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Forrec Ltd. is known in business circles as Toronto’s best-kept secret. The entertainment design company, nestled in the heart of Liberty Village, is literally in the business of dreaming big and bringing those ideas to life.

It has successfully affirmed the adage about the world being a canvas to the imagination by leaving its mark on entertainment attractions around the globe. Playing key roles in the design of mammoth projects like Universal Studios Florida, Legoland Deutschland and the Shanghai Science and Technology Museum, its canon of work also includes Canada’s Wonderland and West Edmonton Mall.

Forrec already boasts a blue-chip client list and the distinction of being one of the world’s top three design firms. But its executives concede the company is better known abroad than here at home.

"You are not famous until you leave Canada. We left Canada, we’ve made our name and now we’d like to come back," said president Gordon Dorrett. "We’d really like to do more work here … I’d like to have an influence on the urban fabric of this city."

Whether Torontonians are aware of it or not, Forrec has already helped fashion the city’s cultural landscape. It has worked on projects with the Toronto Zoo, Ontario Place, Royal Ontario Museum and produced the original conceptual work for the PenEquity Building at Dundas Square.

It also has a deep-rooted history here. Established in the late 1950s as a landscape architectural firm called Richard Strong and Associates, the company has evolved through a number of name and partner changes.

Forrec emerged as an entertainment design company in 1983 and currently has 11 shareholders. Most of that group participated in a management buyout of the firm that occurred in two stages in 1998 and 2001. Dorrett and senior vice-president Steven Rhys are the company’s two senior shareholders.

"That’s probably one of our most frustrating things – it is as difficult for us to find work in Toronto as it is anywhere else," Dorrett said. "I can walk into an office in Korea and people immediately know what Forrec is and hold us in high esteem. We pitch on work like the Chicago (Navy) Pier and we can work on Chicago’s waterfront, but we can’t work on Toronto’s waterfront."

The rancorous debate over the development of Toronto’s waterfront has raged for decades and shows no signs of letting up. Earlier this month, the Toronto Waterfront Revitalization Corp. sparked a fresh bout of criticism after announcing that a proposal for a beach at the foot of Jarvis Street had won its most recent design competition.

While not specifically commenting on that idea, Dorrett said years of dithering have resulted in "missed opportunities" for the city. At the crux of the problem, he added, is a misguided fear of commercialism.

"We all know that the only thing that is going to drive this is a big injection of cash and it is not going to come from the city or the province or the federal government, it has got to come from privatization low fee cash advance. And we’re of the belief here that that is not a negative thing," Dorrett said. "There are so many wonderful opportunities that we’ve seen elsewhere that combine privatization and public and you end up with a winning product."

The starting point ought to be the combination of Ontario Place and the CNE grounds, which are among the biggest pieces of "under-developed" urban land on the continent, he said.

"It’s sad. I mean, people would flock by the thousands to a San Antonio Riverwalk or a place like that where we can go and enjoy the waterfront," he said. "There are ways to make `green’ fabulous," he added, pointing to the resounding success garnered by Tivoli Gardens in Copenhagen, Denmark.

And while Toronto is just waiting for the next "big idea," it is located in a relatively small market compared to other parts of the world. Large-scale projects just don’t pop up every day in Canada, said Rhys. "So we have to go where the fish are running."

That means about 90 per cent of Forrec’s work is for clients outside of Canada, with the bulk in emerging markets such as China, India, Korea and Dubai. In addition to theme parks, the company designs water parks, entertainment centres, shopping centres, hospitality, casinos, cultural attractions and specializes in urban and resort planning.

Its current projects include Universal Studios Dubai, a $2.2 billion (U.S.) project situated in the United Arab Emirates boomtown. Forrec is planning the project’s landscape, architecture, interior and show design. It is a massive undertaking that has been completely adapted to respect "ethno-cultural" requirements, such easy-to-access prayer rooms, he said.

"A lot of the emerging trends are emerging in the emerging markets," added Rhys. "The canvas is pretty clean there compared to back here in North America where we are saturated with a lot entertainment opportunities."

The hottest trend right now is "multi-use" commercial developments. In India, for example, a shopping centre is no longer just about retail. It is a theme-based entertainment destination.

Forrec, itself, functions like a multi-disciplinary "think-tank" with its 100-person team of architects, interior designers, graphic designers, story tellers and creative illustrators collaborating on all projects. Moreover, its multicultural work force has been pivotal in serving its international client base.

And while Toronto is often considered "boring" compared to places like New York, Canadians have "the good fortune to be branded as having a certain level of integrity."

Said Dorrett: "Anybody can draw pretty pictures. But to draw a pretty picture and get it built and brought to life, that is the tough part."

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The past decade has been one of the best on record for residential real estate in the Toronto area.

