Green Grow the Rushes, O

One is one and all alone
Among all that is -- and isn't -- currently being said by candidates with their eyes on the January 23 election, there's little reference to the idea of repatriating one time industrial sites, many of which fell on hard times as offshore (and highly competitive) sources of their products steadily came into being. Perhaps we aren't a victim of this kind of economic downturn here in the Niagara Region as much as has been the case in more heavily industrialized locations like Hamilton, parts of Toronto, and US cities such as Buffalo. Nevertheless, there are abandoned factories scattered thoughout our area, as witness several in Niagara Falls and Welland. Moreover, there continue to be doomsayers who forsee the General Motors exit from St. Catharines as being only a matter of time. What would become of Plants One and Two, etc., then, eh?
The Green Party might be expected to have this situation as part of its platform, but I can't say that they've made me aware of it. Admittedly, they have concerns about the environment, but this isn't quite the same as worrying about what's to become of stretches of land that were once the scene of great -- and prosperous -- activity but are now, in every sense of the words, sitting there gathering dust.
At most, the McGuinty government's introduction of Green Belt legislation perhaps has some connection with the topic. Nevertheless, the purpose of this political move is to prevent further urban sprawl rather than bearing down on the problem of derelict manufacturing plants.

Two, two, the lily-white boys
Despite it all, however, hope lies on the horizon.
Indeed, within the Niagara Economic Development Corporation's plans for ensuring the Region's economic growth, there's a decided interest in encouraging the revitalization of what are called brownfield sites. In fact, an all day conference held at the Sheraton Fallsview Hotel on December 14 was focused on the opportunities that can be found hereabouts for turning round disused -- and, in most cases, contaminated -- industrial properties.
People with a wide range of backgrounds attended the sessions and a healthy number of real estate brokers and agents were among them. Perhaps they were present because the day earned them some credits that they all now need to renew their licences, but their participation also underlined a recognition that the real estate business increasingly goes beyond simply selling houses nowadays. For example -- and especially in the commercial field -- things are, in a quite special sense, not what they used to be. Rather, they can be full of chances to create something entirely new and, quite often, excitingly different.
The day -- promoted as Action Niagara: The Economics of Smart Growth -- featured a series of presentations by some knowledgable people and, to my mind, the winning line came as a caption to a photo similar to the one at the top of this page. It was projected on a screen behind the speaker and wryly observed:
"I remember when all these trees were a parking lot."

Three, three, the rivals
Apart from the need to turn brownfield sites around, there's a compelling agument for replacing many other elements of community infrastructure in an extensive list of locations. Just as some factories have outlived their usefulness, numerous roads, bridges, water sources, sewer systems, and a variety of public buildings such as schools are no longer able to properly serve the needs of people using them. The majority of them were built long before today's heightened demands and expectations were envisaged. Moreover, the cost cutting that governments at most levels have decided upon -- for good reasons or not -- has led to what can be called an infrastructure deficit that runs into billions of dollars. Depending on which expert you talk to, the figure ranges from $60billion to $130billion from one end of Canada to the other, but there's little question that the shortfall is growing year by year.
Somewhat coincidentally, however, the problem is similar to the one that faces an owner or developer who's willing to revitalize a brownfield site. There's really no single authority who'll exercise the authority or assume the responsibility for anything!
There are no clearly set out rules and there are no obvious ways to obtain planning approval, let alone of ensuring it. Nor is there much of a welcome from the traditional funding sources or even many of the non-traditional lenders. Perhaps nothing succeeds like success, but the revitalization process is widely seen as a mistake waiting to happen.
Small wonder, then, that there's a scarcity of buyers for abandoned industrial properties and sites -- and most real estate agents will tell you so without hesitation.

Four for the gospel makers
Again, however, there's hope on the horizon.
Small in number though they are, individual investors and specialist companies are increasingly emerging to take on the challenge. Moreover, there's growing evidence that the projects don't end up in failure.
In confirming this fact, the Action Niagara day included a presentation of several inaugural Niagara Community Design Awards. These recognized that Smart Growth principles can be successfully embraced and included such noteworthy examples as the Thundering Waters Golf Club in Niagara Falls, The Keg Restaurant in St. Catharines, and the City Core Revitalization project that's currently under way in downtown Thorold. There was also a Pioneering Leadership Award presented to Nino Donatelli of the Merriton Developments company, whose early and still ongoing belief in the possibility of turning things around puts paid to all the sceptics who questioned his wisdom in doing what had never been done before.
The upbeat tone of this presentation session was followed by three separate group discussions about the implications of "making something out of nothing." In particular, the one concerned with "Financing Smart Growth" came up with a view that, ahem, it's like working on your second million, which is easier than trying for the first one.
Even so, there was consensus that it can be done, even if it calls for a learning experience and usually includes some hard lessons.

Five for the symbols at your door
Perhaps one of the most interesting points to emerge during the day's sessions was that, despite the uphill battle with planning officials, lending people, and anyone else with a preference for traditional (and therefore proven) development proposals, the profitability is quite likely going to be higher than normal.
Part of the reason is the absence of comparables, which allows developers to have business plans that will give them a better than average R.O.I. Moreover, the acquisition cost is attractive, even though it usually calls for a cash, no condition offer (which is why Smart Growth participants need to have deep pockets). For instance, Nino Donatelli's company picked up Domtar's old 30 acre site at Glendale Avenue and Merritt Street for less than $1.5million, and The Keg Restaurant (which was the first outcome) has to be worth at least that already. In turn, the final value of the building on Hartzel Road (which is destined to be an hotel, retail, and condo complex) will undoubtedly run into several hundred times the price paid for the land.
Niagara isn't alone in this kind of revitalization, of course. The ongoing conversion of old Toronto industrial buildings into upscale lofts, not to mention their encouraging rate of sale, is proof that our local developers aren't going in a wrong direction.
All told, things are looking good and, in my opinion, we can expect more of the same hereabouts -- regardless of which party succeeds in the current hustings.

With my customary warmest regards to everyone and, of course, every good wish for 2006.

Duncan Pollock, Real Estate Broker,
427 Gate Street, Niagara-on-the-Lake,
Ontario, Canada L0S 1J0
Tel: 905-468-3154 Fax: 905-468-3812
Cellular: 905-704-9037
email: duncanpollock@sympatico.ca
Note: e-mail address changed as above on November 3 2007
website: http://www.duncanpollock.com

PS. One of my web pages provides a list of the other newsletters I've sent out. If you choose to go to it, you can click on any title to bring up its full text.
PPS. I've recently been invited and encouraged to create a second website, one that deals with my approach to the industrial, commercial, and investment real estate market. You can reach it, if you're so inclined, at http://www.iciniagara.com.