David GibsonJ.P. MOCZULSKI
The four-storey factory had been on the market for a year before Toronto developer David Gibson considered buying it. Looking at the 1904 property, he saw something others had missed: the chance to transform a brick-and-beam building into premium office space for Waterloo's technology sector.
The former car-parts factory stretches over a block of Kitchener's old warehouse district. "It was pretty gruesome, but you could see the opportunities here," Mr. Gibson recalls of his first impressions of 51 Breithaupt St. in 2009. The building at the former Collins & Aikman plant still housed mammoth machinery. The 4.3-acre site also needed an environmental cleanup – a potential financial risk.
Mr. Gibson, who is chief executive officer of Perimeter Development Inc., looked beyond the uncertainties, convinced that a nearby rail line and the tech sector's appetite for "cool" spaces would play in his favour. His hunch will be tested later this year when the first phase of Breithaupt is available for lease, likely in the high teens to low $20s a square foot for Class A space.
In the new economy, as in the industrial past, transportation can define the value of real estate. The vacant plant is close to major roads and sits beside a rail line that once shipped its goods. Today the rails carry commuters to white-collar jobs in the city.
"The supply chain now is people," says Rob Horne, commissioner of planning, housing and community services for the Waterloo region. Describing new-economy workers as "footloose capital," he says Waterloo "must acquire and retain its talent capital, and one way to do it is to create and occupy interesting spaces."
Perimeter purchased the property for $500,000 and later sold a half interest to Allied Properties REIT, an experienced player in renewing old buildings.
Two subsequent transit investments by the government have added to the lustre of the location.
Last year, the Region of Waterloo purchased three acres of land across the tracks from 51 Breithaupt to build a transit hub for Via Rail, GO Transit and inter-city buses (GO plans to introduce a commuter service to Kitchener later this year). And two months ago, the regional government approved an $800-million light rail project, with funding from the provincial and federal governments.
Mr. Gibson also decided to buy 51 Breithaupt because of the growing appreciation for repurposing dormant factories in downtown locations, a concept that appeals to tech-sector workers who want to be close to amenities.
"City centres are being revitalized and restored," he said. "If you believe in that, and believe in mixed use and the future of city centres, then this was a natural project to take on."
In Kitchener, Mr. Gibson has seen how new investments, such as the University of Waterloo's new pharmacy school, and the restoration of defunct industrial buildings have added cachet to a once-overlooked downtown.
Two blocks away from the property on Breithaupt St., a $40-million conversion of the 1908 Kaufman Footwear factory into residential lofts was completed in 2005. Also nearby, a $30-million redevelopment of the former Lang Tannery has attracted high-profile tenants such as Google Inc.
"We will see more and more redevelopment of some of the industrial areas here," predicts John Jung, chief executive officer of Canada's Technology Triangle Inc., a public-private partnership that promotes economic development in the Waterloo region. "I view these kinds of buildings in a region as true assets," he says. "They create unique opportunities that you cannot replicate."
A recent report by Colliers International describes the Kitchener office market as "strong," adding that "the trend to brick-and-beam office space is expected to gain steam."
Colliers managing director Karl Innanen says "there now is a real demand for high quality Class A office space, especially in unique and interesting buildings like the Lang Tannery and Breithaupt."
Midway through a $36-million renovation that began with the removal of 1,200 tonnes of assembly-line machinery, the Breithaupt's interior now features large windows, high ceilings, brick walls, oak floors and foot-square beams of oak, Douglas fir and hemlock. The environmental cleanup is expected to be completed shortly.
Some historic features have been restored, and the window replacements are consistent with the original 1900s style.
Two sections of buildings were demolished to create modern courtyards, and as a result the gross leaseable floor space has dropped to 176,000 square feet from the original 256,000.
Mr. Gibson hopes to lease 60,000 square feet later this year and fully rent the property by 2013. His company will be the property manager.
With a real estate philosophy that combines passion and patience, Mr. Gibson is confident his initial hunch about Breithaupt will pay off: "If you do the right job, the financial returns will look after themselves."
Special to The Globe and Mail
Jennifer Lewington