February 20, 2020

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Bumps on the road

The future of the city's rapid transit rests on residential infill, but it hasn't been a smooth journey for developers

If you step on to a southbound bus at Osborne Station, there’s not much to see along the Southwest Transitway, a 3.6-kilometre patch of pavement that serves as the city’s only rapid-transit corridor.

First, you rumble through a tunnel below some CN Rail lines. Then you travel past the back end of Winnipeg Transit’s headquarters and main garage.

For the final two kilometres, you gaze out at a big green patch of nothingness known as the Fort Rouge Yards.

For more than a decade, this two-kilometre strip of former industrial land has been eyed as the site of Winnipeg’s first transit-oriented development, a collection of new condos and apartments that would allow residents easy transport to work or school without having to rely on cars.

Former owner Ken Douma, who bought the decommissioned rail yards from CN, wanted to build 1,375 units on the property. His plan died in 2004, when then-mayor Sam Katz cancelled an earlier iteration of the Southwest Transitway.

Current owner Andrew Marquess, who purchased the land from Douma in early 2008, scaled back the development density to 900 townhouses and apartments. His original plan called for construction to begin in 2011 and wrap up this year.

Halfway through 2015, all that stands at the Fort Rouge Yards is a single show home, a pair of transit stations and a series of coming-soon signs. This is not just a concern for Marquess, who has borrowed and spent millions to remediate the former industrial site, install geothermal heating pipes below it and build roads (and one of the transit stations) above ground.

Developers are watching with interest, as the Fort Rouge Yards is one of the largest infill projects ever proposed in a city famous for building outward instead of up. A failure here could send a signal Winnipeg isn’t serious about higher-density development.

They’re also watching intently at city hall, where Mayor Brian Bowman made an election pledge to complete six transit corridors by 2030. On the campaign trail, Bowman said new developments alongside future bus-ways would help pay for his multibillion-dollar promise. If Marquess fails, so does Winnipeg’s mayor, a man he’s never met.

There’s even more skin in the game at First National Financial, Canada’s largest non-bank lender. The Toronto firm, which has been lending Marquess money since 2003, took over the risk of a $7-million Fort Rouge Yards loan guarantee from the City of Winnipeg earlier this year.

Finally, Winnipeg as a whole has a bet on Marquess, who actually controls two parcels of strategically important infill property. In addition to the Fort Rouge Yards, Marquess owns 59 acres of unserviced city land in the Parker neighbourhood, alongside the future second phase of the Southwest Transitway.

He acquired this land in 2009 through the Parker land swap, one of the land transactions vilified by an external audit of major City of Winnipeg real estate deals.

Marquess, who moved to Winnipeg from Calgary about 14 years ago, bristles at a narrative he says has emerged about him in his adopted home.

"This guy pops up from nowhere. This guy was at the right place at the right time. This guy has something strategically important," he said in an interview earlier this month. "Everything I bought in this town, everyone had a chance to buy."

From farm to negotiating table

Winnipeg Free Press

For more than a decade, a two-kilometre strip of land called the Fort Rouge Yards has been eyed for residential-transit development. (John Woods / Winnipeg Free Press files)

Marquess, 50, grew up on a cattle ranch near the hamlet of Gem, Alta., a speck on the highway map about 140 kilometres east of Calgary.

Before moving to Winnipeg, he worked at wealth-management company Assante, started an agricultural-genetics company in Saskatoon with his brother and worked in real estate in Calgary.

Marquess said he started in property at Mainstreet Equity Corp., a Calgary company that buys, renovates and manages rental apartments. This business model served as the template for the real estate projects he pursued in Winnipeg during the first few years of the last decade.

"Buy a property. Fix it up. Raise the rent and move forward. That was the model we had here," said Marquess, sitting in the boardroom of Gem Equities, the development company he runs out of a one-storey building on an industrial stretch of Spruce Street in inner-city Winnipeg’s Sargent Park neighbourhood.

Gem Equities is named after his childhood home, but there’s little of the farm boy at the office. On a sweltering Friday, Marquess is dressed in a light-blue pinstripe dress shirt and charcoal slacks. He’s slim, with a full head of blond hair.

