Portage Place purchaser's alleged past mismanagement 'doesn't set a good track record,' advocates say

Winnipeg community advocates are asking questions about the company recently approved to buy Portage Place mall, while waiting to find out whether Toronto-based developer Starlight Investments will go through with the purchase.

Mareike Brunelli learned that a company linked to Starlight had previously owned another mall in the Heron Gate neighbourhood of Ottawa, which residents told CBC News was poorly managed for years before it was demolished in 2013.

Brunelli — a director of a Spence Neighbourhood Association community development project — wonders why that information wasn't brought up at city council meetings open to the public before the city, province and federal government signed off on the sale. 

"We are worried because we know how things work in the inner city," she said. "We know when money comes in what usually happens, and we want to make sure that we say something before it's too late and they can say 'no one complained.'"

Inner-city advocates worry that downtown residents could lose a cherished gathering place and shopping centre, and Brunelli says the example of the Heron Gate mall has heightened those concerns.

Starlight's assets and size were discussed at meetings of Winnipeg City Council and its executive policy committee, but nothing about its history.

'Hub of the neighbourhood'

Paul Jordan, CEO of the Forks North Portage Partnership — a joint project of the city, provincial and federal governments which owns the land Portage Place sits on and the parkade underneath the downtown mall — described Starlight as "Canada's biggest landlord" at an executive policy committee meeting on April 9.  

City councillors and Forks North Portage officials pointed out that the company holds $11 billion in assets under its management, including 36,000 multifamily units and millions of square feet in commercial spaces across Canada.

Details about their plans for Portage Place are scarce, other than a proposal to build two apartment towers on either end of the mall, potentially geared towards students. 

One aspect of Starlight's past that didn't come up at city council is the fact that the company's founder, Daniel Drimmer, previously owned another property management company called TransGlobe. 

It was this company that bought the Herongate Mall in Ottawa, as well as most of the properties in the surrounding neighbourhood, in 2007. 

Josh Hawley has lived in the Heron Gate neighbourhood for 25 years and says it had always been solidly working class, with affordable, good-quality homes where many newcomers lived. 

"The mall was the hub of the neighbourhood," he said. "As soon as TransGlobe bought it in 2007, there were a ton of vacancies in the mall." 

Requests for an interview with Starlight sent via phone and email were not answered.

Maintenance of the surrounding houses in the Heron Gate neighbourhood also went into decline, Hawley said. 

"We see the repercussions of that, years later, where there's major leaks in basements, flooding, mould, rampant cockroach infestation, bedbugs, broken railings, broken floors."

Many of the problems experienced by TransGlobe tenants in Heron Gate and in other cities were documented in a CBC Marketplace feature in 2012 called Trouble for Rent, which dubbed the company "one of Canada's worst landlords."

TransGlobe founder Daniel Drimmer left the company to start Starlight, which then bought up much of the property held by TransGlobe. 

In 2012, thousands of homes in the Heron Gate neighbourhood were then sold to another national property manager, Timbercreek, which has since demolished hundreds of homes in order to make way for the construction of large apartment towers. 

Back then, newly minted TransGlobe CEO Kelly Hanczyk told CBC he planned to run the company differently and said he'd doubled the amount spent on capital expenditures such as repairs. Drimmer also declined CBC requests for comment at that time.

Whose due diligence?

In Winnipeg, there appears to be some disagreement among decision-makers over whose job it was to thoroughly scrutinize the Portage Place sale to Starlight. 

Because the city, province and federal government are all shareholders in the property through the North Portage Development Corporation, in addition to the city, the deal needed signatures from Manitoba's minister of municipal relations and the Treasury Board, as well as federal Minister of Innovation, Science and Economic Development Navdeep Bains.

"A significant amount of due diligence has been undertaken with respect to this transaction," Mayor Brian Bowman said in an email statement. 

The deal first received approval from the board of the Forks North Portage Partnership. When the city voted on it, councillors made their approval conditional upon the provincial and federal governments doing the same.

This was done "in recognition that they have access to significantly more financial and legal expertise and resources in completing all necessary due diligence," Bowman said.

