More than once, Ronald McCowan tried to buy Elliot Lake’s doomed shopping mall. Where so many others saw an old, tired structure—vacant stores, broken escalators and a notoriously leaky rooftop parking lot—McCowan, a real estate veteran, saw dollar signs. “Most of the assets that I buy are exactly like that,” he said last year, testifying at the public inquiry into the mall’s 2012 collapse. “That is exactly the space I live in. That is what we do.”
Under oath, McCowan said he’s been investing in property for 40 years, making his first real estate purchase at 17 and expanding ever since. “The business model is very simple,” he testified: look for commercial buildings in secondary markets that need “a little bit of TLC,” renovate them, and attract new tenants. Now the president of McCowan & Associates, a private firm headquartered in Barrie, Ont., he said he owns close to 60 properties (half of them shopping plazas) spanning four million sq. feet with a combined value of nearly $600 million.
In the end, McCowan never did add the Elliot Lake mall to his portfolio. He thought he’d reached a $10-million deal in 2009, but claimed the owner, Bob Nazarian, tried to hike the price by $500,000 at the last minute. (“I said: ‘Gentlemen, have a nice day. I’m not interested.’ ”) Another sale was brewing in late 2011, but he said that one died, too, after Nazarian refused to lower the asking price to offset the cost of fixing the mall’s rotting roof. “They said that the roof was fine.”
Barely six months after the final deal fell through, a large chunk of the Algo Centre’s upper-level parking lot—corroded by decades of salty slush and rain—crashed through the mall below, crushing two women: Doloris Perizzolo, 74, and Lucie Aylwin, 37. On Oct. 15, more than two years after emergency workers pulled their bodies from the rubble, the Elliot Lake inquiry will release its final report, the deﬁnitive account of why the building caved in—and why the rescue effort appeared, at least from the outside, so inept.
In a tragedy defined by countless what-ifs, Ron McCowan represents yet another. What if his company had purchased the Algo Centre before it caved in? Could two lives have been saved? “If I had bought the mall, I would have started work on it immediately,” he testified, saying he would have hired an engineer to examine, with a camera, “every single” structural beam holding the deck in place.
It’s impossible to say for certain what might have been. But one thing is clear: even after the plaza collapsed, McCowan still saw dollar signs in Elliot Lake.
When the devastated community (population 11,300) set out to build a new mall, his firm responded with a winning pitch that met the city’s three ironclad requirements: that it be one level, enclosed, and include some type of central gathering place, preferably a food court. Unlike most malls, though, the one in Elliot Lake would be heavily subsidized. The plan called for the city to spend close to $4 million preparing the nine-acre site for the developer, with the help of a $1-million grant from the province and another $1 million from Ottawa. The city would then sell the “shovel-ready” land to McCowan for $1.2 million, leaving local taxpayers on the hook for approximately $800,000. (The actual construction costs, to be paid by McCowan, are expected to exceed $15 million.)
In November 2012, just five months after the collapse, McCowan travelled north to address a grieving town anxious for some positive news. He told city council that “Pearson Plaza,” with enough space to fit nearly two dozen tenants, should be open “a year from today” (i.e., November 2013).
Nearly two years after that pronouncement—and almost a year after McCowan’s predicted opening came and went—the new mall still isn’t built. And despite such unprecedented government funding, some residents are starting to wonder if it ever will be.
In a once-booming mining town that has reinvented itself as a retirement community—a place where 35 per cent of the population is over 65, way above the national average of 15 per cent—the old mall was the social hub, a spot to meet for coffee, take a walk, and scratch lotto tickets. Locals are driving to Sudbury or Sault Ste. Marie, four hours round trip, just to buy underwear. If nothing else, the mere prospect of a new mall symbolized Elliot Lake’s grit and resilience: a testament to what the city endured on June 23, 2012, and how it continues to heal.
Instead, the much-publicized project has been hampered by delay after frustrating delay. The architectural drawings have shrunk. City councillors are livid (“He’s got us over a barrel,” one said, describing the developer). Last month, a small group of locals staged a protest, chanting: “We want a mall!” Emotions are so high that councillors recently passed a unanimous motion directing staff to contact Bob Nazarian—the old mall owner, who famously said the Algo Centre was “a black hole” and paying for repairs was like flushing money “down the drain”—to see if he wants to build more commercial space on his now-vacant plot of land.
Ron McCowan, meanwhile, has endured his own difficult year, highlighted by a controversial Bay Street transaction that raised serious questions about his conduct as interim CEO and largest shareholder of Partners REIT, a publicly traded real estate investment trust. While Elliot Lakers wondered about their shopping mall, the Toronto Stock Exchange was reporting “an incident of significant non-compliance” involving McCowan to the Ontario Securities Commission.
