Condo tower on hold as developer seeks protection

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Sexual banter
benefits none
WORKPLACE • A new
Canadian study has found
that sexual behaviour in the
workplace, such as flirting, jokes, propositions and
innuendoes, has a negative
effect on everyone — even
those who said they enjoy it.
The study, by researchers
from the University of Toronto’s Rotman School of Management and the University
of British Columbia’s Sauder
School of Management,
was trying to discover if
employees who enjoy sexual
behaviour at work draw any
work-related benefits.
It defined sexual behaviour in the workplace as
“sexual jokes, innuendo,
discussions of sexual matters, or flirtation.”
The study’s aim was to
see “if men and women got
anything positive out of the
behaviour, such as enjoyment and social bonding.”
Jennifer Berdahl, associate professor at the Rotman
School, who co-authored the
study, said: “We were very
surprised to find that even
those who say they enjoy it
do not benefit from it.”
FROM HERALD NEWS SERVICES
INSIDE
FP TODAY
How U.S. taxpayers
could be the big
losers in Fed’s new
bank bailout scheme.
Page D8
TUESDAY, APRIL 7, 2009
Alberta outlook weakens
Recession-hit Economy seen
consumers shun shrinking 1.8%
cocoa comfort
this year
COMMODITY • Consumption of cocoa, often seen as
one of the last comforts to
go in a recession, looks set
to take a knock as consumers in emerging markets cut
expenses during the global
economic downturn.
Hard evidence of a
decline in demand should
be provided this week with
the first quarter grind in
Germany scheduled to be
released and set to show a
year-on-year fall of about
20 per cent, traders and
analysts said.
Grindings of cocoa beans
are closely watched as they
indicate demand anticipated by processors.
The International Cocoa
Organization forecast last
month that cocoa grindings
in Asia and Oceania would
fall by 10 per cent to 719,100
tonnes in the crop year to
September because of the
global economic slump.
Analysts also said high
prices may have helped to
curtail demand.
WWW.CALGARYHERALD.COM
LISA SCHMIDT
CALGARY HERALD
T
he outlook forAlberta’s
economy is weakening
along with the rest of
the country, a new forecast
said Monday.
The Conference Board of
Canada now predicts Alberta’s
economywillshrink1.8percent
in 2009 as falling commodity
prices prompt energy companies to slash spending.
The outlook is lower than
the 0.5 per cent forecast by the
Ottawa-based think-tank last
month, the first contraction
in Alberta’s economy since
1986.
“Nowwithenergypricesjust
afractionofwhattheywere,it’s
very difficult to see a rebound
in the economy before 2010,”
economist Marie-Christine
Bernard told a conference in
Calgary.
And the recovery will be
more muted, with Alberta’s
economy forecast to grow two
per cent, down from an earlier
forecast of four per cent.
The revision comes as the
conference board revised
its outlook for the Canadian
economy, now expected to
shrink 1.7 per cent.
The previous outlook called
for a 0.5 per cent decline, more
optimistic than other recent
forecasts. The Bank of Montreal said last week it expects
the Canadian economy to decline 2.5 per cent in 2009.
Pedro Antunes, the board’s
director of national and provincial forecasts, said most of
the pain will be felt in the first
quarter, with the economy expected to contract seven per
cent.
SEE JOBS, PAGE D6
Condo tower on hold as
developer seeks protection
‘New financing’
sought for
42-storey
Arriva project
MARIO TONEGUZZI
AND KATHY MCCORMICK
CALGARY HERALD
A
high-profileresidential
condominium tower
near Stampede Park
has been put on hold after
the owner of the site recently
filed for protection under
the Companies’ Creditors
Arrangement Act.
Calgary developer John
Torode told the Herald on
Monday work has stopped on
the 42-storey second tower of
the Arriva condo project in the
old Victoria Park neighbourhood which has about 60 per
cent of its 221 units pre-sold.
“Whatwe’ve doneisput that
limited partnership which is
the owner of that site — the
second tower — into CCAA
(Companies’ Creditors Arrangement Act),” said Torode,
president of Torode Realty
Advisors Ltd.
“What that does is gives us a
chance to restructure the deal
which would include finding
new financing. The financing
we had with the bank did not
go well given the credit crunch
and we think that we need to
find alternative financing to
proceed with the tower.”
The Companies’ Creditors
Arrangement Act is a federal
act that allows financially
troubled corporations the opportunity to restructure their
affairs. By allowing the companytorestructureitsfinancial
affairs, through a formal Plan
of Arrangement, the CCAA
presentsanopportunityforthe
company to avoid bankruptcy
and allows the creditors to receivesomeformofpaymentfor
amounts owing to them by the
company, according to PricewaterhouseCoopers.
Torode said it could take
anywhere from one month
to six months for the financial
restructuring to take place.
The Arriva project includes
a 34-storey tower that has been
builtandisclosetosoldout.Torode also recently announced
that a planned third tower,
whichwastobeanothercondo
complex, would be a boutique
hotel instead. A fourth tower
that was part of the original
plan was cancelled early in the
development process.
