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The Transformation of Yonge and Eglinton with Matt Young of Capital Developments

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Andrew la Fleur discusses the transformation taking place at Yonge and Eglinton with Matt Young of Capital Developments. Matt has sold over 1500 condos at Yonge and Eglinton in the last 2.5 years at Art Shoppe Condos and 150 and 155 Redpath. Investors who missed out on the initial launch now have an opportunity to invest in these buildings as new floors were approved by the city.

Click Here for Interview Transcript

Andrew la Fleur: On today’s episode we’re talking to Matt Young of Capital Developments about the new release of units at 155 and 150 Redpath, two buildings that I personally have invested in. Find out why on today’s episode.


Speaker 3: 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 back to the podcast Matt Young. Matt young is the VP, Vice President of Capital Developments. Matt welcome back to the show.


Matt Young: Thanks for having me, good to talk to you again.


Andrew la Fleur: Yeah it’s great. Great to talk to you again Matt. I know we see each other a lot at different things, business and socially-wise, but great to have you back on the show again after, it’s almost exactly 2 years it looks like. I looked at the calendar, almost exactly 2 years since we had the first interview on the show. I wanted to ask you, get your brain sort of thinking about the market a bit, what would you say over the past 2 years, what would you say has changed at Yonge and Eglinton in terms of the market there and what’s happening there? Obviously your involvement. What has changed at Yonge and Eglinton? Then the flip side of that question is, what would you say has not changed, or what remains constant at Yonge and Eglinton? If you want to think about that and reflect on that, what’s changed at Yonge and Eglinton over the last 2 years? Then after that, what has not changed?


Matt Young: I think what’s changed is a lot of the things that over the past 3 or 4 years that people have been talking about have finally started. Whether it’s construction on new projects, whether it’s the progression of the crosstown LRT, which is now going passed the Yonge and Eglinton area right now so there’s a ton of construction happening as a result of that. I think it’s more of work and things that people have been talking about over the past few years is now fully underway and it’s kind of right at Yonge and Eglinton’s doorstep.


In our case 2 years ago when we last spoke, we hadn’t started construction on any of our projects. We just launched the first project, 155 Redpath, and it has sold really well. I think we were gearing up to start construction, I think probably in early 2015 we started construction on that one. Then since then we’ve started construction on the Art Shoppe and sold that exceptionally well, and then also sold 150 Redpath, the sister tower to 155. That is just starting demolition as of this past weekend.


Now all of our projects are underway, we have permits for everything. Now it’s about building out the vision that we sold people on. I think as that happens you’ll start to see even more changes in the area. There’s other developers building things, so now it’s really the exciting time.


Andrew la Fleur: Absolutely yeah, a lot more shovels and cranes and things in the area. But in terms of the market, what’s your sense? What’s your feel of the market? Looking back 2 years ago, the market then as it was if you recall, and now the market today, September 2016, how would you say the market is the same or different?


Matt Young: Just talking in the submarket for a moment I’d say when we launched our first project, 155, Yonge and Eglinton was I think going through a bit of a rebirth. I think the general public, the buyers of condos, they hadn’t fully realized what had been happening, or what is happening. We spent a lot of time and energy educating people on exactly what’s happening here, how much development’s happening, how much new offices is going up in the area, jobs that are there, the crosstown LRT and all the infrastructure investments that are happening. It was a lot of education.


Fast forward a year and a half, 2 years, when we launched our next 2 projects there, we found it became a lot easier and things sold a lot quicker because the buyers and the public finally knew what was happening there. We didn’t have to sell them on it because they already knew. People came there, I would talk to buyers in the sales office and they would tell me about the LRT. “We’re buying here because we see all the money that’s being spent in this area and it’s going through a big change, we want to be here.” I think that’s been the big thing, is all of that investment has happened and it’s made selling in that area so much easier and the [inaudible 00:04:46] easier.


Then if you look at the market more broader, I know you read all the reports that come out but we’ve got the lowest supply I think we’ve ever had, highest demand or as high as we’ve ever had in terms of demand. We really felt it at our sites, doing minimal marketing and really not putting ourselves out there so much, we’ve had consistent sales from January this year until now, even in the Summer we didn’t really see much of a slow down. As you know typically a lot of people go away in the Summer and real estate slows down a little bit until September, but we didn’t see a slow down at all.