While the question remains whether the next decade will even come close, historically, home buyers have never had such a prolonged period of rising home prices, according to a study released yesterday by ReMax.

Prices of resale homes from 1997 to 2007 increased by 78 per cent for a 5.9 per cent compounded annual rate of return, according to the real estate firm. Unit sales were also 61 per cent higher in 2007 over 1997.

"The Canadian real estate market has surprised a lot of people, especially given the challenges we’ve faced from a high-tech meltdown, the 9/11 crisis, SARS and a credit crunch south of the border," says ReMax spokeperson Christine Martysiewicz. "Over the past 10 years, real estate has shown incredible resilience."

The run-up in prices is the longest sustained increase in house prices in recent history, the realtor says.

The average price of a home sold in Toronto in 1997 was $211,307. That has risen steadily every year, reaching $376,236 at the end of 2007.

ReMax says good economic growth and consumer confidence, fuelled by low interest rates, created the buoyant conditions.

Immigration has also played a major role, with the Toronto census metropolitan area increasing by 20 per cent over that period to more than 5 million.

But the impact of increased property taxes and a slowdown of the economy could have a significant impact this year.

"You may get some decent returns moving forward, but you don’t have the same conditions moving into the next decade as the last," says Derek Holt, an economist at the Royal Bank of Canada. "We are past the peak in terms of expectations and the drivers behind them."

Holt says pent up demand from early this decade has been largely satisfied as the market moves to "the cooling side of the slope. We will revert closer back to long-term averages."

The last up-cycle in the ’80s was actually more dramatic, with prices rising from an average of $76,762 in 1983 to $146,965 in 1989 – a 93 per cent gain – before crashing cash advance loan. Prices fell by 28 per cent over a six-year period before turning around in 1997. Few predicted the length or depth of the current cycle.

One clear difference over the past decade is at the upper end of the market. In 1997, million-dollar homes were extremely rare, with only 175 homes exchanging hands for $1 million or more. Last year 2,309 such homes were sold.

ReMax says many of those homes are in non-traditional neighbourhoods. For instance, a detached home in the modest community of Leaside that sold for $470,000 in 1997 sold again (after renovations) in 2007 for $1.55 million.

The past 10 years has also seen a rise, to 35 per cent from 30 per cent, in condominiums as a percentage of the resale market.

Still, to put things into perspective, Toronto didn’t even make it in the top 10 markets nationally in terms of price appreciation over the past decade.

Edmonton was the hottest market, with a 203 per cent increase in prices – or 11.7 per cent compounded annually. Next was Calgary, with an increase of 189 per cent, for an 11.1 per cent annual return.

Canada-wide, house prices were up 98.7 per cent, or 7.1 per cent annually, which put Toronto below the national level.

However, ReMax doesn’t factor in inflation, which averaged 2.3 per cent over that 10-year period, which would have substantially eaten into returns.

ReMax, the most bullish forecaster, sees houses rising by 5 per cent this year. But other analysts are forecasting anywhere from a 3 to 5 per cent increase.

The big unknown is how much of an impact the slowdown in the U.S. economy, which buys 80 per cent of Canadian exports, will have on our domestic economy. House prices in the U.S. have tanked spectacularly.

Economists are now nervously looking south to see what kind of an impact that may have on the Canadian real estate market.

Building permits in the U.S. dropped 3 per cent in January, and housing starts likely have further to fall. The first two weeks of February have also been harsh on the Toronto market with a 14 per cent drop in sales.

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Stock markets bounded higher Wednesday as investors felt reassured that the Fed would continue to lower interest rates to cushion the effects of a slowdown.

Investors also dealt with high U.S. inflation, data showing further deterioration in the American housing sector and fallout from the credit crisis.

It was another volatile session in Toronto where the S&P/TSX composite index recovered from an early triple-digit decline.

The index finished the session up 103.95 points at 13,551.69 adding to Tuesday's gain of over 200 points, as commodity stocks continued to head higher and oil prices headed to fresh record levels.

"The gain tells me that the market is finally waking up to the fact that supply is still restricted and demand is continuing to grow, because the world doesn't end at the Atlantic and Pacific borders of the United States," said Bob Tebbutt, vice-president risk management at Peregrine Financial Group Canada.

"What's happening is the commodity markets, the basis for all industry, are rising because of various circumstances that are not interested in credit problems."

The base metals sector was 2.8 per cent higher as Teck Cominco Ltd. (TSX: TCK.B) advanced $1.41 to $36.05 and First Quantum Minerals (TSX: FM) gained $8.46 to $86.15.

The TSX Venture Exchange was up 19.89 points to 2,642.49.

The Canadian dollar moved up 0.4 of a cent to 98.72 cents (U.S.).

In New York, the Dow Jones industrials also came back from a triple-digit slide to close up 90.04 points to 12,427.26.

