Discussing Pemberton’s Huge New Project in the St Lawrence Market with Brian Shew

Andrew la Fleur: On today’s episode, I sat down and chatted with Brian Shew of Milborne Real Estate about an exciting new project from Pemberton coming to the St. Lawrence market. Stay tuned.

Speaker 2: Welcome to the True Condos Podcast with Andrew la Fleur, the place to get the truth on the Toronto condo market and condo investing in Toronto.

Andrew la Fleur: Okay. It’s my pleasure to welcome to the show for the first time Brian Shew. Brian Shew is with Milborne Real Estate. Brian, welcome to the show.

Brian Shew: Thank you, Andrew.

Andrew la Fleur: Brian, I know we’ve worked together for many years and just looking forward to chatting with you today. Of course, we want to talk about Time and Space Condominiums by Pemberton, which I know you’ve been working very hard on. Excited to hear about that, but first before we get into that, maybe you could just tell us a little bit about your background. How did you get started in real estate, and how did you end up where you are now?

Brian Shew: I grew up in a real estate family. Ever since I was young … both of my parents are realtors so they used to farm the Chinatown area, and they actually still do. When we used to go to New York City, most people would go to look at the Empire State building and go look at different tourist attractions when me and my family would be going to open houses in New York City, which is ironic, but that’s what we did when we were kids. As we grew up, as the economic market was booming, the first really big pre-construction condo market was done through City Blaze. So, back then, I used to be the guys lining up for people for one [inaudible 00:01:46] city place, multiple phases. Eventually I started working as an assistant, and then I got into the pre-construction side working for Hunter Milborne, and [inaudible 00:02:01] sales, eventually got into management, and now I’m here.

Andrew la Fleur: That’s great, and you’re relatively young guy, if I might say in terms of the industry as a whole, but you’ve probably got more experience than people who are twice your age because you literally, like you said, “Grew up in the business.” And your parents are very well known in the community, and in the real estate industry. You mentioned City Place. Do you remember … What was the first building that you remember being involved with there, or lining up for? Do you remember which building it was, or what year it was? Or …

Brian Shew: Yeah, that was probably in the early 2000s, and it was N1 and N2.

Andrew la Fleur: Okay, and remind us, for those who don’t know, which buildings are they? The N1, N2 buildings?

Brian Shew: I believe that was 15 [inaudible 00:02:56], and 11 [inaudible 00:02:58] Court, and there’s another address but, yeah. Mainly those two.

Andrew la Fleur: Right.

Brian Shew: And then afterwards was 25 Telegram, which, I don’t remember what it’s called right now. I think it’s called Montage, and so I was lining up for that, and also Luna Condos, which was the one next to it. 10 [inaudible 00:03:15] I believe the address is.

Andrew la Fleur: So you’ve really seen the condo market from it’s infancy, when City Place was in a lot of ways the beginning of the condo boom we’re still in, ten, fifteen years ago. How would you say things have changed since then versus what’s still the same? What’s different from those early, early days of the condo boom?

Brian Shew: How it’s processed is different, and what the buyers want, what the clients want, what the tenants want has changed. Back in the City Place days I remember one bedroom, one [inaudible 00:03:59] were the most popular units because of price points. Nowadays larger suites are more popular because people are starting to understand and realize they need to move back downtown, and they need to bring their families back downtown. They don’t want to drive an hour and a half from [inaudible 00:04:20] to downtown on a daily basis.

Even the tenants are changing. Back then a one bedroom is definitely just one person. Nowadays because of affordability, sometimes one bedroom is shared between two people. Right now what’s really popular is one plus dens with two bathrooms. You can share with two people, and in particular our time and space condominiums our dens do have solid doors in them too, for the most part.

Andrew la Fleur: Back in those city place days, you’d see one plus den with one bathroom would be around 750 sq ft.

