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Festival Tower Update: Units Starting to Move

My last blog post I wrote about the Absorption Rates of various downtown condos got a lot of attention and even inspired my friend John Pasalis from MoveSmartly.com to write a great post about the condo market. The issue I wrote about was the fact that some condos, like Festival Tower for example, are loaded with listings for sale but units are not actually selling. It’s been nearly 2 months since then and I thought it was time for an update.

The good news is that after nearly 3 months of no sales, there have been a couple sales at Festival Tower in the last week. A 1 bedroom + den with no parking sold for $435K (approximately $693 per square foot), but the sale that really got my attention was a studio that just went for $365K. To my knowledge, this represents the highest selling price for a studio apartment in the city over the past year, and possibly EVER (for resales, not pre-construction). At this price the buyer paid approximately $750 per square foot. Very impressive and shows that studio apartments can sometimes be fantastic investments as these units were originally selling in the mid $500s per square foot.

In addition, there are currently 3 units that are all sold conditionally (meaning they will likely be sold firm soon). All 3 are in the $414K-$452K range and all are 1 bed/1 bath units. Once these sales start to go through, values will pretty much be set in the building and the dominoes should start to fall. I will continue to watch with intrigue to see where values go in this building over the 6 months.

The big question is still this: will Festival Tower command a premium over other newly completed (or about to be completed) buildings in the area? The few sales we have seen so far seem to indicate that there will be a premium, but how much will that premium be exactly is still unknown.

Questions or comments? Please contact me any time.

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Absorption Rates

I wanted to dig a little deeper for today’s blog post and take a look at absorption rates in various condos. Looking at Festival Tower got me thinking about this subject. Festival Tower has a plethora of units available for sale, but hardly anything is actually selling. The building is stunning. The amenities are amazing, and the film festival that just finished put this tower in the international spotlight for a full 2 weeks. The building has been fully registered and finished for a few months now. I am at a loss as to why units are not moving here. There was so much hype about this building for the last 5 years, and now that it is finally finished, no one is buying?

Let’s compare Festival Tower with other buildings downtown. I took a random sample of various buildings, all completed in the last 12 months. I tried to pick a few buildings to somewhat represent the whole spectrum of the downtown market from the lowest end to the highest end. Take a look at what I found:

Only 3 units have sold in the last 60 days at Festival Tower, and there are currently 42 units available for sale. At this rate, it would take 28 months to sell all available units! Similar story at The Ritz Carlton, where only 2 units have sold in the last 60 days and there are 30 units on the market (actually more since the developer has a few unsold that are not on MLS).

Compare this to a building like Parade in Cityplace, a known area for heavily investor-owned buildings. While there are a lot of units on the market in the building (36 currently), they are moving fast (18 sold in last 60 days)!

Obviously price point has a lot to do with this. There are far more buyers looking for condos in the $300K range than the $800K range. However, I am really starting to rethink the high-end of the market and wondering if there really is a market in this town for condos in the $800 per square foot and above price point.

You could possibly point to a building like Crystal Blu where the absorption rate is quite good and say there is a market but only in one area: Yorkville. One theory I have is people with money to burn on a condo will live in Yorkville, but anywhere else it’s not worth the premium to get a high-end unit.

The point of this blog post is really not to say I have an answer to this question about where are all the high-end buyers, but rather I would like to start a conversation with my readers and clients on the matter. So let me know your thoughts. Contact me or leave a comment.

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How to make $100K in 3 Months

There are dozens and dozens of units available for sale at Festival Tower. Most have been sitting on MLS for months as assignments (tricky to sell at the best of times), but now that the building is registering in a matter of days I expect these units will start moving quickly. I noticed something quite interesting looking through the sales data for a client – one of the bigger 2 bedroom units on a high floor sold in March as an assignment for $945K. Another one of the same floor plan also sold around the same time for about $1.03M, and just this week another one of this floor plan came up as sold for $1.05M (interestingly as I am writing this blog post I noticed the sales price has been removed and it now says ‘sold conditionally’).

So what happened? Seems to me the person who bought for $945K in March is up at least $100K in just 3 months time. Also it occurs to me that selling by assignment is a crap shoot at best – buyers and sellers alike are dealing with very limited an imperfect information and ‘fair market value’ is a very hard thing to determine.