It was never going to be easy. Elliot Lake’s downtown protrudes from the side of a steep hill, and the new mall site is no exception. It required months of blasting and hauling (again, with the help of $2 million worth of federal and provincial cash) just to flatten the property for development. “The reality is, it’s a major construction project,” says William Elliott, the manager of a regional development agency (ELNOS) who volunteered to be the city’s point man on the project. “We weren’t starting from a green field or even a brown field. We were starting with a rock mountain.” (A lifelong Elliot Laker, Elliott also happens to be a volunteer firefighter, one of the first to climb the concrete pile in search of survivors that terrible afternoon.)
Despite obvious challenges, optimism prevailed—at first. In May 2013, a Foodland vice-president told city council his grocery chain had “an agreement with the developer” and “you have my solemn commitment that this store will be operating by Jan. 1  at the latest.” It was wishful thinking; by the time January rolled around, McCowan still hadn’t bought the land, let alone broken ground.
It wasn’t until March 2014 that the property sale ﬁnally closed, giving McCowan ownership of the future mall site and the green light to start construction; a month later, the city rubber-stamped his 80,000-sq.-foot plan. “We are dealing with a person who is honourable, and he will deliver what he says he’s going to deliver,” Mayor Rick Hamilton said during an April 2014 council meeting. “Let’s get this thing moving.”
At the same time, McCowan was immersed in much more lucrative transactions closer to home. His ﬁrm had just paid $27.1 million for 3.87 million units of Partners Real Estate Investment Trust (REIT), making McCowan the trust’s biggest unit-holder (at nearly 15 per cent). By February 2014, he was named the REIT’s interim chief executive officer, and by April—just as the Elliot Lake site plan was approved—he was in the midst of a massive acquisition: the REIT’s $90-million purchase of three Ontario malls, including the Hamilton City Centre and London’s Crossroads Centre.
The seller was Holyrood Holdings Ltd., a company controlled by a real estate developer and retirement-home operator named Laura Philp. At first glance, the deal appeared no different than so many other Bay Street announcements. But behind the press releases, there was increasing speculation that the buyer (Partners, with McCowan at the helm) and the vendor (Holyrood, run by Philp) were more connected than the market realized.
As securities laws make crystal clear, potential transactions between so-called “related parties” must be disclosed to shareholders.
By April, as the REIT/Holyrood deal neared completion, there were so many whispers about the pair’s business relationship that a Financial Post reporter asked McCowan about it. He blamed the confusion on a Hamilton Spectator report that said his firm purchased the City Centre in 2011. “That was totally incorrect,” McCowan said, explaining that his firm managed the property for Philp, but did not own it. “Do a title search and it will show that it was always owned by Holyrood.”
A numbered company registered to Philp was indeed the listed buyer—with a $3-million mortgage provided by one of McCowan’s companies. (Both corporations listed the same Barrie address.) But the story gets even stranger. Less than a year earlier, while in the witness box at the Elliot Lake judicial inquiry, McCowan said the exact opposite: that he did own the Hamilton City Centre.
“What would be the largest property that you have ever purchased with respect to square footage?” one lawyer asked him.
“550,000 sq. feet,” McCowan answered.
“And where would that be?”
“The Hamilton City Centre in downtown Hamilton, formerly the Eaton Centre.”
“Do you presently and still own that?”
“That’s correct,” McCowan said.
In an April 23 release issued by the REIT to announce the closing of the Holyrood deal, McCowan once again contradicted his sworn testimony. “The REIT is aware that a number of media articles exist that erroneously attribute the ownership of the Properties to McCowan & Associates Ltd.,” it said. “The Vendor was the sole owner of the Properties. The sole shareholder of the Vendor, Laura Philp, is engaged in the business of health care facilities, commercial real estate development and ownership and has been a business colleague of McCowan for many years.”
A very close colleague, it turned out.
Court records show McCowan filed for bankruptcy in 1993, claiming more than $3.7 million in liabilities and zero assets. While the insolvency proceedings were still unfolding, he incorporated a new numbered company (1083018 Ontario Ltd.) that would later become McCowan & Associates. Listed as treasurer—until Dec. 11, 2013, a week before the REIT/Holyrood deal was first announced—was Laura Philp. Records also show that the London Crossroads Centre, another mall in the REIT/Holyrood deal, was purchased in 2012 by 1865100 Ontario Ltd., a company that listed McCowan as president. Philp replaced him as president the following year, and that company was then amalgamated with three others to form Holyrood.
For Orange Capital, a New York investment firm, the links were too suspicious to ignore. On May 1, it issued a scathing press release of its own, demanding a forensic investigation and accusing the REIT trustees of displaying “a total disregard for the Canadian capital markets.” Orange alleged a “related party transaction under applicable securities laws” and “a change of control by joint actors that prejudiced and disregarded the interests of minority unit-holders.”