The Nasdaq composite index gained 20.9 points to 2,327.1 while the S&P 500 index moved ahead 11.25 points to 1,360.03.

Investors started the session off gloomy after the U.S. Labour Department reported a 0.4 per cent increase in the consumer price index for January a 0.3 per cent increase in the core consumer price index, which strips out energy and food prices.

The higher-than-expected jump in the CPI raised concerns about the pace of future interest rate cuts by the U.S. Federal Reserve.

But sentiment improved mid-afternoon after the Fed said it now believes the gross domestic product will grow between 1.3 per cent and 2 per cent this year. That's lower than a previous Fed forecast for growth, which at that time was estimated to be between 1.8 per cent and 2.5 per cent.

The central bank, in minutes from its latest meeting, cited damage from the double blows of a housing slump and credit crunch. It said it also expects higher unemployment and inflation.

Investors took this latest evidence of a deteriorating economy to indicate the Fed would continue lowering rates.

"The gloom from the Fed isn't always bad news since it does suggest that they will cut rates further, so I think that's part of the story." said Peter Buchanan, senior economist at CIBC World Markets.

Elsewhere, The Financial Times reported that KKR Financial Holdings LLC, a listed affiliate of U.S payday loans. private equity group Kohlberg Kravis Roberts & Co., has delayed repayment of billions of dollars of commercial paper for the second time.

Demand for commercial paper began drying up last year, choking credit markets.

There was also more miserable news from the housing sector.

The U.S. Commerce Department said January housing starts rose by 0.8 per cent, but only after plunging by a downwardly revised 14.8 per cent in December. Building permits, a more forward-looking indicator, fell by three per cent.

On the TSX, the financial sector moved ahead 0.67 per cent as TD Bank (TSX: TD) moved ahead $1.17 (Canadian) to $67.15 and Bank of Nova Scotia (TSX: BNS) rose 30 cents to $48.31.

Major insurer ING Canada Inc. (TSX: IIC) is boosting its quarterly dividend 14.8 per cent and planning a stock buyback, even as fourth-quarter earnings dropped 12 per cent to $95.8 million on investment losses. Its shares gained 61 cents to $36.88.

The March crude oil contract on the New York Mercantile Exchange climbed 73 cents to $100.74 (U.S.) a barrel after closing above $100 a barrel for the first time Tuesday, despite signs of waning demand amid an American economic slowdown.

The TSX energy sector was up 0.9 per cent as Canadian Natural Resources (TSX: CNQ) climbed $1.30 (Canadian) to $69.35 and EnCana Corp. (TSX: ECA) advanced 84 cents to $71.77.

Canadian Pacific Railway Ltd. (TSX: CP) was $1.57 higher to $73.26 even after it said it is reducing its 2008 profit outlook because of a federal decision on regulated grain freight rates.

It said the Canadian Transportation Agency's adjustment to the railway's revenue entitlement under the Canada Transportation Act amounts to $2.59 per tonne, retroactive to Aug. 1. CPR said "the prospective application of the CTA's adjustment will affect our earnings per share guidance by reducing it approximately five cents per share."

The April bullion contract on the New York Mercantile Exchange climbed $8 (U.S.) to $937.80 an ounce, sending the gold sector ahead one per cent. Kinross Gold (TSX: K) gained 32 cents to $23.95 (Canadian).

In other earnings news, coffee-shop chain Tim Hortons Inc. (TSX: THI) is boosting its quarterly dividend 28.6 per cent after fourth-quarter profit jumped 11.5 per cent to $75.7 million from a year-ago $67.9 million. Its shares were up 21 cents to $35.62.

Shares in Rona Inc. (TSX: RON), a major Canadian retailer and distributor of hardware, renovation and gardening products, fell 94 cents to $15.41 after it reported its fourth-quarter earnings fell to $30.5 million from a year-ago $38.1 million on higher tax costs and one less week in the period.

On the TSX, advances beat declines 902 to 743 with 226 unchanged as 385.1 million shares traded worth $6.6 billion.

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Solid advances in commodity stocks sent the Toronto stock market sharply higher late Tuesday morning, but the financial sector was weak after Bank of Montreal said troubles in the credit markets will reduce its first-quarter profit.

New York markets were higher but well off earlier highs as investors took in a disappointing outlook from Wal-Mart Stores.

Toronto's S&P/TSX composite index gained 153.72 points to 13,380.48 as the market continued to improve after hitting its most recent lows a month ago over worries about the depth of an American economic slowdown. The TSX Venture Exchange was up 31.27 points to 2,616.26.

"I can't quite figure out what's going on today – it's obviously Asian demand is still there and you have the commodities moving but other than that, I don't get it," said Chyanne Fyckes, chief investment manager at Stone Asset Management.

