Before mall’s demolition, a clause seals the deal
Among the oddest parts of the deal that led the city’s white elephant to be torn down: negotiations behind closed doors between the developer and Mayor Bourque. But there were no laws forbidding such a private meeting. In fact, a letter from the developer
Part Four of a seven-part series
One clause can transform a $6-million sale into $3 million.
In the case of Place Marc-Aurèle Fortin, the city of Montreal’s vacant shopping centre in Rivière-des-Prairies, the price-altering provision when the city sold it was a demolition clause.
And it was added to the terms of sale shortly before the transaction was finalized, the outcome of a private meeting between the buyer and Mayor Pierre Bourque that would only come to light later.
More than a year had passed since city council had approved 3311155 Canada Inc.’s option to purchase the mall when Bourque agreed in June 1998 to meet one of the company’s representatives, Michael Sochaczevski.
Council had already approved a six-month extension on the eightmonth option. Now, that extension was about to run out.
Under its option to purchase, 3311155 Canada Inc. was offering to buy Place Marc-Aurèle Fortin for $6 million. The company would pay the city the first $3 million up front and the remainder in $1-million instalments within three and a half years as the company rented an increasing portion of the mall.
Now, though, Sochaczevski and his father, Amos, were seeking to insert a provision that would allow their company the option to demolish all or part of the hulking mall.
And if the Sochaczevskis completely demolished Place MarcAurèle Fortin, the sale price would be reduced to $3 million.
The opposition at city hall learned of the demolition clause and of the meeting between Bourque and Sochaczevski in September, when the changes were brought to a council meeting for approval.
“We thank you for taking the time to meet us last Thursday to review our project,” Michael Sochaczevski wrote in a letter, in French, that was dated June and addressed to “Cher Monsieur Bourque.”
The letter was in the civil service file that was distributed to council members.
“Our study showed the required potential to give new life to this site,” the letter continued, “and we’re eager to be able to continue presenting our project to other large retailers with as much ardour as we’ve had until now.”
The Sochaczevskis also extended their company’s option on the shopping centre by another three months, into September, for which they gave the city an additional $100,000 non-refundable deposit.
The opposition attacked the demolition clause.
“We see now that Mr. Sochaczevski is seeking prior permission to maybe, if he wants, demolish the building completely or in part,” councillor Sam Boskey, who had voted against the original offer, said in council.
In fact, the new clause obligated the city to issue a demolition permit if the buyer requested one.
“An administration shouldn’t present such contracts to city council,” Boskey said. “Normally, we should set a market value that’s equitable, significant, realistic and tell Mr. Sochaczevski if he wants the building, he’ll take it under these conditions. But to say that if he keeps the building he pays a certain price, if he demolishes his own building he pays another price — Mr. Speaker, it’s not at all acceptable.”
Attached to Sochaczevski’s letter was an agreement that was drafted on his company letterhead.
There was a line at the bottom where Bourque was supposed to sign to confirm “our common agreement” on the points they had discussed in the June meeting.
But the city doesn’t sign contracts drafted by businesspeople, Boskey said in council. So the civil service created official documents to present the new terms for approval.
Back in the 1980s, the Duvals had also seemed to be under the impression that concluding deals with the city about Place MarcAurèle Fortin was as simple as drafting a contract on company letterhead with a line where a city official was supposed to sign.
Boskey asked in council whether any civil servants had even attended the meeting in Bourque’s office where the new terms had been negotiated. But his question went unanswered.
What was the point of a civil service if all it did was transform developers’ terms into civil servant legalese?
But it’s not like there was any law forbidding closed-door negotiations between politicians and businesspeople on municipal transactions, or any that prevented council from selling public real estate at a loss.
And at this point, the Bourque administration was racking up big losses with what the opposition called a “fire sale” of municipal properties belonging to the city’s paramunicipal real estate agencies.
Bourque blamed his predecessor, Jean Doré, for paying too much for them at the height of the market.
They included the city ’s stake in the World Trade Center building, which the city had spent $60 million to renovate.
The city also sold the Blue Bonnets racetrack to the province, a losing deal that prompted several councillors to quit Vision Montreal and cost Bourque his majority on council in 1997.
Tucked in the eastern extremity of the island, Place Marc-Aurèle Fortin didn’t attract as much media coverage.
Even the full $6-million offer from the Sochaczevskis’ company would be a loss to the city, the civil service report that was presented at the September 1998 meeting said.
Since purchasing the shopping centre for $3.5 million in 1993, the city had spent another $6.79 million on its upkeep.
Nevertheless, the report recommended the politicians approve the demolition clause that risked reducing the price to $3 million and proceed with the sale “given the advanced state of the file.”
“What a bizarre file,” opposition councillor Richard Théorêt told the council meeting.
The new clause obliged the Sochaczevskis to replace the building with something else if they demolished it. But it didn’t say what.
