Tag Archives: toronto hotel
Andrea Hopkins, Reuters
Five months after buying one of Toronto’s new luxury hotel condominiums, Oliver Baumeister is girding for a glut of suites like his to hit the market as the biggest names in the hotel business open hundreds of units in Canada’s largest city.
Baumeister, himself a real estate agent, is in no rush to sell. When Toronto’s untested market for five-star condo living absorbs the surplus — say by 2016 — he intends to offload his sky-high unit for a tidy 20% profit, and look for his next Canadian real estate investment.
“A bunch of it will sit for a while and it will take time to sell,” said Baumeister, who has been buying Toronto condominiums with his brother for the past four years.
“But we bought it with the belief that the Toronto hotel condo market definitely has a future. When we sell, hopefully … we’ll see about a 20% profit.”
The model of ultra-fine condos attached to luxury hotels isn’t new — cities like Hong Kong and New York are full of them.
But Toronto, a relatively small city with no five-star hotel condominiums a year ago, is coming to the game late but with a vengeance.
By the end of this summer Toronto will have four such projects, as Four Seasons, Ritz Carlton, Trump and Shangri-La open massive towers in a city where a red-hot market for all types of housing has brought rising concern about a real estate bubble.
The granite-and-glass towers, including two of Canada’s tallest residential buildings, are opening in quick succession, adding hundreds of hotel rooms and more than a thousand condominiums just as Canadian housing hype hits a fever pitch.
Comment: And hype is exactly that – hype. Chuck D told us not to believe it, he was right.
Signs of success are mixed. None of the four projects, whose condos cost from just under $1-million to $28-million, has sold out, and the push by developers to sell their remaining units before a resale market kicks in has the feel of a ticking time bomb.
Comment: What push? They all want to sell their units, as with any development regardless of cost. Trump has been selling for almost 10 years now, of course they want to be done.
“I think any developer has concerns about that,” said Howard Tikka, director of marketing Talon International Development Inc, which is developing the Trump property.
“If you have units left to sell, and people are taking them to market to resell, there is just not a whole lot you can do about it.”
With the Ritz Carlton already open and the other three not-fully-sold projects due to hit the market this summer, the developers will compete with sellers of their own luxury condos as speculators and investors try to cash in.
Comment: ASSUMED speculators and investors. Some may have just changed their mind, others may need to liquidate for financial reasons. We have no idea how many will come up for sale, nor the reasons why.
While all four projects boast paper profits for early investors, the simultaneous sale of dozens — perhaps hundreds — of exquisite suites may prove too much of a good thing.
“I think on the luxury side, the market has already peaked,” said Don Campbell, president of the Real Estate Investment Network, an author who invests his own money and advises others about buying into Canada’s housing market.
Campbell said six groups identified the same hole in Toronto’s luxury market about 10 years ago. Four projects went ahead, and all of them are coming on line at the same time.
Comment: But the true measure of this market segment is not what happens in a few months – it is what happens over the next decade, or more. Any time you have multiple instances of the same thing coming on line at the same time there can be issues. Just wait it out and things will settle.
TROUBLES AT TRUMP
The Trump project, a 65-story paragon of glitz with a “champagne and caviar” theme, appears the most troubled. Plagued by bad press, construction delays, disgruntled buyers and a hybrid model of residences and pooled hotel condos, the project has the largest portion of unsold units despite being the first to open its sales office, in 2004.
Talon said 80% of the tower’s 379 units have sold, powered by the hotel condos, currently priced from $967,000. But 40% of the residential condos, priced between $2.3-million and $6.3-million, remain unsold.
It said Trump has the most left to sell because it has twice the number of units as competitors at the Four Seasons and Ritz Carlton, and focused first on selling its hotel rooms.
The Ritz Carlton, Four Seasons and Shangri-La projects have kept their condo and hotel rooms separate. The condo owners have access to hotel amenities but no direct stake in its operation.
Trump, on the other hand, is trying to sell all its hotel rooms to private investors as condos. Owners can live in the suites, or put the rooms into a rental pool and take a cut of income from the hotel guests staying there.
The business structure means buyers of the pooled hotel condo units are subject to commercial tax rates rather than lower residential rates, and the bar for financing is higher.