Bank of Montreal (TSX: BMO) disclosed it will take about $490 million in first-quarter charges – or $325 million after tax – over trading activities and valuation adjustments in the BMO Capital Markets group.

BMO also unveiled a proposal to support Links Finance Corp. and Parkland Finance Corp., two structured investment vehicles. BMO will backstop senior note obligations "to facilitate the continued orderly management of the SIVs, while balancing the interests of our shareholders, clients and debt holders."

Its shares fell 85 cents to $52.98 as investors wonder about more writedowns from the bank – and other financial institutions in Canada and abroad.

"Part of the problem is that they're just writing this off, writing that off," added Fyckes.

"I think if they had any idea about how bad it was, they would just go ahead and write it off and be done with it. But they're not doing that this time because they don't know what's going on and that's what I find very disconcerting."

British bank Barclays Group PLC revealed credit-related losses totaling $3.13 billion, up from a smaller write-down in November, while Credit Suisse, Switzerland's second-largest bank, said it has suspended "a handful" of traders in connection with the overvaluation of asset-backed securities by $2.85 billion.

The misvaluation will reduce earnings by US$1 billion in the first quarter but Credit Suisse expects to remain profitable for the quarter even with the writedown.

The Canadian dollar gave back 0.39 of a cent to 98.85 cents US after Statistics Canada reported Canada's annual inflation rate slid to 2.2 per cent in January, from 2.4 per cent in December, as consumers benefit from the strong dollar and a single percentage-point drop in the GST.

But indications of a slowing Canadian economy showed up in the most recent data for wholesale sales.

Statistics Canada announced that those sales fell 2.9 per cent in December to $42.7 billion, ending a string of three straight monthly increases. Economists had been looking for a 0.2 per cent rise.

The drop largely reflected an 8.1 per cent decline in the automotive sector.

Analysts believe weak reports such as wholesale sales data and a weak reading in manufacturing shipments last week – along with Tuesday's tame inflation report – point to more interest rate cuts by the Bank of Canada.

"We expect that the overnight rate will be cut 50 basis points at the March 4 policy meeting with an additional 50 basis points in rate cuts to come at subsequent meetings to bring the rate to three per cent by mid-year," said RBC senior economist Dawn Desjardins.

In New York, the Dow Jones industrials was ahead 56.33 points to 12,404.54 after surging as much as 157 points.

Wal-Mart's fourth-quarter profit rose to $4.09 billion, or $1.02 a share, in line with expectations low fees payday loan. Its 2008 earnings outlook missed analyst expectations but its shares drifted 21 cents higher to US$49.65.

The Nasdaq composite index gained 5.78 points to 2,327.58 while the S&P 500 moved ahead 4.92 points to 1,354.91.

The TSX financial sector came down from a one per cent advance to a slight rise of 0.2 per cent at late morning as investors took in negative news from overseas banks.

The Toronto energy sector moved up two per cent as oil prices ran ahead. The March crude oil contract on the New York Mercantile Exchange moved up $2.83 to US$98.33 a barrel.

An explosion at a 70,000-barrel-a-day refinery in Texas may have boosted prices, but analysts believe the primary worry is that the Organization of Petroleum Exporting Countries may reduce output next month to support prices in a range of $85 to $100 a barrel.

EnCana Corp. (TSX: ECA) gained 78 cents to C$71.10 and Canadian Natural Resources (TSX: CNQ) improved $2.74 to $67.84.

The gold sector was 4.5 per cent higher as the April bullion contract on the Nymex climbed $25.90 to US$932 an ounce. Barrick Gold Corp. (TSX: ABX) gained $1.94 to $49.95.

The base-metals sector ran ahead almost three per cent.

Teck Cominco Ltd. (TSX: TCK.B) improved $1.17 to $34.45 and Equinox Minerals (TSX: EQN) rose 29 cents to $5.28.

Shares in Thomson Corp. (TSX: TOC) were down 60 cents to $34.20 after the Canadian company won European and Canadian regulatory approval Tuesday to buy news and information provider Reuters Group PLC, but it must sell off financial research units to eliminate antitrust concerns.

A subsidiary of Manulife Financial Corp. (TSX: MFC), Canada's largest insurance company, is adding to the portfolio of U.S. forest land that it manages in a deal valued at US$1.71 billion, including the assumption of debt. Manulife shares traded at at$37.51, up 21 cents.

Overseas, Tokyo's Nikkei 225 index rose 122.51 points, or 0.90 per cent, to 13,757.91.

Hong Kong's Hang Seng Index gained 363.92 points, or 1.53 percent, to 24,123.17. The index lost 1.6 percent on Monday after adding nearly 7 percent over the previous four sessions.

Britain's FTSE 100 gained 13.8 points to 5,960.4, Germany's DAX index was up 51.8 points to 7,019.35 and the Paris CAC-40 was up 25.35 points to 4,887.15.

