The CBC finally has a new home, the postmodern Broadcast Centre, located just west of the bulging glass-and-steel office towers of downtown Toronto. It is a fitting edifice for one of the world's pioneer broadcasting organizations: a remarkable facility, with its ten-storey stomach-shaped atrium encircled by ribcage-like floors.
Executives at the Crown corporation like to call it the miracle on Front Street, but the real miracle isn't the building so much as its advertised price. The CBC has long claimed its new digs cost no more than what they replaced: twenty-six ramshackle buildings scattered about twenty-four Toronto sites. This fantastic economy has been achieved, it is said, by a unique arrangement between the public and private sectors — a marriage in which the broadcaster has been enriched by the entrepreneurial efficiencies and market skills of real-estate developers.
A wonderful story: the only problem is that it isn't true. Leaked banking and leasing documents on the Broadcast Centre, as well as information tucked away in the CBC's annual reports, indicate that the real story is one of how the broadcaster played the Great Canadian real-estate game and lost big. The true annual cost of the project is many millions of dollars more than the CBC was admitting. Additionally, the Broadcast Centre has been encumbered in a financial strait-jacket that threatens to push the cost still higher.
No one could dispute that the CBC desperately needed a new home in Toronto. By the late 1980s, CBC employees, more than 3,000 of them, were toiling in a grab bag of dreary offices, old theatres, and at least one former girls' dormitory. Just over 1-million square feet, seventy-seven per cent of them rented, were crammed with office and broadcast equipment, and staff. Some of Canada's favourite radio shows, including "As It Happens" and "Morningside," were produced in buildings that were not just decrepit and unsafe but also desperately inefficient.
For thirty years, successive federal governments and various dynasties of CBC management had attempted to consolidate the Toronto operations. Finally, in 1978, the CBC purchased a giant undeveloped block of 9.3 acres on Front Street West. The seller was Canadian Pacific Railways. The price was $19.5-million. With a site secured, it seemed the CBC was set to go.
But no. For the next nine years, CBC executives grappled with the question of how to pay for their new home. At first, there were hopes that Ottawa would cough up the construction money. That prospect dimmed when the Conservatives were elected in 1984. But there was at least a stroke of good luck, for the Front Street site had soared in value during Toronto's manic real-estate boom and, by 1987, was worth as much as $200-million.
The result was a joint venture between the public corporation and the private sector. In June 1987, the CBC announced that Toronto Broadcast Centre Ltd., a company established and owned by the developer Cadillac Fairview, would build CBC's new ten-storey, 1.7-million-square-foot home at a cost of $381-million. Because the CBC was then prohibited by Parliament from borrowing money, special financing arrangements had to be made. Toronto Broadcast Centre Ltd. agreed to build with virtually nothing down, borrowing the construction funds itself in return for the CBC's government-backed promise to lease the premises from the builder for thirty-five years.
Around the same time, the CBC struck two additional deals. Its own building having taken up only forty per cent of the 9.3 acre site, the corporation leased, on favourable terms, about three acres to Cadillac Fairview, which planned to build two office towers and a shopping mall. Another acre was leased to Bramalea Ltd. for a hotel and condominium project. The CBC expected revenues from the Cadillac Fairview and Bramalea deals would partially cover its own heavy lease payments on the Broadcast Centre. Banking documents show these were expected to start in the early 1990s at $28-million per year.
Of all the lines delivered by CBC executives involved in these plans, the most magical was the promise that Broadcast Centre lease payments would not exceed the projected cost of the old accommodations. It made the deal seem a no-brainer — great new space for the price of the old. But, in fact, the projected cost of the old rent bills was quite a bit higher than their actual cost. In 1987 the CBC was paying just over $14-million in annual rents, about half the amount of its first $28-million lease payment on the Broadcast Centre.
Banking documents show the CBC bridged this gap by projecting that the cost of staying in the old sites would rise to $28-million by the early 1990s. The projection was based on generous assumptions that the old premises would require $200-million in refurbishing, and that rents would continue to increase at a fierce rate — assumptions that, in hindsight, proved wildly optimistic.
In addition to overestimating inflation and rental rates, the CBC understated the cost of construction. Banking documents show the true projected cost of the building was $497-million. The $381-million figure bandied about by the CBC allowed for offsetting revenues from the rest of the site — revenues which were not guaranteed. There was a cost overrun during construction of about $32-million, bringing the latest construction cost to $529-million. The Toronto Broadcast Centre Ltd. arranged for a standard construction loan of $550-million, and the banking documents put the cost of financing that debt at about $49-million per year.
How would the CBC make up the difference between the projected payments and the actual financing costs? It relied on a "rollup facility," a line of credit in the amount of $250-million that did not have to be repaid for ten years and that was available to the CBC to subsidize its lease of the building. Thanks to the rollup facility, the first-year payment would be offset by almost $21-million, down to an acceptable $28.2-million. The rollup facility isn't detailed in any of CBC's annual reports and would have remained unknown without leaked documents.
The $250-million rollup facility, added to the construction loan, brings the total financing arranged for the new Broadcast Centre to $800-million. Unless the project were refinanced, total payments during the life of the lease would be about $1.7-billion, according to the CBC's private projections included in the banking documents.
It's a particularly rich irony that the CBC would be so reluctant to explain the numbers behind the Broadcast Centre at the same time as the corporation has been cutting services. In December 1990, CBC's then president, Gerard Veilleux, suggested the corporation faced a budget shortfall of $108-million for 1992. In fact, since construction began on the Broadcast Centre, CBC's annual appropriations from Parliament have jumped almost $200-million, from $915.2-million in 1989 to $1.109-billion in 1993.
Six years after the ground was turned, the CBC Broadcast Centre is largely finished. Since mid-1992, staffers have slowly been moving in. A complicated and fantastic array of new broadcast equipment, some $253-million worth, is being installed in the new building. One bankruptcy later, the once-mighty developer Bramalea Ltd. is no longer involved in the project; Cadillac Fairview too has run into financial turmoil and only one of its twenty-nine-storey office towers was built. The CBC had counted on collecting more than $150-million from these developers by now — money it would have put towards its own heavy lease commitment. To date it has received only about $62.6-million.
CBC vice-president Jim Byrd remains convinced the Broadcast Centre will inspire a new creative spirit among thousands of employees once scattered about the city. "The fact that we're all in this one building and the fact that there are those opportunities to rub shoulders and meet people ... it is helpful," Byrd said. "It will lead to greater synergies, a greater sense of one corporation and a set of objectives and goals."
But while visions brew and synergies bind, the CBC and the taxpayers it serves will continue to wrestle with that old problem of how to pay for the building.