From the Herald.
Developer’s deal of the century?
Property specialist: 99-year lease ‘ absurdly low rent’ for Salter Street block
By BRUCE ERSKINE
Business Reporter
Centennial Group Ltd. is getting a great deal on its lease for the Salter Street block property on Halifax’s waterfront, says the vice-president of investment sales with DTZ Barnicke in Hali f ax.
“It’s an absurdly low rent for that property," Tim Margolian said Wednesday in an inter view. “It could be significantly more — probably double.
“They’ve undervalued the land by a long shot."
Centennial, which is led by prominent local developer Ralph Medjuck, will pay about $39 million in rent over the course of its 99-year lease with Waterfront Development Corp. Ltd. for the Salter Street water front block. Lease documents filed with Service Nova Scotia’s land registration office in Dartmouth detail the rent ag reement for the 1.4-hectare property. It will be home to a $75 million devel opment that will include a 142-unit apartment building, a 98-unit hotel, 75,000 square feet of retail space and a half-hec tare public park.
Centennial will pay $50,000 a year in rent during the con struction phase. That rate will apply for five years or less, de pending on how quickly the complex is occupied.
Rent for the next 15 years is fixed at $275,000 a year.
Rents will then increase in 10-year increments: $320,500 a year for years 21 to 30; $332,750 a year for years 31 to 40; $366,025 a year for years 41 to 50; $402,628 a year for years 51 to 60; $442,890 a year for years 61 to 70; $487,179 a year for years 71 to 80; $535,897 a year for years 81 to 90; and $589,497 a year for years 91 to 99. Colin MacLean, Waterfront Development’s president and chief executive officer, said the provincial Crown corporation negotiated incremental rent in creases because of income uncertainties tied to the lengthy lease term.
“It’s hard to predict property incomes at that time. That’s why we chose to do 10-year in crements."
The lease also includes provi sions for the corporation to re ceive 3.5 per cent of gross reve nues above $1 million in any given lease year from a restau rant that Centennial plans to build.
MacLean said that arrange ment will allow the corporation to benefit from what it thinks will be a successful eatery with out risking public money.
Frank Medjuck, Centennial’s legal counsel, said the lease agreement “absolutely" re flects fair market value for the waterfront property.
“It was independent people negotiating back and forth."
He said Waterfront Develop ment will realize an “upside" from projected restaurant reve nues.
The lease also includes a pro vision that could terminate the agreement if construction doesn’t begin by next June.
But Medjuck said Centennial has “no concerns" on that front.
The company has a long de velopment track record.
MacLean said he was confi dent that footings for the pro ject will be in place by next June, which would fulfil the agreement’s construction mile stone requirement. “They’ve given us no indica tions otherwise," he said, not ing that the Medjucks have built “a lot" of Halifax. “I feel positive about it."
Michael Turner, president of Halifax real estate consultants
Turner Drake & Partners Ltd.,
wasn’t privy to details of the long-term lease, but he didn’t think much of the concept.
“I think the WDCL and the province’s policy of leasing benefits nobody," Turner said.
Long-term leases allow poli ticians to pretend that promi nent public properties such as the waterfront haven’t been sold to the private sector, he said. But Turner said they give leaseholders little incentive to redevelop those properties mid ter m.
“They don’t have enough ten ure left. It wouldn’t make sense."
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