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Montreal transit agency ventures into real estate with mixed-use complex

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Rendering of a nearly 300-unit housing project near the Frontenac Métro station planned by the Société de transport de Montréal.

Firme d’architectes Lemay

Montreal’s transit agency will soon be breaking ground on a new project. But this time it won’t be the usual subway-line extension or transit hub. In a first for the Société de transport de Montréal (STM), the agency is venturing into the real estate business with plans for a residential-office complex that will go up on a parking lot it owns, located just steps away from one of its Métro subway stations in the east end of the city.

It’s a bold foray for the STM as it seeks to boost much-needed non-farebox revenues to fund capital investments, operations and maintenance costs while at the same time promoting transit-oriented development (TOB) and helping the city reach its affordable/social housing targets.

The concept of transit agencies using real estate development for financing and urban planning purposes is not new; Hong Kong’s Mass Transit Railway Corporation has been a major real estate player for decades and other transit commissions involved in property development in one form or another include Singapore, Paris, London and New York. But Canadian cities to date have not been very adventurous on this front and Montreal’s modest first step is certain to be closely watched by transit agencies across the country as they seek innovative ways to capitalize on existing or new infrastructure and land development.

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“This is a project that has several aspects and it’s important it have several aspects,” STM chairman Philippe Schnobb said. “There’s a huge need for social housing in Montreal.” The venture – at the Frontenac Métro station – allows for the densification of a low-income neighbourhood; in addition, its location right next to the subway helps promote public transit use. It also gets rid of an eyesore parking lot/heat island and replaces it with a structure that will include a green roof and a courtyard.

The four-building complex will have a green roof and a courtyard.

Firme d’architectes Lemay

Plans call for a four-building complex that will include 298 residential units – 60 subsidized apartments for low-income residents, 109 affordable condo units and 129 market-priced condos – as well as office space that the STM will either occupy itself or lease out. Building heights range from two to 12 storeys. An underground parking space will have room for 213 cars and 175 bicycle stalls.

Mr. Schnobb says the Frontenac venture could open the door to more real estate related transactions in the future that will provide for recurring revenues. “We could have simply sold the parking lot, pocketed the money and invested it somewhere. But what’s also important for us is to be generating recurring revenues,” he said.

Spearheading the project for the STM is its commercial subsidiary, Transgesco. Partners include the non-profit housing agency Société d’habitation et de développement de Montréal (SHDM) and local social housing groups. Under the terms of the deal, the STM is selling the land to Laval, Que.-based general contractor Cosoltec Inc. for $5.35-million. The STM will in return get ownership of the two-storey, 25,700-square-foot office building.

Construction is set to get underway next year, with delivery slated for 2021.

The Frontenac plan has been in the works for about two years, with close collaboration between the STM, the SHDM and local groups, SHDM spokeswoman Leslie Molko said.

Construction is expected to be completed in 2021.

Firme d’architectes Lemay

“We need to look at what Montreal and other cities are doing,” said Cherise Burda, executive director of Ryerson University’s City Building Institute. “It’s thinking about how you create neighbourhoods around these transit lines, which is something we don’t usually do.”

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There is still too much of a “silo” mindset in Ontario, with a lack of cooperation between the various transit, housing, city and other agencies, Ms. Burda said. “It’s such a wasted opportunity.

“Why not have a real estate development arm of [regional transit authority] Metrolinx or other agencies staffed with smart people who can make informed decisions and work with developers?”

James Perttula, director of transit and transportation planning for the City of Toronto, says the Montreal experience will be closely followed. “We don’t have anything like Montreal to announce, but this is something we are looking at more and more now,” he said.

“The role is to think much more strategically about the city’s real estate assets. Certainly we’re looking at opportunities for affordable housing.”

The city recently merged four separate real estate related agencies into one umbrella group, dubbed CreateTO. Its mandate is to manage Toronto’s real estate portfolio, develop city buildings and lands and provide real estate solutions to the various divisions, agencies and corporations, including the Toronto Transit Commission.

CreateTO is currently conducting an inventory of the land around existing stations and examining ways to use city-owned properties for housing solutions, including affordable housing, Mr. Perttula said.