Comment: Which is one of the major problems they are having. No matter how much money you have, when your property tax bill is 9x higher than you expected, you get mad. And some of those tax bills are $80,000 or even $100,000.
“I called every major lender regarding Trump, and the only one I could find that was willing to finance was HSBC,” said Callum Ross mortgage consultant Jason Friesen.
Comment: Because our banks are getting out of the condo/hotel game. I helped a client buy on Victoria street a few years back, in a mixed building. He barely got CMHC to back him – in fact I was told that his was the last mortgage insured for that type of project. So yeah, there is certainly a problem getting financing for combined buildings.
“There were some units that had $20,000 (annual) property taxes for an $800,000, or 1,500 square foot, unit because it was zoned commercial. So lenders wouldn’t touch it.”
Comment: As I said, imagine the bills on the big ones!
Real estate lawyer Bob Aaron, who represents “a handful” of disgruntled Trump buyers, said some are trying to get out of their contract or walking away from $250,000 down payments.
“The monthly costs are too high, or they realized too late that they had overpaid, or can’t finance it, or didn’t realize they were getting into a business venture superimposed on property ownership,” he said.
Comment: And if no one learned from the fiasco that was 1 King West, then it is their own fault. This sort of thing was huge news, anyone with any interest in real estate should have known about it. And it should have prompted a lot of questions that would have avoided the issues here.
“They had very smooth sophisticated marketing, and I think buyers were dazzled by being partners with Donald Trump.”
Comment: I don’t know about that. I had an interested client years back and I had extensive discussions with them. I was never dazzled, nor were they ever duplicitous. If buyers did not do their due diligence, then they have no one to blame but themselves.
The American property mogul has licensed the Trump name to the project but has no part in owning or operating the tower.
FLIPPERS AND FOREIGN BUYERS
The debate about who is buying them dogs Toronto’s condo boom. There are no figures for foreign buyers in Canada, which is seen as a financial safe haven amid global woes, but talk of affluent Asian, European and Middle Eastern investors abounds.
Comment: Tridel says that only 5% of their Toronto buyers are foreign, a figure I imagine to be fairly representative of the market as a whole. And the Association of Condominium Managers says that 22% of units are rented out. So yes, there are actual figures. The problem is that they don’t jibe with the catastrophe stories most of the press is writing.
Janice Fox, director of sales at the Four Seasons, estimates 30 to 40% of buyers there have been foreign, but she said they intend to live in the units, at least part of the year.
Comment: The ultra-luxury market is NOT representative of the Toronto condo market as a whole.
Some 90% of the Four Seasons 210 condos have been sold, including one last year for $28-million, the highest price ever paid for a Canadian condominium. That buyer is foreign, but the family intends to move to Toronto, Fox said.
The resale market may be a gold mine for early buyers, as some prices have doubled since the first investors signed on in 2004 or 2007.
Comment: Most Toronto properties have doubled since 2004, new or resale.
“There’s been a big gain in price. There’s probably a small group who bought in 2007 who has had a massive gain and want to cash out on that,” said Michael Braun, marketing manager for Shangri-La developer Westbank Corp.
With more than 50 of 393 units remaining to be sold before August, when contracts close and buyers can start re-selling, Braun says it could take until early 2014 before Shangri-La sells all of its units.
Realtors estimate between 10% and 20% of pre-construction sales are made by investors who intend to flip the units as soon as the deals close.
Comment: Which Realtors are those? Funny you don’t quote any of them…
The Ritz Carlton, open since mid-2011, is a cautionary tale of the risk of resale. More than 90% of its 159 units have been sold — but nearly two dozen are back on the resale market, diluting the sales power of the developer.
“I think the values have been hurt at the Ritz, where you’ve had some powers of sale,” said real estate agent Brian Persaud, referring to forced sales due to mortgage default. “That’s going to harm the value, definitely.”
Comment: People forget that these luxury projects are the first ones in Toronto. And they all started around the same time and finished around the same time. After this initial buzz, things will slow down. Any new ultra luxury projects will be single events.
As the summer openings of the three other projects approach, developers and investors seem to have one eye on the clock and one eye on historically low interest rates, desperate to sell before the talk of a bursting Toronto condo bubble comes true.
Comment: THERE IS NO BUBBLE.
