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The Kings Of Condo City
Optimistic Toronto developers are riding the increasing shift of housing demand toward homes in the sky
Jacqueline Thorpe, Financial Post Published: Saturday, May 31, 2008
Related Topics
National Post / Who Brad Lamb, head of Brad J. Lamb Realty Inc. Claim to fame The showman. His loud, proud marketing strategy has helped the company become the biggest broker of condos in Toronto, with 2,000 units sold in 2007. Flagship Parc Loft: Residences overlooking a park in Toronto's west end, where size to finishes are "bigger and better." On condo mania "It's one thing to pay $8-millon for a 10,000-square-foot apartment. I get that -- guys paying $800 or $1,000 a square foot for a massive apartment in Yorkville ? I can't understand in the low end why anyone would pay $800 a square foot in this market."Brent FosterNational Post / Who Brad Lamb, head of Brad J. Lamb Realty Inc. Claim to fame The showman. His loud, proud marketing strategy has helped the company become the biggest broker of condos in Toronto, with ...
From his penthouse in Toronto's hip fashion district, Peter Freed can track the development of his next six condo projects taking shape along King Street West.
One of Mr. Freed's buildings will have interiors by Philippe Starck, the must-have French designer of the moment. Another will be inspired by the Neoplasticism art movement made famous by Mondrian, where design is pared down to the basics of lines and the primary colours red, yellow and blue.
Mr. Freed has eight projects on the board worth a total of half a billion dollars, a tiny fraction of the record 33,980 units under construction in the city. Canada's biggest city has become North America's biggest condo market, with more units now under development than Manhattan, Chicago and Los Angeles.
As Mr. Freed looks off his terrace, where the lap pool and giant padded loungers are looking a little forlorn on a wet spring day, he is confident Toronto will not also become North America's biggest condo meltdown.
"Right now, there's very large demand," says Mr. Freed, dressed casually in jeans, shirt-tails hanging out, no laces in his shoes.
At 39, the laid-back developer is the fresh face of an eclectic group of condo kings who are transforming the very skyline of the city. Along with other design-focused builders like Cityzen Development Group, stalwarts like Tridel Corp. and Menkes Developments Ltd., and newcomers like Bazis International Inc., Mr. Freed is banking on the view Toronto is undergoing a seismic housing shift.
Boom or bust? Page FP5
Figures show a marked slowing in the Canadian housing market this year, including a 7.3% year-over-year drop in existing homes sales in Toronto in April and a subsiding of the mania that drove the condo market into overdrive last year.
But builders say demographics, immigration, government regulation and cultural change will continue to skew demand for housing toward the condominium. Housing hotspots like Calgary may have already burned themselves out in a frenzy of building and soaring prices, but Toronto's rise as a global city will allow it to ride out any short-term weakness, they say.
"We understand there's 75,000 people a year for the next 20 years projected to move into the city core," says Mr. Freed.
So Toronto's condo kings, mostly privately held, backed by joint-venture partners and old-fashioned bank loans, are knee-deep in a building boom that has seen 67,984 condo units in 316 buildings launched since 2004.
To anyone walking the city streets, the scale of activity is eye-popping, with dozens of cranes swinging across the skyline, the monotonous thud of foundation pilings being driven into the ground and convoys of cement trucks causing endless traffic snarls.
They are building by the waterfront, around the subway line in the north of the city and in the east end where work-live lofts are all the rage.
At Concord CityPlace, an 18-hectare master-planned city near the waterfront, 21 condo towers will eventually arise from barren railway lands, along with town homes, lofts and a large park. The city-within-a-city will be home to 16,000 people.
"People ask us all the time what's going to go on in the market," says James Ritchie, vice-president of sales and marketing at Tridel, the biggest builder of condos in Toronto and owned by the DelZotto family. "To be candid, it's very difficult to tell you where it's going to go one way or another, other than when we look at the fundamentals, what's happening here in Toronto and how its going to affect housing. The fact is, it's sustaining itself."
