An artist’s rendering of the future East Harbour community hub (Courtesy Cadillac Fairview)

Cadillac Fairview is acquiring what will become the largest commercial development in Canada, the 38-acre downtown Toronto East Harbour project, from First Gulf and its partners.

The company announced the transaction Friday morning, saying in a release the deal is expected to close on Sept. 25. Financial details were not immediately released, but Cadillac Fairview CEO John Sullivan confirmed to RENX the project is expected to cost in the range of $8 billion.

“This will be the largest commercial development ever undertaken in Canada,” Sullivan said in an interview. “Think of this like Canary Wharf in London.

“We’ve done some very large development in the past, the Toronto Eaton Centre, TD Centre would both be in that category, four to five million square feet. This is double that. The TD Centre is 4.5 million square feet, this is 10 (million). This is a once-in-a-lifetime opportunity.”

The site is about three kilometres from the downtown core and is designed to create a new eastern commercial core.

East Harbour master plan approved

Toronto council approved the East Harbour Master Plan in 2018, providing for 10 million square feet of commercial development, including office, hotel, retail, institutional, entertainment and cultural space. With the capacity to accommodate over 70,000 employees, future growth potential is supported by a planned multi-modal transit hub and commuter rail terminus.

“This really fits in with our downtown strategy,” Sullivan said. “We don’t really have any development land left (downtown), and our portfolio is very well leased, and the market continues to be very strong.

“We really see this as the next evolution of our downtown strategy, albeit it on a scale even beyond what I ever contemplated. Opportunities like this don’t present themselves very often, and we were fortunate enough to seize on this one.

The new transit hub was a key factor in Cadillac Fairview’s interest.

Transit hub key to acquisition

“If I had to pick one thing that I would say to you attracted us to this it was the transit hub. Having that transit hub right in the middle of the project was a key factor in us actually going ahead with the acquisition,” Sullivan told RENX. “If you think what has made huge developments like this successful in other parts of the world, they’ve always been anchored by transit.”

As one of largest office complexes in the country, East Harbour’s transit infrastructure will connect to the Lakeshore and Markham/Stouffville GO Train lines which travel past the site as well as to the future Ontario Line subway, SmartTrack services and TTC light rail transit.

“I can’t get into the specifics of what Metrolinx (the provincial government agency which operates GO Transit) is thinking, but what I can tell you is that we and others in the city are envisioning this transit hub in essence as Union Station east. It is meant to service that whole part of the city, not just our development,” Sullivan explained.

The hub will have capacity for about 32,000 passengers per hour. For perspective, Union Station handles about 250,000 passengers per day, so the hub would double the rail passenger capacity in downtown Toronto.

East Harbour fits in with CF strategy

The master plan for the multi-billion-dollar East Harbour project was conceived by First Gulf and its partners, Cowie Capital Partners Inc. and Northglen Investments.

“On behalf of First Gulf and our partners, I am extremely proud of how we brought this project to life and established support for it,” said First Gulf CEO David Gerofsky in the release. “The shared vision, developed in collaboration with community and government stakeholders, establishes East Harbour as a key driver of economic growth and competitiveness for Toronto.

“We know the project is in good hands with Cadillac Fairview and we look forward to seeing our collective work realized.”

Part of CF’s growth strategy has been to active acquire and develop lands adjacent to urban financial cores in high-potential districts. It has employed this core-shifting strategy in downtown Toronto at the South Core and its combined five-tower scheme, including Maple Leaf Square, ICE condominiums and the 16 York Street office building currently under construction.

This strategy has also been employed in Montreal at Quad Windsor, CF’s $2-billion development plan which includes the revitalization of Windsor Station, five residential towers (featuring Tours des Canadiens 1, 2 and 3), and two office towers including Tour Deloitte.

Sullivan said the City of Toronto forecasts it will need an additional 45 million square feet of commercial space to accommodate 300,000 more employees by the year 2041. Based on that estimate, and the tight land situation downtown, East Harbour could make a major contribution.

“We are out of land, so we thought what better way to replenish that land, than to buy a site with 10 million square feet (of space) on it,” he said.

Details about the East Harbour

The Soap Factory will be the first building redeveloped as part of the Toronto East Harbour project. (Courtesy Cadillac Fairview)

First Gulf had been seeking partners for the project, and Cadillac Fairview is one of the firms it approached.

“We had a number of different discussions about how this could unfold, whether we bought it all or we bought part of it,” Sullivan said. “At the end of it all I think we both agreed the best deal on the table was for us to acquire 100 per cent.”

The start of construction is a couple of years away, but the plan is first to convert the existing Unilever Soap Factory building. Cadillac Fairview says it is already in discussions with prospective tenants.

“I would see that one going ahead in the next two to three years and being delivered two to three years after that,” Sullivan said, noting the plan is for it to be expanded to about 600,000 square feet.

“We’re going to revisit that and see if that is the right size, to see if we want to tweak that, or if we want to look at it a little differently. That’s why we are going to take a little bit of time, quite frankly, to take a look at the entire master plan that’s been approved and see if there are any changes we want to make.”

Among other features of the development, CF says it will create space for an affordable employment incubator for the City of Toronto and provide an estimated 30,000 square feet of space for a non-profit community use.

East Harbour also integrates close to nine acres of green space with a network of streets, plazas, sidewalks and open spaces. It will be designed to create a walkable, bikeable network of paths, bridges and connectivity to public transit.

LEED and WELL certifications will be targeted throughout East Harbour, which is to be built out during the next 10 to 15 years.

The project will also implement part of the Don Mouth Naturalization project to provide permanent flood protection for the area.

“I really think this sets us up for the next 15 years to be a very dominant player in the development of the Toronto office market,” Sullivan concluded.

About Cadillac Fairview

Cadillac Fairview is one of the largest owners, operators and developers of office, retail and mixed-use properties in North America. The Cadillac Fairview portfolio is owned by the Ontario Teachers’ Pension Plan. The real estate portfolio also includes investments in retail, mixed-use and industrial real estate in Brazil, Colombia and Mexico.

Valued at around $31 billion, the Canadian portfolio includes over 37 million square feet of leasable space at 68 properties in Canada, including Toronto-Dominion Centre, CF Toronto Eaton Centre, CF Pacific Centre, CF Chinook Centre, Tour Deloitte and CF Carrefour Laval.

About First Gulf

First Gulf is an award-winning office, industrial, mixed-use and retail property developer with assets of over $4 billion completed since its inception in 1987. First Gulf is a fully integrated development company in all aspects of real estate development, from land acquisition and planning approvals to design-build, construction, leasing, financing and property management.

To date, First Gulf has developed and constructed over 30 million sf of office, retail, and industrial real estate. First Gulf is part of the Great Gulf Group. Established in 1975, with major projects in Canada and the United States, the Group’s fully-integrated activities span the entire real estate spectrum.

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