Investment Insights: Creative Thinking Enhances Opportunity

In a land market as tight as Downtown Toronto’s, investors need expert partners with inside knowledge with the ability to see hidden opportunities

With unimproved land availability in Toronto virtually non-existent, developers have turned to purchasing improved sites, up-zoning the land, and redeveloping it. Some groups choose to create additional land value via the zoning process and then sell at a healthy premium to a third-party who will build the end product. With the recent phasing out of the Ontario Municipal Board (OMB), market participants are quoting a 40%-50% premium for zoned vs un-zoned land.

As an urban land specialist servicing clients in this challenging environment, you must have a deep knowledge of the market, understand your clients’ needs, and have that added ability to think outside of the box. Liam Sauro, Associate Vice President in our Capital Markets Toronto Central group, displayed all of these attributes in finalizing a recent deal – and it started with a hunch.

Liam was aware that the Wynn Group of Companies was in conversation with Timbercreek Asset Management to sell a portfolio of approximately 4,500 residential units and three million square feet (sf) of commercial space — a transaction estimated at over $1 billion.

In assessing the portfolio, Liam had a hunch that one of its assets was not being fully valued at market for development lands. The downtown site in question was 484 Spadina, home to the former Waverly Hotel. Zoning was in-place for a rental apartment totaling 15-storeys and 125,423 square feet to accommodate 309 (279 sf) bachelor units and 5,042 sf of first-floor retail space.

On behalf of a client, Adrian Rocca of Fitzrovia Capital, which specializes in high-end residential development (https://www.gta-homes.com/condo-developers/fitzrovia-capital/ ), Liam approached the Wynn family with the theory that the site may be undervalued as part of a larger portfolio. He believed value could be enhanced by broadening the building’s design from small bachelor units catering exclusively to university students to incorporating two- and three-bedroom units that would serve both students and young working professionals.

Together, Liam and Fitzrovia drafted a letter of intent and presented it to the Wynn Group. In the end, Fitzrovia and its partner AIMCO closed on 484 Spadina in March 2018 for $23.6 million dollars, which equates to $188.20 per buildable square foot. Fitzrovia is currently in the process of altering the building’s design in support of Liam’s idea.

With many players chasing very few quality deals, such creative thinking is key to maximizing value in the constrained Toronto development market. For further information about this deal or to inquire about downtown development opportunities, please contact Liam Sauro directly: liam.sauro@cushwake.com

Shawn P. Lubic, is Senior Financial Analyst, Capital Markets, Cushman & Wakefield.