Behind-the-scenes queries about lots not yet for sale
After the sale of the vacant mall, the city aims to sell off nearby land too. Developers show interest when negotiations take place behind closed doors but that evaporates once a public bidding process is launched. And the lack of interest from bidders, i
Part Five of a seven-part series
The residential real estate market in Montreal was charting an upward course as the new millennium began, and nowhere more so than in Rivière-des-Prairies.
Construction in the district had slowed during the market downturn, but had never sputtered the way it had in other parts of Montreal, thanks to the availability of cheap municipal land.
By 2000, the empty canvas above Maurice-Duplessis Blvd. to the river had filled in as Jean Drapeau’s administration had envisioned two decades earlier.
In fact, no area of the island had added more households during the 1980s and 1990s than R.D.P.
The population of the district grew by 11 per cent between 1991 and 1996 alone, compared to 0.1 per cent for Montreal as a whole.
There had been more than 4,700 housing construction starts in R.D.P. between 1986 and 1991. That had slowed to 1,100 from 1991 to 1996, but the pace of construction had been picking up again since 1996.
And that’s why, in December 2000, the city’s housing department wrote a report to the city executive committee recommending the Bourque administration capitalize on the upsurge and sell the last large tract of the MarcAurèle Fortin site.
The piece, south of MauriceDuplessis, was the last unsold section of the rectangle that had been earmarked for expropriation, resale and development by the Drapeau administration in 1981.
The city bought the 200 parcels that made up this southern portion for $7.68 million between 1988 and 1992, under Drapeau’s successor, Jean Doré.
The site measured two million square feet — about the size of 27 soccer fields — and extended from just below Maurice-Duplessis south to the railway tracks, and from the continuation of GilbertBarbier Ave. east to FernandGauthier Ave.
This was the land that Doré had refused to sell to the province to relocate Hôtel-Dieu hospital in the early 1990s because the city was saving it for housing development.
And there was an additional impetus for the city to sell the site in 2000.
Developers had been approaching the city to buy the land, the report from the housing department said.
Just as when it was revealed to city council that two of Bourque’s councillors were fielding private offers for the vacant Place MarcAurèle Fortin shopping centre in the mid-1990s, no one ever seemed to question how individuals were able to make behind-the-scenes inquiries and offers on city properties that weren’t yet for sale.
“The interest manifested during the past months by certain builders to develop this site leads the housing department to recommend to the municipal authorities to authorize the launch of a call for proposals with a view to selling and developing it,” the housing department employees wrote in their report to recommend the executive committee authorize a call for bids.
But this time, the housing department didn’t want the land sold for houses geared to first-time buyers like the previous projects that had benefitted from cheap municipal land in the 1980s and 1990s.
The civil servants recommended the city target the “mid and upscale niche market.”
The last two censuses had shown the population growth in R.D.P. had been among baby boomers with cash who were shopping for their second or third home in the district.
In fact, there was an overabundance of starter homes in the area.
So the housing department recommended the city go to tenders to seek a project of 200 to 300 “high-end” to “mid-range” detached and semi-detached houses and townhouses with corresponding price tags for the last section of the Marc-Aurèle Fortin site.
The call for bids sought a quality, low-density development with big houses on spacious lots surrounding a large park, plenty of greenery and abundant parking.
The average price of a newly built single detached house on the island was $169,233 in 2000.
But in the call for bids for the Marc-Aurèle Fortin site, the housing department foresaw single detached houses carrying price tags of $215,000 to $365,000.
And while new semi-detached houses on the island were going for an average of $129,775, the housing department wanted the price range for semi-detached houses in this project to be $162,000 to $205,000.
Moreover, the winning developer was required to bury unsightly power lines in this high-quality project.
Just over half of the site, or 1.19 million square feet, was deemed buildable land, and it was this portion that the executive committee authorized for sale in the call for bids in December 2000.
The rest of the land was needed for streets, the park that was to be built by the city and a buffer zone on the west side of the project where the developer would have to erect a 4.5-metre-tall raised bank to conceal the industrial zone on the edge of the site.
The description and house prices might have recalled Michael Fainstat’s warning about the Opération 10,000 logements program of the Drapeau administration in the 1980s. Fainstat was the lone opposition councillor who criticized the strategy as subsidizing sprawl in a far-flung district rather than building up the city core.
Fainstat had argued that Montrealers were really financing homes for the wealthy through the sale of city land since the houses that were built under the program weren’t affordable for the average citizen.
But Fainstat’s words were ignored then. And now, in his absence, they were long forgotten.
Besides, demographics and the real estate market were offering Montreal a golden opportunity.
How could the city lose?