Brian Shew: Yeah, it’d be 650 and up. Also in the furniture packages, the den would have desk. Nowadays we’re showing a bed. Back then the dens were eight by nine, much larger. Nowadays dens are about seven by eight. It’s a little bit smaller but you can still fit a bed in.

Andrew la Fleur: That’s just a new reality of how people are living, isn’t how? What would you say to the new condo investor who’s hearing that and saying, “Two people living in 650 sq ft? No way. It’s too small.” That’s something we here a lot. But you’re on the ground, like you said you’re seeing the changes over the years. Are people actually living like this? What would you say to the new condo investor who’s having a hard time wrapping their head around these kinds of spaces?

Brian Shew: People adapt to what they have and what they need. The smaller space you have, you just have less things. If you look at Hong Kong, for instance, 500 sq ft is probably a three bedroom, because their bedrooms are actually six by seven. Their beds are always against the wall, and actually their window sill is their closet. That’s how miniature they’ve been for years. We’re not rediscovering something new. We’re just bringing something that already exists to Toronto.

Andrew la Fleur: What do you think is driving that? Is it simply just affordability? Like you said, not everyone, but most people do not want to have a super long commute, and most people want to live close to work, and whatever their budget allows them to, that’s what they will adjust to. Is that fare?

Brian Shew: That’s part of it, but the other part of it is lifestyle is changing for people. Back when we were growing up it was always about eating at home with your family and all that. Now people, even older than myself, people go out and eat a lot more. Nobody’s cooking at home, so you don’t need to be in your house as often as you used to. Now there’s a lot more amenities. You can downstairs and use the gym. This and that. Back twenty years ago, nobody went to the gym. You stayed at home and …

Andrew la Fleur: Nobody ate out.

Brian Shew: Nobody ate out. I mean, very few, not nobody, but there was a lot less restaurants in Toronto. Now it’s big boom, because the society is different.

Andrew la Fleur: Right, absolutely. I know you and your family have been investing in condos as well for at least as long as we’ve been talking, maybe longer. I don’t know. What tips would you have for the new condo investor? What are the top tips you give to new condo investors from your experience? I’m sure you’ve had some big wins, and over the years maybe you’ve had some not so big wins. What do you look for when you’re looking to invest in a condo?

Brian Shew: One thing I don’t look at is price per square foot, because it really does not matter. In the resale market, or what we call the end user market, they don’t look at that. All they look at is, when they go in, how does it feel? Do I like it or do I not?

I would buy something where not only do you look at the plan, and the plan looks good, but at the same time, what is the feeling you’re going to get when you walk into this place four years later?

Andrew la Fleur: That’s awesome. That’s something I talk about a lot as well. That’s something if you’re new especially to investing, it’s very hard to get a sense of just looking at floor plan, isn’t it? You really have to have experience in the market, and you have to have physically been in a lot of condos. Obviously that’s where relying on people who’ve got that experience really comes in for the new investor, isn’t it?

Brian Shew: Yeah, just because the layout looks square, doesn’t meant that it’s the best layout.

Andrew la Fleur: Right, or just because the price per square foot is low, doesn’t mean it’s a good buy.

Brian Shew: Correct. You have to look at the feeling when you go in. Also keep in mind your own personal strategy. You have to look at the time frame of your investment. Is it five years? Is it ten years? Is it twenty years? It changes. If you’re looking for a long term home, it’s okay not to have a great view, because you’re going to be looking at a long term rental, and you’re [inaudible 00:09:46] is better. Versus if you want something like a quick, a quick sell. Then you would look for something with a better view, just because somebody can see it, they feel it, they like it a little bit more. Your rental performa is not as strong, but it’s an easier exit.

Andrew la Fleur: That’s a good point. In terms of your preference for your own investment and your family’s investment, do you tend to go for the lower floor stuff that’s cheaper, that’s going to give you better cash flow return on investment? Or do you tend to go for the higher floor, better view, more premium type units that are going to give you that appreciation and ability to flip quicker?

