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Adjacent to the Surrey Central SkyTrain station, a new urban village is springing up in Surrey, B.C. Here is an architectural rendering of 3 Civic Plaza. The tallest tower will house 353 residential suites and will stand more than 50 storeys high. (Century Group)
Adjacent to the Surrey Central SkyTrain station, a new urban village is springing up in Surrey, B.C. Here is an architectural rendering of 3 Civic Plaza. The tallest tower will house 353 residential suites and will stand more than 50 storeys high. (Century Group)

Investment

Smart or risky? When suburban cities become developers Add to ...

Jim Cox is very interested in turning a profit for his corporation. He’s always on the lookout for new development opportunities and potential business partners. He’s quietly assembling land for a future play.

“We’re here to make money,” says Mr. Cox, a trim, silver-haired man whose résumé includes his work on the massive redevelopment of Vancouver’s waterfront land near Stanley Park in the 1990s.

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But Mr. Cox, contrary to what this introduction might imply, is not a private-sector developer. He’s the head of a development corporation created in 2007 by the City of Surrey, the fastest-growing and geographically largest municipality in the Vancouver region.

Under his direction, Surrey City Development Corp. has invested $13-million of taxpayer funds into a $100-million, 50-storey hotel, office and condo complex that will become a key feature of the new downtown the city is trying to create out of what was little more than a SkyTrain stop, a cluster of big-box stores and fast-food outlets, and a giant tower perched on top of a mall. The project, 3 Civic Centre, is due to break ground soon and is to be completed in early 2015.

The corporation also bought a failing mall in its Cloverdale neighbourhood, with plans to redevelop it into a mixed-use project. On industrial land near the river, it is constructing a building geared specifically to house a local brewery that is expanding and couldn’t find the space it wanted in Surrey. It is developing an industrial park in another sector of the huge city. And it is co-developing a 114-unit townhouse project in south Surrey.

Mr. Cox and the Surrey corporation are one example of the aggressive strategies some suburban municipalities are taking as they look for ways to make money from the land they hold or to encourage private development.

Larger cities have ventured into that kind of entrepreneurial development for decades. Toronto has its own development corporation. Vancouver has an unusually active real-estate department. Over the years, it has built rental apartments, bought a giant empty department store in its troubled Downtown Eastside and co-developed it with a private partner, and assembled land in order to foster private-sector development.

But now suburban municipalities are contemplating or adopting a similar approach to take advantage of the land they have or to encourage development for particular goals.

In Surrey, part of Mr. Cox’s work is specifically aimed at creating the conditions for developers to build in the planned new downtown.

Across the river, in the small city of New Westminster, the council is putting $95-million of its own money on the line by developing an office tower on top of a needed civic centre. The Anvil Centre, under construction and due to open in 2014, is meant to spur development around its downtown SkyTrain stop. But it’s also undertaking the risky move to try to generate more activity in its historic but somewhat shabby downtown, with the centre and tower positioned as a gateway to the area.

Developers already building in those areas or those who are contemplating whether to start something tend to be enthusiastic about seeing cities commit their money.

“The investment New Westminster has made is a huge catalyst to development there,” says Robert Fung, who specializes in restoring and upgrading historic buildings.

The city says three developers are in talks with the city about new projects since the tower decision was made, but those aren’t public yet.

In Surrey, the company building the 50-storey tower also expresses admiration for the city’s can-do approach.

Sean Hodgins, president of Century Group, the company building the 50-storey tower, said Surrey’s attitude has made developers feel confident.

That’s not just because of its efforts to assemble land around the new downtown, which provides big blocks that are attractive to developers, or its small investment in the Century project.

It’s also because Surrey has put some serious skin in the game by building a new city hall and new main library, which will be main features of the downtown-to-be.

Mr. Hodgins says, as do many municipal politicians and planners, that it’s understandable that cities would become developers of industrial parks, townhouses, or hotels.

“The local government often is one of the larger developers in a region anyway.”

Darryll Frost, owner of the award-winning Central City Brewery, said the city’s new building for his operation is going to alter the whole area.

“This building is gorgeous to look at. It will be the genesis of that whole area,” said Mr. Frost, whose company will be offering tours and tastings on site.

But the idea of a city expanding its reach beyond community centres, libraries or sewage-treatment plants also makes some people wary of whether it’s going too far.

Michael Geller, a well-known development consultant in Vancouver, was on the Surrey corporation’s board. He quit because he got uncomfortable about some of the deals the corporation was considering.

Mr. Geller said he has no problem with cities trying to capitalize on their land or even to build commercial projects that the private sector won’t.

“If it could be proven that they were a developer of last resort, that’s okay.”

But he doesn’t support cities developing their land with the explicit goal of making money, as Mr. Cox has said Surrey’s corporation has.

“That’s where we part ways. There’s not only the appearance of a conflict of interest. There are going to be conflicts.”

But Mr. Geller is also critical of the New Westminster decision to finance a new office tower, even though the only private-sector partner the city could find for it bailed before construction started. That would seem to make the project in need of a developer of last resort.

But the problem in that case, Mr. Geller said, is the city is plunging into an investment that every other private-sector developer in the city judged as too risky after the city said it wouldn’t allow any condos – the easiest profit-making part of any mixed-use project.

Mr. Cox acknowledges that a city or city corporation has to be more cautious than a private developer.

“There’s no question there’s risk associated. One of the things we’re very careful of is how far and how deep our participation is.”

With the brewery building, the city is leasing it to Central City Brewers at market rates, although it did have to get special financing security because of the risk that, if the brewery were to leave, the city would have a hard time finding another tenant.

He said the corporation is also careful not to price its products below what private developers are selling or leasing for, even though it has an advantage, to avoid accusations of unfairness or conflict.

But Mr. Cox remains firmly convinced about the value of the city’s entrepreneurial approach.

“Because we’re in the market, we can help to achieve community objectives.”

 

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