The first time the city tried to sell the southern portion of the Marc-Aurèle Fortin site, it set the minimum bid price at $5 million, or $4.20 a square foot.
The resolution passed by the executive committee in December 2000 to launch the call for bids in early January said the $5 million represented the land’s current market value.
The city’s economic and urban development department had established the market value at between $4 and $5 per square foot.
However, a paragraph buried in the civil service report that accompanied the resolution said the city would deduct “certain costs” from the sale price once a winning bidder was chosen.
So the expected “revenue” for the city after the deductions would be $2 million to $3 million, it said.
In other words, while the resolution stated the city was offering the land for a minimum of $5 million, the city was actually preparing to sell it for $2 million to $3 million, or half of its market value.
The deductions included $1 million for what the city estimated would be the developer’s added construction costs due to the geology of the site, which remained to be fully studied.
The city would also foot half of the cost of burying the electrical and telecommunications lines, the price of which was estimated at $2.5 million. So the city expected to deduct another $1.25 million from the sale price for that.
And the city would also deduct one-quarter of the cost of decontaminating the site.
A preliminary study had pegged the decontamination bill at $1.6 million. So the city expected to deduct $400,000 from the sale price.
However, the city had a clause in the call for bids that said if the provincial subsidy program paying developers half of the decontamination bill happened to be cancelled or run out of funds before the project got started, the city would cover the province’s half along with its one-quarter. So in that case, the city would deduct three-quarters of the decontamination bill from the price for the winning developer to buy the land.
The city’s goal, as always, was new property tax revenue from the developed land.
In five to seven years, once all 200 to 300 homes in the project were built, the city could expect to start collecting $1 million a year in tax revenue, the civil service report said.
The deadline came and went in March.
But no one bid.
Market value is simply the price the market is willing to pay. And it appeared that sometimes when the city put property up for public bids, the market wasn’t willing to pay — anything.
Just as with the sale of the Place Marc-Aurèle Fortin shopping centre, developers seemed interested to buy city property when the negotiating was behind closed doors. But the interest evaporated when the city launched a public bidding process. And the lack of interest from bidders, in turn, spurred the city to reduce its asking price.
The city wasted little time launching a second call for bids in April, this time with a lower minimum bid price: $3.75 million, or $3.15 per square foot.
The city would deduct the same “certain costs” from the winning bid.
Now, the city expected to make $1 million on the sale of the land.
And the civil service report now talked about generating “up to” $1 million in annual property tax revenue once the project was fully built in five to seven years.
The report said the housing department had recommended lowering the starting price to $3.75 million after speaking with four developers who apparently balked at the minimum price in the first call for bids. The developers, who weren’t identified in the report, said they were concerned the development costs, particularly the price of decontamination, might end up higher than the city estimated.
The risk wasn’t all that evident, however, given that the city had committed to deducting significant portions of the development costs from the sale price.
The only caveat was a clause in the specifications that said the city couldn’t sell the land for less than one dollar after the deductions.
Moreover, neither civil service report for the first and second call for bids mentioned that the city would also cover half of the infrastructure costs.
The Bourque administration had passed a bylaw in 1996 that had the city foot half of the infrastructure costs for residential projects as an incentive to developers.
When the deadline on the second call for tenders arrived in May 2001, one developer bid.
Groupe immobilier Grilli Inc., a major builder in the West Island, had in fact submitted two offers to buy and develop the land.
One of the company’s offers respected the bid specifications – the other one, not so much.
It was Grilli’s “not totally conform” bid, as the civil service report described it, that the executive committee declared the winner in August.
The “not totally conform” bid of $3.75 million proposed a $51.8-million project of 242 homes built in four phases over three to five years.
The company’s other proposal, which respected the city’s specifications, called for 250 homes and a bigger investment of $54 million.
Meanwhile, Grilli’s “not totally conform” winning bid deviated quite totally from some of the city ’s requirements for the project, including the height of the raised bank to screen out the industrial area and the requirement to bury the electrical and telecommunications lines.
Grilli’s winning bid proposed to replace the required 4.5-metrehigh raised bank with a three-metre-high structure in a buffer area that would be a dozen feet wide.
But the civil servants said the screen needed to be at least four metres high and the buffer zone at least 80 feet wide to be an effective sound barrier.
Grilli’s alternative also changed the street layout desired by the civil servants.
And instead of burying the lines, Grilli’s “not totally conform” winning bid called for overhead lines suspended from poles running behind the houses. The lines would be connected to each house underground.
Nevertheless, the city ’s selection committee decided that Grilli’s “not totally conform” bid appeared “much more interesting than the first, and it merited being retained and improved,” the civil service report to the executive committee said.
The economic and urban development department had gotten the Grilli company to agree to work with the utility companies to find an economical solution for burying the electrical and telecommunications lines, the report said.