“There has to be a correction — but hopefully not within a year …. it is scary,” said a Toronto banker who bought one of the Shangri-La luxury units in 2007 and hopes to resell at a 15% profit as soon as he can.
Comment: No, there does not HAVE to be a correction.
“Obviously there is going to be a spiral-down effect (when all the units hit the market) but that is to be expected,” said the banker, who bought the unit with his parents and declined to be named to protect their privacy. “At worst we’ll break even.”
Comment: So this buyer is looking to make 15% and the one above is expecting 20%. Why does this not sound so bad?
Real estate agent Persaud is more sanguine. He believes all the luxury condos will be sold, especially once resale values stabilize and buyers can get a first-hand look at the finished five-star product.
“I don’t think they’ll be vacant forever,” he said. “Eventually the market will catch up to it, but there is going to be blood in the streets for a while.”
Comment: That is a dramatic way to say it, but yes…
Contact the Jeffrey Team for more information – 416−388−1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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Over the next couple of years, this city will get five new luxury hotels. It starts with the Thompson, which opens its high-concept doors this month and promises to be ground zero for the beautiful people
Maryam Sanati – Toronto Life
Lately, King West is an urban cloud nine: designer condos, old brick studio spaces, fantastic carpaccio. Only 15 years ago, no one had much reason to venture down here—not for work, not to live, not for a dining scene, because there wasn’t one. There were no ad agencies, no Susur Lee joints, no Spoke Club and certainly no boutique hotels. But now the dozen or so blocks bounded by Spadina and Bathurst, from Adelaide down to Wellington, are a humming, self-sustaining ecosystem—a model of how to retrofit a vintage downtown neighbourhood.
Real estate agents call this part of town King West Village, a handle the locals find too artificial to pass their lips, especially considering the place isn’t yet fully formed. At every turn, there’s a construction site, or a gaping hole in the ground, or a lot with a target on its back, almost all of them bearing the same signage: an artful graphic in lower case letters saying “freed.” It’s not an existentialist statement; “Freed” stands for Peter Freed, the Forest Hill–bred developer who has nine projects on the go in the area. No one has been a bigger catalyst of the evolution of King West, or capitalized on it more, than Freed. His real estate portfolio, mainly condos, is worth $1 billion, and much of it is geared to a highly specific breed: a 35-ish, design-obsessed demographic that wears Japanese denim, listens to Phoenix, works in advertising or banking or consults in high tech, travels often and widely, and stays at properties designed by Ian Schrager, the Manhattan entrepreneur often credited with founding the boutique hotel genre. In King West, Freed has prepared a landing strip for these hipster high flyers (and those who aspire to become them). They’re not rich, necessarily. Their ambition is to be tastefully in the know.
For them, Freed has invested in a crowning achievement, a gleefully anticipated light box on Wellington: the 102-room Thompson Toronto, which is scheduled to open its high-concept doors this month.
The Thompson Toronto is the first international arm of a New York brand, and it comes to a city that’s been slow to embrace its kind. Boutiques or “genre hotels” pour art and fashion from a cocktail shaker. Guests see them as anti-generic, even though many are now multinational chains. The best of them become cultural hubs, a scene of art shows and film screenings staffed by modelesque bartenders. The American hotelier André Balazs calls his boutique chain The Standard, presumably since that’s what it wants to be: the measure of vitality.
Montreal saw the rise of boutiques in the early 2000s while the Toronto hotel market stood relatively still (unless you count the massive overhaul of the Windsor Arms, which had closed a tatty shell in 1991 and reopened elegantly in 1999). The last real estate bubble made investors skittish, and the city’s inferiority complex fed the reticence. Were we world class? Not enough to deserve a bunch of nice hotels. Now, the GTA has swagger: a population boom, a cultural rebirth to flesh out its merits as a destination, and foreign investors snapping up our real estate.
In the first blush of these changes, well before the economy turned, developers began planning several hotel projects to keep in step with the growth. The Ritz-Carlton, the new Four Seasons, the Trump International and the Shangri-La should be completed by 2012, at which point the city will have more than 1,000 new luxury rooms to rent. The big four will be considered five-stars, in the rankings of the hotel world. (Until now, Toronto’s only five-star has been the two-year-old Hazelton Hotel in Yorkville.) They come with altitude, ranging from 52 to 66 storeys.