After moving to Winnipeg, Marquess started or held an interest in no less than 22 different corporations, most of them numbered companies registered in Manitoba.

Prior to Gem Equities, his main Winnipeg firm was B&M Land. Mainly active before the global recession of 2008, it was controlled by Marquess, through a separate numbered Manitoba company, and San Jose, Calif., developer Ben Bingaman, through a numbered company registered in Nova Scotia.

Marquess said he met Bingaman while both worked for Assante, in separate cities. "He grew up on a farm, I grew up on a farm," Marquess said. The two became friends and decided to work together, he added.

By 2008, changes to the real estate market in Winnipeg led Marquess to reconsider the idea of renovating apartments and switch to infill construction. Building new would allow him to take advantage of more tax credits, he said.

"The real estate had started to move and I realized the model wasn’t going to continue to be successful because the prices of buildings were moving faster," he said. "There was a point where it didn’t make any sense and I could see that in ’08. So this opportunity came up of buying this piece of dirt in Fort Rouge."

The Fort Rouge purchase

Winnipeg Free PressLeesa Dahl / Winnipeg Free Press

About 11 years ago, Douma’s Redview Developments purchased the 25-acre Fort Rouge Yards site from CN and planned to build affordable housing units on the narrow strip of land. A rapid-transit corridor championed by former mayor Glen Murray was slated to run alongside the property.

"Rapid transit would make it a nicer development, no doubt about it," Douma told the Free Press in 2004. "To make a city grow, you probably need fast transit."

At the time, Douma said he planned to go ahead with his development whether or not the transit corridor was built. But he wound up sitting on the land after Murray resigned mid-term during the spring of 2004. Murray was succeeded by the less transit-friendly Katz, who cancelled the bus-corridor project.

Marquess said he took an interest in the land in 2007 and closed on a purchase from Redview in 2008.

"There was a contiguous piece of dirt that seemed to be in a good area," he said, adding he wanted to build affordable housing on a scale that would make this feasible, financially. "What nobody wants to talk about in this town is that we have certain levels of income and people’s ability to afford different types of housing. We’re not Calgary. We’re not Edmonton."

Marquess said he had no idea at the time events were in motion at all three levels of government that would revive the Southwest Transitway.

In February 2008, the federal government announced a $500-million rapid-transit fund that would result in at least $17.9 million for Manitoba. Weeks later, in March 2008, Katz announced the City of Winnipeg would begin socking away $2.75 million every year to pay for a transit corridor. The former mayor also insisted in an interview he was never opposed to rapid transit.

In September 2008, when Katz and former Manitoba Premier Gary Doer stood inside Winnipeg Transit’s Fort Rouge garage and announced the $138-million first phase of the Southwest Transitway, Marquess was present at the press conference.

Marquess said he didn’t know what the event was about when he received an invitation to attend from the city’s planning, property and development department.

At the press conference, Katz communications director Brad Salyn introduced Marquess to reporters as a developer who planned to build housing alongside the proposed bus corridor.

It’s not entirely clear why Redview agreed to part with the Fort Rouge Yards when a bus corridor along his property was so close to being revived. Douma declined to respond to requests for comment.

Construction on the Southwest Transitway began in 2009. The first phase, from Queen Elizabeth Way near The Forks to Jubilee Avenue near Pembina Highway, opened on time and on budget in April 2012.

The Parker land swap

Winnipeg Free PressLeesa Dahl / Winnipeg Free Press

In April 2008, the City of Winnipeg filled a vacancy at the top of the planning, property and development department by naming Phil Sheegl the new director. A developer and real estate agent, Sheegl was touted for his private-sector experience. Then-mayor Katz also described him as a close friend.

Months after Sheegl arrived, in August 2008, someone instructed a city property appraiser to estimate the value of nine acres of Marquess-controlled land at the Fort Rouge Yards, according to a city real estate management audit completed in 2014. This initial appraisal took place a month before Katz and Doer made their Southwest Transitway announcement.

In October 2008, a second appraisal was ordered up of the same nine acres. The appraiser was also instructed to come up with a value for 59 acres of vacant, unserviced city land in Fort Garry’s Parker neighbourhood.

