Wal­ton, in­vestors bank­ing on growth

City plan­ners will ask coun­cil­lors to freeze the south­west Ot­tawa boundary, but that isn’t what ev­ery­one wants to hear, writes DAVID REEVELY.

Ottawa Citizen - - CITY - dreevely@ot­tawac­i­t­i­zen.com ot­tawac­i­t­i­zen.com/ greaterot­tawa

Hun­dreds of small in­vestors in Asia and Europe who’ve in­vested in farm­land in hopes of flip­ping it for devel­op­ment have more rid­ing on an Ot­tawa plan­ning com­mit­tee meet­ing this week than they prob­a­bly re­al­ize.

Our city plan­ners want to deny them a wind­fall, say­ing there’s no need to open their land west of Bar­rhaven and south of Kanata for devel­op­ment for at least five years, maybe more.

It’s been a rough few months for them. They’re par­tic­i­pants in an in­vest­ment scheme led by Cal­gary-based Wal­ton In­ter­na­tional, which has big dreams for the land, a master plan for fill­ing in land in south­west Ot­tawa with hous­ing, stores and of­fices based on its idea of “smart growth” prin­ci­ples — walk­a­ble neigh­bour­hoods with tran­sit built in from Day 1, mix­ing homes and work­places.

All of which sounds lovely, coun­cil­lors agree, if only it in­volved prop­erty that isn’t farm­land on the out­skirts of town, be­yond the line where the city’s of­fi­cial land-use plan says devel­op­ment stops. The city’s re­vis­ing that lan­duse plan this year. Its stud­ies show there’s plenty of land in­side that ur­ban boundary for new homes and com­mer­cial space, more than enough to last un­til 2031.

At that meet­ing this week, coun­cil­lors are be­ing asked to con­firm the plan­ners’ find­ings and to freeze the boundary, with 3,200 acres un­der Wal­ton’s con­trol on the wrong side.

That means no big money for the in­vestors and no big money for Wal­ton, which has been try­ing to con­vince lo­cal politi­cians that the city needs to be think­ing about cre­at­ing a big new sub­urb out­side the Green­belt so it can be planned prop­erly, decades in ad­vance.

“I think we prob­a­bly should have a con­ver­sa­tion in 2063, which is prob­a­bly when it’s real,” says the chair of city coun­cil’s plan­ning com­mit­tee, Alta Vista Coun. Peter Hume, of Wal­ton’s ideas. “We’re not ex­pand­ing the ur­ban boundary. That’s not where we’re go­ing. We’re not chang­ing any­thing about the way we feel about agri­cul­tural land.”

The com­pany’s idea is just to talk about 2063 now, ar­gued Ja­son Child, the On­tario pres­i­dent of Wal­ton Devel­op­ment and Man­age­ment. “It is not a two-year-plan or a two-year build-out or any­thing of that na­ture,” he says from Toronto. Plan­ning “in­cre­men­tally,” with a 20-year out­look re­vised ev­ery five years, leads to sliv­ers of con­struc­tion that don’t nec­es­sar­ily work to­gether, Child says.

The last per­son to take a good look at what the cap­i­tal should look like in 50 years was French ur­ban plan­ner Jacques Gréber, and he was work­ing for Wil­liam Lyon Macken­zie King. Wal­ton, with its prop­erty butting up against the Green­belt near High­way 416, fig­ures it would emerge well from a for­mal ex­am­i­na­tion of the city’s needs as Ot­tawa heads to­ward the year 2100, but it’s not ask­ing for any­thing spe­cial.

Only, as Child puts it, “to en­gage in a con­ver­sa­tion” about plan­ning devel­op­ment on a big piece of land all at once.

The idea has some trac­tion on coun­cil, where Wal­ton of­fi­cials — in­clud­ing their lo­cal rep­re­sen­ta­tive, two-time Ot­tawa Cen­tre Lib­eral can­di­date Richard Ma­honey — have worked the halls for years.

Com­mu­ni­ties such as Bri­dle­wood in Kanata South have been built “street by street” with­out a good enough over­all vi­sion, says Coun. Al­lan Hub­ley, so they find them­selves with­out li­braries, with­out enough schools, and so on. Look­ing at an area on a large scale would ad­dress that.

