Zoning cuts payout for Toronto Hydro sale of North York site

Theglobeandmail.com
May 10, 2018
Shane Dingman

It took five years to sell, but Toronto Hydro has finally managed to unload the former headquarters of North York Hydro in a deal that also illustrates the value of zoning density in the city.

Announced in late April, Toronto Hydro sold the 8.1 acre site at 5800 Yonge St. to condominium developer Times Group Corporation for $122.2-million. Meanwhile, one the city’s ten largest land deals of 2017 happened across the street on the similarly sized 8.6-acre Newtonbrook plaza lot for which Hong Kong-based Aoyuan Properties paid $200.8-million.

If the deal was priced per acre, you could say Toronto Hydro got a much worse deal: Its $15-million an acre was 35 per cent lower than what Aoyuan paid for Newtonbook.

And Newtonbook is prezoned: Former owners Silvercore Properties won an Ontario Municipal Board hearing to get approval to build 1.7 million square feet of density (with potential for 250,000 more). By contrast, Toronto Hydro was ordered by city council to produce a plan for 1.25 million square feet of density on the site, the maximum allowed under the city’s existing secondary plan.

Aoyuan’s plans for the site, which includes the current shopping plaza and several neighbouring private homes, envisages five towers comprising mixed-use office, retail and residential space with up to 800 condominium units.

Dan Rogers, vice-president of capital markets at commercial realtor Cushman & Wakefield, said the Toronto Hydro site price of about $97 a square foot compares with $114 a square foot for Newtonbrook, a price difference of about 15 per cent.

“We definitely surpassed the vendors expectation on price point,” says Mr. Rogers, who notes that the original listing was in 2013, but the sale was delayed for five years as the utility complied with a council motion to come up with a concept plan for the site that did not exceed the city’s density rules. Toronto Hydro is independently managed but wholly owned by the city.

“There was a motion in council. We followed the spirit of that motion,” says Brian Buchan, director of public affairs for Toronto Hydro. “We collaborated extensively with city planning on this issue, we were following the secondary plan … part of the study that council has put forward specifies certain densities.”
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A mixed-use office, retail and residential space with up to 800 condominium units is planned for the Newtonbook plaza.

Mr. Rogers says that in typical land deals, sellers of unzoned properties incorporate what are essentially bonuses, to be paid as much as 10 years after the sale, whereby the purchaser agrees to offer up more cash should they wrest more density through the planning process.

Times Group declined to discuss the deal when contacted, but in published reports, president Hashem Ghadaki said, “We are going to talk to the city about the density and what we can do,” and discussed plans to put three 30-storey towers on the site.

Toronto Hydro declined to discuss any possible bonus provisions that might have been included in the sale. And Mr. Rogers warns that density bonuses are rarely for more than the original price per square foot; often times additional square footage can be discounted by up to 25 per cent.

Whatever the final price, the Toronto Hydro property is almost certainly going to remain at a discount to the Aoyuan deal.

Toronto Hydro customers will likely get a rate rider that returns some of the net proceeds from this sale to them, but not until at least 2019 and it likely won’t be visible on their bill.