As the real estate audit eventually reported, the appraiser warned he didn’t have time to conduct proper analyses of the sites or visit either of them. The unnamed city employee came up with a value range of $806,000 to $1.6 million for the Marquess-controlled land at Fort Rouge. The city-owned Parker lands were valued at $986,000 to $1.16 million.

Marquess said he is almost certain Sheegl approached him — though doesn’t recall precisely when — with a proposal to acquire a portion of his Fort Rouge land because Winnipeg Transit needed it to expand its main garage.

"Phil would have come and said, ‘We need this dirt, the north end part’ because they needed it for the station," Marquess said. "I said I didn’t want to sell any land. He said, ‘Well, we need the dirt. We need to do the transaction.’ "I said, ‘I don’t want to sell. Do you have anything that’s of similar quality? Remember, I wanted to build. I wasn’t a land trader. Buying and selling didn’t do me any good. I wanted something I could build on. That’s what ultimately led to Parker."

Sheegl, who spoke openly in 2008 about his desire to extend the Southwest Transitway west toward Sterling Lyon Parkway, was promoted to deputy chief administrative officer in October 2008.
In March 2009, a draft plan to exchange the 59-acre Parker parcel for nine acres of Marquess-controlled land at Fort Rouge was emailed from the city to the developer, according to the real estate audit. A letter containing the actual agreement was then mailed to Marquess in May 2009, according to the audit.

The city’s legal services department did not review the agreement until June, after Marquess had a copy, the audit states. Elected officials finally got wind of the land swap when a report recommending the deal was presented to council’s property and development committee in July 2009.

That report pegged the value of both parcels of land at an even $1 million but did not disclose the values were conducted the previous year, without site inspections or full appraisals. The report also included a map showing a rapid-transit corridor might run alongside the Parker neighbourhood.

After the property committee approved the swap, Marquess said in an interview he planned to build 3,500 townhouses on the Parker lands. This led to a rough ride at executive policy committee, which narrowly approved the deal despite complaints it was being rushed through city hall.

The debate at council the following week was acrimonious. "The fact this is being rammed through here at 8:30 at night on a Wednesday in July is a bunch of garbage," Transcona Coun. Russ Wyatt seethed. Nine days after the report materialized, council approved it by a 10-6 margin.

In the ensuing years, the assessed value of the Parker lands fluctuated wildly. The parcel was assessed by the city at $1.9 million in 2010 and then corrected to an even $1 million. The following year, it bounced back to $1.8 million and was "significantly greater" in 2012 than it was in 2009, according to the real estate audit.

In July 2014, consulting firm EY concluded there was no way to tell if the city received value for its money through the land swap, using the term "rush job" to describe the land valuations. Former mayor Katz, however, rejected the audit as flawed.

"It was a rush job because the director of transit said we need to get this to council. End of story," Katz said during an exit interview in October 2014.
Winnipeg Transit director Dave Wardrop rejected this assertion. He said his staff identified Marquess’s land as the best place to expand the Fort Rouge transit garage well before the land swap made it to council.

"It is true we identified the need for the garage lands. We said we would like to build somewhere. That was basically it," Wardrop said in a telephone interview earlier this month.

"We said, ‘Can you get us some land?’ I wouldn’t go as far as to say we had an impetus for the land swap. How PP& D went out and procured the land, we had nothing to do with it.
"It’s very frustrating for us, here at Transit, as the whole deal tarnishes the rapid-transit project."

In 2013, the city wound up selling off a chunk of the land it acquired from Marquess but did not need for its new transit garage. The same year, council approved a plan to complete the Southwest Transitway by running it through the Parker neighbourhood, as envisioned in 2009.

This year, council approved a plan to expropriate as many as 20 acres of the Parker lands from Marquess because Winnipeg Transit needs to make way for the bus corridor.

Marquess said he wants the city to demonstrate it really needs to take the land back. Even though Parker suffers from serious issues — including poor drainage, no services and no road access — the land "looks ripe for development" to someone with a fresh perspective on this city.

"Winnipeg’s no different than any other city, but it just seems, from my short time here, it a takes a lot longer for Winnipeg to get where these other cities have been," he said.