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Frank D’Angelo, whose former juice and beer companies collapsed under more than $120 million in debt, is buying back the assets of one of them.

A judge has approved a deal whereby a numbered Ontario company owned by D’Angelo’s family will purchase D’Angelo Brands, which is currently shut down and under court protection from creditors.

D’Angelo, president and chief executive officer of the numbered company, said in a brief interview yesterday his family wanted to keep the juice and energy drink maker after the court recently allowed a sale of its assets.

"We decided we would rather have it in our hands," he said. "I think it’s good."

Meanwhile, the future of the other insolvent company, Steelback Breweries, remains uncertain. Court filings show management has temporarily ceased operations and is looking at options.

D’Angelo, founder and former chief executive officer of D’Angelo Brands and Steelback, also did not rule out a return to brewing.

"At this time, I’m just concentrating on what we have ahead of us in the first quarter and then we’ll decide," said D’Angelo, who appeared in numerous Steelback television ads. "We’ll see what happens."

Details of the D’Angelo Brands deal, including how much the family paid for it, remain under court seal until completion.

However, court filings show the family provided a cash deposit of $297,000.

In allowing the sale and an extension of court protection until May 16, Madam Justice Sarah Pepall said the court supervisor monitoring the insolvent companies recommended the deal after a bidding process in which six parties made offers.

The company’s management also concluded the D’Angelo family proposal represented the "highest and best offer."

Wasanda Enterprises – controlled by generic drug magnate Barry Sherman – sought and gained court protection for D’Angelo and Steelback last November payday advances. The two firms alone owe Wasanda about $101 million plus another $20 million in accrued interest.

The financial health of the two companies has steadily deteriorated in recent years despite loans from Wasanda.

The two companies have acknowledged revenues didn’t meet projections; advertising and marketing costs did not reflect sales; production was inefficient and expenses too high and a strong Canadian dollar slashed margins on packing agreements with U.S. customers.

Wasanda gained protection a few weeks after D’Angelo’s unusual announcement that he had sold his "majority" stake in the two companies to his "financial partners" for an "undisclosed amount."

D’Angelo Brands and Steelback continued production but both firms shut down operations in December pending reviews.

The beverage company, which produces fruit juices and energy drinks with names such as "Cheetah Power Surge," has terminated about 110 workers.

Steelback, brewer of 11 brands, decided to close its small Tiverton brewery in central Ontario until the end of March because inventories can meet demand. It has cut more than 20 jobs there.

The company is also trying to sell a small Quebec brewery and D’Angelo Brands has closed a local restaurant called Mamma D’s.

The report from the supervisor monitoring the two companies’ operations showed D’Angelo Brands posted negative cash flow of almost $1 million in the 2 1/2 months ending Feb. 1. Steelback racked up almost $500,000 in negative cash flow in the same period. The companies have more than 400 creditors.

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George Weston Ltd., majority owner of Canada's largest supermarket chain and one of its biggest bakery companies, climbed back into the black in its fourth quarter, the company reported today.

Net earnings were $151 million or $1.07 per share, compared with a year-earlier loss of $428 million or $3.33 per share. The loss in the fourth quarter of 2006 takes into account an $800-million goodwill writedown by Loblaw related to its 1998 acquisition of Provigo.

Sales edged up 1.5 per cent to $7.69 billion from $7.58 billion

Still Weston (TSX: WN), which owns 62 per cent of Loblaw Cos. (TSX: L) along with major bakery and dairy operations, said adjusted operating margin declined to 4.1 per cent in the period ending Dec. 31, 2007 – down from 5.0 per cent a year earlier.

Adjusted for the writeoff, operating profit fell to $302 million for the quarter, down 16 per cent from $359 million, yielding adjusted basic net earnings per share from continuing operations of 89 cents, down from $1.14.

Loblaw reported last week that it earned $40 million in the fourth quarter, up from the writedown-afflicted year-earlier loss of $756 million, as sales rose 2.7 per cent to $6.97 billion.

"While the results have been disappointing, the transformation to a centralized business structure . . . is now complete," Weston chairman and president W. Galen Weston said of Loblaw, which is now headed by his son Galen G. Weston.

"There are signs of improving value perception . . . and overall sales performance."

Despite a hit from the rising dollar, the company's Weston Foods segment, which does much of its business in the United States, “showed improved performance" in the fourth quarter and had “another strong year" in 2007, the company said.

"Markets are tight, but there was good volume growth in fresh categories, especially in our premium lines," Weston told analysts.

"The benefits of pricing and cost-containment initiatives offset the unprecedented commodity market conditions."

The company said it had improved productivity, raised prices and was hedged out about nine months in an effort to cope with sharply higher wheat prices, a situation expected to continue.

