Monday Morning Quarterback: Ottawa’s Foray Into Real Estate

This article appeared in the Globe & Mail last week and highlighted our federal government’s blatantly hypocritical decision to become a real developer, in spite of their warnings about the real estate market.  Typical government…

“Federal Government Gets In On Condo Action With Overhaul Of Ottawa Neighbourhood”
By: Bill Curry
The Globe And Mail

After issuing months of warnings about the rapid expansion of Canada’s condominium market, the federal government now appears to want a piece of the action.

Ottawa is planning a major overhaul of a 49-hectare campus-style property it owns in the nation’s capital called Tunney’s Pasture.

Situated along the Ottawa River about four kilometres west of downtown, it is a drab complex of grey concrete government buildings. But the neighbourhood around it is currently one of the hottest spots for new condo development in the capital.

Created more than 50 years ago, Tunney’s Pasture is the very opposite of the “live-work-play” mantra of modern urban planners who favour intensification and mixed-use buildings. Instead, the buildings on site – which house Health Canada, Statistics Canada and other branches of the public service – are far apart and connected by wide boulevards. After 5 p.m., the area is largely deserted.

The federal government, however, sees an opportunity to turn the property into a place where people can live, work, shop and access the Ottawa River, all without a car. Foreign Affairs Minister John Baird, who is also the political minister for Eastern Ontario, announced Monday that the government is launching consultations on how to redevelop the site. That will produce a master plan by next year that will guide development over the next 25 years.

It is a bold attempt to revitalize a huge swath of land in the city’s urban core, although it could meet resistance from in surrounding neighbourhoods who already complain about too much traffic.

There is also the potential for the federal government to make a lot of money. That could help the government pay for new government buildings and renovations of buildings already on site.

“This is a great location,” said Roger Greenberg, CEO of Minto Group Inc., one of Ottawa’s largest residential developers. Mr. Greenberg said the amount of money Ottawa could raise would be “considerable” given the size of the property and its location.

While the federal government has been mostly expressing concern about the potentially overheated condo markets in Toronto and Vancouver, Mr. Greenberg said Ottawa’s market is far less volatile because of its base of well-paying government jobs.

“Ottawa has always been a much more stable environment,” he said, noting that he’s eager to hear more detail from Ottawa about the plans.

Many of the government buildings at the site need to be completely renovated or torn down and the federal government is testing the public’s appetite for filling in the space between government buildings with condos and commercial space. Ottawa wouldn’t build the condos, but could potentially lease or sell some of the land to developers.

“There are a number of options that are available,” said John McBain, an assistant deputy minister with the department of Public Works. “We would look for private-sector partners. But certainly we want to get away from the cold, institutional feel that the Pasture has now and develop more of a mixed use that would have eyes on the street, that would have people living in the community.”

The location includes a station on Ottawa’s bus-only Transitway that will become the western end of a new light-rail line running through the city’s urban centre by 2018, making it even more attractive to developers and potential home owners.

Katherine Hobbs, a city councillor for the area who has seen drawings of the proposed developments, said there would be about 12 new residential buildings.

“I’m very pleased. It’s a great plan,” she said.

Getting public support in the city of Ottawa, however, won’t be easy. While the city council is broadly supportive of plans to have more people living in and around the downtown to reduce the financial pressures of urban sprawl, people living in the affected neighbourhoods have been vocal in their opposition to other projects.

Plans for new condos on the east side of Parkdale Avenue – across the street from Tunney’s Pasture – are currently the subject of heated debate over their height and potential impact on traffic in the area.

The federal plans could double the number of public servants working at Tunney’s Pasture from 10,000 to 20,000.

Jeff Leiper, a spokesman for an area community association, said traffic will be an issue but he welcomed the plan because it could ease the current pressure from developers to build high rises in established residential areas.

“Over all, we’re excited,” he said.

Wow, when was the last time you heard something so hypocritical?

For the last few months, we Canadians have been inundated with warnings from Jim Flaherty, Mark Carney, and all the boys in Ottawa who believe they should be in control of our finances about the impending doom that faces the real estate market, personal credit, savings, retirement plans, and basically anything else we could fear.

Correct, or incorrect, I find it hypocritical that Ottawa would warn us about the impending doom facing real estate owners and then turn around the next day and announce plans to delve into real estate development themselves.

Has anybody been following the labour negotiations in the National Hockey League?  I’d like to draw a parallel.

This summer, several NHL teams have signed players to ludicrous 10 or 12 year contracts, for over $100 Million.

Then, the same owners who have approved (and probably spearheaded) these deals in the first place, turned around the next day and told the NHL Players Association that they want to reduce salaries, impose maximum 5-year contracts, and re-structure the entire financial system.

How can you sign a player to a $100 Million contract one day, and then claim poverty the next?  How can you sign a player to a 12-year deal one day, and then demand the elimination of contracts longer than 5-years?

It’s absolute hypocrisy.  In 2004-05, I sided with the owners against the greedy players.  In 2012-13, I’m siding with the players against the self-righteous, hypocritical, self-interested owners who care more about the success about their own individual team than the success of the league, even though they wouldn’t have the former without the latter.

But you’d better stop me there before I go on a real rant…

Hypocrisy exists in all industries, but when it’s so damn obvious (like these two cases), it’s almost comical.

Real estate development is a tough game!  Good luck to Ottawa, and hopefully the taxpayers won’t have to suffer the burden of any financial losses…


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  2. jeff316 says:

    Sometimes government can’t seem to win. When it acts within its traditional narrow scope, it gets bashed for being too rigid, unimaginative, not innvoative, not maximizing potential or trying new things, and when it takes chances, it gets criticized for going beyond its mandate, taking chances, ignoring risk.

  3. Ralph Cramdown says:

    As I recall, the specific warnings out of Ottawa have been about Vancouver, Toronto and people who take on WAY too much debt, rather than all real estate buyers countrywide.

    Regardless, if Ottawa is selling assets on my behalf, I’d hope they’d attempt to maximize the price they get by all means legal and ethical. Here’s hoping it’s a straight sale and not a profit sharing partnership.

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