Plan for housing development in Toronto part of ‘massive’ opportunity to unlock value in real estate portfolio, CEO says
It may seem like a stretch for furniture retailer Leon’s to get into the housing game, but the chain’s chief executive doesn’t see it that way.Photo by roy Fleece/Leader-Post
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Leon’s Furniture Ltd. revealed in January that it intends to develop a master-planned community that would include 4,000 residential units on a large tract of land it owns near its corporate head office in Toronto. It may seem like a stretch for a furniture retailer to get into the housing game, but Leon’s chief executive, Michael Walsh, doesn’t see it that way. Unlocking the value in the publicly traded company’s vast real estate portfolio — it has 303 stores across the country under banners that include Leon’s, The Brick, Brick Outlet and The Brick Mattress Store, many on land that it owns — is one of the chief executive’s key priorities. The Financial Post’s Denise Paglinawan spoke to Walsh recently about the company’s plans. The following interview has been edited and condensed.
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Financial Post: Where are you now in the development process for the residential community?
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Michael Walsh: The first approval happened in July 2022 when Toronto City Council adopted a recommendation to convert our land from a general employment area to a regeneration area. With that recommendation, it went to the minister of housing at the provincial level and in December of 2023, what’s called Official Plan Amendment 591 was approved without modification. The conversion from employment area to regeneration area allows us to build office, retail, industrial and housing.
FP: How will that be broken down in the mixed-use project?
MW: The key to all this is optimizing and intensifying the land. There’s two phases to it. Phase one, we can do fairly quickly, we just have to go back with a submission to the city and that would be for a new head office and a new retail flagship store. The second phase of that is developing the master plan and then working with the city on a secondary plan to get that approved. We’re hoping that we can get that completed in 2025.
FP: Why did you make the jump into developing the land yourself?
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MW: The real reason is we own 429 acres across the country. We currently develop our own lands with distribution centres and a lot of Leon’s properties are owned by the company. You won’t see me in a dump truck, but what we’ll do is we’ll partner with a top-tier developer, and figure out joint ventures and other business relationships where they’ll develop the land and we’ll continue to maintain some ownership in it.
FP: You’ve mentioned that you already own a bunch of land throughout the country. Can you give an estimate of the value of your land holdings?
MW: I probably can in May. We announced a while back that we’re going to create a REIT, given the properties that we hold, which would be a separate company with a separate CEO and a separate board of trustees. That’s already been announced (in May last year). As part of that, 35 to 50 per cent of our properties will be sent into the REIT. So we have to do valuations on all of our lands, which we’re currently starting.
FP: Do you think the company’s stock price adequately reflects that value?
MW: No, I think our stock price is low. We still remain focused on retail because that’s the engine behind this company and a big focus of ours between our retail and our services. But unlocking the value of our real estate is massive. Our land and buildings are on our balance sheet for $236 million and all of its unencumbered. That definitely is not the valuation of 429 acres, with 40 acres being in North York (part of Toronto), then we have another 32 acres of land where our Burlington (east of Toronto) store is and we have parcels within other stores and locations.
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FP: What made you think of developing residential?
MW: With this particular site, we believe that we can build 4.6 million square feet of gross floor area. So how you maximize that is through residential, high-rise, low-rise, rental units and town homes. So each property is different, but when you want to optimize and intensify land, it’s a mix of a whole bunch of different things.
FP: You became CEO of Leon’s in July 2021. What’s it like to take the helm of a 100-year-old family business?
MW: I’m the first non-Leon CEO and I feel very humbled by it. You have a retail organization that’s been through every market condition known to retail and we have successfully navigated through it. I spent a long time at another retailer, which was another great company. But coming here, everybody thinks of Leon’s as just a furniture store and we’re not. We have a real estate portfolio that’s quite large, we have a suite of products and services that live within the ecosystem, from an insurance company to a warranty company to a service company. It’s great being part of a Canadian icon.
FP: What can the company do to get better recognition for that diverse portfolio?
MW: We’ve started doing that. The REIT will be a publicly traded company. We need people to understand Leon’s Furniture Limited and all the components from financial services to appliance to the other retailers. There seems to be great interest out there. They’re blown away at how much more Leon’s is than a furniture company. And by the time you get to the end of it, they’re like, “Oh, and your shares are trading where they are? You have a story to tell. You’ve got to start telling it.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
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