For real estate developer Rick Jackson, a win-win: $36 million and a built-in ‘booty call’

Written by By Ellie Douglas, CNN Not everything was a win for Canadian real estate developer Rick Jackson and his WE Charity organization. We sold the five downtown Toronto properties we purchased earlier this…

For real estate developer Rick Jackson, a win-win: $36 million and a built-in 'booty call'

Written by By Ellie Douglas, CNN

Not everything was a win for Canadian real estate developer Rick Jackson and his WE Charity organization. We sold the five downtown Toronto properties we purchased earlier this year to the Smarthomes Living Development Corporation for $36 million, and the five “covered goods” (a traditional real estate term for commercial and residential properties) we made a profit on. We also did not benefit from any of the future incentives our ventures were meant to receive (i.e. first year sales kickers, dividends). We likely would have seen those profits if the properties had been not strategic to our other real estate developments in Toronto.

Having said that, we made a profit and recognize it as a win for both Smarthomes and WE Charity and we’re pleased that the profit will support charitable programs in the community. The transactions are structured to appeal to the Smarthomes’ purchasing practices and strategy, as a result the purchase price includes all of our lease payments, R&D costs and unit rent, which is paid in cash each month.

The reasons for picking five downtown properties to sell were multifaceted. We certainly looked for a huge upside in our sales, but we also looked for a discount from what we would have paid at listing. For example, we paid an estimated $2.65 million for a large single-family home at 999 Norman. With a street sale (where a property’s seller is no longer the buyer), the property then returned a market value of more than $8 million to our broker, plus $2.75 million of capital gains that was delivered immediately. We also wanted to sell every building that we purchased or did not keep to be sure they were impactful to the community. The properties we sold at $21 million, $14 million, $15 million, $14 million and $10 million totaled $36 million. That’s an 80% discount from their estimated worth to our highest estimate market value.

Covered goods buildings are commercial properties that have their own standing on the street (i.e. within eyesight of the main commuter train station) and have an office component. The model is most commonly employed by grocery chains, and is similar to the building model used by Best Buy and Sears, and multiple restaurants and businesses.

If you look at the rental list that was disclosed for the five properties that WE donated to Smarthomes in the venue, you’ll notice that 80% of the units were let by fitness studios, salons, hair salons, hair dryers, dryers, photography studios, delis, hair salons, nail salons, daycare, grocery stores, banks, banks, restaurants, coffee shops, consignment stores, drug stores, fancy shoe stores, specialty shops, record stores, restaurants and so on. The buildings were selected because they were convenient for commuters, and fit Smarthomes’ minimal-based format.

There’s a good story behind every successful deal. This one was no different. Our acquisitions go beyond financial benefits. It’s also about building a relationship, and building trust, and that’s precisely what we did. We created long-term community relationships and platforms and by doing so we got future opportunities, including important work for WE Charity.

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In turn, our negotiations were reasonable and for the Smarthomes, they are pleased with the outcome, and at no point were WE Charity’s needs or wishes prioritized over our needs or wishes. We worked for both organizations, and we are thankful to our real estate partners at Catellus, Realcorp, CBRE and MJF for giving us this opportunity.

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