At least a third of each of these structures will be reserved for private residences, the condominiums that make the developments possible. Banks are extremely reluctant to loan money for stand-alone hotels, deemed too costly and risky; pre-selling condos not only helps developers get financing, but their revenue boosts hotel operations in troubled times. The condo owners also provide hotels with an indigenous population.
Private residences cater to a velvet-robe-and-slippers crowd that wants the elevator-ride availability of a concierge and full-service spa, not to mention access to maids and room service. Those perks are selling points at the Thompson, too. And they’ll be a strategic piece of the King Edward Hotel, bought this past March by a group of owners headed by the Israeli-born developer Gil Blutrich. (A vast revamp is in the works.) It’s also the plan for Bisha, a 41-storey boutique development on Blue Jays Way led by the nightclub impresario Charles Khabouth.
As for cost, Thompson’s condos run about $600 a square foot, while hotel guests will be asked to pay $300 or so a night. The five-stars have found buyers willing to pay $1,500 a square foot and, when they’re completed, will drive up the threshold for room rates to well over $500 a night. And up and up and up until, who knows, a decade from now, we might lament the folly of new hoteliers in a saturated market. But for now, Toronto is open for business.
Peter Freed was a born entrepreneur, if you ask his mother, Hazel, who says he’s been selling stuff since he was in kindergarten. “When he was five,” she recalls, “Peter made about 20 paintings, took them around the neighbourhood in his little red wagon, and sold them all.” His father was a lawyer, and the young Freed would interrogate his dad’s clients when they came to the house: “My name is Peter Freed. What do you do?” At age seven or eight, he marshalled neighbourhood pals to collect tools, wood and five-inch nails. He outlined the specs of a fort, and it was built in a day.
To earn money as a teen, he hauled boxes as a shipper-receiver for a King West jeans company and, in his early 20s, laboured for a contractor. Working on subdivision construction in the outer suburbs, he saved $75,000 and invested it in building townhouses in North York. After that project, he was officially a developer, and another 1,000 townhouses soon followed.
Freed had always liked the buildings around the Rotterdam pub, a ’90s institution on King West, and it was here that he saw possibilities. Freed Developments opened its King West headquarters four years ago. His mom works for him now, from time to time. “I call myself the factotum,” she says jokingly. Right now, she’s organizing an office move.
An understated guy—not the egomaniacal cowboy that’s often the caricature of a developer—Freed knows his limitations. The Thompson is his first hotel, which is why he partnered in the deal with Tony Cohen, who in 1998 founded a restaurant-and-hotel investment and management company called Global Edge. Though Cohen’s experience in hotels isn’t vast, he has been through good cycles and bad since opening Toronto’s Hotel le Germain—one of the city’s earliest boutiques—in 2003 with the Germain family, seasoned Quebec-based hoteliers. Cohen is 37 years old, a former Montrealer with movie-star looks and an affable way. He wears Pal Zileri made-to-measure and is fixated on the finer points of design—in other words, he’s exactly the Thompson demographic.
Freed, who’s 41, has aesthetic interests, too. His penthouse atop 66 Portland Avenue—his first real estate development in the area—is 6,600 meticulous square feet, half of that space a terrace with a pool. He has said that his company caters to “a downtown, design-oriented, play-hard, work-hard, fashion-savvy buyer”—cheesy but accurate—and his corporate tag line is “design based development.” He has hired local fashion designers, including Bustle and Smythe, to decorate floors of Fashion House, his loft development at 560 King West. But his personal style is more casual than Cohen’s. He wears jeans, an untucked dress shirt and, on the afternoon I met with him, the look of heartburn on his face. He was just days away from the birth of his first child, a son named Rowan, and a matter of weeks away from the opening of the Thompson. “I have a lot of nights when I’m thinking about the project,” he said, “tossing and turning, half asleep, half awake.”
