The Bayside Centre – The Centre of It All
From my perch in the concrete cliff (otherwise known as the Boat Building), I gaze southwards to the “minarets of money” in the Chemical Valley and across the vast roof expanse of that great behemoth known today as the Bayside Centre. The Centre is a whale of a building the length of the downtown core and occupying roughly one fifth of its footprint.
It’s about this BIG!
300,000 plus sf building.
245,000 sf of leasable space.
600 heated underground parking spaces.
200 surface parking spaces.
A 50% or more vacancy rate
Original Value: $30 million plus $6.5 million for land acquisition.
Building Replacement Cost: approximately $50 million
Current Asking: $6.5 million
Those were heady days back in 1982. Derelict buildings along the waterfront were being replaced by upscale apartments and office buildings. But the crowning glory was the grand marriage between Cadillac Fairview’s new Sarnia Eaton Centre and the City of Sarnia’s land acquisition that made it possible. Everybody was doing hybrid marriages and building sprawling downtown estates in those days: London, Chatham, Guelph, Brantford, Peterborough. They were heralded as the solution to urban renewal. Cadillac Fairview even brought along its adult children from previous relationships (Eaton’s, A+P, et al). It was going to be one big happy family.
Everyone, who was someone, attended the ceremony. MPP Andy Brandt, who had first proposed the idea as an alderman ten years before, and then as mayor. James Bullock, the president of Cadillac Fairview. John Eaton, and the cream of the crop of local politicians and the business and social elite filled out the wedding party. The highlight was the toast to the bride and groom by the Premier of the Province of Ontario, uncle “Big Daddy” Bill Davis, whose conservative government had paid the dowry for the bride by granting the money for the land acquisition. What a party! For a while, it seemed that retailers and patrons would continue celebrate into the future. For a while.
Sadly, like too many marriages that begin with the best of intentions, the reality of the personalities soon made themselves apparent. Temptation laid just ten minutes down the street (Hwy 402). The siren call of the Lambton Mall flaunted financial and locale incentives in what was then Clearwater. Soon enough affluent residents of the municipality and the Lake Huron shore found the call too convenient to ignore. Newcomers and downtown dwellers found spacious suburban home developments to enticing. Big Boxes moved in too. It took a while, but the adult children in the Bayside family home (Eatons, Mark’s and Spencer, A+P) were looking for greener fields and abandoned the nest, creating deep insecurities among their new sibling retailers. The local neighbours began gossiping the “I told you so’s” and soon everyone shunned the family. By 1996, Cadillac Fairview exercised their big city smarts and found a local boy who had made good (Lou Longo) to assume the mortgage and marital responsibilities, and then quietly skipped town. Being the reputable type, Longo put the best construction on everything including a new name, the Bayside Mall. But the Mall had passed its retail prime and finally found itself under the thumb of a land speculator (SAMAK Management and Construction) who levied the abuse and abandonment that one might expect of an absentee landlord. In this world of just retribution, SAMAK then fell victim to the various excessive financial demands of its harem of properties. The dream was crushed. In December of 2012, the authorities were called in the form the Ontario Superior (bankruptcy) Court and a Receiver (A John Page and Associates) was appointed to bring some stability and resolve the family debts.
It would make a good soap opera, but it makes a better reality show that involves economics, politics, and urban planning.
Who are the players today and what are their motives?
The bank, ICICI, an Indian financial institution with branches in Canada, is the mortgage holder seeking payment on their mortgage of about $13 million. The bank’s sole objective is to recover as much of the debt as possible. Their case is straightforward – time is money. (read, “a bird in the hand….”, if one could be found).
The Ontario Superior Court of Justice controls the building and has appointed the Receiver to manage and dispose of the building.
The Receiver has stated that they would prefer a settlement which maximizes the financial benefit to the Bank while achieving a sustainable business operation for City (read, “no land speculators may apply”). It sounds altruistic, but the reality is probably to sell at any cost acceptable to the Bank. There have been no serious bidders in the past year, so the Receiver would like to sweeten the deal by combining the building with the land into a single package more attractive to the market.
The County of Lambton (of which the City is a major player) is the largest tenant at 56,000 sf and is negotiating a two year lease renewal with the Receiver.
The City of Sarnia owns the land debt free and receives taxes from the mall based on business revenue. They would prefer another investor with big ideas and deep pockets to restore the mall to prosperity. But that would seem unlikely given the current state of business economics. The impact on the remainder of the downtown retailers could be a painful repeat of history in the short term until consumer demand increases to fill the capacity of both.
Currently, the City seems reluctant to turn over the deed. The property has been sold on two previous occasions without the land. So why get involved in the sale of the building?
