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Units in Northern Junk development will be strata, not rentals

Construction costs are up by 50 per cent and interest rates have skyrocketed, making the rental project unfeasible to finance, says Reliance Properties

Developers of the long-vacant historic Northern Junk buildings near Victoria’s Johnson Street Bridge had promised rental housing but now have permission to build strata units instead.

Victoria council approved a proposal in 2021 by Reliance Properties to rehabilitate the gold rush-era buildings and incorporate them in a six-storey mixed-use building with 47 rental residential units, commercial space, a waterfront walkway, a public alley and an elevator to connect the street to the waterfront.

Just over two years later, construction costs are up by 50 per cent and interest rates have skyrocketed, making the rental project unfeasible to finance, said Jon Stovell, president of Reliance Properties.

While the overall cost of the project is relatively similar whether it’s rental or strata units, a strata project allows the company to borrow a larger percentage of its costs, Stovell said.

Victoria council approved a request Thursday from Reliance Properties to terminate an agreement that required the development company to build rental housing, paving the way for Reliance to go ahead with condos.

Other elements of the project remain unchanged. The 47 units will range from about 400 square feet to 1,100 square feet, with four studio units, 30 one-bedroom units, nine two-bedroom units and four units with three bedrooms.

The project includes amenities for the public, including construction of a waterfront pathway, a public elevator to water level and a mural.

City staff told council Thursday the amenities exceed city requirements, and recommended council approve the request from Reliance.

Reliance is awaiting the approval of its application for a tax exemption from the city to offset the cost of seismic upgrading, Stovell said.

If that application is successful, the company expects to be able to start work on the building, Stovell said.

Despite the switch from rental to condos, Stovell said many of the units will likely be purchased and rented out by owners.

“So I don’t think it’s completely a lost cause for any existing rental to be created there,” he said.

The Caire & Grancini Warehouse and Fraser Warehouse were built in the 1860s and are among the oldest buildings in Victoria, city staff told councillors.

They’re known colloquially as the Northern Junk buildings because they last operated as a scrap-metal recycling business, which closed in 1978.

Reliance has spent more than 13 years trying to win approval to develop the landmark property.

Coun. Dave Thompson said the switch from rental to strata is unfortunate, but approving the strata option to ensure the project moves forward is the “lesser of evils.”

Coun. Jeremy Caradonna said he wouldn’t support the switch if interest rates hadn’t risen significantly.

“I genuinely do believe that many projects that were viable a few years ago are no longer viable without changes like this, which is unfortunate, but the reality that we face,” he said.

Council approved the change in a 7-2 vote, with councillors Susan Kim and Chris Coleman opposed.

regan-elliott@timescolonist.com

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