Brian Shew: In the market today, I would find specific projects and take whatever I can get.

Andrew la Fleur: Because the market is so hot, you mean. It’s so competitive to get anything in today’s market.

Brian Shew: Correct. So I would really go with anything I can get in today’s market. If I had choice, then again it goes back to the question of how long I’m holding it for. The high floors are great, because you get views and all that, but you’re also paying a premium for it. It depends on what you’re looking for for your investment. If it’s long term home, then I would go for a low floor. If you want an easier exit strategy, I would go with the high floor.

Andrew la Fleur: You mentioned price per square foot as one of the mistakes that a lot of first time investors fall into. The trap of just looking at price per square foot as the determination of whether to buy or not. Are there any other mistakes you see a lot of first timers making in the market? Is there something else that you think of in terms of what you should not do when you’re investing?

Brian Shew: Looking for deals at 5 and 10% down. Because whenever you look at deals for 5 or 10% down, usually construction has already started. Your time frame of four years has all of a sudden been cut down to two. With two years, and you only out 5% down, you still have to put in the other 15% on closing within two years, so …

Andrew la Fleur: Which is coming up fast.

Brian Shew: Coming up fast, right. Two years really is not a long enough time for a real estate investment to grow.

Andrew la Fleur: If you’re looking for a quick flip.

Brian Shew: Correct. For long term it’s very good to put 5 or 10% down, but if you’re looking for a quick flip, definitely it’s a bad [inaudible 00:12:36].

Andrew la Fleur: Certainly a lot of investors will say, “Find me something with 5% down.” Well, first of all they’re extremely hard to find. Second of all, like you said, they’re usually when the building is already well under construction. It’s almost completed. So you don’t have that luxury of time to see your investment appreciate.

The market’s hot. It’s crazy hot right now. What has surprised you most about the market over the last year? Over the last few months? What’s been the biggest surprise for you about this market we’re in right now?

Brian Shew: The biggest surprise is probably for me, not only the price is going up in resale and pre-construction, but also the rental rates are continuing to grow. Usually in a typical market, there’s always a balance. I’m a Star Wars fan, so I like the force. There’s always a balance, right? I always tell people, if the market ever goes down, then the rental rates go up, because there’s less buyers and more renters. And vice versa. But now, they’re both going up at the same time.

The only theory for that is because Toronto is growing as a city. We have about 150,000 coming into the city every year, and that’s only from immigrants. That’s not including people coming from Waterloo, London, North Bay, and their kids all coming into the city. In my experience, as long as the Toronto experience continues to grow, your real estate investment if very very strong in Toronto.

Andrew la Fleur: Absolutely. It has been unusual, like you said. The rental rates and the resale prices have been going up together over the past year, whereas like you said, usually it’s an inverse relationship. If the resales are doing really, really well, rental prices tend to flatten out as more people stop renting and start buying, and vice versa. Now both of them are just going up by double digits at the moment. Great if you’re an investor. Very hard if you’re new and trying to get into the market, that’s for sure.

Where do you see the market going for the rest of 2017? Can this continue? Or has it just gone too high, too much, and it’s bound to slow down? Or will this continue? Where do you see things going?

Brian Shew: I see it continuing to grow because the demands just there. If you look at Urban Nation came up with some number of Q3 and Q4 of last year, and there’s really no supply. Again, not only in the pre-construction market, but in the resale market there’s very little supply. Anything that comes out is going voer asking in condos, which is unheard of for a few years now. Actually what you should look at in the market place, you’ll notice that things between 600,000 and 800,000 is very rare. Buying something in that price point is good because it just doesn’t exist.

In the past ten years, everybody was buying small bedroom, one plus den [inaudible 00:16:00]. They’re trying going bigger now is not only real in the pre-construction market, but it’s real in the resale market.