Of lawsuits and loan guarantees 

In this 2008 photo, Andrew Marquess poses in the re-development site between Fife and McPhillips. Marquess on the Fort Rouge Project: 'Can it succeed? Sure it can. It's waiting to succeed. The question is, in my mind, does the city want it to happen?' (Phil Hossak / Winnipeg Free Press files)

Compared to renovating apartment buildings, building housing from scratch proved challenging to Marquess. His first large-scale infill-housing project, B&M Land’s 19-building Terra Commons complex west of McPhillips Street, started out in 2007 as a rental-housing project. After delays and a slow build-out, it’s finally approaching completion as a condo complex.

As part of the Terra Commons project, Marquess built units on land that was supposed to be set aside for a community park. In 2014, the city fined him $70,000 for the move and forced him to forfeit a $100,000 deposit.

But this wasn’t the worst of his financial troubles. From 2009 to 2012, companies under Marquess’s control were sued for non-payment no less than 15 times by suppliers. Those firms were ordered to pay at least $1.59 million.

In January, April and July 2011, city building inspectors issued derelict-building orders against three Winnipeg properties under his control. The orders were cancelled in December, when the Free Press wrote about them — and Marquess quickly brought the buildings into compliance.

Marquess said his troubles started during the global recession in 2008, when one of his partners backed out and he could not secure financing from a lender.

"I think everyone’s situation in 2008 was different. Some people lost everything. Some people didn’t have a problem. And you had the whole spectrum in between," he said, referring to the period from 2008 to 2012 as a chapter of his career he had to endure. "We’ve finished every project we’ve ever done."

The derelict-building orders, however, angered several members of council, including Wyatt and former St. James-Brooklands councillor Scott Fielding. Only two months before news of the derelict orders broke, council approved a $10-million city loan guarantee that would help Gem Equities secure $14.7 million in financing from the Federation of Canadian Municipalities, which was interested in helping Marquess build on the Fort Rouge Yards.

In a year-end interview in 2011, Katz called the loan guarantee a "zero-risk" proposition for the city. Correspondence obtained by the Free Press through freedom-of-information legislation two months later revealed that was not the case, as the city faced some risk if Marquess defaulted during the construction process.

Earlier this year, First National Financial assumed that risk from the city in a deal approved by council. Marquess described the move as an unprecedented vote of confidence.

"They’re not in the habit of indemnifying a borrower. That certainly should give you a general idea of their comfort level," he said. "The relationship is really, really deep."

Marquess would not disclose how much money he owes First National Financial. Moray Tawse, the firm’s co-founder, declined to comment due to client-confidentiality considerations.

Marquess said the support from First National Financial, which says it administers $87 billion worth of mortgages, "really speaks volumes to Fort Rouge and all these questions" about whether he could have benefited from an association with former mayor Katz or former city administrator Sheegl.

Marquess said he met Sheegl once prior to 2008 because they have children the same age. Marquess said he was not well-acquainted with Katz, either.

"It’s like everyone else. We had bought a house in Phoenix and of course, on WestJet you see half of Winnipeg going back and forth, right? So that was another ‘connection’ — me and 130 other people," Marquess said.

"A lot of people wanted to make a lot more of it than what it is. I certainly wish I had the influence at the city I was purported to have."

Nonetheless, Marquess and Katz developed some form of social relationship. In June 2009 — one month before the Parker land swap came to council — Free Press columnist Gordon Sinclair Jr. reported Marquess, Katz and Sheegl dined together at the Lobby On York, a restaurant located in the Residence On York, a residential building Marquess controlled at the time.

About two years later, Marquess’s wife, Maureen Diamond, sold a South River Heights residential property to Katz’s ex-wife, Baillie Burke. The transfer of the 1,600-square-foot Montrose Street home, now assessed by the city at $381,000, took place between June 2011 and May 2012.

The property briefly housed a grow-op before the former mayor’s ex-spouse acquired it. "When she (Diamond) bought it, the first renter used it as a grow-op for a week," said Marquess, adding the marijuana plants were discovered during a routine cheque-collection visit.

Katz declined an interview request. Burke could not be reached.

