OMERS Bets $3.1 Billion on Contentious Toronto Casino Project

The Canadian mega-fund has just announced its plans for an 11-acre entertainment, commercial, and residential development in downtown Toronto. 

(October 12, 2012) – A C$3.1 billion bet isn’t ‘all-in’ for the Ontario Municipal Employees Retirement System (OMERS), but it certainly makes the $55.7 billion fund a big fish in Canada’s commercial real estate space. 

Oxford Properties Group, the real estate investment arm of OMERS, has announced plans for a proposed 11-acre development in downtown Toronto that includes retail, office, and residential space, an expanded convention center, a 4,000-space parking complex, as well as a linked hotel and casino. 

“Oxford has a considerable vested interest both in this project and in the downtown core of the City of Toronto,” Blake Hutcheson, Oxford’s president and CEO, said in a statement. “We have engaged an extraordinary team to develop the very best plan for this site and to transform this entertainment and commercial hub into a world class destination.” 

The casino portion of the project has met with substantial opposition from nearby communities and local politicians, and would need city hall’s approval to go forward. However, Hutcheson them Oxford Place wouldn’t be Vegas North: “Every detail is being planned in a professional and tasteful way to ensure success for all stakeholders. We would not take this on if we did not think we could deliver a bull’s eye solution to this complex issue, and we will work with all stakeholders to deliver an extremely positive result for the City of Toronto.” 

That said, Michael Kitt, Oxford’s EVP of Canada, made clear that the gambling destination is a nonnegotiable element of the development. “Although the casino itself represents less than 10% of the project’s area,” he said, “it is a necessary and essential catalyst for the entire development.” 

The last time a public pension made a major gambling investment, the odds did not turn up in its favor. The Teacher Retirement System of Texas laid down $100 million into the buyout of Stanton Casinos, a Las Vegas gambling company, according to the Dallas Morning News. The company went bankrupt, and the $110 billion pension fund walked away down more than $99 million. 

“There is no getting around it,” Britt Harris, the fund’s chief investment officer, told the newspaper in May. “This was a bad investment.” 

Rather than pensions investing in casinos, lawmakers often propose the opposite flow of funds: using gambling dollars to fund public retirement systems. 

This spring, Kansas Governor Sam Brownback publically endorsed a proposal to use revenues from state-owned casinos to fund the Kansas Public Employees Retirement System. The pension faced an $8.3 billion shortfall at that time, which threatened the state’s credit rating. The bill has passed both the Senate and Legislature, but has yet to be signed into law.