A Family Affair
By Danny SC Tseng
“He always said you never learn anything by talking,” reminisces Steven of his late father Murray Menkes, who began as a small house builder in the 1950s. Murray, an opinionated risk-taking visionary, laid the foundation for his three sons: Alan, Steven, and Peter, who collectively elevated Menkes Developments Ltd. to new heights. Today, the Menkes Empire is responsible for some of the greatest real estate developments in the Greater Toronto Area. In an intimate conversation moderated by Paul Godfrey, president and CEO of Postmedia Network and a close friend of the family, attendants at ULI’s 6th Annual Fireside Chat listened silently as the three sons shared stories and lessons learned over the course of 37 years.
It was perhaps a symbiotic synergy the Menkes family had with each other that allowed them to bridge the seemingly contradictory notion of independence and collaboration. After working for a year in the investment business in New York City, Alan, the eldest son joined the company in 1976 during the dawn of the lifestyle condominium movement. Alan, who now leads the High-Rise residential division of Menkes, remembers his father as strategic in his own quiet way by creating three separate divisions. Steven, who joined in 1982 was trained as an accountant and spent the first 12 years focusing on raising capital, and since 1994 heads the low-rise division of the company. He recalled his dad as a wonderful listener who would always provide an honest answer on the spot. Peter, the youngest son, knew his father as a fair, tough, and supportive mentor who set high-expectations. Although he originally set out to become a banker, Peter joined the company during the recession of the 80s and began in the leasing department. He currently runs the Commercial/Industrial Division. Even though day-to-day operations are run autonomously, the three sons thrived on each other in a cohesive way where the sum of the parts is greater than the whole.
With the belief that development flourishes along transit nodes, Menkes took a strategic position in 1979 on a property in downtown North York at Yonge Street and Sheppard Avenue. Its proximity to the subway and Highway 401 gave Menkes the confidence to pursue their first office tower. However, the 1982 recession began shortly after the project was zoned and approved. Alan recalled that when you sit through a recession and nobody calls for a year, it leaves a lasting impression. Luckily, a strong banker who believed in their vision supported Menkes without having any tenants signed. Incidentally, within 60 days of building, Proctor & Gamble leased the entire tower as their new headquarters, a feat that doesn’t often happen. To this day, P&G still occupies the structure.
Hot off the success of the P&G tower, the Menkes family began to assemble land at Yonge Street and Empress Avenue for a large mixed-use development zoned for two office buildings that stood on a large retail podium. Unfortunately, another recession hit in 1990 and it wasn’t until 1996 when signs of life for the residential market began to emerge. Immediately, Menkes rezoned the office towers into residential, signed on Loblaws in the concourse level, and made a deal with Famous Players for a 10-plex theater in the podium above. This idea of a “lifestyle entertainment mixed-use facility” became the successful Empress Walk, a landmark for North York.
“Have a good banker!” Peter joked when asked by Godfrey what advice he would give to young ambitious people. Yet, there’s certainly truth in that as Menkes has proven to be extraordinarily resilient in the face of recession. During the recession of the 90s, pension funds saw real estate as a good alternative asset class. With Menkes’ expertise as developers, Peter forged alliances with their financiers and to this day, the company still uses those on-going pension funds. Strong relationships will certainly get you far. Furthermore, Menkes was flexible in seeking out other opportunities. In 1994, Steven led the low-rise division, which accounted for 75 per cent of the company’s work at the time. As the “numbers guy” in the company, Steven knows a thing or two about mitigating risk when the market goes south. He could not stress enough the importance of relationship, communication, and honesty of the lenders. Steven tributes the credibility Menkes garnered through their successful developments (that were built before the recession) that gave bankers the confidence to offer their support.
“Excel in an area you feel comfortable in; let people know that you’re an expert and luck will go your way,” advised Alan. Such was certainly the case with the Four Seasons, one of Menkes most celebrated accomplishments. The original Four Seasons in Toronto’s Yorkville area was built in the 1970s and was a Brutalist fortress typology with low ceilings and contained more hotel rooms than necessary. In a joint venture with Lifetime Developments, Four Seasons enlisted Menkes for their expertise in complex mixed-use projects for their new flagship location. The market value couldn’t sustain the cost of a stand-alone hotel and the development was subsidized with the addition of residential suites. The hotel/condo mix was a first for Menkes and it was extremely challenging to reconcile the logistics for putting residential units above a five-star hotel. However, the effort paid off. Completed in 2012, the Four Seasons is the quintessential hotel-lifestyle condominium with highly desirable amenities, services, and finishes. In fact, the hotel brand itself inherently came with a huge following and “Four Seasons Aficionados” would walk in the door exclaiming “Where do I sign?!”
With an affinity for challenging projects and taking calculated risks, Peter Menkes bought a site at 25 York Street near the Air Canada Center at a time when the vacancy rate in the areas was as low as three to four per cent. However, Menkes recognized the importance in its proximity to Union Station and strategically connected the lobby space of their new commercial building to Toronto’s PATH system, Air Canada Center, and the Southcore Financial Centre. There were initially skeptics, but Telus recognized the value the location offered and leased 60 per cent of the building. Similar to the P&G Building, 25 York Street development become a catalyst for growth in the region. In fact, Menkes also has plans for a mega mixed-use development at the Harbour 60 site to undergo construction in 2017, which has inherent difficulties due to the number of stakeholder involved.
When asked what the greatest challenges of the future is, Steven lamented that growth plans and policy will be the biggest issue for low-rise residential. Alan and Peter both see transit and infrastructure as hurdles. There needs to be collaboration between two levels of government (provincial and municipal) in order to solve the gridlock problem. With the advancement technology, retails store will shrink with the growing prevalence of ecommerce. In 25 years, the vision Menkes has is the “Manhattanization” of Toronto where density will continually be driven by immigration and supported by lots of public transit. With four of Murray Menkes’ grandsons joining the company in various sectors, the Menkes family will no doubt continue to be a major player in shaping the city’s skyline.
Paul Godfrey asked the audience, “What comes first, confidence or success?” Godfrey believes the answer is the former. Perhaps it’s the confidence that Murray Menkes initially had in Alan, Steven, and Peter that eventually lead to the tremendous success that Menkes Development Ltd. enjoys today.