Andrew la Fleur: Right, certainly something we’ve been talking about a lot on the podcast is that trend toward the bigger suites and that 600,000, 800,000, that sort of price range is pretty much the hottest segment of the market right now. If you’re looking for a 800, 900-ish square foot in the resale market, good luck. It’s bidding wars everywhere. That’s on the rental side as well. It’s just very hard to find that product right now.

Would you say it’s slowing down for the smaller stuff?

Brian Shew: No because there’s still a demand to live. People coming into the city, their first time here, like students or even first careers, working at the big banks and all that, or lawyers, they can only afford a one bedroom. THat’s what they’ll live in. Again, society is changing. People that are starting at the bottom jobs, they still want to live by themselves. If they can’t afford it, mommy and daddy can. That’s just society these days.

I remember growing up myself, and I used to walk to school when I was five, by myself, twenty minutes. To [inaudible 00:17:31] public school. Now it’s like you better drive your kids to school or you’re going to get in trouble.

Andrew la Fleur: Until their 15, yeah.

Brian Shew: Yeah, so again society is changing. Younger people are more privileged. They want to live in this one bedroom, or one plus den. Sometimes they live in a one plus den and share it with their friend. So, the smaller product is still very popular. The bigger popular is for a new demographic that’s coming into the city, which is for families.

Andrew la Fleur: Or especially the people who can’t afford a house. They’re saying, “Well, let’s look at two bedrooms instead.”

Let’s shift gears now and talk about this new project you’re working on, Time and Space condominiums, by Pemberton. I know it’s early stages of the project, and it’s not officially launching for quite some time yet, but what are some of the key highlights of the project you’d like to point out? Specifically to condo investors who are looking for places to invest. What are the key points of the project in your opinion that are worth highlighting?

Brian Shew: First of all this project is fully approved. That’s a very important thing to me at least.

Andrew la Fleur: Why is that? I know what you meam, but maybe explain for the newbie. Project is fully approved and that’s important. What do you mean by that exactly?

Brian Shew: The bylaws in Ontario allows developers to sell before being fully approved. Whether it’s a design, or unit counts, or multiple things, the legislation allows it. There’s been times where as an investor you buy a unit, next thing you know the builder comes back to you and says, “You know what? We changed the designs. Do you want this new design at a discount price or increased price?” Depending on the situation, if it gets larger or smaller.

Andrew la Fleur: It’s riskier.

Brian Shew: It’s riskier, versus something that’s fully approved. You know you’re going to get it. There’s a little bit more confidence in that.

Andrew la Fleur: My understanding is Pemberton’s actually been working on the approvals and zoning for this site for quite a long time, haven’t they?

Brian Shew: Yeah, Pemberton only sells fully approved sites.

Andrew la Fleur: It’s been a couple of years they’ve been going through the approvals process, so it’s really solid at this point, I guess you could say. From the approval standpoint, the building is good to go, so that’s always reassuring for the investor. What else? What other key points of the project?

Brian Shew: As far as the amenities, we are one of the only condominiums out there right now that we’re going to be offering an outdoor swimming pool. That’s very rare in the market today. Most condominiums don’t have swimming pools because of maintenance fees cost. But, we have a master plan project of about 1700 units. Just shy of it. Because of the size of it, we’re able to offer these great amenities. We actually have two exercise rooms, two yoga studios, two saunas.

Andrew la Fleur: Two of everything.

Brian Shew: Two of everything, really. Two theaters. We even have a basketball court where you can use it for volleyball and badminton. You can consider it full size. Kid’s play area. We’re going to have commercial and ground floor. It’s really really a master plan. The lot is all the way from front to [inaudible 00:21:10], and from Sherborne to Princess. It’s an entire city block. We are building a community in the St. Lawrence Market area.

Andrew la Fleur: Right, it’s a really unique project. Taking up an entire city block. You said almost 1700 units in total?

Brian Shew: Yes.

Andrew la Fleur: How many buildings really is it? It’s not one building with 1700 units, is it?