The city had found a buyer in far less time than it had taken to sell Place Marc-Aurèle Fortin.
But things would change following the municipal election that fall.
In November 2001, voters in the city and the suburbs across Montreal Island elected the first administration of the megacity that was being created by provincial legislation on Jan. 1, 2002.
The suburbs that were against the forced mergers had joined with members of the opposition on Montreal city council to defeat Bourque, who had campaigned for the province to legislate “one island, one city.”
The anti-Bourque forces formed the Montreal Island Citizens Union, led by a former provincial cabinet minister, Gérald Tremblay.
Now mayor, Tremblay appointed a suburban mayor, Frank Zampino of St-Léonard, as chairman of the executive committee.
Shortly after the election, Groupe immobilier Grilli began discussions with the city housing department to withdraw its offer to buy the Marc-Aurèle Fortin site.
“As we made known last April, this is to confirm our intention to withdraw from the development project for the Marc-Aurèle Fortin sector,” Mario Grilli, president and CEO of the company, wrote to Denis Quirion, the director of housing for the economic and urban development department, in August 2002.
Grilli’s letter also asked the city to return his company’s $100,000 bid deposit, which Grilli’s company had given in the form of a standby irrevocable letter of guarantee from his bank.
Grilli’s letter said the cost of burying the electrical and telecommunications lines had not yet been settled, “which puts in question the economic feasibility of the project.”
Grilli’s letter also pointed to a new bylaw the Tremblay-Zampino administration was planning to introduce that would require developers to pay all of the costs to build infrastructure, such as roads, sidewalks and sewers, in new residential projects.
The bylaw would end the costsharing arrangement between developers and the city that had existed since Bourque’s 1996 bylaw.
The Tremblay-Zampino administration said it was simply harmonizing Montreal’s practice with the prevailing practice in Canada and in the island suburbs that had been merged with Montreal.
Bourque, who was now leader of the opposition, called the Tremblay-Zampino reform a “bludgeon” against development, particularly in the Pointe-aux-Trembles–R.D.P.–Montreal-East borough, which still had land available for construction.
But it was a new regime at city hall, and new people were in charge of development across the newly merged island.
Saulie Zajdel, who was responsible for real estate and later for urban planning on the executive committee under Bourque, was reelected in 2001, but was now an opposition councillor with the rest of Bourque’s Vision Montreal team.
(Zajdel would defect to Tremblay’s party before the 2005 election, saying he was tired of being in the opposition. But he would not have a seat again on the executive committee, and wouldn’t seek reelection in 2009.)
The local councillors in R.D.P. also changed.
Aimé Charron didn’t stand for re-election in 2001.
In the preceding four years, Charron had a shotgun blast through his front door and twice, cars were set on fire in his driveway (he said he couldn’t think of anything in his work as a councillor that would have provoked the attacks).
He was one of a dozen Vision Montrealers whom Bourque dropped before the 2001 election, saying he wanted younger candidates.
Charron’s fellow R.D.P. councillor Giovanni De Michele, not much more of a spring chicken than his colleague, ran again for Vision Montreal in 2001, but lost to a Tremblay candidate, Cosmo Maciocia.
The Tremblay-Zampino administration’s new infrastructure financing bylaw went into effect in May 2003.
The same month, the executive committee formally accepted the withdrawal of the Grilli firm’s offer to purchase the Marc-Aurèle Fortin site and agreed to return the developer’s deposit.
Numbers were constantly changing elements in Montreal civil service reports.
The report to the executive committee recommending it approve the Grilli firm’s withdrawal was one example.
The winning “not totally conform” Grilli proposal had called for construction of 242 homes, according to the first civil service report. Two years later, the report recommending the executive committee accept Grilli’s withdrawal said it was 230 homes.
And while the overall cost of infrastructure work for the project had been pegged at $6 million in the civil service reports two years earlier, it was now estimated in the report concerning Grilli’s withdrawal at $11 million.
The cost of infrastructure, when divided by each home, was too expensive for the developer to justify, the latest report said.
The civil service had also changed its tune on the project. Two years earlier, the civil service had been enthusiastic about selling the Marc-Aurèle Fortin land at its market value for a low-density, high-quality development with lots of green space.
Now, the civil service presented the criteria of low-density, highquality development and green space as factors that made the Marc-Aurèle Fortin land difficult to market.
The site “has constraints,” the report said, “being adjacent to a railway track on the south side and an industrial zone to the west, requiring buffer zones to be put in and increasing the total surface area dedicated to parks and green space by 25 per cent; consequently, half of the linear streets only have houses on one side, the other being occupied by green space.”
It sounded like a case for once again lowering the city’s asking price.