Arkfield has acquired a seven-storey downtown Toronto mixed-use office building with long-term redevelopment potential from Dream Impact Trust for $23.7 million.

The 0.34-acre site at 10 Lower Spadina Ave. is occupied by a 62,163-square-foot building that, aside from a vacant former ground-floor Starbucks store, is fully leased with a 5.7-year weighted average lease term.

“One of our strategies in today's market is owning income-producing, cash flow-positive assets,” Arkfield chief investment officer Rouh Ramezani told RENX. “Shorter term, the strategy is going to be focusing on the operation of the property. The tenants are high quality and we will operate the property to their standards.

“It’s the same with the ground-floor retail. We want to improve that retail experience in that area, given how great the location is in front of the park and the lake. We want to improve the operations of the asset to do justice to the location.”

The deal, brokered by TD Cornerstone Commercial Realty and CBRE, took about six months to close. Arkfield chief executive officer Ramin Jalalpour told RENX several bidders were interested in the property.

10 Lower Spadina’s redevelopment potential

The building’s tenant spaces and common area were recently modernized and underground parking is available.

The location at the northwest corner of Queens Quay West provides unobstructed views of Lake Ontario and offers convenient access to several nearby amenities, the Spadina streetcar, the Gardiner Expressway, Lakeshore Boulevard and Billy Bishop Toronto City Airport.

Toronto-based Arkfield is an integrated real estate group that owns, operates and develops commercial and residential assets in Ontario. Its portfolio totals more than 4.3 million square feet of residential density with an estimated completion value of $4.5 billion.

“Longer term, we will seek to find the best use for the asset and for that particular location,” Ramezani said.  “It could be a condo, a  purpose-built rental or an office. It’s too early to tell right now.”

The site has mixed-use zoning for office and retail, but would have to go through the rezoning process to be converted to residential use.

“This is not an asset we want to take to development immediately,” Jalalpour said, suggesting it could be five to 10 years before redevelopment is considered since the building is providing steady holding income.

The building’s page on Arkfield’s website shows a preliminary proposal for a 360,000-square-foot tower with 500 residential units.

Interest in site to the immediate north

Arkfield is also considering a possible future land assembly for the property. A 105-year-old City of Toronto-owned low-rise building immediately north of the site at 20 Lower Spadina Avenue could potentially be sold and Arkfield would be interested in acquiring it. 

Jalalpour said his company has had initial conversations with municipal representatives about that possibility, but it’s still very early and the talks aren’t too serious at this point.

The 20 Lower Spadina building is currently occupied by Centre Francophone du Grand Toronto and Broad Reach Canada.

Arkfield’s development pipeline

Arkfield owns almost 20 income-producing and development assets, including several proposed multiresidential development sites along Yonge Street in north Toronto.

The most advanced of those is a condominium partnership with Tridel that’s in the pre-sales stage for a 14-storey, 246-unit building at 6080 Yonge St. 

Arkfield is in the final stages of receiving zoning approval for a site at Yonge and Churchill Avenue where it’s proposing to build 45- and 33-storey towers with a combined 862 units and close to 14,000 square feet of retail space at grade.

“I don't think we’re going to rush to launch this project anytime soon,” Jalalpour said, acknowledging the depressed state of the condo market at the moment.

Among the other development sites owned by Arkfield on, or close to, the north Yonge corridor are: 7-17 Nipigon Ave.; 7079 Yonge St.; 6200 Yonge St.; and 6125 Yonge St.

Arkfield’s investment strategies

Jalalpour said the company has capital available should a new opportunity come up to purchase another income-producing asset, with future redevelopment potential, similar to 10 Lower Spadina.

“We are an investment-oriented, sophisticated developer,” Ramezani added. “If you look at it from the finance and private equity real estate side, we are a more operation-heavy and development-heavy private equity real estate firm.

“We cover A to Z on land development projects. We have income-producing commercial projects. We have multires value-add and, of course, construction and the consumer products that we build.”