Home Depot pays $11.5 million to exit Toronto project

Home Depot Canada has paid an $11.5 million break-up fee to get out of a deal that would have seen it open its first downtown location in Toronto, according to several reports.

The fee -- equivalent to four years’ rent -- was paid to terminate a 20-year lease on 75,000 square feet of space in a 91,000-square-foot retail development at the corner of Queen St. W. and Portland St.

The developer, RioCan Real Estate Investment Trust of Toronto, said the multi-use project -- which also includes a five-storey, 90-unit condominium – will go ahead as planned. A grocery store and a second large retailer will most likely take the space that had been earmarked for the Home Depot store.

Home Depot, which had been seeking space to open a store in downtown Toronto for 10 years, pointed to a slowdown in the Canadian home improvement industry as the reason for ending the deal. The Home Depot store would have anchored the development.

“Given the current economic situation in Canada, we re-evaluated the site and determined it wasn’t the right time to open this location,” Tiziana Baccega, Home Depot Canada’s manager of public, relations told HCN.

“The home improvement industry has slowed down, as people take on smaller projects, so we’ve chosen instead to reinvest in our existing store network and our associates,” she said.

Home Depot currently has 176 stores in Canada, with locations in Fort Saskatchewan, Alberta, and Campbell River, British Columbia, set to open next month. Baccega confirmed that a third store, in Dunkin, British Columbia, is expected to open in August. In the past several years, the retailer had been opening 10 to 15 locations annually.

Canada’s largest home improvement retailer, RONA, has also slowed expansion in recent months.

Home Depot’s search for a location in downtown Toronto met with resistance over the last decade from residents averse to the arrival of suburban style warehouse stores. RioCan had worked with Home Depot to design a two-story “urban” format about two-thirds the size of a typical Home Depot.