Would it be residential? Commercial? Offices?
“What’s in the midst of happening here?” Théorêt asked.
“I’m certain on the other side (of council chambers), they know what the plan is.”
Executive committee member Saulie Zajdel responded for the Bourque administration.
“It’ll be a pleasure to explain Mathematics 101,” he began.
The city was fortunate to have the Sochaczevski company’s offer because every major developer in Montreal had passed on the property, Zajdel said.
He also said the city had already made money because it had sold the property for $10 million to the Duvals to build the mall in the 1980s. Vision Montreal councillor Aimé Charron, who had served on council during the Drapeau era, had told him so, he said.
“You have to recognize that the city has already — and it’s not a negative — profited from this sale once,” Zajdel said.
What he told council was wrong, however.
The Drapeau administration had sold the land to the Duvals for $3 million. But that information wasn’t in the civil service file. The report also didn’t mention the millions of dollars the city had spent to acquire the land in the first place to sell to the Duvals.
“The city will finally get rid of a white elephant, will start to get taxes, will have a chance that a developer will do something with this land that is empty, that’s a nothing for the people of Rivière-des-Prairies since 1985, 1986,” Zajdel said.
He described the Sochaczevski purchase as a union of the west and east of Montreal.
“The best of offers, to my knowledge, across Montreal, it’s a person
from the west of Montreal, a Jew of Montreal,” Zajdel said, without raising objections from his fellow councillors. “Maybe he can make links with the people of (the) east of Montreal, unite all of Montreal. It’s a good project.”
His Vision Montreal colleagues slapped their desks in approval as he sat down.
The changes to the Sochaczevskis’ offer passed by a majority vote.
A month later, Bourque handed the keys to the shopping centre to Michael Sochaczevski as a symbolic gesture at a press conference held in R.D.P.
It was late October, two weeks before the municipal election, and Bourque vaunted his administration’s work in R.D.P. and Pointeaux-Trembles. City hall had completed Perras and MauriceDuplessis Blvds., he said, and now it had found buyers for the white elephant.
“Give us another few years, and we’ll make it into a West Island,” Bourque said of the eastern end of the island.
Though it wasn’t mentioned in civil service reports or at council, the Sochaczevskis had acquired partners since first presenting the purchase option to the city, and they attended the press conference as well.
Father and son Marcel and Sylvan Adams were the Sochaczevskis’ equal partners in the purchase, the local paper, L’Informateur de Rivière-des-Prairies, reported from the news conference. The Adamses owned Iberville Developments and were shopping centre developers. They were the “facilitators” in the project, talking to big retailers and conducting studies to see how the mall could meet the retailers’ needs, the article said.
The buyers planned to rename the mall Place de la Rivière, invest $20 million and open in 2000.
The idea of an entertainmenttype centre was shelved, Sylvan Adams told the newspaper. They were “investing all their energy” in talking to big-box chain stores, he said.
The final council vote approving the sale of Place Marc-Aurèle Fortin to 3311155 Canada Inc. followed in December 1998, a month after Bourque surprised polling experts and won a second term with a majority.
The opposition asked why Bourque hadn’t tried harder to find a public use for Place Marc-Aurèle Fortin. It could house municipal archives or become a library or a hospital, as the province had once considered, they said.
Boskey had lost his seat in the election. So it was Théorêt who summed up the opposition’s conflicting feelings about the sale.
With the demolition clause, “I see that the sale before us is a sale for $3 million,” he said.
On the other hand, it was time for the city to part with its costly white elephant and hope that whatever the buyer did with it would bring the city some tax revenue, he said.
Zajdel once again told council, incorrectly, that “the city has already pocketed $10 million for this land. Don’t forget it. So the city already has for the last 13 years this money in the bank.”
He also said demolition was only a possibility.
Montreal’s sale of Place Marc-Aurèle Fortin to 3311155 Canada Inc. was registered in late December.
The city’s public notice of the sale listed the price as $6 million.
Then, in August, the city issued a demolition permit to the new owner. As stipulated in the demolition clause, the price dropped to $3 million.
In early September, a crane ripped into Place Marc-Aurèle Fortin. It was the start of a four- or five-month operation to tear down the hulking structure.
And one year later, the site, now bare, made money for its new owner.
3311155 Canada Inc., now registered as a joint venture of the Sochaczevskis’ company and the Adamses’ Iberville Developments, sold part of the empty land to two big-box stores for $7.9 million combined.
A few years after that, the numbered company sold the northeast corner of the site to a house builder for another $807,602 combined, before taxes.
All told, 3311155 Canada Inc. sold those parts of the site for over $8.7 million while holding onto the southwest corner. Twenty years later, it still owns a small strip mall there.
Alfonso Argento was a witness to the tribulations of Place MarcAurèle Fortin.
During the 1980s, Argento and his brothers built a row of townhouses directly across the street on city land they had won through Drapeau’s Opération 10,000 logements.
