News Report: MaRS bailout could cost taxpayers up to $477 million
It is fair for you to assume that I didn’t fall out of my chair when the Conservatives released Ontario government cabinet documents surrounding the second phase of the white elephant known as MaRS.
In 2007, which dates this blog a bit, I wrote that “The MaRS project itself is not innovation; it’s just bricks and mortar.” More recently, I returned from a tour of Chicago’s small incubator and reported as follows (see prior post “See you again, Chicago” Sept. 20-12):
Chicago isn’t on the same scale as Palo Alto when it comes to tech deals. But it is strong enough to warrant a five month old State-backed Accelerator in the Merchandise Building, with 165 different start-ups already calling it home. Far more than you’d ever find at Toronto’s Mars Discovery District.
Which begs the question. If it was clear to some of us in the tech ecosystem that MaRS 2 wasn’t required back in 2011, at least not to support space demands from start-ups, why did the Liberal government proceed just the same? And why did the MaRS Board of Directors seemingly encourage it?
At the time, MRI Minister Glen Murray (my favourite Provincial Cabinet Minister) said this:
Every day, the innovators and entrepreneurs at MaRS work on ideas that will save lives, invent whole new industries and create jobs we can’t even imagine today. Our government is proud to help meet the demand for state-of-the-art space that will help bring these projects to life.
The MaRS boss, Ilse Treurnicht, added:
The MaRS Centre has been at capacity since it opened six years ago, when we first started working with entrepreneurs building new growth companies. Today the MaRS community has tremendous momentum, and our facility is bursting at the seams! This expansion of the MaRS platform offers a huge opportunity to accelerate that momentum and further strengthen our innovation economy for future generations.
Since there was never demand for the new space beyond the Province’s two original taxpayer-backed tenants (Ontario Institute for Cancer Research & Public Health Ontario), the Liberals are running to cover their tracks by buying the building (having already guaranteed a loan to build the project in the first place). With no demand from start-ups, as was clear all along, Premier Wynne now claims that it was always the government’s intention to “consolidate” some of its real estate space at the very handy corner of College and University through the acquisition of MaRS phase 2 from the US REIT Alexandria. And yet, it was only 16 months ago when the Liberal government announced that it was selling some of its downtown Toronto office space.
Buying and selling real estate in the same geographic market. Guaranteeing the loan of a very expensive incubator, and then buying the building for $317 million to hide the fact that the tenants never arrived to cover carrying costs of the original construction loan. Plus a bunch of other expenses that the taxpayer is now on the hook for.
Imagine the scenario where a bank provided a real estate development loan and then wound up taking the project over when the developer couldn’t lease the space to new tenants. What would OSFI say if the bank claimed that it wasn’t a failed credit underwriting process, and that it always intended to use the tower itself. The hammer would come down.
There’s Ontario’s innovation strategy for you. Only $36.3 million was available for OVCF 2 (see prior post “Northleaf’s Venture Catalyst Fund gets to work” Feb 27-14), but the Grits can find almost $500 million to wash away MaRS’ failed real estate project.
Makes the techie in all of us want to cry.