That is, individuals and corporations who bought real estate way back when to, say, create art or hawk couches are now either selling the property for huge sums to a developer, as per the Woolfitt model, or looking at ways to develop it themselves, as Telus Corp., Leon’s Furniture Ltd. and Canadian Tire Corp. Ltd. are doing.
“I think there’s a really big opportunity here to address the housing shortage,” Mike Moffatt, a housing policy expert at the Ottawa-based Smart Prosperity Institute think tank, said. “We are kind of running out of places to build, and as land grows more scarce, we need to look at some of these people that you wouldn’t normally think of as being housing developers and see them as an important piece in solving the puzzle.”
Enter non-real estate corporations such as Leon’s. Chief executive Mike Walsh has been getting bombarded by calls from real estate big shots ever since the company announced a plan, pending City of Toronto approval, to build 4,000 homes, a new corporate headquarters and a new Leon’s store that will be about half the size of the old HQ and big-box store that currently occupies a 42-acre parcel of land in the city’s northwest.
The Leon family purchased the property in the 1960s, but a decent chunk of the acreage could still be mistaken for a farmer’s field, albeit one bordered by a highway. If you’re wondering what it cost way back when, you’re not alone. Walsh shares the same curiosity, but he hasn’t been able to find a record of the original sale. For some historical perspective, the average house price in Toronto in 1967 was $24,000; now it is more than $1 million.
“When the Leons started buying properties in the 1960s, their philosophy was to buy a big piece of land, build a big store on it, build a big warehouse and the people would come to shop,” he said. “It turns out they had great foresight in picking the right pieces of land.”
Leon’s owns another 32 acres in a suburb west of the city as well as several chunks of property in Toronto’s east end and more, and all of it could potentially include a housing component someday. The company’s real estate holdings — without any housing currently on them — is valued at $260 million. The decision to consider building now instead of 1975 is a simple case of doing the math and factoring in modern consumer habits.
Once upon a time, someone drove to a showroom to pick out a new couch. Today, they can shop for it online, saving themselves the headache of battling traffic to get to a store. That allows furniture stores and other companies to optimize their retail footprint for the e-commerce age, given that many already own the land their stores are on, and also maximize the financial return on the land that is left over by developing it.
The added perk in all this for a furniture retailer is that all those new homeowners and renters who are moving in to a mix of high rises, low rises and single-family homes in northwest Toronto are going to need somewhere to sit. Guess whose new store will be within walking distance of their front doors?
“We can even deliver the couch to their door,” Walsh said.
Any perceived foot-dragging can largely be chalked up to cities and provinces generally wanting to have a surplus supply of empty, workforce-designated lands at their fingertips, just in case the next Tesla Inc. shows up and says they want to build a new manufacturing facility and office complex close to a major highway.
Neither Telus nor Canadian Tire responded to interview requests to discuss their corporate vision around property development, but pop down to the latter’s flagship store in midtown Toronto, which has been in the company fold since 1922, and look up. It is not hard to imagine what is coming next.
The company’s real estate spinoff, CT Real Estate Investment Trust, is the developer behind a proposal to build two new condo towers on the site, with a refurbished retail store at its base.
Several additional Canadian Tire properties in Toronto and beyond are similarly being eyed for intensification, while Telus took stock of its land holdings during its transition from copper-wire-based networks to fibre optics and found 200 properties with the potential for development and a gross value of $3 billion — and that’s prior to anything new being built.
In Toronto, commercial real estate folks speak in near-mythical terms of a fellow named Richard Zoppas, who also did not respond to interview requests, but, if the off-the-record whispers are accurate, he did sell an industrial building he bought in the city’s east end for $1.4 million in 1985 for $100 million to Metrolinx, an Ontario Crown transportation agency.
It is unclear what the future may hold for Zoppas’ old building, but it is a two-minute walk to public transit, directly south of a trendy neighbourhood and has thousands of square feet of leasable “flex/work” office space that, with a little rezoning acrobatics, could become something else, such as, say, housing.
Unlocking a property’s potential starts with owning it