"This is an industry issue," said Gary Prince, the company's U.S payday loan. president of Weston Foods..

"It is highlighted right across the world as an issue."

Sales of baked goods and dairy products were $932 million, down 5.5 per cent from a year earlier.

Excluding the currency impact, fresh bakery sales rose 5.9 per cent due in part to higher prices.

Sales of fresh-baked sweet goods, mainly under the Entenmann's brand, were flat, as were biscuit sales, while frozen bakery sales increased 4.3 per cent. Dairy and bottled beverage sales rose 4.2 per cent.

For the full year 2007, sales rose two per cent to $32.82 billion.

Annual net income was $563 million or $3.92 per share, up from $110 million or 52 cents per share in 2006.

On the Toronto Stock Exchange today, George Weston shares traded down 37 cents at $50.03, off about 37 per cent since last July.

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CALGARY – Agrium Inc. said Monday it is refiling documentation as the U.S. Federal Trade Commission continues its competition review of the Canadian company's proposed acquisition of UAP Holding Corp.

The notification and report form under the Hart-Scott-Rodino Antitrust Improvements Act was originally submitted when the deal was announced in December but was withdrawn on Jan. 11 to provide more time for FTC staff to review the transaction without issuing a formal request for more data.

Such a so-called second request would likely delay the takeover at least until summer.

The US$2.65-billion friendly acquisition, which would make Agrium (TSX: AGU) the largest farm-inputs retailer in North America, has been approved by competition authorities in Canada, where UAP (NASDAQ: UAPH) has little presence online payday loan.

Agrium said it has continued to provide the FTC with additional information, following the agency's informal requests.

The new re-filing provides a 15-day period to continue discussions under the Hart-Scott-Rodino waiting period, but Agrium observed that there is no assurance the FTC will not issue a second request.

The company said it "remains committed to working co-operatively with the FTC as it conducts its review of the proposed acquisition and remains confident of a successful close to the transaction." 08:37ET 11-02-08

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Thanks to a surge in condominium construction, Canadian housing starts had a robust start in 2008, even as the U.S. real estate market continues to fizzle.

Foundations were poured for a more-than-expected 227,700 units (annualized rate) in January, up from 184,700 in December, according to figures released yesterday by the Canada Mortgage and Housing Corp.

Just about all of that increase was due to volatile segment of multi-unit construction (up 64 per cent) compared to a decrease in single-unit starts (such as detached homes) representing a 4.8 per cent dip.

"While this likely reflects an ongoing shift towards multiples in the face of growing land constraints in densely populated areas of the country, it is bound to make starts quite bumpy going forward," said BMO Capital Markets Economist Robert Hogue in an economic note.

In Toronto, where there has been a record sale of condominiums, the increase in overall starts has been even more dramatic, up 95 per cent in January to a seasonally adjusted and annualized pace of 38,300, compared to 19,600 in December. While some of that had to do with bad weather, builders also had trouble shifting resources from low-rise to high-rise projects last year.

But with that structural shift out of the way, 2008 promises to be a vertigo-inducing year on construction sites.

"There is a significant backlog of high-rise condo sales in the Greater Toronto Area that should start construction in the coming months," said Ontario Home Builders president Mark Basciano.

Toronto-area housing starts are expected to hit 41,600 this year compared to 33,293 in 2007, largely due to record condo sales in the last three years fast cash payday loan. Toronto has more ongoing condo projects than any other city in North America.

This will buck the national trend. The CMHC is forecasting that starts across Canada will actually decline overall in 2008.

"Housing starts are expected to decrease in 2008 mainly due to recent increases in house prices, which will push mortgage carrying costs higher for home buyers," said Bob Dugan, chief economist at CMHC.

Still, the Canadian housing market is in much better shape than the beleaguered U.S. market.

"Despite some global financial instability with regards to the U.S. housing market, Canada continues to experience robust employment levels, ongoing income gains and low mortgage rates," said Dugan.

Peter Hall, deputy chief economist at Export Development Canada, estimates that it will be at least mid-2009 before U.S. housing markets begin "a meaningful rebound."

Hall estimates there are more than seven million surplus units on the market.

"There is no clear indication that the U.S. market has hit bottom," he said in an economic note this week.

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Thane Heins is nervous and hopeful. It’s Jan. 24, a Thursday afternoon, and in four days the Ottawa-area native will travel to Boston where he’ll demonstrate an invention that appears – though he doesn’t dare say it – to operate as a perpetual motion machine.

The audience, esteemed Massachusetts Institute of Technology professor Markus Zahn, could either deflate Heins’ heretical claims or add momentum to a 20-year obsession that has broken up his marriage and lost him custody of his two young daughters.