I think what that says is there’s a lot of demand in the marketplace across the board, very, very little supply. It’s taking longer and longer for developers to get product to the market and as a result of that I think prices are going up significantly. I think demand is there and units are all selling. I think it’s a great thing for the real estate market. Now it’s up to us as developers to figure out how we can get more product out to feed the demand.


Andrew la Fleur: Where do the submarket of Yonge and Eglinton going over the next few years?


Matt Young: To me I think there’s still more opportunity in that market than anywhere else in the city. People are now buying condos on the basis of construction was happening but when the LRT is finally functioning, when a lot of the new retail starts opening up in that area and we’re starting to see it now, La Carnitas and Sweet Jesus just opened up in the Yonge and Eglinton area just around the corner from our sites. If you’ve ever been on John Street and seen their location, Sweet Jesus is line up down the street all Summer long, and even beyond the Summer, just to get ice cream. We’ve got a lot of great new retailers coming up and opening up in that market. I think that’s only going to add to the value in the area. To us, we’re still very, very bullish on Yonge and Eglinton.


Andrew la Fleur: I want to talk about the market a little bit. You touched on it but what would you say are the biggest challenges and what are the biggest opportunities for … Talking to you as a condo developer, what would you say are the biggest challenges and the biggest opportunities facing developers today?


Matt Young: The biggest challenge is finding good sites, and I think if you talk to every developer today they’re going to tell you the exact same thing. Once you have a site and you’re going through the process, the process can sometimes take longer than expected or you have hiccups in getting your approvals, or whatever, but for the most part the hardest part is finding that site because once you’ve got it you kind of have a sense of how long things are going to take and when you’ll be able to get your product to market. But there’s too many big developers today and very few good sites left for development. If you look around, all the surface parking lots are pretty much gone.


Developers are now tearing down 8 and 10 story buildings in order to put towers on those sites, which I think needs to be done. The reality is we’ve got a lot of people who want to live here and we’re having a hard time creating enough homes for people. If you look in the low-rise market, as prices this year have gone astronomical, the high-rise market is really going to be the affordable market to be in. We’re going to need a high-rise market to service people who can’t afford a million dollar home, which unfortunately is the vast majority of people in the GTA. Biggest challenge is finding good sites and then getting them to market quick enough.


Andrew la Fleur: A lot of talk lately across the country has been about the Vancouver 15% foreign buyer tax. I was curious what your take is on that and how you think something like that might affect the market in Toronto if it were to come to Toronto.


Matt Young: As far as the tax goes I haven’t been reading up on it lately to see what the impact’s been. I’ve kind of heard rumblings that it actually hasn’t caused a huge impact, yet at least. Maybe you can correct me if I’m wrong on that one but that’s what I’ve been hearing.


Andrew la Fleur: Yeah, the stats have come out for the month of August in Vancouver and the sales are actually way down. The sales in the market are way down from what they were the previous year, it’s only one month of data so it’s really hard to know if it’s because of this tax or if it’s just a trend that was already happening and this tax is just coming in at the end of an established trend. It’s too early to say I guess. In my opinion I guess it’s too early to say what the impact is or if this really is a major factor in the market there of foreign buyers. I’m just curious to see what you take is really on the whole foreign buyer thing in Toronto. Do you see a lot of foreign buyers in your projects? You sold … Maybe give an idea of how many units you’ve been involved with the sale of and how many of them you would say were foreign buyers.


Matt Young: In Yonge and Eg now we’ve sold about 1,500 condo units over the past 2 and a half years. I’d say of those 1,500 there probably isn’t more than maybe 20 to 30 that have been foreign buyers. Yeah, I’d say-


Andrew la Fleur: 2% or less.


Matt Young: Yeah, it’s a very, very small market. I think there are certainly demographics that are buying projects more than other, but all of the buyers that we have for the most part have local driver’s licences, they’re already residents here. In many cases they’re new immigrants but they’ve moved here and this is their first real estate investment. We haven’t seen a huge impact on international buyers buying our projects.


That being said we also haven’t really gone out in a heavy way to court those buyers, so it might be different for other developers, but as far as I’m concerned I think it’s a relatively small risk. If it was to happen in Toronto I don’t think it will have any impact whatsoever on the market.


Andrew la Fleur: Do you think, I’ve got to ask you, you get it all the time, I asked you I’m sure 2 years ago but always interested to hear what your current take is on it, do you think there’s a condo bubble in Toronto?


