Developer indefinitely pauses downtown Saskatoon grocery store after request for separate project is rejected

A developer is indefinitely delaying its proposed project to build a grocery store in downtown Saskatoon's Midtown Plaza after city council denied its request to start work on a housing project in the Rosewood neighbourhood due to unfinished sewer upgrades.

"We will not start a new project in the City of Saskatoon," Jeffrey Drexel, president of Arbutus Properties, told CBC News from Vancouver. "I'm extremely disappointed in the council's decision."

On Monday evening, council voted 8-1 to reject a request to remove a hold on a parcel of land in Rosewood, where the developer wants to build an apartment tower that would be considered affordable housing.

The hold hinders work on the building until the lot is serviced.

Council wants Arbutus to put $7 million into sewer infrastructure, including a new lift station, before permitting work to proceed. Drexel said $5.5 million of that work has already been done.

"We told them there is an interim solution, that there's enough capacity in the existing sanitary line, should we for whatever reason not finish the $1.5 million of $7 million work," Drexel said.

"They've put some heavy conditions on us in terms of getting our affordable project going and conditions that we had not agreed to."

Drexel said there is a Nov. 30 deadline on the affordable housing funding Arbutus got from the Canada Mortgage and Housing Corporation for the Rosewood project.

Mayor Charlie Clark, who voted against concessions for Arbutus, said in an emailed statement that he wants both the apartment building and the grocery store to proceed.

"Right now, Arbutus Properties owes the City of Saskatoon more than $2.5 million in overdue payments, and also wants the city to approve development proceeding on a parcel of land that doesn't have servicing completed," the statement read.

"This puts the city at further risk. Arbutus Properties has asked for a different set of rules than what every other developer has followed and the city council wasn't prepared to do that, given the outstanding payments and risk."

Drexel said those fees "are for services that are yet to be provided" to them on the site.

"The city is citing a rule that doesn't actually exist. There's no rule that they can't permit a development to proceed without the lift station that they require us to build," he said.

Ward 1 Coun. Darren Hill cast the lone vote in favour of Arbutus.

"Arbutus has the right to be disappointed and annoyed with the decision. The interest rates are phenomenal, costs of construction and labour shortages are high. We should've taken that into consideration."

Hill said the city could have issued a permit for Arbutus to pour a foundation, but held back a building permit until the lift station was completed.

"Affordable housing is desperately needed in Saskatoon. We now are running the risk of this project not proceeding because of the decision we made. We didn't demonstrate any flexibility."

The project is slated to add 244 affordable units to the city.

Hill called the outstanding dues "ridiculous" and "not a valid reason" to hold up the development, since the city holds multiple letters of credit from Arbutus.

'Delaying our ability to fund the Pitchfork project at Midtown Plaza'

The Vancouver-based real estate developer was also slated to open a Pitchfork Market + Kitchen grocery store in the Midtown Plaza downtown. It already owns another one in southeast Saskatoon.

Drexel said the uncertainty around the Rosewood tower affects Arbutus's $6-million investment in the downtown grocery store.

"We had put a considerable amount of money into the affordable housing project, which we can't access until it's approved, so it's affecting our cash flow and delaying our ability to fund the Pitchfork project," he said.

Drexel said everything is related to cash flow in the development world.

"When one thing gets pushed, it causes other projects to be pushed."

Drexel said the grocery store is slated at $6 million and the affordable housing development at $53 million. He said that aside from that $59 million, Arbutus has $7 million in infrastructure costs.

He said it's unlikely Arbutus will withdraw from the project entirely, but the company can no longer commit to a completion date or on an opening date for the store.

"I thought the council's job was to try to find reasons to do projects, not reasons to shut them down. The administration is shutting it down and the council isn't doing their job," he said.

"For any city to reject a project for an affordable housing project is very short-sighted."