Brian Shew: It’s four buildings. The first launch will be the north east. The second launch will be north west. Then we have the two south towers that are coming later on.

Andrew la Fleur: Okay, and what other components … I understand there’s some park space as well planned.

Brian Shew: Yeah, on the south side between the two south towers we’re going to be building our own park. In south of [inaudible 00:22:00] there’s actually a park from Jarvis that goes all the way to Parliament. It’s a strip of park. In less than a five minute walk you can walk to Sherborne commons, which is right by the water. That’s just around from Sugar beach. Within ten minutes you do have a lot, a lot of park space.

Andrew la Fleur: Talk to us about the east side of downtown. The project is out front in Sherborne. I know you’ve got a lot of experience in this neighborhood having sold there. I think you’ve even lived in the area as well. What would you say about this area in terms of where it’s come from and where it’s going?

Brian Shew: None of Toronto was really that popular back then. You can even look back at [inaudible 00:22:48] 20 years ago. You couldn’t wait for the streetcar there. Right? But look at it now. Whatever is happening to the west will happen to the east, because Young street is the core. Everything goes along Young street. Sherborne is like a ten minute walk to Young. We’re very, very well priced compared to the west. The west, a ten minute walk is [inaudible 00:23:16], but [inaudible 00:23:20] versus Sherborne, it’s probably a 10% difference.

Andrew la Fleur: In prices.

Brian Shew: In prices. So, in that sense there’s a lot more growth potential in the east side.

Andrew la Fleur: Right, right. Potential’s there. In terms of a neighborhood … I think you have lived in the area as well.

Brian Shew: Yeah I actually live there now.

Andrew la Fleur: Oh you’re there now, yeah. I’m just curious your personal take on living in the area, as a neighborhood.

Brian Shew: What I like about living there. It’s a little bit more quiet than the west. No offense to the west residence. It’s a little bit rowdier. There’s little bit more parties going on. There are more restaurants and bars, and all that, which is great for lifestyle at the same time. The east is a little bit more calm. In my building, the main demographic is usually from 30 to 45, versus when I used to live in the west, it was much younger. When we used to live in the west, most people were like 25 to 35. Versus the east, it’s a little bit older demographic, it’s quieter, and people are more respectful.

Andrew la Fleur: Yeah it’s a bit of different crowd from the west side.

In terms of buying into … You touched on it a little bit but maybe just expand on this idea of as an investor, what’s the advantages of buying into a master planned, multi-faced community with, in this case, 16-1700 units? What are the advantages of the investor buying into a project like this, versus your standard run of the mill 300-400 unit building?

Brian Shew: First of all, whenever there’s a building of this size, builders always need to secure their project. The first thing they do is release the first portion of it at a very competitive price. Once they get to the sales target that they need to construct, then they start increasing prices slowly, depending on the market of course. If you are able to get into the first batch, then the developer themselves will help you increase [inaudible 00:25:39].

Andrew la Fleur: Right, so yeah if you’ve got a big project with a lot of units, you’re going to see price appreciation right away if you’re getting in the first group of units to be sold.

Brian Shew: 100%

Andrew la Fleur: Yeah, so there’s great opportunity there for the investor. In terms of … I guess amenities is the other big one you touched on as well. A lot of people are saying I don’t want to buy in a building with a lot of amenities or a swimming pool and stuff like this, but …

Brian Shew: But your maintenance fees are probably much more affordable. It’s less likely for it to increase.

Andrew la Fleur: Because there’s so many units. The cost of maintaining a swimming pool and so on for a small building is huge. For a big building like this, per unit, is very small.

Brian Shew: Correct. For instance, concierge service. It’s very popular in the condominium world. People don’t buy if there’s no concierge [inaudible 00:26:34]. A 24hr concierge is going to cost you 240-300,000. It’s a standard fee. You have the three pools, full-time concierge, part-time pay, you have all this over-time pay. This and that. The cost doesn’t change. But if you have more people sharing the cost, obviously it’s going to be less.

