Leon’s Furniture plans to build new Toronto neighbourhood with nearly 4,000 housing units

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Leon’s Furniture Ltd. LNF-T has been selling home furnishings for more than 100 years. Now, the company has decided to also sell homes.

The furniture empire, with brands such as Leon’s, The Brick, The Brick Mattress Store, and Appliance Canada, plans on turning one of its large plots of land on the outskirts of Toronto into nearly 4,000 new homes, including rental apartment buildings, single-family houses, townhouses and condos.

It will be Leon’s first foray into residential building. Leon’s Furniture Ltd., or LFL, owns 430 acres of land across the country and is figuring out how it can make money from its vast acreage.

The residential project in Toronto is slated for a 40-acre parcel that lies between two major highways – the 401 and the 400 – north of the downtown core. The site is predominantly fields and currently holds the company’s headquarters and a signature Leon’s retail store with its giant signature yellow sign that is visible from the highway.

“I get a question from friends and colleagues all the time. ‘You guys own that farm field in front of you?’ And the answer is, ‘Yes, we do,’” said Mike Walsh, LFL’s chief executive. “We think we can build 3,500 to 4,000 homes of different designs and types to maximize the space,” he said.

LFL is in the early stages of planning. It will start with building a new head office and new Leon’s retail store to replace the ones on the site. Then, it will move onto developing the residential real estate.

Leon’s is the latest to jump into the residential building business in Canada, as the federal government attempts to deal with the lack of affordable housing across the country.

The high cost of real estate had already priced many out of the market before the Bank of Canada started raising interest rates in March, 2022, which caused borrowing expenses to soar. Then, over the past year, rental prices shot up as landlords eliminated pandemic-related discounts and record levels of new immigrants and temporary residents increased demand for shelter.

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In order to encourage more developers to construct apartments that are purposely built for rental, Ottawa has eliminated the 5-per-cent federal goods and services tax on new units.

Mr. Walsh said LFL has not yet made a decision on what portion of the new housing will be rental. He hopes his company will be able to use the tax break, which applies to rental construction that begins by 2030 and is completed by the end of 2035.

Leon’s is following the playbook of other big-box retailers and mall operators, which have been changing their properties into residential units, warehouses and office buildings.

RioCan REIT has been developing its shopping centres into a mix of apartment buildings, condos, offices and retail. SmartCentres REIT, whose shopping plazas are dominated by Walmart stores, has been redeveloping some of its land into a similar mix. And Hudson’s Bay Company sold off some of its coveted department stores and changed one floor of its Toronto department store into a co-working space.

Leon’s, The Brick and other LFL brands are known for their large square footage with warehouses, which allow customers to take home their furniture or appliances immediately. But as shopping has changed and more customers order online, LFL has been building smaller stores and warehouses or distribution centres that are centrally located.

Currently, LFL has 303 stores, 22 warehouses and eight distribution centres in the country. Nearly three-quarters of LFL’s 430 acres is pretty much vacant with parking lots, fields or farmland.

LFL has already said it wants to hive off some of its real estate into a publicly-traded REIT, or real estate investment trust.

“It’s about making the best use of the land,” said Mr. Walsh.