Who owns the air that Rail Deck park would be built on?
Uncertainty over air rights ownership muddles talk of the proposed Rail Deck Park in Toronto.

TheStar.com
Sept. 27, 2016
Jennifer Pagliaro

A group of developers is laying claim to the rights over a large stretch of the rail corridor downtown, complicating the city’s intention to build a 21-acre park in that space.

Mayor John Tory last month announced the proposal to build a rail-deck park between Bathurst St. and Blue Jays Way — which city staff now say could cost more than $1 billion. The mayor’s executive committee voted last week to move ahead with that plan, which Tory has backed as a legacy project.

The city, Tory and local Councillor Joe Cressy have said that preliminary talks over the sale of the air rights over the active rail lands with two rail companies, who say they own most of those relevant rights, have been “positive.”

But Matthew Castelli, a GTA developer behind Senator Homes and the Kingsman Group, says those air rights have already been sold to a consortium of developers that includes the Craft Development Corporation, based in Etobicoke.

“I can’t really talk about anything at all. The only thing I can confirm is I’m part of a consortium that do own the air rights over the rail lands,” Castelli told the Star on Friday.

Castelli said the group’s rights include the entire 21-acre stretch being eyed by the city and that the rights were not purchased recently.

He refused to provide more details about the terms of the deal or any documentation confirming the ownership.

“We want to bring out our story at a later point in time,” Castelli said, noting a public relations firm would be in touch. “You can talk to the city. They’ve got evidence of it. They’re fully aware.”

However, the city says it has only done preliminary searches, which do not confirm this. The rail companies have refused to comment.

Councillor Joe Cressy, whose ward encompasses the proposed park space, said Craft came to meet him with a proposal for seven to 10 “giant” condos built on a deck over the rail corridor, which would include a small park.

“My initial and immediate response was, ‘what is your ownership?’” Cressy told the Star. The developers, Cressy said, promised to share the details, but never did.

“They’ve been making these claims, but they have not substantiated it,” Cressy said. “So that was the end of the conversation.”

Craft did not respond to a request for comment for this article. Castelli did not respond to follow-up questions about Cressy’s comments.

Ownership of air rights is a complex business in Ontario.

When you purchase land, the owner typically holds title on everything below and everything above the property. But those rights can be stratified, or parsed, and sold-off for a price — in order to allow, for example, mining in the rights below or bridges in the rights above.

Jeffrey Lem, director of titles for the province, has told the Star that determining who exactly owns those stratified rights — which can be tiered “like a wedding cake” — is difficult to determine. He said the rail lands are of the most complicated in the province. Title searchers are paid to do this kind of work, he explained.

According to land records searched by the Star, a previous private sale for just a one-acre transfer of air rights east of Union Station totalled $8.7 million.

City spokesperson Wynna Brown said, “There are various entities that have rights along the corridor” and that the city has not yet done an “extensive title search on the required properties and interests.” Part of the initial spending on the project still to be approved by council will include paying a title searcher, according to a staff report. An initial search by staff, Brown said, found “properties can have upwards of 10-20 registered documents on title relating to various types of agreements.”

Tory acknowledged there are “letters floating around from lawyers and assorted others all claiming various interests in this.”

He reiterated that “positive” discussions with the rail companies over the air rights have been in “good faith.”

And ultimately, he said, it’s up to the city to determine how the area can be developed through zoning, with the city moving to re-designate the area for park use only.

“I am pushing ahead to try to build a park with absolute determination, and I have told that to these people,” Tory told the Star. “There’s a lot of pieces of paper floating around and a lot of people flying the halls of city hall telling people things, and I would just say that’s all very interesting, but I’m just trying to build a park.”

Cressy said it’s possible the developers — who do not appear currently to be big players in the downtown development game — have secured conditional ownership, which would hinge on the lands being zoned for development.

But no one involved is saying much.

In an email Aug. 3, CN Rail spokesperson Mark Hallman told the Star: “Some of the air rights in question in the rail corridor are owned by Canadian National Railway Company (CN), and others by Toronto Terminals Railway (TTR), which is 50/50 owned by CN and Canadian Pacific Railway Ltd.”

When asked about the group of developers this week, Hallman said CN “as a matter of corporate policy, does not confirm the existence or absence of pending transactions.”

In a letter to executive committee this week, George Huggins, director of operations for TTR, identified the company and CN as “owners of most of the air rights and property strata above the (Union Station rail corridor).” He also criticized the city for moving toward rezoning the area, calling it “premature and inappropriate.”

But in a later email to Tory’s chief of staff, which was forwarded to the Star, Huggins clarified that “TTR has a history of collaborating with the City of Toronto in moving important public infrastructure projects forward, and we will continue to co-operate on any and all projects. We regret any misunderstanding.”

Asked about the group of developers Friday, Huggins said: “I’m sorry, I don’t have any comment.”

When Castelli was asked if he was aware of the city’s intention to zone the area for parkland, he simply said “Yeah,” and laughed but refused to comment further. He did not respond to a question about whether the group has agreed to a conditional purchase only.

Both Cressy and the mayor’s office downplayed the potential for the developers’ interest to cause additional challenges to securing the rights at a still undetermined cost.

Regardless of who owns the rights, Cressy said the city will deal with the rightful owners in purchasing them to build the park.

“We are negotiating with the owner of the property,” Cressy said. “We have not been shown anything from anyone to state that it’s changed.”