Andrew la Fleur: Per unit.

Brian Shew: Per unit. That is the advantage of living in a master planned community.

Andrew la Fleur: And renters obviously love amenities. If you’re a renter, you’re going to pay $2,000 a month, you’d rather have a lot of amenities than no amenities, for most people.

Brian Shew: Correct. Also lifestyle is important to live in a bigger building. We do have commercial on the ground floor too, so that is going to help the community grow more amenities. There’s probably going to be a dental office and all that in the future. That’s what Pemberton likes to do.

Andrew la Fleur: Do you know approximately what the square footage of the retail space is in the building? Any idea or how big it is? The scale of it?

Brian Shew: I don’t really have the size of it, but it’s definitely over 10,000 sq ft of retail.

Andrew la Fleur: Pretty significant.

What about Pemberton? What do we need to know about Pemberton as a builder? You talked about the fact the building is all zoned and approved, that’s the type of builder they are. They don’t sell projects that are not approved yet. What else should we know about Pemberton in terms of buying from them?

Brian Shew: They have their own typical standards, which is a little bit higher than most other builders. I wouldn’t say all, but you know. They have their own personal thoughts of what should be in a home.

For instance, in your bedroom they have a light fixture. I know it sounds weird that there may not be, but in a lot of condos that’s not standard.

Number two, every single unit is actually 9ft ceilings, smooth ceilings, because they actually own the drywall company. The company that is building is called Saddlebrook. They own that too, so everything is more or less done in house. You expect the quality control to be better. At the same time, I’m not sure if they’ll allow it for this project, but they do have a D-core home that’s up in Woodbridge somewhere, and they do allow upgrades for certain projects. Not all builders will allow this, but they’re willing to work with people and give them a home.

Andrew la Fleur: Probably a lot of people have heard of Pemberton and seen their projects, but for those who haven’t, give us a sense of the history and the size of the company.

Brian Shew: They’re one of the biggest builders in Toronto. They’ve probably been around for around 70 years.

Andrew la Fleur: Family builders, multi-generations …

Brian Shew: Correct. They own quite a bit of land, and they have a lot of projects coming on. They own golf courses up in Woodbridge and all that, so …

Andrew la Fleur: They’re not going anywhere.

Brian Shew: They’re not going anywhere.

Andrew la Fleur: They’ve been around forever and they’re going to continue to be there long after a purchase is made if you’re an investor. Obviously they’ve build thousands and thousands of condos, which is huge. A lot of builders out there nowadays that you’re buying from, they don’t have that track record.

Brian Shew: Another important thing in my eyes too, if you actually go to their older sites, things that are five years old, six years old, I still see the Pemberton truck there once in a while. That means they’re still servicing their older sites for whatever reason, even after the fact. That is important to me too. They’re still servicing what they built.

Andrew la Fleur: Service what they sell, absolutely.

Brian Shew: Correct.

Andrew la Fleur: As opposed to sell it, finish it, get the heck out of there, move on to the next one, see ya, forget it. Which is what a lot of smaller builders do, because they just don’t have the resources or the staff to keep up with things like that.

This has been great Brian. Is there anything else about yourself, or about this project, Time and Space condos, that I didn’t ask you that I should’ve asked?

Brian Shew: No I think we touched based on most things that we need to. The location is Front and Sherborne. I’m sure a lot of people know that’s very close to St. Lawrence Market, which is one of the historical markets in Toronto. It’s the oldest one. We actually call it old Toronto. It’s a fantastic neighborhood. 15 minutes walking to the core. Looking forward to seeing yourself, Andrew, and your clients at our office. I think that’s it.

Andrew la Fleur: Great. Awesome. I’m looking forward to it very much as well.

Brian, thank you so much for your time today. Hopefully we’ll have you again on the show, I’m sure for other projects in the future.

Brian Shew: No problem. Thank you sir.