Toronto real estate developers need to be an optimistic lot. Not only do they have the current U. S. housing bust hanging over their heads, but also the still-fresh memory of the Toronto property crash of the early 1990s.
"We didn't call that a recession in our industry; it was a depression," says Sam Crignano of Cityzen, which has 14 projects and 9,000 units on the board, including the Daniel Libeskinddesigned glass L Tower at the foot of the city on Front Street. "It was that perfect storm -- a number of factors all converged to create that disaster."
Double-digit interest rates, overbuilding, the introduction of the GST and a recession that sent unemployment soaring to 12%, brought the Toronto property market to its knees. According to Goldman Sachs, it was the fourth longest of 24 housing busts in the OECD since the 1970s. Prices declined from December, 1989, to September, 1998, a 34-quarter marathon that took values down 50% in some areas.
Not only did the residential market fall apart, but Canada was home base for some very public flameouts in the commercial and retail real estate sector, with Campeau Corp. and the Reichmann's Olympia&York Developments Ltd. filing for bankruptcy.
Now, the U. S. housing meltdown looms large, with prices down about 14% from their 2006 peak and so many homes on the market it would take nearly a year to shift the supply.
The developers have noticed the first quarter softening. But they are not afraid.
New condo sales totalled 3,433 in Toronto, only eight fewer units than last year, according to Urbanation, a condo tracking firm. And the price per square foot for sales rose to $388 from$348.
However, with a glut of new buildings nearing competition or currently under construction, the market is definitely expected to cool.
Brad Lamb, Toronto's biggest condo broker, and its most flamboyant, says new condo sales could be off as much as 40% this year and resales 10%. Mr. Lamb has his head plastered onto the body of a lamb on billboards all over the city. He also hosts Big City Broker on HGTV, a "docusoap" looking at the business of real estate.
"But last year was an incredible, stupid year, where literally every property we put on the market sold by auction, with four or five bidders for every property," he says. "We're still getting that a bit, but it will start to taper off. The time to sell is about 30 days. A year ago it was 15 days. It will probably go to 60 days, which is a normal market. Sixty days is still a seller's market."
The condo kings take a long-term view of a city they say is still in its infancy.
"Over the last 10 years Toronto has grown by over a million people," says Alan Menkes, president at Menkes Development, which has been developing homes in the Toronto area for the last half century. Its latest project is the Four Seasons Hotel and Private Residences, a two-tower development in tony Yorkville, where luxury suites will run from 1,100 to 9,000 square feet and prices from$1.2-million to $16-million.
"You're adding jobs, you're adding buying power," Mr. Menkes says. "They come with capital and they're looking for housing."
Immigration is the main driver behind the condo story for Toronto, say developers, each one of whom can reel off the statistics on their fingers.
Immigration to Canada totals roughly 225,000 a year and some 40% to 50% settle in Toronto. The Greater Toronto Area is expected to swell from about 5.5 million people to 6.9 million in 2016 and 8.3 million by 2031. The city proper is projected to reach 3.05 million by 2031.
The Ontario government increasingly wants that population contained. In 2005, the province slapped an 800,000-hectare greenbelt -- about the size of Prince Edward Island--around Lake Ontario, protecting a large swathe from development. The effect has been to intensify construction around established cities and vertically.
Immigrants are used to living in apartments, developers add. The condo is a natural alternative.
"The house is really more a North American phenomenon because no one in Europe can afford it because land is so expensive," says Michael Gold, president of Bazis North America. The developer has 35 projects underway around the world, including 1 Bloor, an 80-storey tower to be built on the corner of Canada's priciest retail strip. "We really see Toronto catching up to the rest of the world."
Mr. Ritchie is loath to call the recent increase in building "a boom." Rather, he prefers to call it a slow, steady ramp up to accommodate the growing swell of people.
Besides immigrants, young people -- especially women -- are fuelling condo demand. They live with their parents longer, save money and move directly into home ownership.