Three days later, after REIT’s trustees conducted their own investigation, McCowan tendered his resignation as interim CEO. The trustees later said they had “obtained material new information that persuaded” them to conclude that McCowan and Philp have “a close business relationship” and “should be considered as acting together under applicable regulation.” Had the board known “the extent” of that relationship beforehand, the property deal would have been submitted to unit-holders for approval.
In a subsequent letter to the REIT, the Toronto Stock Exchange said “it would not be approving any further transactions” until its compliance and disclosure department is satisfied that their business “can be conducted in compliance with the rules and regulations of the TSX, as well as the best interests of the REIT’s security holders and the investing public.” The TSX also confirmed “that this matter has been logged as an incident of significant non-compliance and will be reported to the Ontario Securities Commission.”
Last week, an Ontario court ofﬁcially approved the rescission of the Holyrood transaction, returning all three properties to Philp’s firm and transferring her REIT units, received as payment, back to Partners. The REIT’s stock, meanwhile, has yet to recover from the revelations, plummeting last month to a multi-year low of $3.75 per unit.
Not long after the Partners debacle made headlines, McCowan’s company nearly pulled the plug on Elliot Lake. The firm had issued construction tenders for the new mall, but the dollar figures came back way higher than expected. At the same time, McCowan was having little success convincing retailers to set up shop in rural northern Ontario, and had no interest in building empty space.
“The message we got back was that the numbers had come in millions of dollars over budget and there was no economics for them to build it,” says Elliott, the city’s project manager. “Basically, the message was: ‘Unless you are prepared to find these millions of dollars, we are not going ahead.’ ”
Elliott digested the bad news with the city’s fire chief, Paul Officer (who, in recent months, has also served as Elliot Lake’s acting chief administrative ofﬁcer). Their best hope, they figured, was to drive to Barrie and talk to McCowan in person, optimistic that a face-to-face meeting would convince him not to walk away. “You know, it’s a long drive down there, almost five hours,” Elliott says. “We had a long time to talk about all the various scenarios that could play out.”
Two years earlier, Officer and Elliott were among the emergency responders who rushed to the mall, hoping to save lives. Now they were together in a pickup truck, hoping to save the new mall.
Their summer road trip worked. McCowan told the pair his staff would study the possibility of a revised, cheaper site plan, ensuring the project didn’t die. But in mid-August, when city council received the reworked drawings, the overwhelming response was anger, not gratitude. “We asked for a Porsche and we ended up with a damn Volkswagen,” said deputy mayor Al Collett, speaking at a special council meeting Aug. 15. “As far as I’m concerned, I’d tell this guy to take a hike.”
The new site plan was smaller than 60,000 sq. feet—20,000 less than the original proposal. “I’m appalled,” said Coun. Chris Patrie. “[McCowan] was chosen because he said he would build it, regardless of tenancy.” It was Patrie who introduced the motion to ask Nazarian about building more commercial space on the old mall property.
Still, every councillor did vote to approve McCowan’s revamped plan, anxious for something—anything—to get built. “There’s not much you can do to change the outcome,” Mayor Hamilton said. “What you can do is accept what we have as a reality, and move on to what we need: rejuvenation of a general merchandiser within the community.”
McCowan declined an interview request from Maclean’s, but an email from his lawyer, Paul Le Vay, said site-servicing is approximately 60 per cent done and “it is anticipated that construction will be completed sometime in mid-2015.”
“McCowan & Associates Ltd. is an experienced developer, having built five freestanding buildings in the past three years and having renovated a number of others,” it continues. “The project has been downsized based on the company’s experience with respect to commercial tenants being willing to lease in Elliot Lake. A number of leases have been signed and others are in the process of being negotiated. In due course, the company will announce its commercial tenants.”
Three have confirmed so far: Dollarama, Foodland, and the local library. (The latter two are occupying temporary locations pending the mall’s completion.)
Despite all the setbacks, Elliott is confident that fellow residents will soon be sipping coffee in a new food court. “Shy of some unforeseen development, the bottom line is the business case exists for what they’ve proposed and what was approved Aug. 15,” he says. “So there is no reason for them not to do it.”
Like so many others in town, Elliott understands why people are frustrated. He wants a new mall as badly as everyone else. But he also knows how fortunate his city is: first, to have received so much government money to prep the land for a shopping plaza, and second, that a private firm is investing millions more to build it. “People need to understand is he is still willing, rather than walk away, to build 60,000 sq. feet of new space in the community at a cost of roughly $15 million,” Elliott says. “That is a $15-million private sector investment in the city of Elliot Lake, and I don’t think anybody should be turning their noses up at that or feel that somehow we are getting a bad deal.”
Not yet, at least.