Zahn is a leading expert on electromagnetic and electronic systems. In a rare move for any reputable academic, he has agreed to give Heins’ creation an open-minded look rather than greet it with outright dismissal.

It’s a pivotal moment. The invention, at its very least, could moderately improve the efficiency of induction motors, used in everything from electric cars to ceiling fans. At best it means a way of tapping the mysterious powers of electromagnetic fields to produce more work out of less effort, seemingly creating electricity from nothing.

Such an unbelievable invention would challenge the laws of physics, a no-no in the rigid world of serious science. Imagine a battery system in an all-electric car that can be recharged almost exclusively by braking and accelerating, or what Heins calls "regenerative acceleration."

No charging from the grid. No assistance from gasoline. No cost of fuelling up. No way, say the skeptics.

"It sounds too good to be true," concedes Heins, who formed a company in 2005 called Potential Difference Inc. to develop and market his invention. "We get dismissed pretty quickly sometimes."

It’s for this reason the 46-year-old inventor has learned to walk on thin ice when dealing with academics and engineers, who he must win over to be taken seriously. Credibility, after all, can’t be invented. It must be earned. "I have to be humble. If you say the wrong thing at the wrong time, you can lose support."

The creation in question is a new kind of generator called the Perepiteia (read related story "Holy crap, this is really scary"), which in Greek theatre means an action that has the opposite effect of what its doer intended. Heins torques up the definition to mean "a sudden reversal of fortune that’s a windfall for humanity."

Deep down, Heins has high hopes. But he also realizes that merely using those controversial words – "perpetual motion" – usually brands a person as batty. In 2006, an Irish company called Steorn placed an advertisement in The Economist calling on all the world’s scientists to validate its magnet-based "free energy" technology.

Steorn was met with intense skepticism and accused of being a scam or hoax. Seventeen months later the company has failed, despite worldwide attention, to prove anything under scrutiny. Well-educated people, from Leonardo da Vinci to Harvard-trained engineer Bruce De Palma (older brother of film director Brian De Palma), have made similar claims of perpetual motion only to be slammed down by the mainstream scientific community.

Heins has an even greater uphill battle. He isn’t an engineer. He doesn’t have a graduate degrees in physics. He never even finished his electronics program at Heritage College in Gatineau, Quebec. "I have mild dyslexia and don’t do well in math, so I didn’t do very well in school," he says.

What he does have is a chef’s diploma, and spent time as chef at the Canadian Museum of Civilization before launching his own restaurant in Renfrew called the Old Town Hall Tea Room. He has also had political ambitions. In 1999 he ran unsuccessfully as a candidate for the Green Party of Ontario, deciding a year later to run as an independent in the federal election.

Today, Heins is focused on showing his invention to anybody willing to see it, in hopes that somebody smarter than him will give it credibility. His long-time friend, Kim Cunningham, manager of communications and government relations at the Ottawa Centre for Research and Innovation (OCRI) is working part-time with Potential Difference to help get the message out.

Together, they have demonstrated the Perepiteia to a number of labs and universities across North America, including the University of Virginia, Michigan State University, the University of Toronto and Queens University.

"It’s generally always the same reaction," says Heins. "There’s a bit of a scramble on the part of the observer to put what they’re seeing into some sort of context with what they know no fax payday loans. They can’t explain it. They don’t know what it is."

He’d be happy if somebody did, even if the news was bad. His wife has kicked him out. He doesn’t earn an income. He can’t pay child support. The certainty would be welcome. "I’ve tried to quit many times, and thought if I could just be a normal guy I would have a normal life … But I had this idea and I believe it works."

Others want to believe – or at least help out. Cunningham, whose brother is general manager at Angus Glen Golf Club, introduced Heins to the club’s president, Kevin Thistle. For two years Thistle has acted as angel investor, providing start-up capital needed to incorporate Potential Difference, file patents and continue research.

Cunningham’s boss, OCRI president Jeffrey Dale, helped open doors at the University of Ottawa and make introductions to its dean of engineering. As a result, Heins teamed up last fall with Riadh Habash, a professor at the university’s school of information technology and engineering.

"Dr. Habash has essentially rolled out the red carpet," says Heins, explaining that he now has access to a university lab and all the equipment he needs to test and simulate his generator.

In an interview with the Toronto Star, Habash was cautious but matter-of-fact with what he’s seen so far. "It accelerates, but when it comes to an explanation, there is no backing theory for it. That’s why we’re consulting MIT. But at this time we can’t support any claim."

In the meantime, Heins has been on a letter-writing campaign to raise money for his mission. He’s written former U.S. vice-president Al Gore, Virgin Group founder and billionaire Richard Branson and John Doerr at venture capital powerhouse Kleiner Perkins Caufield & Byers. He’s also tried to contact entrepreneur Elon Musk, chairman of electric car upstart Tesla Motors, and the "ReCharge IT" project run by Google’s philanthropic arm.