Making it right at Fort Rouge

Winnipeg Free Press

Large development signs dot the weed filled Fort Rouge Yards, a barren two-kilometre stretch of land north of Jubilee Street running parallel to the Southwest Rapid Transit Corridor. (Mike Deal / Winnipeg Free Press)

Back in 2008, when Marquess acquired the Fort Rouge Yards, no one in Winnipeg had attempted to develop 18 acres of infill housing. It took two years for Marquess to bring an area master plan to city hall.

It envisioned the construction of 900 units, with construction on low-rise townhouses expected to begin in 2011, mid-rise apartments and condos to follow from 2012 to 2014 and highrise apartments and condos to rise from 2013 to 2015.

The actual build-out has not begun, though Gem Equities has completed the below-ground services, above-ground roads as well as a Jubilee rapid-transit station to match the Fort Rouge station the city completed in 2012. The floor slabs at Jubilee Station, incidentally, are served by geothermal heating and should be the first in Winnipeg to clear themselves of snow.

Wading through the minefields of infill development has proven more hazardous for Marquess, who has struggled with the twin burdens of installing services as a land developer and then creating housing as a homebuilder — a pair of functions that are often separate when residential homes rise over new, suburban subdivisions.

Marquess finally began marketing units at the Yards at Fort Rouge in 2013, when Gem Equities announced a construction partnership with TV personality Mike Holmes.

Marquess said he has commitment letters to build 136 units. To date, the city has issued permits to MEG Construction, partly owned by Marquess, to build an 18-unit, three-storey condo building and a 22-unit three-storey condo building, both on Rathgar Avenue.

Marquess said he can’t proceed until the city declares Jubilee Station 100 per cent complete. While it’s already in use, some of the mechanical work has yet to be commissioned.

Until that happens, he can not access the Federation of Canadian Municipalities loan, never mind start construction. He chooses his words carefully when he complains of the time it has taken for the city to review and approve his plans.

"We should have been building these condos years ago," he said. "The holdup was the delay in getting approval to build the transit station last fall."

The one-year delay has cost the Yards at Fort Rouge "three or four sales" from customers who have demanded the return of their deposits, Marquess said.

"The city’s decision-making and their thought processes have not been a benefit to me," he said. "These people should be living in their units. That’s the frustrating part. There should be units happening there. That’s not me."

Fort Rouge-East Fort Garry Coun. Jenny Gerbasi, a strong supporter of the Fort Rouge Yards, said she, too, is frustrated with the pace of development.

"It’s obviously been a really long period of time. It’s frustrating," she said. "I can’t really answer why it’s taking so long."

Mayor Bowman, who’s counting on transit-oriented development to serve as the financial fuel for six rapid-transit lines, said he wants to see as much infill housing in Winnipeg as possible.

"There have been some challenges which certainly predate my time in office," the mayor said when asked how confident he is the Parker land along the Southwest Transitway’s second phase will be developed while the Fort Rouge Yards remain empty along the transitway’s first phase.

Marquess said Mike Holmes is still a partner with Gem Equities on the construction of the Yards at Fort Rouge. A spokeswoman for the Holmes Group in Toronto did not respond to requests to comment.

Monica Newman, a former saleswoman with RimRock Realty, said she was instructed to stop selling units in the project late in 2014 — and was not provided an explanation.

Marquess insisted units at the Yards remain on sale and expressed frustration with the questions surrounding his project.

"Can it succeed? Sure it can. It’s waiting to succeed," Marquess said. "The question is, in my mind, does the city want it to happen?"

Marquess said he is not certain transit-oriented development will be a hit in Winnipeg, based on his experience to date.

"I’ve always seen this as a unique opportunity," he said, insisting he would have developed the land with or without a transit line. "I’m excited about Fort Rouge. Clearly, I’m all in in Fort Rouge."

So is Coun. Gerbasi, Mayor Bowman, First National Financial, the Federation of Canadian Municipalities and anyone in Winnipeg who wants to see higher-density development.

Such is the breadth of the support for the enigmatic Andrew Marquess, the Alberta farm boy-turned-Winnipeg real estate developer, who carries so many expectations.



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Updated on Saturday, July 18, 2015 at 8:23 AM CDT: Fixes a repeated section of story.

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