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Mayor ecstatic over sale of Merchant Square office tower
The City of New Westminster’s sale of the Merchant Square office tower is a relief to many at city hall.
This week the city announced 777 Columbia, a joint venture of two well-known tycoons, Joe Segal and Suki Sekhon, purchased the building for $36.5 million.
“[The price was] in the ballpark of what we always said it was worth,” said Mayor Wayne Wright during a briefing at City Hall on Tuesday. “It was tough, hard slogging. The price is right.”
Property tax revenue from Merchant Square will help pay operating costs for the Anvil Centre, said Wright.
And the office tower will also meet one of the city’s primary goals—creating jobs.
“This shows where this city is going. The last 12 years is going to pale to what’s going to happen,” said Wright. “This building was one of the most important pieces of the puzzle.”
The city’s budget to build the tower was $30 million. Of the added $6.5 million it will receive a $4.8 million cash contribution for access to up to 137 parking spaces for office tenants.
The city’s cost to build the parkade is $12.5 million, and it will retain ownership of all three levels.
Segal and Sekhon provided a $5 million deposit when the deal was signed last month. They’ll pay another $6.25 million when the sale closes Dec. 30. The balance will come due when the building is either 75 per cent leased or by Dec. 30, 2017, whichever comes first. The city will also get interest on what’s owed.
Until it’s paid off, the city will hold the mortgage on the building.
When the office tower is full, the city anticipates $650,000 in property tax annually and another $400,000 in utilities. The city also plans to lease a 6,000-square-foot space on the ground floor off Eighth Street for a restaurant and another 800 sq. ft. for a coffee shop across from the SkyTrain entrance.
City officials said the goal of building the office complex was to generate jobs and property taxes and not to make a big profit. No tenants for the 137,000 square feet of office space have signed on.
“The value in office buildings is on the income side which is the leasing. We’re not assuming that risk of holding the building and its operating costs in order to eventually realize the income,” said Lisa Spitale, the city’s chief administrative officer.
The city hopes the office complex will put 500 extra people Downtown. Coun. Bill Harper said the plan was always to use the Development Assistance Compensation (DAC) from casino revenues to not only pay for a civic centre but to leverage it for a tax-generating office tower that would boost the area’s economy.
Two years ago, the city decided to go it alone on the project when Uptown Property Group pulled out of a tentative partnership. The city did it to keep control and also because the DAC funding required completion of the Anvil Centre by December 2013.
But Spitale said by November 2012 the construction schedule started “trending beyond December 2013. That caused a whole lot of fun for us. We went to the province about the likelihood of an extension. We didn’t know if they were going to allow this because previously they had not allowed this.”
But the province said OK as long as the project finished by 2017 and there were no changes.
Former mayoral candidate James Crosty led a petition campaign calling on the city to hold a referendum on the decision to borrow money to finance construction of the office tower.
He said news of the sale made him “pessimistically optimistic.”
“For me the city has dodged a bullet by making the sale, which is a good thing. At the end of the day we needed to sell it because of the potential cost to the taxpayer,” said Crosty. “I would suggest the buyer got a pretty sweet deal.”
He still worries that the city continues to hold a mortgage on a commercial property with no tenants. And he’s suspicious the closing date for the sale comes after the November civic election.
“Segal is a respected business person, he’s got a huge portfolio, I don’t know why we have to mortgage this for him,” said Crosty.
The city said Anvil Centre should be complete by June.
A “soft opening” should follow, with a grand opening and launch of programs in fall.