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South-end land deal could increase city coffers, bring new jobs

The $2.1M purchase price equates to about $500K per acre, a significant increase from the $125K per acre Panels negotiated with city in 2016
USED 2019-11-26 Good Morn RB 11
Raymond Bowe/BarrieToday

The city could make more than $1.2 million on an industrial land deal that would also lead to almost 90 new jobs in south-end Barrie.

Councillors will consider a motion Monday night to waive the city’s right to repurchase 24, 28 and 32 Rawson Ave., near Huronia and Saunders, and keep the development agreement with its owner, in exchange for a deal where the city is reimbursed for these waivers because the landowner failed to live up to the development agreement’s terms.

“What we tried to do was create that sort of win-win-win where the city achieved its development agreement conditions… the developer isn’t necessarily out of pocket and we’re attracting new development to the property,” said Stephannie Schlichter, Barrie’s director of economic and creative development.

This reimbursement, which could reach more than $700,000, and the original $525,000 purchase price, could mean approximately $1.225 million into city’s coffers.  

Schlichter said the deal also takes into account the increase in land values, since the sale and purchase was made about five years ago.

“It’s atypical in the sense of the appreciation of market conditions, the appreciation of land values, and how we address that in this type of situation,” she said. “It is not usual where we have a buyer of industrial land look to resell it, but it has happened in my history.”

The 4.2-acre property is located on the north end of Rawson Avenue in the city’s South Barrie Industrial Park. 

In June 2016, the city entered into a property purchase agreement with RW Framing, which created a new company called Panels that operated a modular construction framing business, primarily for new home building. This land was transferred to Panels to build a new manufacturing facility where the modular framing components would be assembled and shipped to various destinations throughout the Barrie and Greater Toronto Area markets for installation.

It was initially intended to be a 20,000-square-foot facility, employing 14 to 20 staff, including general labourers, engineering and administrative staff.

By October 2018, however, the city was notified that Panels had withdrawn its building permit for a 47,791-sq.-ft. facility and reduced the building footprint to approximately 14,000 sq. ft. 

In August 2019, city staff continued to receive communication from the company that it intended to move forward, but that October the city was verbally informed that Panels was looking to sell the property, citing reduced demand in new home construction and the rising cost of the project, which no longer made it feasible for development.

Part of the original deal, however, is the city has an option to repurchase this property at 90 per cent of the original $525,000 sale price. It also counters what’s seen as ‘flipping’ land, which goes against the property sale’s original intent  encouraging development, attracting business and creating jobs.

“The whole intent is not to flip the land,” Schlichter said, “so by them (Panels) providing back (to the city) a significant portion of the uptick in the market value… they aren’t essentially flipping at this point, or the issues associated with flipping are mitigated and then we’re looking at bringing in an employer.” 

Staff have acquired a copy of the purchase agreement between Panels and the new buyer, a numbered company held by TFI International, which is a large Montreal-based international transportation and logistics company with 16,000 employees. 

TFI intends on a spring/summer construction start date for a new facility, which will house their package and courier businesses. It would be a 43,800-sq.-ft. building with both office and warehousing space, with approximately 89 employees plus owner operators.

City staff say the Panels to TFI land sale stipulates a purchase price of $2,113,750 and makes allowances for the buyer to assume the studies, assessments, engineering documents and the steel contract already purchased for the planned development of the site. Panels stands to make a profit of $1,093,789  or 2,113,750 minus its $1,019,961 costs.

The $2,113,750 purchase price equates to $503,273 per acre, a significant increase from the $125,000 per acre Panels negotiated with the city in 2016.

It’s the city’s right to buy back this property at 90 per cent of the original purchase price, plus associated costs which Panels has invested in the property. There is also a legal requirement that Panels must first offer to sell the property back to the city, and the city has 90 days to accept.

Panels has not done this, staff say, and has instead requested the city waive its conditions in the development agreement. Panels has also not fulfilled its requirement to build on the site within 18 months from the sale closing date.

Staff recommend the city attempt to negotiate an agreement with Panels, allowing it to sell the property to TFI or another buyer, and result in Panels and the city each receiving $573,145  but the city’s share could rise to $704,144. This is in addition to the $525,000 the city earned from its sale to Panels in 2016, for a total of $1,229,144.

“We achieve our objective of selling industrial land, which is to bring development and employment to the city,” Schlichter said, “and at the same time they’ve got a buyer to the table.

"They (Panels) can’t develop so we found a way forward, and at the same time we’ve met the terms of our development agreement and are achieving some of that, retaining some of that market (value) uptick if we were to go out and do it (sell the land) on our own.”