Patience, planning and foresight have paid off for Calloway REIT and SmartCentres after the 50-50 partners unveiled a plan to develop nearly 6 million square feet of new commercial, residential and retail development within the Vaughan Metropolitan Centre (VMC).
The real estate companies owned chunks of land and development rights to the 53-acre site for a number of years but it was the go-ahead for the Spadina-York subway station (linking Vaughan to Toronto in the south) that transformed the project from a modest project to its current ambitious status.
Calloway had originally planned to develop the Vaughan SmartCentre on the site, which was originally acquired in 2005 from SmartCentres. Leasing and construction was halted after the subway expansion became known and Calloway then began plans for a higher-density development.
The REIT also secured more infrastructure for the project. Calloway negotiated with the regional transit authority to build a new regional bus terminal on the site. At the end of the day, the project will be sited at a nexus of subway and bus routes and the busy 400, 407 and 7 highways.
“We took the idea of a subway and turned it into something much bigger,” said Al Mawani, Calloway’s President and Chief Executive Officer. “I look at this as almost like the new Finch station. It is the most northern outpost of the subway in the GTA. For Woodbridge and Aurora [suburbs] this will be their transshipment point for them to go downtown.”
The development partners received the enthusiastic support of the City of Vaughan, which is eager for added density and urbanization for the bedroom community. Initial plans for Calloway VMC are for it to include about 5 million square feet of office and residential, split about evenly, with the remainder composed of new retail space.
“The City of Vaughan is obviously keen that it becomes much more urbanized in terms of office. They gave a lot more entitlements for what was just a piece of land slated to become retail,” said Mawani. It could also get a push from infrastructure improvements such as a proposed widening of Hwy. 7, an important east-west artery through the city.
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New towers for Vaughan
Mawani envisions a series of commercial towers for the VMC development with a height in the 12- to 14-storey range. The first building slated for construction under the joint venture will be a 300,000-square-foot tower with KPMG as the lead tenant taking about 50 per cent of available space. Designed by Diamond & Schmitt Architects, construction of the LEED Gold standard tower is scheduled to begin in 2013 with completion in 2015 and feature a tunnel connecting it to the subway.
The Calloway CEO could not name other tenants but said that the development is well known among the GTA real estate industry. “The brokerage community and the people looking for office space have known about this for a while and we have had some presentations to other lead tenants. There is clearly significant interest.” The pace of office development will be dictated by tenant demand, he added.
Calloway’s share of the development is estimated to be $600 million to $750 million over the 15 years it will take to complete the ambitious project, according to analysts who follow the REIT.
Mawani stressed that the 6-million-square-foot development carries less risk for his REIT than people might initially think given the transit and zoning commitments plus its “virtually undeveloped” current state. “It is not like trying to build something and have the neighbours complain about shadow falling on someone’s home, there is none of that,” he said. “It is going to be less risk for a public company like ours.”
Calloway is known as an owner and operator of retail real estate, with 26 million square feet in 118 value-oriented retail centres. Mixed-use development efforts such as the Vaughan project, as well as U.S.-style, high-end outlet centres, represent new areas of growth for the REIT.
Both Calloway and SmartCentres, a private real estate development company owned by Mitchell Goldhar (Wal-Mart’s Canadian developer), which has built more than 250 shopping centres across the country, are relatively new to office and residential development. But they are adding or contracting expertise as required.
Calloway and SmartCentres have a long relationship and extremely close ties. Calloway has been buying SmartCentre-WalMart shopping centres for a decade, and the REIT is headquartered in SmartCentre’s Vaughan headquarters. The two have done some smaller joint venture deals and SmartCentres owns about 20 per cent of Calloway’s units.