Tannery Lofts
February 26th, 2007Every time the cow bell rang, eager loft buyers knew that the price was going up
Reprinted from The Globe and Mail
Metal scrap yards, public housing and a padlocked gate surround the century building. Inside, water seeps down a wall in the abandoned basement that’s littered with piles of bricks, a few lopsided toilets and possibly some walking spirits. Two stories up, manufacturing equipment that predates the computer age lies unused, bolted to the floor.
This is one of the city’s most successful loft conversion projects, in a downtown condo and loft market that is clearly nowhere near cooling off - and in a neighbourhood that has recently left some experienced developers licking their wounds.
Twenty of the 36 units at the Tannery Lofts on Dundas Street East near River Street were bought in one weekend late last month. They sold to the tune of an old cow bell, which the sales team banged every time it jacked up prices in front of waiting customers.
Sales benefited from a particularly good set of loft features — in a city where the definition of loft is frequently stretched beyond recognition — and from a textbook marketing campaign.
That campaign found the market sweet spot.
The developer of the Tannery Lofts is Walsh Development Group, which four years ago completed the conversion of the old Gillette razor factory on Adelaide Street East into Liberty Lofts. With the Tannery Lofts, the company waded into a neighbourhood where two other experienced developers had recently been forced to pull their loft projects from the market because of poor response.
Demand for the Tannery Lofts came from a highly tuned marketing strategy that left little to chance. The sales office was compact, and the number of sales staff low, so that as the day progressed a line formed and excitement grew. Some people were filing out contracts on cardboard boxes. While others waited their turn, it was not unusual for prices to rise by $5,000.
Not only were the units 70% sold two days after the sales office opened, but the team were able to shuffle through their different price lists and raise prices seven times during the first weekend.
The smallest loft, a 443 square-foot unit, started selling at $119,000 but had jumped to $139,900 by the end of the weekend. Similarly, the largest loft (1,300 square feet) climbed from $329,900 to $350,000. On a square-foot basis, prices started below city averages at about $250 and shot up to $315, more in line with some resale prices at popular existing loft buildings.
Other recent sales efforts in the area have not done so well. Atria Developments, for example, signed up only a handful of buyers for its LTD lofts before closing the sales office last November, two months after opening it. The building at Queen Street and Carlaw Avenue was to have included 118 lofts designed by the architectural firm Kohn Shnier. The family-owned developer had successfully completed the iZone live/work lofts across the street a short time earlier.
Hans Jain, a principle with Atria, said the company is re-evaluating the LTD project and could re-launch a lower-priced, stripped-down version this year. Initially, Atria aimed for buyers wealthier and more sophisticated than first-timers, offering top-of-the-line finishes, big units averaging 880 square feet, and an unusually large amount of interior common space. But this kind of buyer was just not interested in the neighbourhood, Mr. Jain says.
Inaugural Source, which announced plans in 2002 to convert the Malthouse at Queen Street East and River Street into 26 townhouse lofts, also pulled its project because of weak interest. Ron Herczeg, the developer, blamed a softening marketplace where product now has to be unique if it is going to sell well. Inaugural Source is considering returning with a more expensive freehold townhouse project, he says.
Unlike most other loft developers, Walsh Development hired a marketing team early on for the Tannery Lofts project. The owner, Christopher Walsh, declined to be interviewed, but Mr. Brdlik says his company played a fundamental role in creating the design, selling features and pricing.
“I always find it interesting how the developer leaves out the marketing people until the end and just uses them as order takers and sees them as a necessary evil,” Mr. Brdlik says. “It’s a tougher market today. Purchasers are becoming more educated and the market is maturing.”
Lofts are a niche market with unique ingredients that are often hard to pinpoint, and numerous developers who have successful track records with condos have met their match with lofts, he says.
Among the special features added to the Tannery Lofts to help with their marketability are: extra-large wooden doors — 8 feet by 4 feet — at entrances; roof decks sold separately for between $12,500 and $20,000; sliding walls that partition sleeping areas; partial height walls to block off other areas; and raised flooring in some areas with extra storage space built underneath.
Early on in the project, the Tannery Lofts marketing team decided prices should be competitively set near $280 a square foot. The group felt that some downtown developers were getting greedy and it didn’t want to fall into the same temptation. The team also thought that a project in the east end of the city had to offer more value than something closer to the centre or on the west side. But once the group knew the buyers were there, it felt it could gradually start raising prices.
On the first Saturday of sales, one young woman interested in buying wasn’t completely convinced she should commit. When she returned Sunday, the price of the unit she liked had increased by $20,000. She asked if she could buy it for the original price but the salesperson refused. She left in frustration, but the unit sold later that day for the premium price.
Early this month, during the second weekend of sales, the pace of purchasing fell dramatically to just three units, and three earlier buyers opted out within the standard 10-day cooling-off period. The down shift was expected because the big push is always for the grand opening weekend when the best prices are available. In fact, the Tannery Lofts sales office has already closed down.
The pricing strategy at the Tannery Lofts includes holding back between 20 and 30% of the units from the market until completion. Completed units in move-in condition can garner premium prices.
Despite the Tannery’s derelict look, Walsh Development and Mr. Brdlik saw that the building had potential. The 13-foot ceilings, massive windows and thick wood beams and posts — some naturally charred by a fire years ago — are rare in Toronto lofts.
The marketing team wanted to target first-time buyers in their 20s and 30s. It emphasized such key loft features as sandblasted brick, the extra-large doors, a refurbished factory elevator car and optional roof decks.
The building had a long industrial history, including years as a soap factory. It has also been know as the Adam Beck Cigar Box Manufacturing Company Building. But leather has more market appeal, so the property was branded appropriately.
A glossy brochure highlights views from the lofts of the CN Tower to the southeast, a Mercedes office to the south and the Dundas streetcar, which runs by the front door. Another handout outlines the city’s plan to revitalize neighbouring Regent Park.
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