Argento had settled in R.D.P. in 1968 when it had no school and hardly any houses, Henri-Bourassa was just a country lane and the area smelled like an open sewer.
So in the 1980s, no one would have been more pleased for more development in the district than him.
But the shopping centre project barely flickered on his developer radar when the city put the land up for bid proposals.
Galeries d’Anjou shopping centre already existed in a neighbouring district and had proper road access near the crossroads of Highways 40 and 25, unlike the R.D.P. site.
“So it was destined for failure,” Argento now recalls, years later.
“The first rule to develop a piece of land is you need to develop access. No access, no future.”
A giant shopping centre, by Argento’s reckoning, was a “crazy project” for the area at the time.
He predicted what would come next when the Duvals went bankrupt.
“I knew the only thing that was feasible was demolition. This project was a no-no from the beginning. Once this thing flopped, I was pretty sure the next move would have been to demolish and do something else.”
Why didn’t the city just demolish its white elephant and sell parts of the vacant land for nearly triple what it got for selling the vacant shopping centre?
“You can’t blame the city for not knocking it down,” Michael Sochaczevski now says, years after his company spent $1 million to tear down Place Marc-Aurèle Fortin.
“It was $92 million worth of value that was built. Nobody thought about knocking it down.”
Indeed, the mall was nearly finished. The escalators were in and some stores had cash registers. Retailers had placed Help Wanted ads in 1990.
“We were convinced that we could make a shopping centre a go there. We were buying it inexpensively and we thought, ‘Hey, the rents that we could offer because we’re buying it inexpensively — we should be able to make an absolute go of this.”
By Sochaczevski’s account, the demolition clause was put into the offer only to minimize risk.
“When we bought the shopping centre, this was the essence of the deal: We think we can make this a shopping centre, but we’re not sure. We’re going to pay $3 million, and if we are successful at making it a shopping centre, we end up paying six. That was the deal.”
Why make the deal in Bourque’s office?
“Because that’s where we made the deal.”
Sochaczevski recalls that it was their partners who convinced them to demolish.
Marcel Adams was “the best shopping mall person in the province,” Sochaczevski says.
“Until Marcel Adams said ‘Hey, the most economical thing to do with this site is to knock it down’, nobody had that on their radar. Everybody was trying to make a go of the shopping centre, including us when we bought it.”
Through his lawyer, Zajdel says his understanding at the time was that demolishing the mall would have cost millions of dollars — “money which to my understanding the city did not have available at that time.”
By Zajdel’s recollection, the civil service handled the process of seeking and evaluating offers on the shopping centre, and bureaucrats likely provided him with whatever information he offered in council. He was responsible “at a political level only.”
When the white elephant vanished, the parcel of land that had once been preordained by city hall to become a “mini downtown” in R.D.P. became a parking lot instead.
In the summer of 2000, city council’s urban-development committee approved a new site plan calling for an asphalted space surrounded by Loblaws and Canadian Tire big-box stores and a small strip mall on its outer edges.
With the zoning approval in place, the big-box stores bought their parcels from the numbered company in December 2000.
The deed of sale to Canadian Tire says the purchase is based on the terms of an offer that was accepted by 3311155 Canada Inc. in July 1999, a month before the city issued the demolition permit.
“That’s an error,” Sochaczevski says today of the date in the sales deed, adding that he recalls Iberville partnering in the numbered company and talking to the big-box stores only after 3311155 Canada Inc. bought the mall from the city.
Why didn’t the city sell the mall directly to big-box stores?
It was Adams who had the idea to bring them in, Sochaczevski says.
The big-box stores, meanwhile, say they have no documents concerning the transactions and say the executives involved have since left.
For his part, Zajdel says he doesn’t recall attending a meeting about the sale of the shopping centre, but says there was possibly a meeting with a big-box store representative.
“We do not know when in the process there was information about big-box retailers having an interest,” the message through his lawyer says. “The only meeting that we are aware of was one where at least one city service bureaucrat representative was present, and there was possibly a representative of one of the companies present. It is unknown when in the process this meeting took place. Twenty to 22 years is a long time to remember these particulars.”
And what was the benefit to the city from approving the new site plan minus the shopping centre? $37,000.
That was how much the civil service calculated the new development would increase annual property tax revenue for the city.
At that amount, it would take 81 years to equal the $3 million the city sacrificed in the sale with the demolition clause.
However, the civil service report recommending council approve the new site plan put a positive spin on it, saying that with stores finally opening on the site, the city would see $600,000 a year in business taxes.
Still, the civil service didn’t offer a comparison of the taxes the city would have collected had Place Marc-Aurèle Fortin opened or, for that matter, if there had been any other type of development on the site.
With the property on the north side of Maurice-Duplessis settled, the city still owned one last large section of the Marc-Aurèle Fortin site on the south side.
And city hall was about to embark on a new money-losing venture with it.