"One of our developments at Broadway and Redpath, I would say 25% to 30% of those units were purchased by single women probably in their late-20s, early-30s on a career path," says Mr. Crignano of Cityzen.
Mr. Lamb says his company has reams of buyers in their 20s, drawn by the affordability of condos. "They used to be over 30," he says. "It's a very industrious generation of young people who see the benefit of owning their own property."
The condo scene is turning Toronto into a young and very social city, Mr. Lamb adds. "CityPlace is like Peyton Place or Melrose Place," he says. "In a building like CityPlace with 400 people -- 400 people typically under 40 -- I can tell you the scene at the pool is crazy."
At the other end of the spectrum, empty-nesters and a wealthy international set are demanding luxury and high-end design.
Mr. Freed says demand for more expensive units has risen gradually and that the luxury buyer is prepared to shop around. "We sold 20 high-end units in other buildings that were between $1-million and $2-million, but we had a lot of people who didn't buy," he says. "They didn't want to be in buildings with people who were buying units for $180,000."
In March, he sold $20-million worth of condos in two weeks at one of his higher-end buildings, where units range from $1.5-million to $5-million.
Mr. Menkes says 70% of the Four Seasons Private Residences have been sold. "We're really providing a product that was not available before. We're putting Toronto on the map in terms of international draw," he says.
The developers see every downtown Toronto parking lot or disused industrial space eventually filled with condos, mixed with shops and restaurants, and an increasingly educated and wealthy buyer moving in.
Even if there are lean years ahead, they say they are much wiser than they were in the early '90s, with buildings pre-sold before the foundations are dug.
"The fiscal discipline that has been instilled in developers today because of the '90s debacle has put us in much better standing," Mr. Menkes says. "Just in terms of banking underwriting, when we do construction loans, the discipline is much more rigorous."
Cautionary notes aside, it is clear the condo kings are thrilled to be participating in the rise of Canada's condo city.
"I've lived in Toronto my whole life," says Mr. Freed. "To see certain downtown neighbourhoods take shape and become so liveable, so fast, it's incredible."
jthorpe@nationalpost.com
Optimistic Toronto developers are riding the increasing shift of housing demand toward homes in the sky
Jacqueline Thorpe, Financial Post Published: Saturday, May 31, 2008
Related Topics
National Post / Who Brad Lamb, head of Brad J. Lamb Realty Inc. Claim to fame The showman. His loud, proud marketing strategy has helped the company become the biggest broker of condos in Toronto, with 2,000 units sold in 2007. Flagship Parc Loft: Residences overlooking a park in Toronto's west end, where size to finishes are "bigger and better." On condo mania "It's one thing to pay $8-millon for a 10,000-square-foot apartment. I get that -- guys paying $800 or $1,000 a square foot for a massive apartment in Yorkville ? I can't understand in the low end why anyone would pay $800 a square foot in this market."Brent FosterNational Post / Who Brad Lamb, head of Brad J. Lamb Realty Inc. Claim to fame The showman. His loud, proud marketing strategy has helped the company become the biggest broker of condos in Toronto, with ...
From his penthouse in Toronto's hip fashion district, Peter Freed can track the development of his next six condo projects taking shape along King Street West.
One of Mr. Freed's buildings will have interiors by Philippe Starck, the must-have French designer of the moment. Another will be inspired by the Neoplasticism art movement made famous by Mondrian, where design is pared down to the basics of lines and the primary colours red, yellow and blue.
Mr. Freed has eight projects on the board worth a total of half a billion dollars, a tiny fraction of the record 33,980 units under construction in the city. Canada's biggest city has become North America's biggest condo market, with more units now under development than Manhattan, Chicago and Los Angeles.
As Mr. Freed looks off his terrace, where the lap pool and giant padded loungers are looking a little forlorn on a wet spring day, he is confident Toronto will not also become North America's biggest condo meltdown.
"Right now, there's very large demand," says Mr. Freed, dressed casually in jeans, shirt-tails hanging out, no laces in his shoes.
