Cadillac Fairview Betting Big on Downtown Montreal

Cadillac Fairview has invested $150 million buying land around the Montreal Bell Centre and plans on building a similar style development to Maple Leaf Square in Toronto (See here). Maple Leaf square, following in the footsteps of LA Live in LA and Victory Park in Dallas, is a hugely successful development that capitalizes on the brand of pro franchises in Toronto. This bodes well for the proposed Montreal development since there is no stronger brand there than the Habs.

Here's a quick Comparison to the Actual Maple Leaf Square and proposed development in Montreal:

Transit
Maple Leaf Square: Next to Union Station
Proposed Montreal: Lucien-L'Allier Station

Office Component
Maple Leaf Square: 10 Storey
Proposed Montreal: 27 Storey

Residential:
Maple Leaf Square: 872 units between two buildings (54 and 50 Storeys)
Proposed Montreal: 700 units between three buildings (Two 44 Storey buildings and one 25 Storey building)

Cost:
Maple Leaf Square: $500 million (2005)
Proposed Montreal: $400 Million

Prices at Maple Leaf Square started at about $450 psf with a 25% deposit structure. This was much higher than competition from nearby Montage at Cityplace. Montage was about $300 psf with a more flexible deposit structure. Expect this project to charge a premium over others as well.

Worth it?

While Montage topped out at about $500psf....Maple Leaf Square approached $700psf this year.

People saw good value living at Maple Leaf Square and units were sold quickly. I expect to see the same thing when Cadillac Fairview starts the sales in Montreal later this year.

Anecdotally, from the Real Estate agent community, i've been told that a huge component of the buyers at Maple Leaf square were overseas investors. Wonder if the same will hold true in Montreal.

Employment Diversity and Effect on Job Loss during the Recession

Thanks to Don Campbell for keying me on this fundamental.

When the Conference Board of Canada publishes its quarterly economic outlook for Canadian cities we take a particular interest in how they rate the diversity in the amount of industry groups for the town.

Diversity is a strong indicator for how resilient the town will be in the future when shocks to the local economy happen.

Resilience, rhymes with Brilliance, is defined as “the power to return to the original form after being bent or stretched; elasticity; buoyancy; ability to recover readily from illness or adversity

During the current recession the oil and gas sector in Alberta had overall job losses as the price of oil faltered and investment in Oil sands was postponed. Edmonton and Calgary have weathered the storm of job losses (in fact they gained 0.2% and 0.4% new jobs respectively) in part because the cities were diverse outside of oil and gas.

Toronto with its massive job market (almost as big as the combined labor force of Alberta and Saskatchewan) is an example of great resiliency. The number of people employed in Toronto has decreased 2.0% vs. the 2.3% loss for the entire province of Ontario (Ottawa has a less diverse economy and lost 4.8% --more jobs than the provincial average).

Toronto has survived the Nortel crash and it has survived the NAFTA transition away from manufacturing in the past...and will survive the global financial meltdown and the auto sector mess today.

As for the anomalies in Quebec and Vancouver...who cares!

I won't even begin to explain Montreal and Quebec City because I would never invest their anyway....one of the most anti-landlord places in North America and Vancouver is currently the real estate bubble capital of Canada because the homes are not affordable.

In closing:

Why should the diversity the local economy is a factor to look at when looking at investing in real estate in a town?

Diversity = More jobs created in good times and less jobs lost in bad times = higher population growth in good times and less population loss in bad times = more stable real estate investments.