Matt Young: No. It’s probably the most common question I ever get asked. I think friends or family once they know I’m in the real estate business, that’s usually the question they ask. To me I think if you look at the fundamentals of the market, there’s no real sign that a bubble is happening. All the units that are selling are being sold to buyers before they’re built, so it’s not as if we’re building on specifically and hoping that a buyer’s going to come. We’ve already got a buyer for those units, usually they have 20% deposits in those deals, so they’re heavily invested in keeping those units and there’s very limited risk that they would not close.


If you look at the rental market in many cases buyers of new construction condos tend to sway toward being investors, although that is starting to shift more now, but those investors are looking for somebody who’s going to rent that unit out. If you look at the rental market today, I don’t think it’s ever been as tight as it is now. I’ve got friends who are agents who deal with a lot of rentals and they’re having multiple offers on rentals. Units are coming up and within less than 24 hours that unit’s already rented. If the market is that tight on supply I don’t see how a bubble could be happening.


I think the reason people think there’s a bubble is that if you’re a Canadian born person who’s been watching the real estate market over the last 10 years and seen this constant boom, you probably wonder and you reference back to 5 or 10 years ago, “Here’s what the prices were then and here’s what the market was like then. This is what it is today, that can’t be sustainable.” But I think you have to look at it from a broader and say, “Where is Toronto as a city going?” If you compare Toronto to other cities that have already gone there, what do those cities look like? If you look at places like San Francisco or New York, any major city in the world that people really want to live in, those cities are all super expensive. Those cities, the idea of a single family home on a 50 foot lot isn’t even in the realm of possibility. Nobody can buy that in New York, nobody can buy that in London, nobody can really buy that in San Francisco for the most part.


If you look at Toronto in the same vein as those cities, then Toronto is still very cheap and we’re just going through a bit of a growth spurt between that transition from being able to afford a single family home to now not being able to afford a single family home. People are having to make lifestyle choices as a result of that. I think rather than recognizing what’s actually happening, people say, “There must be a bubble and this can’t be sustainable because I should always be able to buy a home in a city like this,” but that’s not really the case. If you look around the world there’s a lot of places where detached home ownership or even having a large, what we would call in North America, livable space isn’t the norm.


I was in Hong Kong earlier this year I looked at a project, the largest unit in that project was 320 square feet. [crosstalk 00:14:40] kind of product that’s being built in places where you have a huge amount of population and very, very little land or very little supply of real estate. It’s just what happens. I think that’s starting to happen in Toronto. We’re not where New York is yet but I think we’re on our way to that. That’s something people should consider.


Andrew la Fleur: That’s great. Now I want to talk to you of course today about you’ve got some news about Redpath, 150 and 155 Redpath, 2 great projects that I personally invested in both of them. I’m very excited about both those buildings. Why don’t you tell us what’s new, what’s happening there and break the news I guess, what’s exciting?


Matt Young: I guess the breaking news is we have new floors. We have a new floor at each of the projects. We had basically sold out, we had a handful of units left in each project. These new floors are much needed supply. We’re just starting to release them now. We’ve got about 30 new units at 150 Redpath and [60 00:15:50] new units at 155. Obviously 155 is farther ahead on construction, we’re now on the 16th floor and construction’s going exceptionally well. I think these buildings are going to turn out to be really, really beautiful buildings. We spent money in places that I would say other developers don’t necessarily spend money on because we really want to make sure that these are exceptional quality buildings from the top to the bottom.


Andrew la Fleur: Yeah, we were talking about that [inaudible 00:16:21] that’s one of the things I wanted to ask you about. I found that very interesting, and again this is one of the points that I’d love for people listening, investors out there listening, to hear about, because I think it’s really something that separates the quality developers, the experienced developers, the developers who really care about building a high quality project, that they’re looking beyond just finishing a building a getting out of there, looking to really have something that 5, 10 years down the road after it’s built is still respected and known as a really great building to buy and to live and to invest in. Yeah maybe can you give some examples? You said that you’re spending some money in areas on the building, that some extra things. Can you give any examples of what that looks like or maybe in a broader sense? Yeah, go ahead.


Matt Young: There’s a few key things. One example, if you look at a lot of buildings going up they have window wall systems on the outside of the building. That’s basically a window system that fits between the 2 slabs, and it basically acts as the skin of the building. In our case we’ve invested in a few different things that elevates that quality system. We don’t have [inaudible 00:17:37] panels for example, we have a shadow box design along the slab edge, so the slab edge is between floors where the concrete slab is poured. If you look at a lot of buildings they have a metal panel or they have a back painted glass slab edge cover. What we’ve done is actually do a shadow box so the panel sits away from the slab edge and it’s the same color and same glass as the actual glass that you’re looking out of in your suite. It’s just a nicer finish. It’s a nicer quality finish.


