from today's Globe....
Daniels Finds a Winning Formula
BY TERRENCE BELFORD
Last updated on Friday, Jul. 31, 2009 03:11AM EDT
In an astonishing turnaround, new condo sales soared in June. RealNet Canada Inc. reports 1,706 sales for the month, off just 9 per cent from the same period last year and more than double the sales reported in May.
It may be premature to say the new condo housing slump is over, says RealNet president George Carras, but sales are a strong indicator that buyer confidence is beginning to return and that builders have re-tooled their offerings to better meet market demand.
In fact, one veteran developer – The Daniels Corporation – has made an extraordinarily bold move. For the past four years in its low-rise homes it has done a 180-degree turn from the usual process of selling then starting construction when 70 per cent to 80 per cent of the units are sold.
Daniels has built first and then gone to market when the homes were just 30 days away from completion. Now, for the first time, it has tried the same technique with high-rise condos to great success.
The busiest markets in the Greater Toronto Area were Downtown West with 343 sales and Downtown East with 290, but the action in those two markets was as different as night and day. In Downtown West, which stretches from Bloor to the Lakeshore and the west side of University to Dufferin Street, sales were evenly spread with 34 of the 51 projects reporting sales. Compare that with the dark days of February when only 19 of them sold any units.
In Downtown East, which runs from Bloor to the Gardiner Expressway and from the east side of Church Street to the Don Valley, a whopping 248 sales came from a single project: One Cole on the northeast corner of Parliament and Dundas Streets.
One Cole is the Daniels Corp. project. It is the first phase of the redevelopment of Regent Park and consists of a nine-storey and a 19-storey tower with 292 suites, 10 of which are two-storey townhouses at the rear facing Cole Street. Martin Blake, Daniels's vice-president says the project went on sale in early June and by the end of the month, 243 suites had been snapped up by eager buyers. They get to move in this November.
The reason for such blazing sales activity? It is a combination of factors, he says. First was location. Second was the appeal to renters. They could buy a suite and carry the costs for about the same as the rent they are paying and know for certain they can move in late this fall.
Third was price. The suites from the 400-square-foot studios to the 1,230-square-foot townhouses sold for just over $400 a square foot or $87 below the average price per square foot in the Downtown East area.
That considerable price savings can be traced back to the way One Cole was developed and marketed. Daniels's approach eliminated the need for two years or more of marketing costs to drive sales to the level acceptable to lenders. It built and then had a brief and intensive sales campaign. Six weeks later the project is 84 per cent sold, says Mr. Blake.
Daniels could also accurately project construction costs because it was building in the here and now and not trying to guess how much construction costs would rise over the three to five year period it normally takes to develop a high-rise project.
Daniels can do it because it has a long track record and a great relationship with its lenders, says Don Pugh, the company's vice-president in charge of low rise. He has overseen seven of these build and then sell projects in the past four years and the result is always the same: A speedy sellout and an equally quick move-in date.
“Now we usually start selling about 30 days before move-in date,†he says. “I once tried 10 days but the lawyers complained too much. They just couldn't handle the work in that short time frame.â€
The One Cole phenomenon follows on the heels of Daniels's astonishing success in May with a Mississauga project called FirstHome Eglinton West at Winston Churchill Boulevard and Eglinton Avenue West. The company put 157 stacked townhouses on sale at 10 a.m. May 23 and had sold them all by 6:10 p.m. that day.
Prices ranged from $154,400 to $276,900 for a one-bedroom unit and people camped out on the street in front of the sales office to get a chance to buy, Mr. Pugh says.
While he readily admits not many developers have the track record and strong relationships with lenders Daniels has, the concept of build then sell has a terrific psychological component.
“People drive by the site for months or, in the case of One Cole, years. They see the buildings going up but when they call and ask if they can buy, we tell them no, not yet,†he says. “You get this terrific buzz going; this great anticipation.â€
The success of One Cole has led Daniels to do its phase two at Regent Park the same way. Construction starts this fall on a series of townhouses at Cole and Oak streets, Mr. Blake says.
“We won't start selling those until they are substantially complee.â€
