But there’s a business case for those investments, too. They help make a subdivision a destination neighbourhood, and they enhance Daniels Corp.’s reputation as a genuinely socially conscious builder. “We’ve established a persona in the marketplace,” says Cohen.
The company was founded by John H. (Jack) Daniels, the respected Polish-born architect who led developer Cadillac Fairview during its glory days in the 1960s and 1970s, but who was eased out in 1982.
Daniels and Cohen first met briefly in 1982, to discuss a seniors housing development in Toronto. Cohen, with degrees in psychology from McGill and the London School of Economics, had a long track record helping community groups in Toronto and Montreal finance and build co-op housing. An avid guitarist and pianist, he was writing and producing jazz and R&B songs on the side.
After Brian Mulroney’s Conservatives were elected and pulled out of social housing, Cohen got in touch with Daniels again, essentially looking for a job.
Daniels had bought a parcel of land in Mississauga to build townhomes. He was willing to indulge Cohen’s social conscience on the site if he could also generate a profit. “Jack is really quick on his feet. He understands that real estate is up and down and all around. You have to be flexible and think outside the box,” says Cohen. He built the project to then-new R-2000 federal insulation standards, and it sold like hotcakes. Daniels, who is now in his mid-80s, and still chairman and CEO, has been happy to let Cohen run the company ever since.
Even though Mulroney got Ottawa out of social housing, Ontario’s Liberal and New Democrat governments kept at it. In 1995, however, the fiercely right-wing Mike Harris Tories were elected. “Literally the morning after the election, they terminated all social housing programs,” says Cohen. “It was 60% of our business at that point.”
Cohen soon rebounded. Seniors housing looked promising, and he struck up an alliance with Amica Mature Lifestyles that has produced 13 retirement homes and seniors condo projects in Southern Ontario.
Tapping Cohen’s social-housing roots, Daniels also launched several initiatives in the early 2000s to help low-income and first-time buyers. One was rent-to-own buildings called Gateway Rental Communities. Under this approach, a portion of a tenant’s monthly rent earns them credits that can be used toward a down payment on any Daniels home. Another was the company’s FirstHome developments, which are based on a bold strategy: prebuilding.
It took a while to persuade lenders to allow prebuilding. After a condo bubble and bust in the early 1980s, banks and governments required developers to sell at least 65% of a project in advance before they could break ground. That ensured that they could pay off the construction loan.
Daniels told lenders that it was prepared to hang on to any unsold units itself and rent them out. In a perennially tight rental market like Toronto, that pretty much guarantees an income stream big enough to carry any remaining debt, even if sales are slow. “There’s the real magic,” says Cohen.
The risks of the prebuilding approach became apparent when the Toronto condo market froze up during the 2008-2009 financial crisis. Daniels was building the first phase of Regent Park when world markets dived in September, 2008. The first condo building was completely unsold. “That was a difficult moment,” Cohen says drily.
To spark sales, Daniels offered so-called Inner Circle early-purchase opportunities to its own employees, TCHC employees and other supporters of the project.
That’s a standard condo marketing gimmick, and anyone could have got on the list for $250. But the offer provided a reminder that social housing is still a political hot button; it sparked a furor reminiscent of the one that arose when the late Jack Layton and Olivia Chow lived in a co-op.
Among those who took up the Inner Circle offer was a city councillor of the NDP persuasion, Pam McConnell. Daniels began selling the units in May, 2009, and McConnell bought a two-bedroom unit for $400,000-plus—in part to demonstrate her faith in the project. Cohen himself bought two units as an investment, and to show confidence in the project. But by early 2012, those units had shot up in value. The Toronto Sun’s scrappy city hall columnist (and former provincial Conservative candidate), Sue-Ann Levy, complained that insiders had got a “suite deal,” and asked, “Where have all the poor people gone?” The TCHC asked former judge Patrick LeSage to investigate. LeSage reported that there was nothing improper. “Daniels was prepared to take a risk and has done more than required,” he concluded. “In my view, TCHC and Daniels may be proud of their accomplishment.”
So, for now, the politics have quieted. But what will happen to the revitalization and the rest of Daniels’s business if the market plunges? “Do I see a bubble that’s about to burst? No, I don’t,” says Cohen. But even if he’s wrong, there will be plenty to do. “People stretch to become owners, they work hard to become owners,” he says—in any market.