A Window on Westmount Ville Marie

Wednesday Night # 840

The dozen and a half guests at the Nicholsons' included several new faces, notably Bruce Burnett, President of ANTEV, gestion et consultation who came with Andrew Cross, publisher of ESPACE Montréal; Simone Spiller, a student of Gerald Ratzer who is soon to become the web master for SNC Lavalin. Christopher Halsted, once a frequent participant, and now based in Toronto with Deloitte Touche, has returned to Montreal for a project.

David Nicholson posed three questions for consideration by the guests. As was to be expected, the replies were as varied as the guests. There was very little controversy over replies to the third question, when it became evident that the first guests to answer were clearly experts in the field and on top of the situation.

Question 1: Who is more deserving of support as a candidate for the presidency of Alliance Québec, William Johnson or Constance Middleton-Hope?

The Answers: Both and neither. "We are having another passionate discussion on the issues of yesterday."

William Johnson, by taking a more extreme position might stimulate negotiations, leading to a compromise with which everyone can live. Howard Galganov clearly demonstrated this with his stand at the Fairview shopping centre. However, there is a danger in asking for "more", this does not always work as an effective negotiating tool. Québec has made great strides in encouraging multi-ethnicism.

William Johnson, will turn the Alliance into an English language political movement, a sort of "Bloc anglais", thereby risking cutting off federal financial support. This would be a pity as Alliance has accomplished much in quiet backroom negotiating style - another political group is not necessary.

Constance Middleton-Hope, because without fanfare, she has stressed individual rights, and has helped individuals understand, recognize and exercise their rights. This is the purpose of Alliance Québec.

Question 2: Should the government subsidize the construction of a new baseball stadium?

The answers: Yes and no. >P> On the surface, it seems unreasonable for the government to spend money to subsidize entertainment for a relatively small proportion of the population, while claiming to have insufficient funds to adequately support such services as health care.

The ball park should only be supported if it can be demonstrated that it can stand on its own two feet. "If it can't stand on its own two feet, it shouldn't exist." If this line of reasoning is accepted however, it follows that the cultural life of a city embodied in such institutions as the symphony or opera, would be unable to exist here or anywhere in the world, to the detriment of society.

A baseball stadium does not exist in a vacuum, but has a positive impact on the city. A positive cash flow can be generated which might be highly beneficial to the city. Studies can be done (and probably already exist) to determine the extent of the benefit to Montréal and the business community here. The decision should take into account positive impact on the development of the Southwest part of the city near the Molson Stadium. The Palais des Congrès is to be expanded, the ICAO building is another anchor of the Cité internationale and now IATA has moved to Place Victoria. Please see our EXPOS site

Question 3: Where is the local real estate market heading?

The Answer: The local real estate market is alive and healthy in Montréal.

The Montréal market has dropped further, longer and deeper than elsewhere. There is in fact a fifteen to twenty percent differential. For the last year and a half, there has been an upward trend in the country, starting in the West and gradually moving East. Montrealers for the most part are so obsessed with local politics that they have not benefited from this trend. The main beneficiaries have been Europeans, Americans and Canadian pension funds. This is a repeat of the situation in Manhattan a few years ago. The current situation points to the advantage of setting up an REIT. A Canadian REIT today is looking at an annual return of 9-10%. That figure might double in Montréal.

Some of those taking advantage of the situation in Montréal are now leasing for more per square feet than it cost to buy. In the next nine months, the market will be fully sold, after which it will level off.

There has been very little if any construction of commercial or industrial buildings in the last seven or eight years, so that gradually spaces are being filled by a natural growth of about three percent annually. What has happened is that with the drop in the market, "B" class tenants were able to move into and fill "A" class buildings. Likewise, tenants moved to "B" class buildings from "C" class buildings, leaving vacancies there. A great number of "C" class buildings returned to ownership by mortgage holders, who sold them at extremely attractive prices.

At this point Americans and European investors jumped in, renovating and making them very viable. As rental prices rise even moderately, the return becomes extremely attractive.

New tenants are moving in from elsewhere. Montréal offers much to new industry, a uniquely fine quality of life, a diverse and educated population, four universities, a safe, clean environment, among other positive factors.

A year ago buildings could be bought and remodeled if necessary, at twenty-five percent of the cost of construction. In the last year this has risen to fifty percent of construction costs. As long as this differential exists, little if any new construction will take place, and return on original investment will continue to rise. This will continue for an estimated eight or nine more years.

Although the housing market has begun to improve, it is not yet part of this phenomenon. Investing in Westmount real estate is an opportunity. Houses are selling, although prices have not increased greatly. "Old Westmounters" are moving out - or selling houses and moving to apartments - they are being replaced by younger families, many francophones.

Montrealers should stop comparing their city to Toronto. The models for Montréal are cities like Boston which have established their own niches by concentrating on strengths - universities, research centres, high technology, pharmaceuticals, film industry… all sectors in which Montréal is highly competitive. Toronto is now a dynamic, interesting, multi-hued city in which to live and work, but it too has problems, principally the tax issues associated with the creation of the Mega-city.

Reported by Herbert Bercovitz and Michael Judson Edited by Diana Thébaud Nicholson

839 Europe #841

our .../westweb/Realestate

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