We also removed a horizontal mullion in the glass. We initially in our design had that and removed that horizontal mullion just because we felt having one big [pane of 00:18:19] glass that sits from your floor all the way to your ceiling in your suite would be a much nicer experience than having a horizontal mullion. That’s basically a metal frame that would cross the suite 3 or 4 feet up. Those are 2 things we’ve done to really elevate the skin of the building.


In our parking garage for example we’re actually spending money on making the parking garage not feel like a total afterthought. We’re going to painting the garage a certain way and we’re going to be coming up with really great way-finding and graphics for the garage. We’ve got a few other interesting ideas that we’re working on right now that’s going to make it even more interesting and ultimately more livable. If you’re living in that building you’re going to feel comfortable coming home and you’re going to feel like a lot of time and energy was invested in the details, not just in selling the units.


Those are 2 areas right now that I think we’re going above and beyond. There’s other things that we’re starting to work on as we go through the project, as we’re finalizing tendering of construction where we’re finding opportunities to create value for the residents. Even the column when we were pouring the building, a lot builders would pour what would be a standard column, it’s a rough finish. We’ve actually put Sonotubes around the columns and created an architectural finish around the columns going up the building. When those columns are finished they’ll be very, very shiny and super smooth. They will look like they’ve been finished architecturally and not just like they’re there to hold up the building.


It’s another example where we’re spending a little bit more money but we think it’s going to make a difference in the quality of building that we’re delivering. For us we want all of our purchasers to feel like they got value. When they move into this building we want them to feel like this is a premium building compared to other projects in the neighborhood. They’re hopefully going to realize value from that. Hopefully they’ll want to buy from us again the next time.


Andrew la Fleur: Yeah, it’s certainly worked out very well for you so far. I think if you keep doing that it’s going to continue. That is a reason why your buildings do command a premium in the resale market as well, it’s details like that and thinking through things like that that most developers will say, “Here’s an opportunity to save a little bit of money,” without really thinking about, like you said, the user experience at the end of the day and the feeling that you get when you’re in the building and in your unit. Matt why don’t you tell us, why do you think 150 and 155 Redpath, specifically now, why is it a good time for an investor to look at getting a unit in those buildings right now you say?


Matt Young: I think for one there’s very, very little product in the area, so we’re trying to create as much product as possible for the demand. Both projects since we launched have seen a number of new developments happen that I think are going to add value to those projects. To get units now after that has happened I think is fantastic. For example we’ve got public art that’s going into both of these 2 projects. We did a public art competition. It’s not been released who the artist is and the artwork that’s being done. Maybe you can post a link on your blog, there’s been lots of articles about it.


Things like that are going to add value. We’ve just signed a lease that we’re just wrapping actually I should say, a lease with our first tenant at 155 Redpath, which is going to be a fantastic tenant. We’ll be able to announce that hopefully fairly soon. These are all little things that have been done since after we launched that people will be able to start to realize what the living experience is going to be like in this building. It’s easier for them to visualize what it’s going to be like. I think we’re making a better and better building as the days and weeks go on. To have units left, now to me is the perfect time to jump on them.


Andrew la Fleur: That’s great, thank you very much Matt. I really appreciate. Yeah, looking forward to seeing these new units, the new release. A lot of these units were sold out of course many months ago and now-


Matt Young: All of these units were sold out.


Andrew la Fleur: All of the units were sold out.


Matt Young: [crosstalk 00:22:49] product left.


Andrew la Fleur: There you go.


Matt Young: [crosstalk 00:22:52] It’s good that we have a little bit left here.


Andrew la Fleur: It’s great, it’s great. The building’s a little bit taller too, that’s always a good thing.


Matt Young: [Absolutely. 00:23:03]


Andrew la Fleur: Yeah Matt thank you very much for your time today, really appreciate. Always good to chat with you. Hopefully we can have you again on the show soon.


Matt Young: For sure. Hopefully we can get you by for a construction tour one day soon.


Andrew la Fleur: Absolutely it’d be great. Thanks Matt.


Matt Young: Awesome. Anytime, have a good one.


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