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In Calgary, Calgary Transit works with the city’s real estate and development services team to assess and plan developments at train stations, spokeswoman Sherri Zickefoose said. One recent transit-oriented development project that was approved is a 20-acre mixed use “urban village” next to the Anderson LRT Station, she said.

The key policy approach underlying many of the real estate related transit projects is known as land-value capture. Essentially, the concept is that transit agencies as a rule help boost property values via public projects such as transit hubs and should therefore be entitled to part of the returns that the private sector benefits from as a result of those infrastructure improvements.

Land-value capture can take many forms, including direct involvement in real estate development by transit commissions, indirect participation through private-sector partnerships, or other mechanisms such as transit-supporting levies imposed on developers.

A new, 67-kilometre automated electric light rail network in the Montreal area being built by Quebec’s pension-fund manager Caisse de dépôt et placement du Québec includes plans for land-value capture. The Caisse will build and operate the system, known as the Réseau express métropolitain (REM); a recently upwardly revised estimate puts the cost of building the network at $6.3-billion. The project offers several options for tapping into the revenue-generating potential of property-value increases on the land the trains will pass through. The Caisse could, for example, get involved in property development through its real estate subsidiary, Ivanhoé Cambridge.

“Because transportation and land development are so intertwined in cities, pairing real estate development with transport system investments makes perfect sense,” said Deborah Salon, assistant professor at the school of geographical sciences and urban planning at Arizona State University.

“Public investments in new transit infrastructure have served to make money [and sometimes a lot of it] for those who own land near the stations and developers working in station-area neighbourhoods. At the same time, many transit agencies have trouble covering their costs.”

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Foreign buyers all but disappeared from Metro Vancouver real estate market: data

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The latest property transfer data from the B.C. Ministry of Finance, released at the end of July, indicates that foreign buyers have all but disappeared from the Lower Mainland.

The numbers show that just one per cent of all real estate transactions in Metro Vancouver and the Fraser Valley Regional District during the first six months of this year involved foreign nationals, down from three per cent in the same period a year ago.

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Burnaby, Coquitlam and Richmond were the top destinations for foreigners buying property in the first half of 2018, with three per cent of transactions in Burnaby and two per cent in each of the other two municipalities involving foreign nationals. The sole municipality to see an increase in the proportion of foreign nationals making purchases was the City of North Vancouver, where foreign buyers were involved in one per cent of deals in the first six months of 2018.

Those concerned about foreign nationals purchasing agricultural properties will be reassured to know that foreign buyers of Lower Mainland rural properties have fallen from 14 per cent of the total in the first six months of 2017 to zilch in the first half of this year.

Nevertheless, a recent Insights West poll found foreign homebuyers are the most commonly identified contributor to the region’s housing crisis, with 84 per cent of Metro Vancouver residents naming them – more than the proportion that identified population growth or that other bête noire, shadow flipping.

Bold moves

While foreign buyers are the favourite scapegoat for the housing crisis, lower foreign participation in local real estate markets this year has barely budged housing prices in the Real Estate Board of Greater Vancouver’s jurisdiction.

Sales statistics from the board through the end of June pegged the benchmark price for a residential property in Greater Vancouver at $1,093,600, or 10 per cent higher than a year earlier. The board’s latest statistics through the end of July indicate a flattening in prices with the benchmark price now $6,100 lower than a month ago.

So, what’s a first-time buyer trying to scrape together a down payment to do?

It’s hard not to recall condo marketer Bob Rennie’s advice to Woodward’s buyers a dozen years ago: “Be bold or move to suburbia.”

With sky-high housing prices this side of the Port Mann, many have chosen the latter option. According to B.C. Ministry of Finance data, Surrey registered 498 first-time home purchases in the first six months of 2018. Abbotsford was the second most popular choice, attracting 148 first-time homebuyers. Perhaps even more remarkable, sales in the far eastern reaches of the Fraser Valley accelerated, with Chilliwack attracting 121 first-time buyers. This positions it to overtake Richmond as the third most popular destination for first-time homebuyers. Richmond had 123 first-time buyers in the first half of 2018, but Chilliwack has outsold it in each of the past four months.