At 39, the laid-back developer is the fresh face of an eclectic group of condo kings who are transforming the very skyline of the city. Along with other design-focused builders like Cityzen Development Group, stalwarts like Tridel Corp. and Menkes Developments Ltd., and newcomers like Bazis International Inc., Mr. Freed is banking on the view Toronto is undergoing a seismic housing shift.
Boom or bust? Page FP5
Figures show a marked slowing in the Canadian housing market this year, including a 7.3% year-over-year drop in existing homes sales in Toronto in April and a subsiding of the mania that drove the condo market into overdrive last year.
But builders say demographics, immigration, government regulation and cultural change will continue to skew demand for housing toward the condominium. Housing hotspots like Calgary may have already burned themselves out in a frenzy of building and soaring prices, but Toronto's rise as a global city will allow it to ride out any short-term weakness, they say.
"We understand there's 75,000 people a year for the next 20 years projected to move into the city core," says Mr. Freed.
So Toronto's condo kings, mostly privately held, backed by joint-venture partners and old-fashioned bank loans, are knee-deep in a building boom that has seen 67,984 condo units in 316 buildings launched since 2004.
To anyone walking the city streets, the scale of activity is eye-popping, with dozens of cranes swinging across the skyline, the monotonous thud of foundation pilings being driven into the ground and convoys of cement trucks causing endless traffic snarls.
They are building by the waterfront, around the subway line in the north of the city and in the east end where work-live lofts are all the rage.
At Concord CityPlace, an 18-hectare master-planned city near the waterfront, 21 condo towers will eventually arise from barren railway lands, along with town homes, lofts and a large park. The city-within-a-city will be home to 16,000 people.
"People ask us all the time what's going to go on in the market," says James Ritchie, vice-president of sales and marketing at Tridel, the biggest builder of condos in Toronto and owned by the DelZotto family. "To be candid, it's very difficult to tell you where it's going to go one way or another, other than when we look at the fundamentals, what's happening here in Toronto and how its going to affect housing. The fact is, it's sustaining itself."
Toronto real estate developers need to be an optimistic lot. Not only do they have the current U. S. housing bust hanging over their heads, but also the still-fresh memory of the Toronto property crash of the early 1990s.
"We didn't call that a recession in our industry; it was a depression," says Sam Crignano of Cityzen, which has 14 projects and 9,000 units on the board, including the Daniel Libeskinddesigned glass L Tower at the foot of the city on Front Street. "It was that perfect storm -- a number of factors all converged to create that disaster."
Double-digit interest rates, overbuilding, the introduction of the GST and a recession that sent unemployment soaring to 12%, brought the Toronto property market to its knees. According to Goldman Sachs, it was the fourth longest of 24 housing busts in the OECD since the 1970s. Prices declined from December, 1989, to September, 1998, a 34-quarter marathon that took values down 50% in some areas.
Not only did the residential market fall apart, but Canada was home base for some very public flameouts in the commercial and retail real estate sector, with Campeau Corp. and the Reichmann's Olympia&York Developments Ltd. filing for bankruptcy.
Now, the U. S. housing meltdown looms large, with prices down about 14% from their 2006 peak and so many homes on the market it would take nearly a year to shift the supply.
The developers have noticed the first quarter softening. But they are not afraid.
New condo sales totalled 3,433 in Toronto, only eight fewer units than last year, according to Urbanation, a condo tracking firm. And the price per square foot for sales rose to $388 from$348.
However, with a glut of new buildings nearing competition or currently under construction, the market is definitely expected to cool.
Brad Lamb, Toronto's biggest condo broker, and its most flamboyant, says new condo sales could be off as much as 40% this year and resales 10%. Mr. Lamb has his head plastered onto the body of a lamb on billboards all over the city. He also hosts Big City Broker on HGTV, a "docusoap" looking at the business of real estate.
"But last year was an incredible, stupid year, where literally every property we put on the market sold by auction, with four or five bidders for every property," he says. "We're still getting that a bit, but it will start to taper off. The time to sell is about 30 days. A year ago it was 15 days. It will probably go to 60 days, which is a normal market. Sixty days is still a seller's market."