The Thompson hotel and condos, which will cost roughly $50 million to build, had already broken ground by the time the economy faltered in the fall of 2008. By the following year, occupancy levels in Toronto had reached a low of 60%, while hotel rates fell by nine%. Hotels measure success on a factor called Revpar, or revenue per available room, and in 2009, that measure fell by 16.3% to $75—pretty much a nightmare scenario. This year, things are looking up, but only by a point or two. The business is immensely dependent on the long term, on sustaining a following even when the initial opening buzz dies down, on a solid business travel market, and on riding out whatever calamity the world economic order brings.
So much is up to the gods. But what Freed and Cohen can control is the style of the place. Just look at the way Jeff Stober mashed up boutique cool at the Drake on Queen West. The Thompson, for its part, has Freed’s trademark “live hard, play hard” way about it, which fits King West, though it suggests a cutoff age of about 45. As the “manifesto” of the Thompson group explains, the hotels are created for “good-looking revolutionaries” who “collect Hiroshi Sugimoto photographs, vintage Zippo lighters, matchbooks from cafés, quotes and, one day, Basquiat.” Those who don’t naturally identify with these associations might just as happily take this as a recipe for how to build a personality.
Like the Ritz, the Trump and the rest, the Thompson has had a long incubation—six years—during which money was secured, deals closed, designs made, and enough residences sold to enable construction. To date, Freed and Cohen have found buyers for 315 of the 336 Thompson condos at 550 Wellington. Freed has also bought a nearby lot, formerly a Travelodge motel, where 315 more Thompson Residences are now for sale. That makes a total of 651 Thompson condos to 102 hotel rooms, which means this is fundamentally a residential development with a boutique hotel piece, rather than vice versa.
When they came together, Freed and Cohen were preoccupied with the food and beverage rudiments of the hotel, and they travelled widely for research—Manhattan, L.A., Paris. They knew they’d have to offer something special. King West is flush with options (Marc Thuet, Rodney the oyster guy, Le Sélect Bistro, and so on), so for the all-important culinary benchmark, Freed and Cohen decided to bring in Scarpetta, an outpost of Scott Conant’s high-Italian New York restaurant. It will be one of three on the property, along with a chic 24-hour diner and a 150-seat offshoot of the Muskoka-based sushi spot Wabora.
These guys have a sharp sense of how their demographic works. The Thompson brand is a strong hook. Their target will have stayed at 60 Thompson or Smyth Tribeca in New York, or have read about it. They will have eaten at Scarpetta, or have heard about it. And as much as they’d never admit it, the idea of New York coming to them—mountain to Mohammed—makes them weak-kneed. Taking their Sugimoto-loving selves for mac-and-cheese in the diner at 3 a.m. is a plus.
Then there’s the Thompson’s look: a glowing white underlit bar in the lobby, canopied by a hand-blown glass-and-bronze chandelier; distressed wide-plank floorboards from Europe; modernist furnishings from names you read in Wallpaper; a plush 40-seat Hollywood mogul–style screening room; leather-wrapped and mirrored walls in the penthouse suite; a rooftop infinity pool and bar; and on street level, next to a dramatic “dining pavilion” and facing the historic Victoria Memorial Park, a reflective pool in summer that becomes an ice rink in winter. (I still recall the day I bought a tuna sandwich from the Globe and Mail cafeteria and walked to this park, then desolate and depressing, and had the loneliest 20 minutes of my life. Times have changed.)
Most idiosyncratic of all is a 125-by-12-foot, hand-painted lobby mural produced by the Philippe Starck of Spain, Javier Mariscal. A Valencian artist and designer of landscapes and interiors, Mariscal is considered a branding auteur by his corporate clients, which included the Barcelona Olympic Games. The piece for the Thompson is an interpretation of the Toronto skyline, set on a jet-black background, with the buildings painted in luminous white strokes, almost like lightning flashes. Every few feet, the mural will go 3-D, so that certain buildings will appear to punch free from the wall, as if breaking out of the municipal grid. The piece, in Tony Cohen’s words, takes this “ever-expanding skyline and reinterprets it in a whimsical way without losing the seriousness of it.”
Cohen says the partners spent “well into the six figures” to light the art and design features of the hotel, so an illuminated mural will be visible to passersby on Wellington. Cohen and Freed think that everyone who arrives at the Thompson’s doorstep—and not just overnight guests, but you and I and the next-door neighbour—might linger over the piece to pick out their touchstones and landmarks. Another invention, then, from this part of King West: boutique civic pride.
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