Paul Snyder knows only one person who could have successfully negotiated a deal to redevelop a site on the Sparks Street Mall: himself.
Whether his confidence is merited remains to be seen, but the real estate community is buzzing about the secretive deal quietly announced about a month ago.
Snyder, former president of the real estate division of Toronto Dominion Bank, is behind the project, which involves a National Capital Commission property on Sparks Street.
On Aug. 1, the NCC issued a press release stating a deal had been reached with a company called 131 Queen St. Ltd., of which Snyder is the sole proprietor.
"I thought this was a good development opportunity," Snyder said in an interview with the Ottawa Business Journal. "And I thought only I could do it. I had a history with the site. This site was important to a lot of different constituencies who had a lot of different objectives."
Snyder would not comment on terms of the deal, saying only it is a "long-term lease and we'll just leave it at that".
"My view is that it is my business and no one else's. But I won't tell you this was easy. At the end of the day, at least the NCC is not too mad at me," he said, referring to what are believed to be relatively high rates for the building's tenant.
The average long-term lease is at least 10 years, but it's rumoured NCC executive Peter McCourt negotiated an even longer term. If so, financing will be easy to obtain since banks look favourably on a stable, long-term tenant.
This deal is especially significant as the federal government is the dominant player in the core. Real estate observers question why the feds didn't proceed with the public tender process and speculate the rates the NCC is paying must be high in comparison to similar projects.
In addition, several other developers, including Minto and O&Y, were waiting for another project to build a new tower in the core. Currently, GWL is building a tower in the core, while there is a reported $1-billion worth of other work going on in the vicinity. GWL is known for establishing a new benchmark for rental rates in the core with its quote of $17-per-square-foot lease rate.
McCourt said rates for the building are "absolutely higher" than those achieved by GWL.
Snyder's history with the site goes as far back as the second tower of the World Exchange Plaza, which was developed by Truscan, the real estate division of TD Bank.
Through that development, Snyder established a relationship with NCC officials and also became familiar with the politics of securing building permits and site plans and negotiating with four levels of government.
Truscan's relationship with the NCC formally began in early 2000, when the federal agency bought a building at the corner of Metcalfe and Sparks streets from the company. That deal included an option for Truscan to buy or lease the property at 131 Queen St., the rationale being it would trade one development site for another.
"The logic at the time was that we viewed 30 Metcalfe St. ultimately as a development opportunity, so we said we would trade one development for another," Snyder said.
The timing was perfect to strike such a deal, as the NCC was on a $40-million buying spree to acquire properties to make way for the redevelopment of Sparks Street.
"We thought that over and thought that, as long as we were getting market value, ... a deal was struck," said McCourt, director of property development and planning.
In the meantime, Truscan was winding down the majority of its real estate holdings, including the option on 131 Queen St. Snyder decided he wanted the site and purchased the option to buy or lease it from Truscan.
The site is now occupied by a parking lot and a handful of retail establishments, but will eventually be home to 308,000 square feet of office and retail space and 34 residential units. Morguard Corporation is the development partner in the project and the architect is Bregman & Hamann Architects.
McCourt said an important aspect of the tower will be maintaining access to Sparks Street from Queen Street. The deal also protects the federal government's interest in the core, he said.
"One of the reasons we had owned this property was to protect the environs of Parliament," McCourt said. As for the aggressive rates, "we might have been able to achieve better rates, but not in that location", he added.
Snyder has yet to secure financing or apply for permits, but construction is expected to start next spring.
Public Works and Government Services Canada, the federal government's real estate arm, will lease the space back from the NCC.
The work is expected to take three years and will coincide with a couple other major projects, including an office complex at 181 Queen St. and another Morguard office tower for the CBC.
Fred Speer, vice-president of leasing for the national capital region, is currently in pre-leasing mode for the third tower of Place de Ville. Speer has been targeting the feds as a potential tenant and, if they could be enticed to sign up, this deal would kick off the $80-million project. The site is blocks away from the Queen Street site.
"This (131 Queen St.) was a good location because there was a requirement for space within the Parliamentary precinct. But am I disappointed they didn't expand their boundaries? Possibly...the industry was expecting a second tender in the downtown core," Speer said.
Jones Lang Lasalle executive Shawn Hamilton questioned why there was no public tender.
"The NCC has always done its own thing. Maybe they didn't feel the need to do it," he said.
One industry insider who did not want to be named said the deal is unfair, both to other developers and taxpayers.
"It's not fair to sole source something of that magnitude," said the source. "The federal government has to get the best possible results and who knows if they could have achieved better rates right now."
- by Kate Chappell