The project is on a block be-
Lorraine Hjalte, Calgary Herald
Work has stopped on the 42-storey second tower of the Arriva condo project in Victoria
Park. Sixty per cent of the under-construction tower’s 221 units have already been sold.
tween12thAvenueS.E. and11th
Avenue S.E. and Olympic Way.
At the construction site, small
signs by Torode Construction
Ltd., on the fence, say: “The
Arriva 42 project is on-hold
and this job site is secured and
not operational.”
Several condo projects in
recent months have been
delayed or cancelled in
Calgary.
SEE ARRIVA, PAGE D6
ARRIVA TOWERS FACTS
■ The Arriva Towers are a planned complex of three
high-rise towers in Calgary. One has been built.
■ The project is located in Victoria Park.
■ The towers were designed to have 34 to 42 storeys,
making them the highest residential buildings in Alberta.
■ The buildings were designed by BKDI Architects, and
developed by Torode Reality Ltd. TRL also owns the
Hotel Arts, Kensington Riverside Inn and other
development projects.
Canadian Employment
Growth, 2005-2009
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
340,000
JOB LOSSES
05 06 07 08 09
Source: Conference Board of
Canada; Statistics Canada
DEBORAH
YEDLIN
Oil surge
a matter
of when,
not if
Against a backdrop of
prognostications regarding
the future of oil prices at a
conference sponsored by
the Canadian Energy
Research Institute, French
energy giant Total announced Monday it was
postponing a decision on
whether to go ahead with
its $9-billion Joslyn oilsands project northeast of
Fort McMurray. Total’s decision speaks of the myriad
risks facing energy players
around the world.
There is no question the
most significant undefined
variable for energy companies today is the timing of a
recovery in the oil price.
Obviously, this relates to
how long it takes for the
global economy to pull
out of recession and chew
through excess capacity,
but at the same time the issue of a meaningful supply
response looms large.
While there is a tendency
to point to excess capacity as a result of the 4.2
million barrels a day that
have been pulled off the
market by the Organization
of Petroleum Exporting
Countries as a reason why
oil prices should remain at
or below current levels, the
reality is likely to be much
different.
That’s because hydrocarbons are still going to
make up 80 per cent of the
world’s energy sources,
with oil and its derivatives
remaining as the primary
fuel source for transportation.
Add in the fact that the
number of people in the
developing world that fit
into an income bracket
where owning a car is possible has doubled in the
past decade and that nonOPEC supply additions
have not exceeded one
million barrels a day since
2003, it’s clear oil prices
will start to rise beyond
current levels. It’s just a
question of when and how
fast.
SEE YEDLIN, PAGE D6
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Trust the opinions of the auto experts with over 2,000 written road tests
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CALAA697968_1_13
D6
Calgary Business
tuesday, april 7, 2009
From D1
Breaking news at calgaryherald.com
From D1
ArrIVA: Developer reassures condo YEDLIN: Project delays
buyers, hopes ‘to get financing to build’
“There’s been a number of projects
stopped and I think many of them
have to do with financing. We’re no
different,” said Torode. “The financing market is difficult. We’re committed to this project and we want
to see it through to completion, but
you can’t do it without construction
financing. So that’s in a nutshell the
bottom line.”
Torode has a number of proposed
projects for the Victoria Park area
and Ramsay, but he said the filing
under Companies’ Creditors Arrangement Act is unrelated to the
other projects. Each of those projects
has its own investors and owners and
theywill eachproceedor notproceed
based on what decisions are made
for those projects, he said.
But Torode also said: “Well, certainly we wouldn’t start one of the
other ones if this one’s (Arriva) not
going. This is sort of the key project.
And you know phase one has turned
out very well.”
He said work has stopped on the
project now. The tower is at grade
on one side and close to grade on
the other side.
“It’s 20 per cent built, and we hope
to finish building to grade — and
ideally, to build the whole tower,”
he said. “I will still be looking after
the site because it is partially built,
and all deposits received from buyers are insured.”
“If credit markets loosen, we hope
to get financing to build.”
Recently it was reported that the
City of Calgary is monitoring nine
condo projects that have been halted
due to the slowing economy. Eight of
the nine sites are in the Beltline.
According to Lai Sing Louie, senior
market analyst in Calgary for Canada
Mortgage and Housing Corp., there
were 7,039 condos under construction at the end of February in the
Calgary census metropolitan area.
That’s down 12.6 per cent from a
year ago when it was 8,052.
Louie said the number of condos
under construction in the Calgary
areaisexpectedtocontinuetodecline
as more units are completed and the
rate of starts slows down as well.
In February, the Altus Group Housing Report said new unsold condominiums are becoming a concern in
the Calgary market. The report said
most of the unsold units in Calgary
are already completed or under construction and the expected decline
in new condo apartment sales this
year could lead to a “sizable” increase
in the number of completed and vacant units.
“Many buildings in Calgary began
construction with less than 50 per
cent of the units pre-sold,” said the
Altus Group Economic Consulting
report.
There are indicators of a “much
more serious problem for Calgary,”
said the Altus Group. Those indicators include a high level of condominium starts in 2008 (5,335 units)
and a high level of condos under
construction. The pace of condo
starts has also declined “dramatically” since the end of July, but “very
few projects in Calgary have been
lorraine hjalte, calgary herald
Arriva tower developer Torode Realty Advisors, which has developed
Hotel Arts, says the filing for protection is unrelated to other projects.
formally cancelled so far.”
