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COLUMN: Did New Westminster get a good deal on its office tower?
Note: This column has been revised from its original version, to include "fit out" costs for Merchant Square.
Did the city strike a good deal with its sale of the Merchant Square office tower?
Depends on what you want from your city.
First off, the sale is a wash. Meaning, taxpayers won’t be left on the hook for any debt that isn’t covered by anticipated revenues. Outstanding is about $5 million, which the city says it’ll pay off over 20 years with revenues from the project’s parkade.
Could the city have got more money for the office tower? You bet.
It sold for $266 a square foot. In January, the six-storey RBC building at the corner of Sixth Avenue and Seventh Street in Uptown sold for $472 a square foot ($32.4M for 66,700 sq ft). That's quite a difference. And we’re talking a building that is 15 years old, and nowhere near a SkyTrain. The cost to "fit out" Merchant Square for tenants would add about $9.5M onto the cost for the purchaser. So it's probably fair to say Merchant Square's cost is about $335 per square foot compared to $472 for the RBC building. Still a fairly big difference.
So Joe Segal and Suki Sekhon got a sweet deal with the office tower. Once it’s leased, they might be able to sell it for $50-60 million.
But do you want the city taking that risk? What will the commercial real estate market do in the next two years?
As the city puts it, their goal wasn’t turning a profit. One goal was to stimulate Downtown as a centre of employment, in this case a tower to house about 500 employees. The tower will generate $650,000 in property tax annually once it’s leased.
Significant benefits, that should continue to bear fruit. The mayor says what’s most exciting is what happens next.
So there’s the difference.
Would you prefer the city had held on to the tower, keeping its cards on the table, with hopes of a big windfall? Or would you rather they did as they did—recognize when they’d won the game, and not push it, and risk losing it all?
• Chris Bryan is editor of the NewsLeader.