King of high-price condos coming to town
But competition's tougher than it is back home
Feb 10, 2007 04:30 AM
Tony Wong
business reporter
Ian Gillespie doesn't build affordable housing.
He makes a living building palaces in the sky, many having water views, with what some might call absurd prices of admission for ownership. Somehow, though, the luxury buyers keep coming.
In fact, if you think condominiums in Canada are too expensive today, you might be tempted to lay some blame on the inflationary influence of the Vancouver-based developer who has become a poster boy for excess.
Two of Gillespie's Vancouver projects – the Fairmont Pacific Rim and the city's tallest tower, Living Shangri-La – are largely sold out despite what are believed to be the highest prices per square foot of any project in Canada.
Living Shangri-La is selling for $1,500 per square foot, while the Fairmont fetches $2,100 per square foot. That's far above what many luxurious buildings, except for the prime offerings, in Toronto are selling for today. The $1,000-per-square-foot level for new buildings is considered high end.
But Gillespie, chief executive officer of private Vancouver-based developer Westbank, offers no apologies.
"I don't set the prices. It is what the market will bear," Gillespie said in an interview in Toronto, where he is launching his latest project, another Living Shangri-La condominium and hotel, with partner Peterson Group.
The $430 million, 65-storey tower at University Ave. and Adelaide St. W., kitty-corner to the new Four Seasons Centre for the Performing Arts, will have 279 condos and 220 hotel rooms.
The developer expects to sell pied-Ã -terre bachelors for $550,000 and up, all the way through to $10 million each for the two penthouses.
Tall buildings, though, sometimes come with tall egos. And Gillespie, a lanky, 40-something blond in a designer suit who looks more like the star of a celebrity hairdressing show than a rough and tumble developer, is filled with a weary self-assurance.
"Actually, in another month, we'll be raising the price at the Fairmont to about $2,400 a square foot," he told a reporter.
Toronto will get off comparatively lightly: a mere $900 per square foot and up on average, if current plans prevail.
Gillespie has profited mightily in Lotus Land, where a lack of available land has driven prices into the territory of National Basketball Association player salaries.
The question remains, however, as to whether he can recreate the magic in Toronto with his first project here.
After all, he is competing with a $300 million, 53-storey Ritz Carlton hotel and condominium already under construction. A new Four Seasons and a Trump Hotel and condominium are also planned for the city, producing an unprecedented plethora of luxury accommodation.
"Any time you add new supply, particularly at this end of the market, it takes time to absorb into the market," said Greg Kwong, executive vice-president of commercial realty firm CB Richard Ellis. "And this is a lot of supply at once."
Harry Stinson, a Toronto developer who started to market his Sapphire Tower condominium project this week, said he was "nervous about Toronto's capacity to absorb so much high-end product."
Gillespie, however, said he hasn't come too late to the party. It's only just beginning.
"I really don't have any concerns that this will sell. I think, if you look at Toronto, given its size and economic presence, the question should be, why has it taken this long to have these hotels built?" he said.
But Gillespie may find Toronto buyers a little more prudent with their cash.
Not only is the competition fierce, but prices here have been more moderate up to now, rising only about 5 per cent a year over the past few years, compared with Vancouver's double digits.
In Vancouver, Gillespie had the audacity to charge $10,000 in a refundable deposit before buyers were allowed to preview his Fairmont property. That kind of chutzpah may not work in Hogtown.
For one thing, the Shangri-La brand may not have the cachet of projects from some of his competitors.
Controlled by Hong Kong-based billionaire Robert Kuok, the 114th-richest man in the world according to Forbes magazine, the Shangri-La brand does have a loyal following in Asia. The hotels are usually decorated in Asian antiques and the service is legendary.
"You really end up feeling like a king," said Kwong, who stayed at a Shangri-La in Hong Kong in December.
Still, the brand, with 50 properties, is making an effort to move beyond its Asian roots into North America and Europe, but has very little presence here now.
The Toronto Star recently asked billionaire hotelier J.W. Marriott, chair and CEO of Marriott Inc., which owns the Ritz brand, what he thought of the Shangri-La as competition.
"I don't think it's really an issue," he said. "They don't have the name recognition in North America."
Gillespie, obviously, thinks otherwise.
"I actually think it's a bit of an advantage," Gillespie said. "People are looking for something a little exotic nowadays, not the same old thing. And, at the end of the day, the market will decide who has the best product."
Gillespie has no doubt that it will be his.
"I think we will be clearly superior to our competitors," Gillespie said. "It's about who will offer the best level of finishing, the best amenities. We will have that."
As for his competitors, Gillespie has referred to Donald Trump as "a caricature of himself" and developer Stinson as more of a promoter than a developer.
Gillespie told a newspaper reporter in Vancouver that the last time he was in Toronto, he saw Stinson "flogging his project" on television and "seriously thought about pulling the plug, if that's what real estate development was in Toronto."
"I'm sorry we don't measure up to his standards," Stinson replied, deadpan. "Maybe we just don't take ourselves as seriously in Toronto."
Jeanhy Shim, president of condominium-research firm Urbanation, said the company is tracking five potential condo developments in Toronto to come to market with prices of $1,000 per square foot. Gillespie's $2,100 per square foot price for his Fairmont project is probably the highest in Canada, she said.
Shim is optimistic that the market can bear several top-end projects.
Housing analyst Will Dunning, however, has forecast a correction for condos. Because much of the Toronto market is linked to success on Bay St., luxury properties could be hit once the market turns down.