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‘THE PRICE? THE PRICE IS RIGHT’, SAYS MAYOR OF NEW WESTMINSTER
City sells Merchant Square for $36.5M BY THERESA MCMANUS REPORTER tmcmanus@royalcityrecord.com
The City of New Westminster has sold Merchant Square office tower for $36.5 million. “We are really pleased with everything about this deal from beginning to end. It was a tough, hard slog,” said Mayor Wayne Wright. “The price? The price is right.” Although a developer may have attempted to sell the building for more money, the city’s motivation for selling wasn’t to maximize profits. “Value in an office building is on the income side, which is all the leasing. The leasing part of this building is where the risk is,” said Lisa Spitale, the city’s chief administrative officer. “We are not assuming that risk.” Spitale said the project was never envisioned to be a Mayor Wayne Wright profit-driven venture, as it was done for job creation, revitalization and expansion of the downtown’s economic base. The city’s goal was to minimize risk to taxpayers and maximize the project’s other contributions to the community, such as property taxes and economic developments. “The city sold the office building to remain whole,” she said. “It is basically to recover our costs and create a situation where all the goals we sought out to pursue are being achieved there.” Coun. Bill Harper said the deal wasn’t just about cost recovery, saying the city will turn a profit. While city officials couldn’t pinpoint the net financial gain to city coffers because of the way the deal is structured, Wright said it could be “several” million dollars. According to the City of New Westminster, the office tower’s total budget was $40 million, which included $30 million for construction and $10 million
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The right price: Merchant Square has sold for $36.5 million to 777 Columbia Street, a partnership jointly owned by Kingswood Capital and Duke Holdings. Renowned businessman and philanthropist Joe Segal co-owns that company. The city will retain ownership of Anvil Centre, a conference and community facility. to outfit the building for tenants, as well as money for and commission and leasing costs. Because the purchaser has assumed responsibility for tenant improvements and leasing of the office space, the city will not require $9.5 million that had previously been budgeted to prepare the space for future tenants. “They gave us a $5 million irrevocable credit, basically the same as cash that
we’ll hold until closing. Closing will happen on Dec. 30, 2014, at which time they will transition the letter of credit to cash, and then we will add another $6.25 million. We will have cash in our pocket on Dec. 30, 2014 of $11.25 million,” said Gary Holowatiuk, the city’s director of finance and information technology, during a media briefing. “The balance – $25.25 million – will be paid out basically through
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a vendor take-back mortgage. It will be paid out Dec. 30, 2017 – or when that office tower is 75 per cent leased up. They will be paying interest on that mortgage during that time, compounding semiannually, paying interest out on an annual basis.” City officials said it’s not unusual for a deal of this magnitude to be paid out ◗The deal Page 4
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