The City might consider selling the land under circumstances favourable to the taxpayers. In May of 2013, Council approved the sale of the lands in concept, but by September 2013, no acceptable deal could be negotiated. The resolution remains in effect. No doubt the Bank balked at their last proposal. If the City sells the land, they need to receive some reasonable amount proportional to the value of the building. Based on the original costs, 20% of $6.5M, or $1.3M would be a starter. Any other proportion resulting in less, would be the “sell low” part of the “buy high, sell low” philosophy of a losing investment. Without the County as tenant, the building would be effectively closed, and relinquishing control of the land could effectively eliminate the City from influence on a future deal where investor promises frequently seem to be more style than substance. The mayor stands by the record of the City noting that the zoning is wide open, parking is not required for most uses, the support for recent developments along Front St, a major financial contribution towards the new art gallery through the County, and improvements under consideration for the Library, amongst others as evidence of their willingness to create a welcoming environment for business.
The Receiver has hired Larlyn Property Management, a national firm with head offices in London, Ontario, as the day to day managers of the newly named Bayside Centre.
Larlyn has a vision to increase the proportion of tenants to 60% commercial and 40% retail. The concept is to bring more workers into the Centre to support fewer retail establishments. They hold out the Citi Plaza (formerly London Galleria) as a successful example. That facility now accommodates offices, various institutional education services, a fitness club, and a public library among its commercial tenants that lease 60% of the space and with a 88% building wide occupancy rate. It’s an idea with practical and financial benefits. Employees in the Centre would be introduced to a downtown live-work lifestyle. Further, there could be the ultimate goal of a river view apartment building on the site which would improve the population density with more affluent residents and wider use of the existing parking garage.
Similarly, the City also sees more non-profit tenants as part of the solution. This may be a temporary benefit, but the workers for those agencies and their clientele fall short of the purchasing power of the employees from profitable enterprises.
Continued resistance towards adding new developments would help reduce the shifting of retail and commercial space that currently leaves older buildings vacant. Replacement, reuse and renovation are the sustainable path.
The downtown holds some unique characteristics in its favour as the only authentic urban setting in the City: a public waterfront, affluent residential housing of various sorts, funky restaurants, several cultural venues, and boutique shops. Further development of this kind of an urban lifestyle would seem to be natural, and finding mutually beneficial ventures between the Centre, downtown businesses, and cultural venues will be a necessity for success.
Individuals and business owners who live and work in the downtown core are the legitimate evangelists to the cause. Some have resisted the urge to cut and run. They carry on day to day in the hopes of better times. Others have already made renovation investments in the future of the downtown. These two groups more than any others have the most to gain in sharing their vision and experience to convince newcomers of the benefits that a revitalized downtown could bring.
The foremost requirement for success lies beyond the control of any single player. Continuing coordinated efforts to broaden the market for industrial and manufactured products, marketing of a bluewater lifestyle to retirees and professionals, and identification, coordination, and targeted regional promotion of tourism assets, are fundamental to creating consumer demand for retail and commercial services. Investments of time, money, and creativity by all parties to leverage these advantages are must to support a variety of life style choices that would include an authentic urban environment as a viable counterbalance the surrounding suburban amenities. Organizations such as the Sarnia Lambton Chamber of Commerce, Sarnia Lambton Economic Partnership, Tourism Sarnia-Lambton, County of Lambton, and the City of Sarnia, are working together to achieve these goals. But only investors can weigh the risk of timing the results.
If only compared to the original cost of $30 million, the current building is undervalued at $6.5 million. One alternative that could be a win-win for all parties would be turning the property into a commercial condominium. Like a residential condominium, businesses could purchase space and pay condo fees for the maintenance of common spaces and the building. It’s a messy way to sell a building, but in the absence of interest for the past year, perhaps it’s a better alternative to eating the elephant whole.
The cost of owning a piece of first-class commercial/retail space with enclosed parking would be within the range of more investors and businesses. Selling small creates the opportunity for future sales momentum to grow. As more space is sold, the unsold portions would become progressively more attractive to a wider range of investors. Local owners would have a greater commitment to the success and sustainability of the facility and the downtown as a whole. Future residential development revenue could provide a dividend offsetting the condo fees.
The mortgage for the bank could be paid off over time just like any other mortgage.
More units sold would mean more tax revenue to the City.
The property management company could gain a long term management contract on behalf of the Centre owners.
The commitments of the Receiver and the Court could be discharged.
The stakes are high for the downtown and the City as a whole. Sarnia is a small city, and that is both its blessing and its curse. The blessing is that finding a shared vision among government, institutions, and business interests can make good things happen. The curse is, when there is no shared vision, we will all suffer the folly of floundering.
David Lavender is a local architect with an international practice. You can contact David at email@example.com or follow him at @LavenderArch.