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