Of all the tenants and “hot prospects” the MaRS Discovery District has lined up to fill its empty Toronto office tower, only one is a private innovation company that is not already located at the business incubator’s main facility, according to a review of a leaked document that helps explain why MaRS turned to the Liberals for a bailout that could cost taxpayers hundreds of millions of dollars.
The high-powered board of the science and technology innovation hub is now warning that the public controversy swirling around the Liberals’ proposal to buy the building could jeopardize the deal.
“The fact that these documents have been made public may, in fact, be harmful to the ultimate completion of the real estate transaction that is under way,” the board said in a statement Friday.
The Liberal government previously gave MaRS Discovery District, a technology and medical research centre, $71-million plus a $234-million loan to build an office tower in downtown Toronto, but the charity and a private real-estate company that had a stake in the building are unable to pay back the loan. The Progressive Conservatives have accused the Liberals of trying to bail out the incubator by negotiating to purchase the building for $317-million – a price that includes the loan.
Earlier Friday, the Tories said the cost to taxpayers of rescuing MaRS could be even higher since the documents indicate the government might help subsidize MaRS’s operating budget, pay to set up office space in the building and break lease agreements in other Toronto office buildings to move civil servants into the MaRS tower.
The Liberals took issue with the PCs’ figures and said the potential deal was a good one for taxpayers.
The building, which was completed earlier this year, is the second phase of the MaRS facility. While the first phase is at capacity, MaRS has struggled to attract tenants to the new tower – something one observer intimate with technology startups blamed on the building’s price and location.
“Probably the number one reason is cost. Startups are very market-driven. They want to spend money on people, which are the number one reason for success or failure, and as little as possible on space,” said Christian Lassonde, a managing partner at Impression Ventures, a Toronto venture capital firm that has worked with MaRS clients.
An internal May 13 report to the Treasury Board – which the Tories obtained from a whistle-blower and released Thursday – shows virtually no new private-sector tenants are poised to move into the now-vacant tower.
A chart titled “Phase 2 leasing status” lists the confirmed and potential tenants for the 20-storey tower as of March 26.
The only leases that had been signed by that date were for two government-funded entities, both of which were announced as major tenants back in 2011 when the Liberal government announced the second phase of MaRS would go ahead.
One is Public Health Ontario, which is expected to move its main labs from a government building in Etobicoke to the top four floors of the tower this fall; the other is the Ontario Institute for Cancer Research, currently located in the first phase of the MaRS facility.
The chart shows lease offers were signed from eight other entities. Four are retail food outlets, one is an office furniture supplier, two are companies already located at the MaRS main building and the last is the offices of MaRS Innovation, which helps commercialize discoveries made at Toronto’s research hospitals and universities.
The chart includes a “hot prospect” list, only four of which have offers in final negotiation or leases out for signature. Of those, only T4G, a tech company with six locations across Canada and 250 employees, is a private company without a current presence at MaRS.