Toronto Sunnybrook Plaza Redevelopment | 56.92m | 16s | RioCan | Turner Fleischer

Northern Light said:
First, TY for linking to this piece.

Second, the most pertinent bit is at the end.

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In respect of the above. I'd certainly like to see them return to rental as the basis of the project, incentives for same are now materially better than they were the last time rental was contemplated here.

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In respect of a project, at currently approved density being non-viable, I don't accept that. I fully understand why they would like more, and the change in what's proposed in the area would certainly suggest they have a reasonable chance of getting more.

That said, the land is a fixed cost on the books, rents and condos have both risen in price relative to pre-pandemic times. The former more than the latter. I fail to see how one could not make money building what's proposed, given that the prices/rents can be re-set.

However, I accept that they would probably be leaving money on the table.

They may wish to consider, though, that the property's retail rental income has now dried up, and the asset is stranded largely because of endless dithering.

At some point, if you can't get a project off the ground in more than 5 years, its not on the weather, the government, the market, or anyone but you. You keep running into changing circumstances, because you keep not moving forward when you have the chance to do so.

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The LPOA will hate this one being taller, but they are well aware the writing is on the wall, given the relatively cozy treatment here by Concert, I would expect them to extract additional community benefit and live with a material increase here.
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Thank you so much for this explanation @Northern Light. I think you are bang on. My brother and I were looking at purchasing a unit in Sunnybrook last year as Concert was preparing to launch. Instead my brother bought in Leaside Common and the project is currently being built. We looked at purchasing in 1414 Bayview as well - also currently being built. So there's 2 projects in the area that are in construction; someone's doing it. I'm not sure what the hold is for Concert.
 
Northern Light said:
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In respect of a project, at currently approved density being non-viable, I don't accept that. I fully understand why they would like more, and the change in what's proposed in the area would certainly suggest they have a reasonable chance of getting more.

That said, the land is a fixed cost on the books, rents and condos have both risen in price relative to pre-pandemic times. The former more than the latter. I fail to see how one could not make money building what's proposed, given that the prices/rents can be re-set.

However, I accept that they would probably be leaving money on the table.

They may wish to consider, though, that the property's retail rental income has now dried up, and the asset is stranded largely because of endless dithering.

At some point, if you can't get a project off the ground in more than 5 years, its not on the weather, the government, the market, or anyone but you. You keep running into changing circumstances, because you keep not moving forward when you have the chance to do so.
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I'd challenge those assumptions. Construction costs have also increased, and the interest rate environment changes everything. Things don't get built if they cannot get financing in place.

The project may be "viable" if someone is willing to take next to no margin on the project, but if the proponent has certain obligations to meet to their investors, their lenders, and to their own internal development portfolio strategy requirements that are not being met, then development does not take place, regardless if us onlookers are "upset" about their unwillingness to develop.

What you said, the land cost here being zero, is also a massive part to this equation. With no mortgage on the property, RioCan has the room to wait out the market and apply for additional density at their own pace. It is the objectively responsible thing to do here from their perspective, and they (and Concert) are both beholden to public and private shareholders.

Also, chasing the highest rents possible may not be their residential portfolio desire, as they did not position this project as a high-end luxury product. Additional density may make the project more viable to develop at mid-high market rents that both RioCan and Concert are more comfortable delivering at.

Anywho, update from the weekend.

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WislaHD said:
I'd challenge those assumptions
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Fair enough.

WislaHD said:
. Construction costs have also increased,
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No question, but so have potential rents, by more than 50% since this project was first conceived.

WislaHD said:
and the interest rate environment changes everything. Things don't get built if they cannot get financing in place.
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I agree. This is, of course, dependent on how they intended to finance the project.

Concert is well capitalized and should be able to fund cash from current (build without borrowing); not so sure about Riocan.

Concert's debt leverage ratio is 30%, so their balance sheet looks pretty healthy.

Ugh.........Riocan is up over 90% as at the end of '23.
 
WislaHD said:
Anywho, update from the weekend.

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After a few weeks with no action, last week they started trucking in dirt and spreading it around.

The prospect of this corner being a fenced off vacant lot with no activity potentially for a long time is rather depressing, especially since they were in such a rush to kick out all the tenants a couple of years back. But as a few of you stated, that's business.
 
I would agree with @WislaHD. I think this is more of fortunate + unfortunate timing affecting this project rather than Concert/Riocan failing to pull the trigger or their ineptitude

A lot of things have happened here that impacted their timeline -
  1. Although OPA 405 was probably considered as a welcome change by both Riocan and Concert, revising the plans after about 5-10 years worth of work and community consultation (in Leaside of all places), not to mention being potentially the first applicant to request higher densities (would have been 2019/2020), was probably a pill too hard and late to swallow for both.
  2. As I understand, both partners were still planning on proceeding with a rental product (given planned demo of site in spring 2020)... until covid hampered those plans.
  3. With covids impact on the rental market, the partners then decided to pivot to a condo product. At this point Riocan wanted out since they wanted to stick to rental I believe, while Concert was ok delivering a condo product. So this is when Concert bought out the remaining share of the land from Riocan (ie 2021ish) and the redesign into condo presumably commenced
  4. Concert then planned on launching the project as a condo sometime late 2022/early 2023 - we all remember what happened during this time. Construction prices exploded, inflation and interest rates ticked up, and the precon market died. So Concert probably backed off - remember these guys are pension fund owned. They are probably not going to proceed with sales in a dead market.
  5. And not to mention an unnecessarily complicated design that compounded the cost of construction, an enormous raft slab bc of the water table, and resulting 150+ unit types for sale. The building was effectively designed to fail in this new environment (ie post 2022/23)
And today I presume Concert is contemplating a redesign of their original plans based on opa 405, macroeconomic changes, approval trends in the area. I would not be surprised if we saw this -
AlbertC said:
I predict this will become 2 towers, in the height range of 35 to 40 storeys.
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I'll be happy to see an increase in density to the site, in particular to the 16s building.

Still, I suspect there will be many cries of a "bait and switch" from locals, given their opposition to taller developments in the area.
 
ProjectEnd said:
That's fine, but RioCan have been out of this for like a year and a half now. It's just Concert at this point.
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Valid point; of course, I wasn't thinking about that since Riocan still appears in the the thread title!

Perhaps @Paclo could make the appropriate change.
 
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