Developer got prime federal land at half value

WILLIAM MARSDEN
Montreal Gazette January 15, 2002

The Canada Lands Co., a federal crown corporation reporting to embattled Public WorkS Minister Alfonso Gagliano, sold one of Montreal's most valuable residential properties to a prominent developer for less than half its assessed value.

The deal was made at a time when, according to former Canada Land's chairman Jon Grant, Gagliano's chief of staff, Jean-Marc Bard, insisted any land deals in Quebec be controlled by Gagliano's office. Bard reportedly told Grant: "Canada is yours. Quebec is ours."

Gagliano has denied Bard made that statement and denies allegations he interfered in Canada Lands operations.

Gordon McIvor, vice-president of Canada Lands, said in an interview that the corporation was simply completing a deal already negotiated by Gagliano's department. "We inherited this file from Public Works, but Public Works already had a verbal agreement on the property. ... We inherited a price."

The deal in question was made in 1999, when the Montreal real-estate market was hot. It involved the abandoned headquarters for the Canadian army in Quebec situated on prime real estate at 3530 Atwater Ave. and 3011-3033 Breslay Rd., which is just off Atwater, north of Sherbrooke St. (see map on Page A12).

Canada Lands sold the property to Les Entreprises El-Pine Inc., a company owned by Montreal developer René Lepine, a Liberal party contributor.

Lepine's company paid $4 million for the property, which measures 276,974 square feet. That includes a three-storey graystone heritage building constructed by the Sulpician Fathers in 1803.

Real-estate experts told The Gazette they estimate his net profit will be at least $16 million.

For Lepine, the sale was a major coup. The $4-million price tag means he paid $14.44 a square foot.

"That price was a joke," real-estate agent Sheila Weitzman said, noting that prices for small lots in high-end communities like Westmount and CÙte St. Luc were selling for $50 a square foot.

"A large property like that would fetch even more," she said.

In fact, the official municipal evaluation for the property supports her analysis and that of other real-estate experts contacted by The Gazette.

Four years before the sale, at the lowest point in the Montreal real-estate market, the Montreal Urban Community evaluated the property at $9 million, or about $32.50 per square foot. That evaluation continued through to the end of 1999 when the land was subdivided and Lepine began construction of his 55-unit luxury residential project.

The property was one of the last remaining green spaces on the side of Mount Royal and affords a clear view of the city skyline. The Sulpician Fathers called it La Ferme Sous les Noyers (the Farm Under the Walnut Trees), a reference to the stately trees that graced the property. Many of the trees have been cut down to make way for Lepine's development.

Even before finalizing the purchase, Lepine made sure he had city of Montreal approval to build 55 luxury housing units. He got the approval March 8, 1999. He closed the deal with Canada Lands on April 28 of that year.

Lepine has already sold 12 "luxury" townhouses, as he calls them in his brochures, at prices that vary from $675,000 to $750,000. He is constructing 43 more units including four homes at a starting price of $1.5 million each, 12 townhouses starting at $750,000, most of which are sold, and 27 condos at an as yet undeclared price.

"He's confident enough in the sales that he did not entertain any bargaining," said Weitzman, who showed some of the properties to clients.

Lepine has been a longtime supporter and donor to the federal Liberal party, according to party officials. He refused to disclose his total donations but said that over time he has given to both Liberal and Conservative parties.

How he got the land and how he and the government arrived at such a low price is not entirely clear, mainly because Canada Lands and Gagliano's Public Works Department have been pointing fingers at each other over who is responsible.

McIvor said that Public Works told him there had been six bidders on the property. He refused to reveal the bids.

"We never divulge the other bidders as a matter of principle," he said.

Public Works officials said that they no longer have the file because it was handed over to Canada Lands, which worked out the deal with Lepine.

In an interview, Lepine said there were more than 12 bidders for the property and it was the federal government which re-evaluated the land downward. "They undertook to lower down the evaluation, not me."

He claimed that the MUC then re-evaluated the land accordingly. But, in fact, Montreal property-tax documents show that the MUC maintained its value at $9 million and Lepine paid taxes on that amount in 1999. The land was then subdivided for the new project.

After the deal had been negotiated with Lepine, the Department of National Defence, the original owner of the land, sold it to Canada Lands on Feb. 2, 1999, for $3.3 million. Canada Lands then sold it to Lepine for $4 million two months later, claiming a profit of $700,000.

Canada Lands is a crown corporation whose job is to dispose of federal government properties. It is supposed to obtain maximum value and to assure that developments meet the requirements of local communities.

According to its vision statement, it "strives to stimulate economic growth, generate financial benefits and enhance the quality of life in communities."

By law, the government must advertise land deals for public tender. So on Oct. 8, 1997, Public Works published a small advertisement on Page C11 of The Gazette calling for offers on the property. The ad also ran in the French papers. It ran one day.