500 days

It is a good thing. The developer in Wellington has paid his bill. Beyond this, little has changed. Are we closer to new homes, new apartments? Yes, we are. Incrementally. Still, there is no guarantee that any new homes will be built in the village. It may yet be decades away still. If at all. We have edged closer to seeing new homes rise north of the Millennium Trail, but that is all we have done. Now, we wait. Now, we sit back to see what—if anything—happens next.

Everyone has placed their bets. Shire Hall has committed $45 million on behalf of existing water ratepayers. The developer has committed a comparable share of its capital. They, too, have made a sizeable bet. (Their downside is reduced, of course, by the fact that their land has appreciated greatly with the unfurling of grand new waterworks soon to track along their property. Shire Hall has no downside protection—only ratepayers’ wallets.)

Now comes the hard part. Can the developer sell homes in Wellington? Can they sell them at a pace—a velocity—to satisfy their lenders? Will buyers pay the price point to deliver a profit? Will they find the trades and labour to build homes at scale?

These are some of the questions the developer’s funders are asking this morning—and will continue to ask for the next 500 mornings. The developer will shovel money into the ground in Wellington without a return for the foreseeable future. They will be marketing homes and testing their assumptions of uptake. We must do the same.

Wellington is an attractive place to live. The developer has experience in a similar setting just east of the ferry in Bath. Kaitlin are pros. They don’t invest on a whim. They will have done their homework.

Still…

The world has changed since the pandemic. Interest rates are subsiding, but remain considerably higher than in the last two decades. Materials, supplies, labour, energy costs, and development charges are all higher, fuelling home prices that are out of reach for many families.

Then there is the question of jobs. What will folks do? Bath is within commuting distance of Kingston. Wellington tends to attract weekend folks. Are enough people willing to spend a million dollars on a weekend property? Maybe. But at what numbers?

These are some of the challenges Kaitlin faces. They have assessed them, and they are making a bet on Wellington. It is a good thing.

But Kaitlin is also hedging its bet. Certainly, its lenders are. Kaitlin has committed real capital in this community. They have done so boldly and with enthusiasm. We wish them well. But if the market for their homes doesn’t materialize, Kaitlin has options. They can wait. Or they can sell. Their land is valuable. They have alternatives that Shire Hall and ratepayers do not.

In fairness, Shire Hall is in a much better position than a week ago. It has the developer’s upfront development charges—a year late, but it has the money. It is a good thing. A welcome sigh of relief.

It changes little, however. The risk of this venture remains solidly on the backs of existing waterworks customers.

Some may see the developer’s payment as proof that hundreds of homes will soon arise from the ground. It isn’t. Some will see it as an excuse to push forward with another $250 million of waterworks upgrades for Picton developers. It isn’t. Some see it as a basis to go all in. It is nuts.

So far, Shire Hall has spent $45 million; the developer has paid $17 million (DCs and security deposit). That leaves existing waterworks customers on the hook for $28 million of waterworks debt until the developer burns through Phase 1. It could be five years. It could be 50 years.

The bottom line is this: Developers in Picton and Wellington now have the green light to build more than 800 homes. Shire Hall has bought itself time. It has the time in Picton and Wellington to see how demand unfolds. It has the gift of time to see if the uptake is sufficient to satisfy the developer and its lenders. It has time to measure the trajectory of these projects.

Its lenders will be asking these questions. They will need to see proof of concept. They will continue to ask these questions for the next 500 days. So should Shire Hall.

Existing waterworks customers must see the proof that developers can do what they say they want to do. Shire Hall has operated in good faith with developers on behalf of ratepayers. Now, it must see evidence. It must see new streets of homes rising from the ground. It must see rows of sold signs erected. It must see moving vans arriving in numbers.

It’s proving time.

rick@wellingtontimes.ca