“The prob­lem is the lo­ca­tion of where they’re try­ing to do this is prime agri­cul­tural land,” Hub­ley says. Pro­vin­cial rules ef­fec­tively for­bid the city even to talk about build­ing on it. (Child says agri­cul­ture can be worked into a plan, and would be be­cause lo­cal food net­works are cru­cial.)

Wal­ton has an im­por­tant critic, though: Mayor Jim Wat­son, who ar­gues that try­ing to plan a city 50 years down the line is folly. The way the province re­quires the city to plan now, look­ing 10 to 20 years out and re­vis­ing its out­look ev­ery five years, is about right, says the mayor, who was in charge of the sys­tem when he was pro­vin­cial min­is­ter of mu­nic­i­pal af­fairs.

“I would be re­luc­tant to go be­yond a 10-year hori­zon sim­ply be­cause so much changes in the world and our so­ci­ety,” Wat­son says. “Who would have thought 20 years ago there was go­ing to be a condo boom in Ot­tawa just as there is in Toronto? Go­ing much be­yond that may be good for de­vel­op­ers but I don’t think it’s good for com­mu­nity plan­ning. It’s a bit like eco­nomic fore­cast­ing … the far­ther out you get, the less ac­cu­rate it is.”

‘I would be re­luc­tant to go be­yond a 10-year hori­zon sim­ply be­cause so much changes in the world and our so­ci­ety. Who would have thought 20 years ago there was go­ing to be a condo boom in Ot­tawa?’

JIM WAT­SON

Ot­tawa mayor

Con­sider Gréber’s driv­ing un­fash­ion­able rail ser­vice out of down­town, for in­stance, or his be­lief that the Green­belt would do a fine job of hem­ming Ot­tawa in while largely self-con­tained towns sprouted in the coun­try­side. Re­vers­ing sprawl is the city’s pri­or­ity now, the mayor says.

The let’s-look-to-the-fu­ture ar­gu­ment isn’t stop­ping Wal­ton from push­ing for devel­op­ment ap­provals now. The com­pany has pre­vi­ously stood with numer­ous Ot­tawa de­vel­op­ers in a fight with the city over ex­pand­ing the ur­ban boundary the last time the city up­dated its of­fi­cial plan. Wal­ton left that fight emp­ty­handed while sev­eral other de­vel­op­ers got parcels ap­proved for devel­op­ment by the On­tario Mu­nic­i­pal Board.

“We think that there’s a de­mand right now for land in south­west Ot­tawa,” Child says.

They also have those in­vestors to please. Wal­ton is not a tra­di­tional de­vel­oper, like a Richcraft or a Minto, though it has a sub­sidiary that does that kind of work. It doesn’t even pre­cisely own the Ot­tawa land in ques­tion, at least not in the usual way. Wal­ton is a “syn­di­ca­tor” above all else, an in­vest­ment firm that hap­pens to work with land. The prac­tice is also called land­bank­ing, a term of­ten as­so­ci­ated with shys­ters sell­ing Florida swamp­land to rubes who don’t know that ac­tu­ally, real es­tate is an in­vest­ment that can miss. Land­bank­ing is a fully le­git­i­mate busi­ness, how­ever, al­beit one re­stricted in some ju­ris­dic­tions to wealthy in­vestors.

The com­pany is pri­vately held so over­ar­ch­ing in­for­ma­tion about its fi­nances is se­cret, but a lot of de­tails can be gleaned from the in­for­ma­tion it has to give out be­cause it of­fers in­vest­ment prod­ucts to the pub­lic. Some­times the com­pany of­fers shares in sub­sidiaries that own land, some­times it sells ti­tle to land to in­vestors who’ll never see it.

With its in­di­vid­ual in­vestors, Wal­ton’s bought tracts of land in its home turf of Al­berta, south­west of Hamil­ton and in Ni­a­gara, and out­side Amer­i­can cities: Phoenix, Austin, At­lanta, Washington. The idea is to pick up prop­erty that’s “in the path of devel­op­ment,” ac­cord­ing to what the com­pany tells in­vestors, and push for it to be ap­proved.

When that pays off, it can pay off well.

In Ot­tawa, a 300-acre par­cel just south of Hope Side Road, im­me­di­ately be­yond the south­ern tip of Kanata, was rolled into an in­vest­ment part­ner­ship that also in­cluded 155 acres next to a Honda plant in Al­lis­ton, north of Toronto. Wal­ton raised $35.8 mil­lion by sell­ing $10 shares, $26.4 mil­lion of which went to buy the land. The rest is kept for ex­penses. A lot of those are fees for man­ag­ing the prop­erty and coming up with the big plans for its fu­ture use, fees that get paid to var­i­ous other parts of the Wal­ton con­glom­er­ate.

