National Post (National Edition)
SIDEWALK LABS PULLS PLUG ON TORONTO SMART CITY PROJECT
BLAMES DEMISE ON ECONOMIC UNCERTAINTY CREATED BY COVID-19 PANDEMIC
After two years, countless public consultation sessions and millions of dollars spent on planning, a subsidiary of tech giant Alphabet Inc. abruptly revealed Thursday that it was walking away from a controversial smart city development on Toronto’s lakeshore.
Sidewalk Labs chief executive Dan Doctoroff announced the decision in a post published on the website Medium, suggesting that uncertainty stemming from the COVID-19 pandemic, which he did not specifically name, had contributed to the move.
“As unprecedented economic uncertainty has set in around the world and in the Toronto real estate market, it has become too difficult to make the 12-acre project financially viable without sacrificing core parts of the plan,” Doctoroff wrote. “And so, after a great deal of deliberation, we concluded that it no longer made sense to proceed with the Quayside project, and let Waterfront Toronto know yesterday.”
Doctoroff did not indicate whether the company would continue to employ its 30 Toronto-based employees, or whether it would do any other work in the city.
Sidewalk Labs’ exit marks a turning point in a saga that began more than three years ago, when Waterfront Toronto, a government agency mandated to revitalize the city’s lakeshore, issued a request for proposals to reshape a 12-acre parcel of land.
The winning bid came from Sidewalk Labs, with the promise of a new community built “from the internet up.” In the fall of 2017, the project was unveiled with much fanfare by Prime Minister Justin Trudeau and Alphabet’s then-executive chairman, Eric Schmidt.
In June 2019, Sidewalk Labs published a massive Master Innovation and Development Plan, which envisioned a sweeping real estate development spanning nearly 200 acres of the city’s eastern waterfront, far more than the original RFP contemplated.
Sidewalk Labs was eager to talk about their plans to use manufactured wood to build environmentally friendly buildings and other, higher-tech features, such as garbage robots that would monitor public spaces for waste, but critics immediately seized on the “land grab” aspect of the proposal, and the suggestion that governments heavily subsidize the development.
After a tense summer of negotiation between Sidewalk and Waterfront Toronto, the two sides agreed to limit the scope of the project, and since November of last year the public agency has been studying the details of the proposal.
The Waterfront Toronto board was expected to vote on the project in March, before the COVID-19 pandemic threw normal life into upheaval.
Andrew MacLeod, the chief executive of Postmedia Network Inc., which owns Financial Post, is a member of the board of directors of Waterfront Toronto.
One of the major selling points of the Sidewalk Labs proposal was the so-called “patient capital” that Alphabet brought to the table, suggesting that the company was prepared to invest heavily, and stick around for the long haul before turning a profit.
But several people who spoke to Financial Post noted that they had been watching for an announcement since Alphabet reported earnings in April. At the time, chief executive Sundar Pichai specifically mentioned the “other bets” section of Alphabet’s balance sheet — where the company accounts for speculative ventures such as flying cars and smart cities — when discussing potential cost saving measures to offset revenue challenges posed by COVID-19.
“We’re disappointed that we’re not able to move forward to the next steps, but I would also say that there were some signals, and it didn’t come as a total surprise,” said Stephen Diamond, chair of the Waterfront Toronto board, on Thursday. “We had had signals with the pandemic arising, generally commercial transactions were being reviewed everywhere.”
Doctoroff was not available for an interview for this story.
Will Fleissig, the chief executive of Waterfront Toronto who originally championed the project, before he was sidelined amid mounting controversy, said he still believes in the fundamental approach to innovative urban development.
“I think maybe the lesson is that Toronto needs to continue to innovate, to look at new ways to bring together the private, the public and the non-profit sectors,” Fleissig told Financial Post in an interview.
“If Toronto and Canada are going to remain in the forefront around dealing with these really tough problems we have to think in a different way, and I personally think Canada can step up and look at a Canadian solution in terms of how these partnerships are formed.”
In the debate over whether to go ahead with the project, supporters often suggested that the development was a test of whether Canada could really do big, interesting things.
Because of the global circumstances, nobody was drawing any larger lessons out of how things ended on Thursday.
“It’s sad news for Toronto, because this would have made us a global centre for urban tech, but I think the urban tech ecosystem is still thriving,” said Alex Ryan, senior vice-president at the MaRS Discovery District, one of the institutions that has been supporting the development.
“It’s sad news, but at the end of the day, it’s 12 acres, so it was a small demonstration site.”
On the other side of the debate, Thorben Wieditz, who speaks for the Block Sidewalk campaign, said he’s happy to see Sidewalk Labs go, but he lamented that he had to spend the past two years vigorously opposing the project.
Sidewalk’s exit leaves an opening for a new plan to develop the region to emerge, politicians at all three levels of government noted Thursday.
“Quayside continues to provide opportunities for innovative solutions to urban challenges, including affordable housing, active transport and climate resilience,” Infrastructure Minister Catherine McKenna said in a statement. “While Sidewalk Labs has decided to no longer pursue the Quayside project, we will continue to work with our partners at Waterfront Toronto, the city of Toronto and the province of Ontario to ensure that Quayside is ultimately developed with the long-term goal of making Toronto a more sustainable and livable city.”
Asked on Thursday about Sidewalk Labs’ decision, Ontario Premier Doug Ford called it “unfortunate,” but held out hope something else would come along.
“Now there’s an opportunity for other people to do something spectacular on the Toronto waterfront,” Ford told reporters.
Toronto Mayor John Tory saw a similar opening, saying in a statement that he was confident there were partners out there who would be eager to participate in redeveloping the lakefront area.
“Our goal remains to ultimately build a neighbourhood focused on innovation in Quayside that will be the envy of cities around the world and a beacon for the future,” Tory said.
While it was unclear whether Sidewalk Labs would continue to operate in Toronto, it was revealed Thursday in Fortune magazine that a spin-off entity, Sidewalk Infrastructure Partners, had received US$400 million in investment funding from Alphabet, the Ontario Teachers’ Pension Plan and Sidewalk Labs.
Sidewalk Infrastructure Partners focuses on investing in innovative urban technology companies.