The third-party assessment that led Ontario's Liberal government to approve a $235-million loan for the MaRS tower was based on an assumption that the Toronto innovation hub's second phase would be 80-per-cent full, even though no lease deals had been signed at the time.
A newly released analysis dated March 31, 2010, pegged the completed building's value at $340.6-million.
But Altus Group Ltd., the real-estate consulting company that wrote the assessment, warned its figures were based on the tower being more than three-quarters full. MaRS could not meet that threshold, and taxpayers were forced to step in.
"MaRS is currently in negotiations with several tenants for approximately 80 per cent of the rentable area. Negotiations are at a preliminary stage, and rental terms are not yet agreed upon," the 89-page report reads. "The appraised value is contingent on the assumption final leases are completed and the tenants are ready to occupy their respective premises."
The 2010 appraisal is one of 10 documents the Liberals released on Thursday to a Queen's Park committee, opposition members of which had grilled Brad Duguid, the Minister of Economic Development, Employment and Infrastructure, for refusing to make public more information about the project and the loan.
Along with the appraisal, the Liberals released two versions of a debt-service guarantee that revealed taxpayers could theoretically be on the hook for a maximum of $106-million in interest payments for the building over 15 years.
"Once we started asking about the mortgage, the minister also coughed up and said we're also on the hook for $7.1-million [per year] in the debt-service guarantee," said Randy Hillier, the Progressive Conservative critic for research and innovation. "We pushed hard on that question. Now we find out that it's not $7.1-million, but $106-million. [Mr. Duguid] forgot that this debt-service guarantee was for a further 14 years."
Mr. Duguid called the $106-million figure "nonsense."
"He [Mr. Hillier] is going to have to start listening instead of fabricating nonsense, which is what that is," Mr. Duguid said. "The fact is taxpayers will not be out a cent when it comes to servicing that debt."
The Liberals have reached a deal to buy the tower, and MaRS says it can fill the building in short order and begin paying back the loan with interest.
The problems at the Medical and Related Sciences tower burst into the open during last spring's election campaign, when the Progressive Conservatives released Treasury Board documents outlining a proposed bailout for the mostly empty 20-storey tower across from Queen's Park.
The Liberals announced in September that they had reached a deal to buy the tower for $309-million, including the remaining stake held by U.S. developer Alexandria Real-Estate Equities, Inc.
Nothing in the 700 pages of documents released on Thursday explains why MaRS phase II had such trouble landing tenants.
The 2010 appraisal shows MaRS was close to sealing deals with two major tenants – the main lab for the forerunner to Public Health Ontario and a University of Toronto project – that would have accounted for 51 per cent of total rented area and provided half of the building's gross revenue. A chart listing other tenants with whom MaRS was in talks is blacked out.
Public Health Ontario is one of two major, government-funded tenants that signed leases; the University of Toronto deal never materialized.
Tim Jackson, MaRS's executive vice-president for corporate and community relations, said the stumbling block was the U.S. developer, which demanded rents so high they drove away tenants.
"We remain confident that with the removal of the Alexandria partner in this development we will hit the occupancy rate that had been assumed by the appraiser," he said.