Leon’s Furniture Ltd. has been selling home furnishings for more than 100 years. Now, the company has decided to also sell homes.
The furniture empire, with brands such as Leon’s, The Brick, The Brick Mattress Store, and Appliance Canada, plans on turning one of its large plots of land on the outskirts of Toronto into nearly 4,000 new homes, including rental apartment buildings, single-family houses, townhouses and condos.
It will be Leon’s first foray into residential building. Leon’s Furniture Ltd., or LFL, owns 430 acres of land across the country and is figuring out how it can make money from its vast acreage.
The residential project in Toronto is slated for a 40-acre parcel that lies between two major highways – the 401 and the 400 – north of the city. The site is predominantly fields and currently holds the company’s headquarters and a signature Leon’s retail store with its giant signature yellow sign that is visible from the highway.
“I get a question from friends and colleagues all the time. ‘You guys own that farm field in front of you?’ And the answer is, ‘Yes, we do,’” said Mike Walsh, LFL’s chief executive. “We think we can build 3,500 to 4,000 homes of different designs and types to maximize the space,” he said.
LFL is in the early stages of planning. It will start with building a new head office and new Leon’s retail store to replace the ones on the site. Then, it will move onto developing the residential real estate.
Leon’s is the latest to jump into the residential building business in Canada, as the federal government attempts to deal with the lack of affordable housing across the country.
The high cost of real estate had already priced many out of the market before the Bank of Canada started raising interest rates in March, 2022, which caused borrowing expenses to soar. Then, over the past year, rental prices shot up as landlords eliminated pandemic-related discounts and record levels of new immigrants and temporary residents increased demand for shelter.
In order to encourage more developers to construct apartments that are purposely built for rental, Ottawa has eliminated the 5-per-cent federal goods and services tax on new units.
Mr. Walsh said LFL has not yet made a decision on what portion of the new housing will be rental. He hopes his company will be able to use the tax break, which applies to rental construction that begins by 2030 and is completed by the end of 2035.
Leon’s is following the playbook of other big-box retailers and mall operators, which have been changing their properties into residential units, warehouses and office buildings.
RioCan REIT has been developing its shopping centres into a mix of apartment buildings, condos, offices and retail. SmartCentres REIT, whose shopping plazas are dominated by Walmart stores, has been redeveloping some of its land into a similar mix. And Hudson’s Bay Company sold off some of its coveted department stores and changed one floor of its Toronto department store into a co-working space.
Leon’s, The Brick and other LFL brands are known for their large square footage with warehouses, which allow customers to take home their furniture or appliances immediately. But as shopping has changed and more customers order online, LFL has been building smaller stores and warehouses or distribution centres that are centrally located.
Currently, LFL has 303 stores, 22 warehouses and eight distribution centres in the country. Nearly three-quarters of LFL’s 430 acres is pretty much vacant with parking lots, fields or farmland.
LFL has already said it wants to hive off some of its real estate into a publicly-traded REIT, or real estate investment trust.
“It’s about making the best use of the land,” said Mr. Walsh.
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Leon’s Furniture Ltd. announced on Monday that it is closer to developing a master-planned community that includes 4,000 residential units in Toronto.
The furniture retailer received rezoning approval from the Ontario provincial government in December 2023 for the 40 acres of land it plans to develop for mixed-use including residential, commercial and retail elements. This follows an earlier approval it got from the City of Toronto in July 2022.
“By establishing more density as part of a multi-year, multi-phase development, we will be helping to meet the overwhelming demand for additional housing within the city, while generating substantial value for LFL shareholders,” chief executive Michael Walsh said in a press release.
The land is bordered by Highway 401 to the north, Highway 400 to the west/southwest and Jane Street to the east, municipally addressed as 45 and 88‐100 Gordon Mackay Road, and 11 and 35 Suntract Road.
The company’s home office has been located on this parcel since the company went public on the TSX in 1969.
In an interview with the Financial Post, Walsh said the company currently owns 429 acres of land across the country, which it develops on its own for its stores, warehouses and distribution centres.
The company’s retail banners include Leon’s, The Brick, Brick Outlet and The Brick Mattress Store, which have a combined 303 stores across Canada.
Walsh said that while Leon’s remains focused on retail “because that’s the engine behind this company,” he sees great value in its real estate portfolio.
“Unlocking the value of our real estate is massive,” he said. The company’s land and buildings, which are all unencumbered, are valued at $236 million on its balance sheet, and the shares do not reflect that value, he said.
The company said it expects to complete a secondary plan with the City of Toronto for the 40 acres of land in mid 2025. The first phase of development will focus on construction of a new flagship retail store and corporate headquarters on the site and subsequent phases will focus on 4,000 homes including townhouses, mid- and high-rise buildings and community spaces.
“With this particular site … we believe that we can build 4.6 million square feet of gross floor area,” Walsh said. “And so how you maximize that is through residential, high-rise, low-rise, rental units, townhomes. And so each property is different, but when you want to optimize and intensify land, it’s a mix of a whole bunch of different things.”
Walsh said the company is looking forward to commencing public consultation for the land development after receiving government approval.
In May last year, Leon’s announced its intention to create a real estate investment trust (REIT) for its wholly-owned real estate portfolio, subject to prevailing market conditions and receipt of required regulatory approvals, including approval to list the units on the Toronto Stock Exchange.
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