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Report on Business Google affiliate Sidewalk Labs partners with Teachers to form infrastructure company

Sidewalk Infrastructure Partners, launched Thursday, hopes to invest not only in Sidewalk Labs’ Toronto project, but in similar 'technology-enabled' infrastructure across North America.

Andrew Lahodynskyj/The Canadian Press

Google affiliate Sidewalk Labs is partnering with the deep-pocketed Ontario Teachers’ Pension Plan to launch a new company to invest in high-tech urban infrastructure, even as it remains in contentious talks over its sweeping plans for a “smart city” across Toronto’s eastern waterfront.

Sidewalk Infrastructure Partners, launched Thursday, hopes to invest not only in Sidewalk Labs’ Toronto project, but in similar “technology-enabled” infrastructure – such as dynamic traffic-monitoring systems using multiple sensors – across North America.

The concept for the financing vehicle was first outlined in Sidewalk’s master plan for its Toronto ambitions, unveiled in June, without naming any partners. The new company was registered in Delaware last November.

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In March, The Globe and Mail first reported that Sidewalk Labs, which is a subsidiary of Google parent Alphabet Inc., had approached potential backers and entered into preliminary agreements with financing partners for infrastructure projects associated with its proposed 12-acre smart-city development on Toronto’s eastern waterfront.

Sidewalk Labs remains mired in talks with Waterfront Toronto, the municipal-provincial-federal agency overseeing Toronto’s waterfront development, over its ambitious but much-debated blueprint.

The proposal has sparked privacy and surveillance concerns over Sidewalk’s requests for exemptions from zoning and other rules. The company has stated its goal is to expand its reach across a much broader 190-acre swath of Toronto’s eastern waterfront, for which the city had already developed plans.

Sidewalk Infrastructure Partners says on its website that it aims to help cities update infrastructure amid rapid technological change. It mentions projects related to self-driving cars or the move toward localized power generation known as “distributed energy” – both potential components in Sidewalk Labs’ plans for Toronto’s waterfront.

Waterfront Toronto initially chose Sidewalk Labs as its “innovation and funding partner” to design a prototype smart city on a 12-acre parcel of land known as Quayside in the fall of 2017. But the project, still subject to final approvals by Waterfront Toronto and all three levels of government, became plagued by controversies and delays as Sidewalk developed its purported master innovation and development plan, which it unveiled in June.

Both sides have agreed that if key hurdles cannot be overcome by Oct. 31, they can pull out of the deal. Among the “threshold issues” are Sidewalk Labs’ call to be involved across a much wider area than originally proposed, and the company’s demand for a new light-rail line.

But both the company and Waterfront Toronto suggested Thursday’s new venture will have little effect on the current negotiations.

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“In terms of the deal with Sidewalk Labs and Waterfront, at this point I think it’s not relevant, only because we haven’t even reached the point of whether we’ve been able to resolve the threshold issues,” said Stephen Diamond, the chairman of Waterfront Toronto’s board, which must vote on whether to approve the deal.

Keerthana Rang, a spokeswoman for Sidewalk Labs, said the new venture is a standalone company that could have a role in the Toronto development.

“Sidewalk Infrastructure is a separate company with a mandate to invest in technology-enabled infrastructure projects throughout North America," she said in an e-mail. “This includes making [Sidewalk Infrastructure Partners] financing available as a potential option to those companies or partners ultimately designated to take on advanced infrastructure systems as part of the Sidewalk Toronto project.”

Activists who oppose the project say the deal with one of Canada’s largest pension funds appears meant to bolster the appeal of New York-based Sidewalk Labs in Toronto.

Thorben Wieditz of the Toronto group Block Sidewalk said the financing partnership comes before any deal to develop the Toronto lands is finalized and argued that Sidewalk Labs has failed to reveal enough about its business plan.

“Obviously, it’s a strategic move and it’s a very smart move,” Mr. Wieditz said. “The Teachers’ Pension Plan has a good reputation for doing due diligence. From our perspective, we would hope that they would do due diligence and take a good look at this proposal.”

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There has been a global chase among major institutional investors such as pension funds for infrastructure assets. Teachers’ assets in infrastructure have increased from just less than $10-billion in in 2012 to $17.8-billion at the end of 2018. All told, the plan, which serves Ontario’s 327,000 active and retired teachers, had $192-billion in assets on Dec. 31.

This latest investment will be made by the Teachers Innovation Platform, a new division formed earlier this year to invest in companies that use technology to disrupt incumbents and create new sectors of the economy.

Its first deal was an investment of undisclosed size in SpaceX, a privately held company founded by Tesla Inc. leader Elon Musk that ultimately aims to send a commercial spacecraft to Mars. Teachers has not said how much money it will commit to its innovation platform division.

Olivia Steedman, head of the innovation platform, said in an e-mailed statement that the partnership allows Teachers to combine its infrastructure and investment expertise with Alphabet and Sidewalk Labs’ capabilities in technology.

Sidewalk Infrastructure Partners co-chief executive Brian Barlow echoed that message, also in an e-mailed statement: "We look forward to drawing on our partners’ leadership in technology, urban innovation, and infrastructure systems to make infrastructure more sustainable, intelligent, and efficient through technology.”

In an internal Sidewalk Labs report to parent company Alphabet Inc. last November, Sidewalk Labs said it had completed seed financing for its infrastructure plans, and had entered into preliminary agreements with external investors. The company also wrote in the document that it had “discussed general capital structure with the [Canada] Infrastructure Bank.”

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The bank confirmed it had had preliminary discussions with Sidewalk Labs.

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