90 Harbour complexes. I have to wonder about what will be next for that area. Rumour has it that the LCBO project just to the east of the 1 Yonge project will include a 70s-75s tower (at least that was what a person who was at the public meeting concerning the sale of the property said he overheard from two men next to him, who were apparently involved in the sale), and of course there is 45 Bay, which I expect will be redesigned larger than the already-large vision we know of.
 
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Torontovibe said:
Sadly, any tall towers here, will block out the L Tower. (from a skyline shot)
Click to expand...

I wouldn't be too sure about that, given that most shots from the island/lake tend to be from the west of Yonge Street, resulting in these Pinnacle towers appearing to the right of L Tower. Check out Cal's rendering from earlier in this thread and you'll notice that L Tower remains unmolested:


7693414184_105ab44aed_c.jpg
 
L tower directly from the south is pretty boring anyways, it will look like any run of the mill condo. If you're looking from the southwest (as above, and the classic view from the islands) then not only will it not be blocked by 1 Yonge, you'll see a hint of the curve.
 
caltrane74 said:
I also think $150 million dollars is on the high side for a beat up 24 or 25 storey office tower. But if the rents are estimated at $14 mil a year over 10 years, with the building having zero value at the end of those 10 years. I can see it making sense.
Click to expand...

Also, the Toronto Star building has 3 "sections"
  • 25 storeys tower
  • 3 storeys loading dock (Canada Post Storage to convert to parking / see first post in thread)
  • 5 storeys block (which may have been the former printing press area?)
That 5 storeys block is twice the footprint of the tower section. The increase height potential (tear down and rebuild taller) for that section may have influenced building sale price.
 
Final Sale Prices

162 Mil - Land (7 Yonge Street)
88 Mil - Toronto Star Office Building (1 Yonge St)

250 Mil Total
 
I hope the Toronto Star Building gets a makeover or at least a decent retail podium at street level. That building has been killing the Yonge/Queen's Quay intersection for years and I don't see any reason they couldn't animate it and profit from it, at the same time. That corner is ripe for redevelopment. The cladding on that building is so god damned dreary. (not to mention that ugly hotel, across the street)
 
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I always thought that the Toronto Star tower was more than due for a full reclad, and possible additional floors added on top.
 
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