So far no bites, though there have been nibbles. Heins has had discussions with a well-known investor in Oregon, known to many as the "godfather of start-ups," who is apparently flirting with the idea of investing in Potential Difference. "We got the impression … he’s not necessarily interested in making a tonne of money, he just wants to see us succeed."

Just before the big day at MIT, the Star spoke with professor Markus Zahn about what he expected to observe.

"It’s hard for me to give an opinion," said Zahn, who admitted he was excited to see the demonstration. "I don’t believe it will violate the laws of physics. You’re not going to get more energy out than you put in."

He said it’s easy for people to set up their tests wrong and misinterpret what they see. "You’ve got to look closely."

It’s now Jan. 28 – D Day. Heins has modified his test so the effects observed are difficult to deny. He holds a permanent magnet a few centimetres away from the driveshaft of an electric motor, and the magnetic field it creates causes the motor to accelerate. It went well.

Contacted by phone a few hours after the test, Zahn is genuinely stumped – and surprised. He said the magnet shouldn’t cause acceleration. "It’s an unusual phenomena I wouldn’t have predicted in advance. But I saw it. It’s real. Now I’m just trying to figure it out."

There’s no talk of perpetual motion. No whisper of broken scientific laws or free energy. Zahn would never go there – at least not yet. But he does see the potential for making electric motors more efficient, and this itself is no small feat.

"To my mind this is unexpected and new, and it’s worth exploring all the possible advantages once you’re convinced it’s a real effect," he added. "There are an infinite number of induction machines in people’s homes and everywhere around the world. If you could make them more efficient, cumulatively, it could make a big difference."

Driving home – he can’t afford to fly – Heins is exhausted but encouraged. He says Zahn will, and must, evaluate what he saw on his own terms and time. What’s preventing the engineer from grasping it right away, he says, is his education, his scientific training.

Step by step, Heins is making progress, but where it will all lead remains uncertain.

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Investors gave a sigh of relief at the U.S. Federal Reserve Board’s interest rate cut yesterday, but ultimately the move failed to lift stock markets out of the doldrums.

The Canadian dollar, too, surged by more than a cent after the Fed’s afternoon announcement, before settling back to a more modest gain.

On the Canadian side, the Bank of Canada is expected to follow suit with its own interest-rate reduction of either one-quarter or one-half of a percentage point in March.

"It isn’t so much that they’re playing copycat, but some of the same market forces that are compelling the Federal Reserve to cut interest rates will be felt on this side of the border," said Avery Shenfeld, senior economist at CIBC World Markets.

The blue-chip Dow Jones industrial average surged to a triple-digit gain in the afternoon, but fell again, losing 37.47 points on the day to close at 12,442.83. In Toronto, the S&P/TSX composite index finished at 12,998.21, down 48.22 points.

The dollar was up more than a half cent to close at $1.0068 (U.S.). Earlier, the loonie traded as high as $1.0131, its highest since Jan 4.

The federal funds rate in the U.S. is now at 3 per cent, compared with the Bank of Canada’s overnight lending rate of 4 per cent.

It’s the first time since June 2004 that the Fed’s rate is a full percentage point lower than its Canadian counterpart, and that’s likely to push the Canadian dollar higher.

The Bank of Canada repeated its promise of lower domestic interest rates yesterday, and said the economy was adjusting well to a stronger Canadian dollar.

Speaking to a parliamentary committee, senior deputy governor Paul Jenkins said the central bank was poised to provide more stimulus to help prevent problems in a slowing domestic economy.

But he gave no hint that Canada would match aggressive U.S 500 fast cash. rate cuts. The Bank of Canada had always assumed aggressive Fed moves were likely, he added.

Jenkins insisted the central bank had no formal target for the Canadian dollar and said the bank thought a floating exchange rate was crucial to help absorb economic shocks.

The bank’s next interest rate decision is March 4 and will be the first under the new governor, Mark Carney, who assumes office tomorrow.

"I think the Bank of Canada is dealing with a distinctly different economic situation," said Stewart Hall, market strategist with HSBC Securities Canada in Toronto.

"The headwinds that the U.S. economy faces are much greater than Canada. We have a housing situation that remains intact. While it’s moderating and maturing, it’s not imploding."

The Federal Reserve Board noted in its statement that "financial markets remain under considerable stress, and credit has tightened further for some businesses and households. Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labour markets."

The Fed also sent reassuring signals that it would be prepared to cut rates further, if warranted. It noted that "downside risks to growth remain."

The U.S. rate cut "certainly does provide the economy with a bit of a backstop," said Pascal Gauthier, economist with TD Bank Financial Group. "Whether we see a marked slowdown or a mild recession, it does improve the chance that the U.S. economy kicks back up in the second half of 2008."

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