Property Biz Canada

Oxford Dreaming Big in Downtown Toronto

Oxford Properties Group has big plans for the Metro Toronto Convention Centre. Purchased for $250 million last summer, it wasn’t the biggest deal of the year for the real estate unit of pension fund giant OMERS, considering it was involved in $5 billion worth of property deals in 2011.

Still, Oxford’s development types are excited about the long-term potential for the functional if rather homely meeting place nestled between the railway lands to the south and Front Street to the north.

“The reason we bought it was long-term and strategic,” Oxford president and chief executive Blake Hutcheson said last week. “We literally said how many times in life can you get a 7.5-acre site in downtown Toronto?”

Reportedly 20 potential bidders kicked the tires on the property put up for sale by crown corporation Canada Lands Co. and Oxford won out in part because it was one of the few bidders willing to buy all the associated assets. Also, it was arguably the real estate company best positioned to unlock the potential of the vast MTCC complex based on what it already held nearby.

Oxford owns properties to the east and west of the almost 2-million square foot complex (which includes an office tower, the InterContinental Hotel and parking garage). “It was classic Oxford deal in that it had the InterContinental, so we had our hotel people involved, it had the office building to the west side of the site so we could put our office people on to it and then it is a 72-year ground lease for the Convention Centre that is owned by the province and we own the block to the west and we own most of the block to the east,” Hutcheson told attendees of the RealCapital forum last week.

That has Oxford`s planners dreaming. “We have nearly a mile now of Front St. that we will be able to play with over the next several decades,” he said. “I am hoping that someone is going to look down and say that was a good decision” to buy the MTCC complex.

“We are very optimistic that over time that we can make this whole site spectacular, and it can involve more retail, it can involve more residential density,” he said.

Oxford has just completed a “global review” of the Front St. corridor involving architects from the U.K., the U.S. to begin the work of redevelopment. Oxford intends to announce the team that will work on the project for the next couple years and bring the various decision makers onside. “We are hoping that we can do something transformational, working both with the Convention Centre and the city in this whole corridor.”

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Hutcheson, who was participating on the final panel of the RealCapital day, was asked to talk about major deals over the past year and also highlighted the $220-million expansion the real estate company along with its partner the Alberta Investment Management Corporation (AIMco) are making to the high-end shopping centre.

“Sometimes in life you get these real estate assets that are gifts from God and [Yorkdale] is clearly one of them,” he said.

The expansion, slated to be finished by the end of this year, will see the addition of more than 30 new stores and about 145,000 square feet. Based on demand, Oxford and AIMco could have gone bigger.

“I would say we are oversubscribed at least two to one,” said Hutcheson. “You get these late night calls from presidents of operators saying, `Please get me in at any number.’”

The expansion should be a big winner financially as well, attracting above pro forma rents and a conservative return of more than 30%. “So it shows what you can do in terms of value when you have great real estate. Very few of us have many assets of that nature, but as you see it go up, that is the story behind it.”

In 2005, Yorkdale Shopping Centre completed a $110-million dollar expansion which Oxford said drove customer traffic and sales volume making for a record year for the shopping mecca that year. Yorkdale is currently rated as a Go Green Plus building by the Building Owners and Managers
Association BOMA BESt program, and the latest expansion will feature sustainable technologies that are implemented in the existing facility, including a 65,000 square foot green roof, advertised to extend roof lifespan and reduce atmospheric heating.

Hutcheson and his fellow RealCapital panellists in the day`s final panel were generally optimistic about prospects for the credit and capital markets and developed economies for the rest of the year.

“Broadly we are very bullish on the next 12 months,” said Kelly Marshall, Managing Partner, Corporate Finance, Brookfield Asset Management Inc. His firm bases its rosy view on interest rates, Europe and a generally good outlook for the rest of the developed world. The U.S. Federal Reserve`s vow to keep interest rates at historic lows for the next two or three years is “unprecedented,” Europe`s effect on the global economy will be “managed” and the rest of the world “is pretty good,” he said. “We operate in Brazil and Australia which is derivatively a play of China and we think and we see every day that these countries are operating very well despite what is going on in Europe.”

Michael Cooper CEO of Dundee REIT echoed those positives. “The U.S. seems to be recovering a lot better than the headlines say and it looks like they are going to be pretty strong over the next year,” he said. Europe`s problems are more political in nature than financial, but he is confident that they will be worked through.

The Dundee CEO, like his good friend Hutcheson, was also bullish about the prospects for Canadian real estate. “This is the most fortunate place in the world to live. That is for a lot of reasons, and it is starting to get priced that way,” he said. “My whole career interest rates have come down, we are probably at or near the bottom of that but I think the real change is Canada has moderate growth in a world that has very very slow growth. So I think Canada is very well positioned, with the U.S. getting stronger I think Canada will continue to do better.”

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