When asked for comment on their own investigations, officials from both the province and federal government referred questions back to the Forks North Portage Partnership.

"The Forks North Portage Partnership is the owner of the assets and had primary responsibility for the sale," a spokesperson for Western Economic Diversification Canada wrote in a statement.

That view was echoed by the province.

"The [FNP Partnership] did their due diligence prior to working with Starlight Investments on the sale of their land," a spokesperson for the Department of Municipal Relations wrote in a statement.

CBC News asked the partnership for comment on this story, but vice-president of strategic initiatives and executive director Clare MacKay said the organization is working under a non-disclosure agreement.

Daniel McIntyre Coun. Cindy Gilroy, whose ward includes Portage Place, said in a statement that she hopes the city will "watch closely to have the best possible outcome with the community in mind."

"We work with some great landlords/property owners and developers and some we have challenges with," she said. 

"This needs to focus on the community and their voices. I am willing to work with all parties to make that happen."

Opponents organized

Before the vote at city council, opponents of the sale of Portage Place, concerned about the possibility that the developer would displace those who use the mall as a gathering place — particularly Indigenous people and new Canadians — organized to pressure decision-makers to slow down.

"We were trying to stop the sale from going through," said Owen Toews, who helped form the Portage Place Community Coalition to oppose the sale of the mall.

The council vote to approve the sale came less than two weeks after word of the deal became public.

After that, Toews said he first learned about Starlight's connection to the Heron Gate mall through a friend.

Although no councillors spoke in opposition to the deal, some expressed uneasiness about the speed of the process and what they believed was a looming financial penalty if they didn't make the decision. 

"I guess my concern is this is going very quickly," Coun. Kevin Klein said at the city council meeting on July 18 where council voted to approve the sale, on the condition that the province and the feds did the same. 

"I notice that if there's no decision by July 19, tomorrow, there's a $1.5 million penalty … not sure why. That's pretty quick," Klein said.

That deadline turned out to be false.

MacKay, the Forks North Portage Partnership executive director, was quoted in a story by Global Winnipeg in August, saying that financial penalty only applied if all three levels of government agreed to the deal, and then someone backed out. MacKay did not respond when asked by CBC why city officials would have thought the penalty applied if a decision wasn't made by July 19.

Nevertheless, council voted unanimously to approve the sale. The province then gave the proposal its blessing, and — after calling for a 30-day delay to review the deal — the federal government consented to sell the mall, land lease and parkade to Starlight for $69.9 million. 

'A question mark around accountability'

Opponents say the speed at which the approval of the sale moved through city hall, and the fact that they say they only became aware of Starlight's background after the decision was made, point to problems with the process at city hall.

"I think that there is a bit of a question mark around accountability," said the Central Neighbourhoods organization's Brunelli.

Fort Rouge Coun. Sherri Rollins says she had heard about what happened in Heron Gate, having lived in Ottawa for many years, but it wasn't until after the vote at Winnipeg city council that she became aware of the connection to Starlight.

The mall in the Heron Gate area wasn't the only one in Ottawa's east end that was struggling at the time, she said. 

"It was a particular point in time [at] which there was a recession, and it was hitting Ontario pretty bad, and Ottawa in particular," said Rollins. "It's almost 10 years ago, right, and I think that that's kind of important."

Similarities between Herongate Mall and Portage Place "remain a concern," but her top concern when approving the deal was creating a stable environment for the businesses in the Winnipeg mall, she said.

After the federal government signed off on the sale at the end of August, a 60-day waiting period began in which Starlight can decide whether to go ahead with the purchase. That waiting period expires Monday, at which time Starlight can decide to proceed, back out of the project or ask for more time for due diligence, said the Forks North Portage Partnership's Jordan.

Brunelli says she doesn't want to see members of her community lose access to this chunk of publicly owned land in the heart of downtown. 

With so little information publicly available, however, she says it's difficult to predict what will happen.

"We have no information," she said.

"This specific one example from Ottawa, though, doesn't set a good track record, and yet we're told not to worry about anything."