Ritz Carlton: Incredible Opportunity or Canary in the Coal Mine?
The Residences of the Ritz Carlton was the first of what I like to call the ‘Big Four’ (5-star condo-hotels, the others being Trump, Shangri-La and of course the Four Seasons) to finish. This was a monumental event in the Toronto condo industry as it represents the first truly 5-star hotel to come to our aspiring global powerhouse of a city. Having a 5-star hotel it seems, is a signal that you’ve arrived as a city and it’s an important step if you want to have a chance at becoming the next London, New York, or Hong Kong. Along with the arrival of these hotel condos was supposed to also be stratospheric real estate prices, the like of which Toronto had never seen. $1000 per square foot was theÃƒâ€šÃ‚Â psychologicalÃƒâ€šÃ‚Â price barrier that we were about to smash through. Well, it hasn’t happened. Not even close.
Some interesting stats on The Ritz Carlton:
- There have been 7 MLS sales in the building since it registered in July 2011. That’s an average of 1 sale per month.
- There are currently 30 units available on the MLS and likely many more that the developer has available that are not on the MLS. This means there is at least 2.5 years worth of inventory available in the building. This is the exact same as it was back in September 2011Ãƒâ€šÃ‚Â when I wrote this.
- Average price per square foot of the first 4 sales in the building after registration: $902
- Average price per square foot for the most recent 3 sales: $749
- Average days on the market for the first 4 sales in the building: 28
- Average days on the market for the most recent 3 sales: 142
- Average sale price:original asking price for first 4 sales in the building: 92%
- Average sale price: original asking price for the last 3 sales in the building: 82%
- Average sale price for all 7 units sold: $1,384,254
- Highest sale price $1,673,775
- Average rental rates: about $3.84 per square foot.
- Highest lease rate achieved: $19,000/month
- Lowest lease rateÃƒâ€šÃ‚Â achieved: $4500/month
- Average Days on Market for a rental listing: 64
- Average Sale:List Price for a rental: 93%
Other non-Yorkville buildings that have recently achieved greater than $750 per square foot AND sale price over $1M:
- 770 Bay Street, Lumiere, Penthouse sold recently forÃƒâ€šÃ‚Â $958 PSF
- 80 John Street, Festival Tower, High floor unit sold recently forÃƒâ€šÃ‚Â $824PSF
- 224 King West, Theatre Park (pre-construction), high floor unit sold forÃƒâ€šÃ‚Â $814PSF
- 65 Harbour Square, 30-year old building, High floor unit sold recently forÃƒâ€šÃ‚Â $773PSF
What we know for sure:
- The Ritz has under-performed compared to the market. Anyone who bought at the Ritz during pre-construction and sold today is making a decent profit. Many early buyers got units for around $650 PSF, selling right now at around $750 PSF which represents approximately a 15% increase in 6 years.Ãƒâ€šÃ‚Â However, according toÃƒâ€šÃ‚Â Urbanation, index pricing in the downtown west sub-market that the Ritz belongs to has increased at approximatelyÃƒâ€šÃ‚Â 10% per year since 2005.
- Prices at The Ritz are not going up any time soon. I’ve already mentioned that there is at least 2.5 years worth of inventory currently at the Ritz. The situation is compounded by the fact thatÃƒâ€šÃ‚Â Trump is almost finished, and Shangri-La and Four Seasons will both be complete in about a year. The supply levels for 5-star condo hotels is about to go through the roof. I don’t see how prices at the Ritz could possibly go up anytime soon.
- Right now the Ritz is either a great buy or a terrible buy depending on your perspective. The Ritz is truly a beautiful building and the suites are finished with very high quality materials. When you compare what you can get in this building for $750 PSF versus other ordinary buildings selling for more than that, it’s a no-brainer where you should buy. However, from an investment perspective it’s ‘buyer beware’ when buying into any building with 2.5+ years worth of inventory.
Questions we still don’t have answers to
- Why are sales so slow? Why are buyers in the $1M+ range staying away from the Ritz? I posted a few popular theories previouslyÃƒâ€šÃ‚Â here.
- What will happen when Trump comes online? Will the same story play out at Trump? Will the two buildings compete with each other directly for buyers or not? Will the situation get worse?
- How much unsold inventory is the developer sitting on? There are rumors out there that the developer still has A LOT of units to sell, and these units are for the most part NOT on MLS. Can they afford to continue to carry them for another year or two while they wait for the dust to settle or will they be forced at some point to flood the market? Could they rent out these suites to ride out the storm?
What do you think? If you have something to contribute to the topic, leave me a comment or contact me directly. Also, the stats in this post is begging to be put into “infographic” form. If someone out there reading wants to help me with that, let me know.