“Excessive investor activity has
also been a concern in Calgary,” said
the Altus Group report. “While the
percentage of condominium apartment units offered for rent declined
in Calgary between 2007 and 2008,
the vacancy rate rose significantly
from 0.7 per cent to 3.5 per cent.”
The report said there is”clearly a
large oversupply of product” in Calgary and “more project cancellations
would help move the market back
into balance more quickly.”
The Arriva announcement is the
second major construction project
in Calgary in the past week to be
affected by the current economic
malaise.
Last week, H&R Real Estate Investment Trust announced it was
deferring the south block of the
Bow skyscraper project and construction for the time being would
be stopped at grade level on that site.
mtoneguzzi@theherald.
canwest.com
With this as background, the
question is why energy companies such as Total are not moving ahead with major expansion
plans. This is particularly the case
for the so-called international oil
companies whose sphere of accessibility is increasingly limited.
The answer lies in the associated risk factors that funnel into
the decision matrix.
In addition to price, which is
expected to be more volatile in
the coming years, companies are
grappling with the potential impact of the emphasis on greening
the world.
The assumption being made
seems to be that everything
flowing from the climate change
debate will cause permanent demand destruction that will leave
oil prices in never-neverland for
years to come.
Nothing could be further from
the truth. Populations around the
world — with the notable exception of Japan — will continue to
grow; with that comes an increase
in the gross domestic product and
energy consumption.
If one thing is clear it’s that
consumption will decrease in the
developed world, but this drop
will be more than made up by increases in the energy thirst of the
developing world.
In other words, climate change
initiatives might be perceived as a
risk to oil consumption, but what
it is ultimately going to force is a
change in the relative composition of the fuels used; no one is
about to stop using oil, even if
there is a monumental shift to
electric hybrid vehicles.
Another risk factor is the stability of the existing fiscal regime.
As was pointed out Monday, the
changes to Alberta’s royalty system have done nothing to encourage investment in the province.
But ongoing resource nationalism, or the practice of governments renegotiating their fiscal
take, means that discount rates
go up to accommodate the higher
risk associated with operating in
those parts of the world.
And in today’s new reality of
companies dealing with a higher
cost of capital, the risk/reward
metrics have shifted considerably.
The result of all these issues
— lack of access to resources,
shifting fiscal regimes and now
lack of capital — is that companies have opted not to invest in
new projects.
If there was one tidbit of information illustrating that very point
it was made by Prof. Paul Stevens,
who pointed out that in 2005, the
six largest international oil companies had invested $54 billion US,
but returned $71 billion to shareholders.
The tough part is that energy
companies have to assess a suite
of risks when deciding where to
invest.
Perhaps the biggest, as Total’s
decision illustrates, is how much
capital risk are companies prepared to take in the context of
developing large unconventional
projects in light of the overwhelming global economic uncertainty.
Still, the argument is increasingly compelling that the world
is running headlong into a
situation of an oil supply crunch
and the luxury of sitting on the
sidelines actually doesn’t exist. By choosing not to invest,
companies expose themselves to
increased price volatility, which
only compounds the associated
risk.
The problem, as a number of
market watchers have pointed
out, is that the market is out of
sync with the time frame associated with oil and gas investment. And until this mindset
changes, there will continue to
be projects postponed despite
the fact a long-term investment
proposition exists because of the
underlying supply and demand
fundamentals.
[email protected]
From D1
JoBS
“That’s going to feel a lot more
like a recession this year,” Antunes
said.
Growth will not return until the
fourth quarter, he said, when government stimulus programs start to kick
in, helping to shore up consumer
confidence. At the same time, there
are some signs that the U.S. housing and auto sales have hit “rock
bottom.”
But the economy will shed more
than 340,000 jobs this year, mostly in
manufacturing and construction.
Employment numbers for March
will be released later this week, with
most analysts expecting another
50,000 jobs lost last month.
The forecast expects the national
unemployment rate to peak at 9.5 per
cent by the middle of next year, up
from 7.7 per cent in February.
Alberta’s rate will rise to 6.9 per
cent next year. The rate rose to 5.4
per cent in February.
Butevenwithrisingunemployment
rates, Alberta will continue to draw
people from other provinces.
“The migration numbers are holding up,” said Bernard.
“Even though the job market is
not in good shape, it still is doing a
lot better than in Ontario.”
Still, cancelled energy projects will
deliver a $20-billion hit to Alberta’s
economy this year alone, Bernard
noted.
But the majority of those projects
should start to proceed again with
a recovery in commodity prices,
which the board expects to take
hold next year.
Oil prices will average around $48
US a barrel this year and climb to
$58 US next year, the forecast said.
Natural gas prices will follow.
“As soon as oil prices start to increase . . . we should see all these
projects move forward,” Bernard
said, adding the delay may help
lower costs.
Crude could be back into the $100
US a barrel range by 2013, she said.
[email protected]
CAL00481213_1_1