How could the land for the future Northvolt battery mega-factory, the purchase of which was entirely financed by the government, see its value increase from $20 million to $240 million in just eight years? ?
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“Right now the economy is tough, so we are very happy with this transaction,” admits Alice Wu, a member of the group that sold the 18.5 million square foot land to the Swedish company on October 31. .
“I never thought we could do such a transaction,” she adds.
“It’s like winning at Loto-Québec,” says Gaétan Houle, who was co-owner from 2013 to 2015.
Record sale
According to many, $240 million is the highest price ever paid for land in Quebec.
Mr. Houle had a residential construction project on the property which straddles Saint-Basile-le-Grand and McMasterville, in Montérégie.
However, he and his business partners threw in the towel due to the long delays looming on the horizon to change the zoning of the premises, which were mainly reserved for industrial uses. After all, the land was home to an explosives factory from 1878 to 1999.
“We knew that it was a project that could take a long time to develop,” says Gaétan Houle.
In the fall of 2015, a group composed of Mme Wu and two other investors, Luc Poirier and Serge Gariépy, paid $20 million for the land. Mr. Gariépy maintains that including commissions and related costs, the bill totaled $35 million.
Illustration provided by Northvolt
“Issues” in two ministries
The buyers also wanted to build an ambitious residential project on the land, but the Ministry of Transport was concerned about the traffic congestion that the addition of more than 4,000 housing units would cause on Route 116.
“They did not refuse categorically, but there were also issues to be resolved with the Ministry of Municipal Affairs, which is normal in the case of such a large plot of land,” confides Serge Gariépy.
Despite everything, the City of Saint-Basile-le-Grand officially asked the government, in the spring of 2019, for permission to change the zoning of the land to give it a residential vocation.
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“That’s when the government realized that this land existed,” says the mayor of Saint-Basile, Yves Lessard. So they told us “no, we don’t want to rezone it because we don’t really have any other land with this potential for industry.”
This was not very good news for the owners of the land. At the time, the value of industrial land was growing, but it remained significantly lower than that of residential land.
Photo Francis Halin
“We sold at a good price”
However, the pandemic and its negative effects on supply chains have caused industrial land prices to jump. This is how at the end of 2021, a 4.3 million square foot plot of land located in Saint-Bruno-de-Montarville sold for $95 million, or $22 per square foot. Two months later, in Candiac, a transaction was concluded at more than $27 per square foot.
For its part, Northvolt paid approximately $13 per square foot.
“When there is a shortage, well, it is normal that the demand is there and that prices increase,” notes Mr. Gariépy, who began negotiating with Northvolt during the visit to Quebec of the leaders of this last, in February.
“We sold at a good price to Northvolt because they bought the entire land. It was simpler for the rest of us,” explains Serge Gariépy.
François Des Rosiers, professor at Laval University and real estate expert, does not find the price paid by Northvolt “exorbitant,” but still emphasizes that the sellers were in a position of strength.
“They had to know they had good negotiating power,” he said. Northvolt is a very big project and that’s where they wanted to locate it.”
François Des Rosiers
Photo taken from the Laval University website
An offer blocked by Quebec in 2022
Mr. Gariépy argues that in 2022, his group received a purchase offer of more than $130 million for two-thirds of the land, which represents approximately $200 million for the entire location. The potential buyers had a project for industrial condos, but according to our information, Quebec vetoed it, wishing to keep the land for the battery sector.
By collecting $240 million, the sellers received the equivalent of what they could have earned by carrying out their residential project – without having to wait years and without taking any risks.
According to a reliable source in the real estate community, developers could have hoped to make profits of around $200 million from a project of 4,000 residences, or around $50,000 per unit.
Mr. Gariépy assures that Northvolt did not pay more because it benefited from a government loan.
“We knew that they were going to be helped financially by the government,” he admits. You would have had to be a little disconnected not to know it, but we didn’t know to what extent. The Northvolt people were quite discreet.”
– With Philippe Langlois, QMI Agency