The condo kings take a long-term view of a city they say is still in its infancy.
"Over the last 10 years Toronto has grown by over a million people," says Alan Menkes, president at Menkes Development, which has been developing homes in the Toronto area for the last half century. Its latest project is the Four Seasons Hotel and Private Residences, a two-tower development in tony Yorkville, where luxury suites will run from 1,100 to 9,000 square feet and prices from$1.2-million to $16-million.
"You're adding jobs, you're adding buying power," Mr. Menkes says. "They come with capital and they're looking for housing."
Immigration is the main driver behind the condo story for Toronto, say developers, each one of whom can reel off the statistics on their fingers.
Immigration to Canada totals roughly 225,000 a year and some 40% to 50% settle in Toronto. The Greater Toronto Area is expected to swell from about 5.5 million people to 6.9 million in 2016 and 8.3 million by 2031. The city proper is projected to reach 3.05 million by 2031.
The Ontario government increasingly wants that population contained. In 2005, the province slapped an 800,000-hectare greenbelt -- about the size of Prince Edward Island--around Lake Ontario, protecting a large swathe from development. The effect has been to intensify construction around established cities and vertically.
Immigrants are used to living in apartments, developers add. The condo is a natural alternative.
"The house is really more a North American phenomenon because no one in Europe can afford it because land is so expensive," says Michael Gold, president of Bazis North America. The developer has 35 projects underway around the world, including 1 Bloor, an 80-storey tower to be built on the corner of Canada's priciest retail strip. "We really see Toronto catching up to the rest of the world."
Mr. Ritchie is loath to call the recent increase in building "a boom." Rather, he prefers to call it a slow, steady ramp up to accommodate the growing swell of people.
Besides immigrants, young people -- especially women -- are fuelling condo demand. They live with their parents longer, save money and move directly into home ownership.
"One of our developments at Broadway and Redpath, I would say 25% to 30% of those units were purchased by single women probably in their late-20s, early-30s on a career path," says Mr. Crignano of Cityzen.
Mr. Lamb says his company has reams of buyers in their 20s, drawn by the affordability of condos. "They used to be over 30," he says. "It's a very industrious generation of young people who see the benefit of owning their own property."
The condo scene is turning Toronto into a young and very social city, Mr. Lamb adds. "CityPlace is like Peyton Place or Melrose Place," he says. "In a building like CityPlace with 400 people -- 400 people typically under 40 -- I can tell you the scene at the pool is crazy."
At the other end of the spectrum, empty-nesters and a wealthy international set are demanding luxury and high-end design.
Mr. Freed says demand for more expensive units has risen gradually and that the luxury buyer is prepared to shop around. "We sold 20 high-end units in other buildings that were between $1-million and $2-million, but we had a lot of people who didn't buy," he says. "They didn't want to be in buildings with people who were buying units for $180,000."
In March, he sold $20-million worth of condos in two weeks at one of his higher-end buildings, where units range from $1.5-million to $5-million.
Mr. Menkes says 70% of the Four Seasons Private Residences have been sold. "We're really providing a product that was not available before. We're putting Toronto on the map in terms of international draw," he says.
The developers see every downtown Toronto parking lot or disused industrial space eventually filled with condos, mixed with shops and restaurants, and an increasingly educated and wealthy buyer moving in.
Even if there are lean years ahead, they say they are much wiser than they were in the early '90s, with buildings pre-sold before the foundations are dug.
"The fiscal discipline that has been instilled in developers today because of the '90s debacle has put us in much better standing," Mr. Menkes says. "Just in terms of banking underwriting, when we do construction loans, the discipline is much more rigorous."
Cautionary notes aside, it is clear the condo kings are thrilled to be participating in the rise of Canada's condo city.
"I've lived in Toronto my whole life," says Mr. Freed. "To see certain downtown neighbourhoods take shape and become so liveable, so fast, it's incredible."
jthorpe@nationalpost.com