Wal­ton is also in for a bonus pay­ment when a sub­sidiary sells land at a profit, and typ­i­cally the par­ent com­pany in­vests in each part­ner­ship it­self. If the land shoots up in value be­cause it gets ap­proved for devel­op­ment, ev­ery­body makes money.

For in­vestors in Wal­ton On­tario L.P. 1, as the Kanata/Al­lis­ton ar­range­ment is called, things are off to a pass­able start. Politi­cians in Al­lis­ton agreed that the 155 acres there, on a rail line that con­nects to a de­pot close to the Toronto air­port, would make a fine place for an in­dus­trial park, and re­zoned it. The pub­lic fi­nan­cial doc­u­ments say in­vestors have been paid back $6 for each of their $10 shares af­ter the part­ner­ship sold the Al­lis­ton land for $24 mil­lion, more than dou­ble what that piece of prop­erty cost to buy in 2010. The buyer: Wal­ton Al­lis­ton Devel­op­ment Cor­po­ra­tion, an­other sub­sidiary, which is look­ing for in­di­vid­ual buy­ers for smaller lots.

Based on fig­ures in the in­vest­ment doc­u­ment, Wal­ton es­ti­mates the 300 acres just south of Kanata would be worth about $45 mil­lion with “full en­ti­tle­ment,” mean­ing max­i­mum devel­op­ment rights. Un­for­tu­nately, it has the same prob­lems as most of Wal­ton’s land: it’s on the wrong side of Ot­tawa’s ur­ban boundary and it has an agri­cul­tural des­ig­na­tion.

“I think what they’re try­ing to do is, they re­al­ize they’re in a dif­fi­cult sit­u­a­tion,” says Innes Coun. Rainer Bloess, who, like Hub­ley and other coun­cil­lors, has met with Wal­ton’s peo­ple. “The way their in­vest­ment port­fo­lio works, they’ve got to show their in­vestors some ad­vance­ment.”

When it comes to ac­tual land devel­op­ment, most of Wal­ton’s work is fairly or­di­nary sub­ur­ban sub­di­vi­sions on the edges of Ed­mon­ton and Cal­gary, plus some in­dus­trial prop­er­ties like the one in Al­lis­ton. In Cal­gary, the com­pany paid the mu­nic­i­pal tran­sit agency to ex­tend rush­hour bus ser­vice to a sub­di­vi­sion north­east of the air­port sooner than it oth­er­wise might have.

Child says some of the more im­pres­sive features don’t nec­es­sar­ily get built in at first. “I think it’s im­por­tant to know that the com­mu­ni­ties will be devel­oped over time,” he says, and be­sides that Al­ber­tans likely want dif­fer­ent things from On­tar­i­ans, or Tex­ans for that mat­ter, so de­vel­op­ments else­where won’t nec­es­sar­ily re­flect de­vel­op­ments here.

Pay­offs can take a long time for in­vestors, but Wal­ton says they al­ways come.

Af­ter a scan­dal in South­east Asia, where land­bank­ing is a pop­u­lar type of in­vest­ment and an­other Al­berta firm’s col­lapse touched off a panic, Wal­ton’s Cal­gar­y­based pres­i­dent Bill Do­herty soothed the lo­cal fi­nan­cial press, or­ga­niz­ing jun­kets to its Cana­dian head­quar­ters. “We have never lost our clients’ money,” Do­herty told Sin­ga­pore’s English-lan­guage Busi­ness Times, and the com­pany was sit­ting on a siz­able cush­ion of cash.

This may be true, though it’s also true that ul­ti­mately the risk lies with those clients, be­cause they’re putting up the cap­i­tal. Wal­ton gets paid fees even if noth­ing ever hap­pens with its prop­erty, but it needs in­vestors to keep grow­ing and in­vestors want to see some­thing, any­thing, on the ru­ral land they’ve bought.

GARTH GULLEK­SON/OT­TAWA CIT­I­ZEN

Coun. Peter Hume says there is no need to have a con­ver­sa­tion about the Wal­ton lands un­til 2063.

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