This blog post is really designed as an illustration to show why I preach to my investor clients that the best time to sell your pre-construction purchased condo is 6-12 months after registration.

Reasons:

1. 1 year is the length of a typical lease. Assuming a 3-6 month occupancy period for most condos, selling 6-12 months after building registration will align perfectly with the end of that lease.
2. 6-12 months gives time for the dust to settle in the building (literally), and for the common areas to be completed. Common areas do add value to your property, make no mistake!
3. Allows time for the resale values of a building to get established. Much of this is driven by supply and demand principles – many investors selling at first, and few buyers aware of the building because it’s brand new.
4. To qualify for the HST/GST rebate as an investor, most lawyers will tell you you need a 12 month lease signed.

We see this pattern time and time again with new buildings when they first are finished – those who sell first tend to undersell. Those who are patient and wait reap the rewards.

Questions or comments? Thinking about selling your investment condo this year? Contact me.

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Cinema Tower Platinum VIP Sales Event

Cinema Tower is now selling to a select group of Realtors such as myself at the Platinum VIP stage.  For pricing and floor plans please contact me.

Cinema Tower will be located on Widmer street, in between Adelaide and King. The tower will rise 43 storeys and contain 444 units. It will not be physically connected to Festival Tower, however purchasers will enjoy a 3-year membership to Bell Lightbox (located in Festival Tower), and access to private, residents only TIFF screenings. Amenities will include a full size indoor basketball court, fitness studio, outdoor Urban Terrace lounge, guest suites, screening room, and party room.

Starting prices right now are around $700 per square foot at Cinema Tower with parking spots going for $42K. On the one hand, these price points make Cinema Tower more expensive than other area offerings like Peter Street Condos, Tableau, King-Charlotte, and the like. On the other hand, Cinema Tower is arguably priced LESS than what Festival Tower is selling right now. (I say arguably because Festival Tower has not registered yet and therefore we only have assignment listings and hearsay to go by.) So is it a good deal or not? Well, if you believe that Cinema Tower is unique because of it’s connection to Bell Lightbox and TIFF, then it’s a great deal, if you believe that it’s ‘just another condo tower’, then it’s overpriced.

Looking at the history of Festival Tower, even when it launched several years ago, it was priced at a premium compared to other area offerings, yet it sold very well and appreciated in value extremely well. Cinema Tower will have high-end finishes, great amenities, a connection with Bell Lightbox, and the brand recognition that comes with its association with one of the world’s most respected Film Festivals. There is certainly a compelling case to be made that Cinema Tower purchasers will see a solid ROI by buying at prices on par or below that of the nearly completed Festival Tower half-a-block away.

With Daniels as the developer you get 3 significant bonuses as a purchaser:

1. You know you are getting a well-built building with a high probability of being completed on time
2. Construction has already started (because Daniels has the ability to build before selling-only a few developers can pull this off), meaning occupancy will start in about 2 years (versus 3-4 with other area developments)
3. The deposit structure is only 15% up front with 5% at occupancy (presumably due to the fact that their financing requirements are not nearly as strict as the average developer who needs to pre-sell 70% before starting construction)

For all the details for the Cinema Tower Platinum VIP sale, please contact me.

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Cinema Tower

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Just In Time for TIFF: Festival Tower Final Release of Suites

Festival Tower Condos at King and John, the world’s first Film Festival and Condo! Well, I believe the official marketing slogan is “One Part Condo. One Part Film Festival”. Sales began in this building a couple years back, and construction is well underway, however, in conjunction with the Toronto International Film Festival (TIFF) currently over-taking downtown Toronto, they are releasing the final group of suites in the building.

If you are interested in attending a special Agents only sales event for this final release of suites, coming up next week, or you would like to see pricing for the release please contact me.

Festival Tower is definitely going to be a high-end building with 381 suites spread out ove 46 storeys in the heart of the entertainment district and will also contain Bell Lightbox – the new home of TIFF. Prices are around the $800 per square foot range. The Developer is Daniels Corporation – one of the big boys in town and certainly capable of making a quality product that they are representing with these prices. Make no mistake, the resale values in this building will be driven by 2 factors: uniqueness and exclusivity.

Festival Tower finishes and features available here.

Festival Tower Floor Plans can be downloaded here.

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