Looking ahead

Regardless of where prices land, there’s a clear yet consistent pullback in sales activity. Total residential sales in Metro Vancouver fell by 25 per cent in the first six months of this year compared with sales during the same period a year earlier. Real Estate Board of Greater Vancouver commentary attempted to put July’s decline into perspective by saying housing sales “reached their lowest levels for that month since the year 2000.” While this point of fact was sobering, RBC Economics offered a more balanced perspective a couple of weeks earlier by saying that there was a greater balance between supply and demand in B.C. as policies within the province and at the Bank of Canada – read interest rates – were working to cool “persistently strong markets.”

Having forecast in March that house prices in the province would rise by six per cent this year, the B.C. Real Estate Association took a more cautious stance in its latest prognostication, simply anticipating “less upward pressure on home prices.”

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Real-Estate Magnate's NYC Townhouse Sale Is Among 2018's Priciest

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The 36-foot-wide townhouse measures about 15,000 square feet. The traditional design features marble, onyx and brass finishes.


Photo:

Brian Wittmuss

Real-estate investor

Joseph Chetrit

has sold a townhouse on New York’s Upper East Side for a price in the low-$40 million range, making it one of the priciest New York City townhouse deals to close so far this year, according to sources with knowledge of the deal.

Mr. Chetrit, a onetime owner of the

Sony

Building and Hotel Chelsea, listed the townhouse for $51 million in November 2017. It was part of a collection of three adjacent mansions Mr. Chetrit bought from Lenox Hill Hospital in 2007.

Mr. Chetrit paid a combined $26 million for six adjacent brownstones, then combined them into three. The properties are represented by Noble Black,

Richard Steinberg,

and

Roger Erickson

of Douglas Elliman. The agents declined to comment on the identity of the buyer, who purchased through a limited-liability company. The deal closed earlier this week.

The 36-foot-wide townhouse is the largest of the three. It measures about 15,000 square feet with eight bedrooms. The traditional design features marble, onyx and brass finishes. There’s a wall of glass on the ground floor overlooking the limestone-clad courtyard. A second townhouse is currently on the market for $39 million, while the third is not yet on the market.

One of the home’s eight bedrooms

One of the home’s eight bedrooms


Photo:

Brian Wittmuss

Mr. Chetrit could not be reached for comment.

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One person familiar with the deal said the buyer fell in love with the home, located at 110 East 76th St., while visiting it as part of the 2018 Kips Bay Decorator Show House. The buyer reached a deal with some of the event’s interior designers to retain some of their design elements, that person said.

The largest townhouse deal so far of 2018 closed in February, when Chinese conglomerate HNA Group sold a property formerly owned by art heir

David Wildenstein

for $90 million, property records show.

Write to Katherine Clarke at katherine.clarke@wsj.com

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Heatwave slows real estate deals

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Image: Kalle Niskala / Yle

While the summer heat has slowed down real estate deals, according to experts in the field, business is still faring better than the average over the last five years.

According to the Central Federation of Finnish Real Estate Agencies (KVKL), the slight drop in real estate transactions can be attributed to the unusually hot summer.

Sales of older apartments dropped during the first two quarters by two percent over the previous year, according to KVKL. For newer flats, sales dropped by 9 percent.

According to real estate agents surveyed by Yle, sales of older apartments was nevertheless 3 percent higher than the average for the previous year. New apartment sales were 22 percent above of the average for the last five years.

Only a slight slowdown

”Talk of the market slightly slowing down can be put down to the extreme heatwave this summer,” says Jockum Andersin, regional director at Aktia Kiinteistönvälitys realtors. "But sales are still very much in tune with the times," he adds.

During the first half of this year 33, 700 apartments were sold, which is 5.4 percent above the average of the previous five years.

”The volume of sales has varied this summer. It’s true that the trade could be more lively during the market upturn and during a time of low interest rates, but the overall figures don’t indicate any significant changes over the previous year," says Maria-Elena Cowell, chief executive officer at the Central Federation of Finnish Real Estate Agencies.

The prices of older flats continued to rise in the Helsinki metropolitan area. Meanwhile, in other parts of the country, price increases were less pronounced.

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