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Serving Up the City to the Super-Rich

Fourteen hyper-luxury condos are in development, and foreign buyers can't get in fast enough, report Tenille Bonoguore and Lori McLeod. But it could mean ground-shaking change ahead...

 
TENILLE BONOGUORE AND LORI MCLEOD, The Globe and Mail from Saturday November 3, 2007

The scene had all the trappings of a Hollywood gala. Red carpet rested on the gum-pocked sidewalk, star-erasing lights swept the night sky and well-dressed people clamoured to enter the teeming fray within.

But this wasn't a film festival or theatre gala. It was the grand opening of a condo sales centre, its developers hoping to add another tasty morsel to the growing banquet of high-end offerings. Pulling up to the curb outside the event on Monday night, a Somali taxi driver simply shook his head and flicked a hand toward this slice of Yorkville with a resigned chuckle.

 "Some of these condos are going for $7-million," he said with a wry grin.

"You could buy my entire village for that."

Welcome to Toronto's new era of wealth. Fourteen super-luxury condo developments - with a price tag of $748 per square foot or more - are planning to open their doors in the downtown core, and the city is touting itself as a rival to New York and London.

These projects go beyond anything the city has seen, at least as far as pricing goes. The high end of the market used to be about $500 a square foot. Now, top-priced Four Seasons residences and MuseumHouse surpass the $1,500 mark. Not only has this triggered the need for a new definition of luxury, it also has sparked a vigorous debate over what impact, if any, these super-rich nests will have on the bustling city 50 storeys below.

Condo sales people would have you believe that locals are clamouring to get into these buildings and, for some, that is true. There are many Canadians enriched by a strong economy, high property prices and oil-business success joining the luxury crowd.

Yorkville's Four Seasons and MuseumHouse are being filled by "very mature" residents downsizing from Rosedale, Forest Hill and Bayview properties, said Hunter Milborne, managing partner of Sotheby's International Canada.

"These are the icons of Toronto society who want the best of the best," Mr.Milborne said.

 The few international buyers are the "exception to the rule" for the condos ranging from $1-million to $10-million. At Four Seasons, it's mainly entrepreneurs and business people, many retired, and all wealthy. The smaller, more private MuseumHouse has also attracted investment bankers, a musician and a hockey player.

Nearby, One St. Thomas has two of its 72 apartments still available, and every condo so far has sold to a Canadian, according to a marketing spokeswoman for the development.

But elsewhere, the sales list has a much more international flair. Half of the residences at the Ritz-Carlton, scheduled for completion in 2009, have attracted strong interest from London, Ireland, Singapore, Hong Kong and Australia. Almost two-thirds of Trump Tower condominiums, to be completed in 2010, are foreign-owned, with buyers from the United States and Britain leading a 20-nation charge.

Mississauga-based real-estate broker Hong Yang was at Monday night's opening of the One Bloor East sales centre on behalf of eight Chinese buyers already itching for a slice of the Bloor-Yonge development that has just gone on the market at $850 per square foot.

"In the U.S., [the] real-estate market is not so good. China is booming, but it's risky. Toronto is more stable. And this is more reasonable than Vancouver," Mr. Yang said.

 

CASH INFLUX

Brad Lamb, head of condo-market specialists Brad J. Lamb Realty Inc., said this new market is drawing in wads of cash, the likes of which Toronto has never seen.

"For the longest time, people sort of laughed at Canada as a ... North American backwater," Mr. Lamb said this week, shortly after meeting with an investor from Pakistan who, along with buying and selling real estate in Dubai, owns six Toronto condominiums as a long-term investment.

"People follow stability and strength, and so there's people investing in Canada like they used to invest in England, the United States and Germany," he said. "The world feels our affluence."

Foreign money is also backing these developments: Trump Tower is being funded by an American and a Russian-born Canadian, while One Bloor East, whose Monday-night launch earned the taxi driver's wondering reaction, is being built by Bazis International, the North American arm of a Kazakhstan-based company called Bazis-A Group.  Until now, Bazis specialized in construction materials, with most projects in Central Europe, but after wading into the Canadian equity market several years ago, the company made a splash with its construction of Crystal Blu, a 35-storey condo tower just a few blocks west of its newest project. The company president, Russian-born Michael Gold, currently lives in the 905 with his Kazakhstan-born wife, but said the couple may buy an apartment in the new venture.

This creation and consumption of well-heeled developments is bringing a flood of money into the city, but exactly how much is not known, according to Sherry Cooper, chief economist at BMO Nesbitt Burns. "There is a stealth influx of foreign capital changing the face of downtown Toronto from the waterfront to Yorkville, and no one is measuring it," Ms. Cooper wrote to The Globe and Mail recently.

In her personal quest for a condo, she visited many sales offices for high-end developments, gathering anecdotal information that suggests foreign money is pouring into Toronto's luxury buildings, with a large influx from Russia, South Korea and Dubai, as well as the usual customer base from the United States, Europe and Asia.

All of this "silent money" is coming in via private transactions, Ms. Cooper said, so it remains under the radar of groups such as Statistics Canada, the agency responsible for tracking foreign direct investment in Canada.

Some buyers are investors. Others are choosing Toronto as their full- or part-time North American home. Most are business people, but there is also a growing list of "quite interesting famous people," said high-profile real-estate agent Pat Baker.

 Development sales agents are tight-lipped about exact numbers of foreign buyers, but everyone in the industry is quick to point out Toronto's selling points: The city is considered safe economically, politically and socially - and by global standards, it's a steal.

Real-estate mogul Donald Trump said his 57-storey residential tower is a bargain at $1,500 a square foot: New York equivalents routinely sell for more than $5,000 (U.S.) per square foot. "It seems a little bit wild when you think that Toronto, which is also a great city, is 20 to 25 per cent of that," he told The Globe before using a golden shovel to break ground at the Adelaide-Bay site three weeks ago at yet another glitzy condo launch.

Plus there is the maple leaf factor. "You have people that want the American dream, but they don't want the United States," explained Darryl Mitchell, area sales manager for Royal LePage Real Estate Services, noting that some of this high-end money is coming from the Middle East.

 
THE SKEPTICS

But with this wealth comes worry, and not everyone is rejoicing about the champagne towers rising in the city's heart.

When taken as a bloc, the local and foreign buyers represent a significant amount of wealth concentrated in a very small section of the city. David Hulchanski, the director of University of Toronto's Centre for Urban and Community Studies, said this continues a 30-year trend.

"Most of the city used to be middle-income. Now it's one-third, and the majority of that third has moved down a notch [in earnings]. The very bottom and very top increased. We're polarizing," Prof. Hulchanski said. In essence, the city is developing a rich and highly educated core, ringed by poor inner suburbs and middle-income outer suburbs. Yet he believes condos are not a deciding factor in this. Rather, he said, land prices are driving it, and part of each condo's expense is the price of the land it sits on.

"This is just adding to the skyline," he said.

Sotheby's Mr. Milborne also said there were early concerns that the exclusive real estate would turn into "a ghetto of pieds-à-terre of people who aren't there." But while many buyers are likely to be frequent travellers, he said his clients will mostly use their condos as full-time home bases.

Still, Councillor Adam Vaughan (Trinity-Spadina) said it will take hard work and decisive planning to reap benefits for most of the city residents, who are unlikely to see anything more than their own reflection in the exteriors of these luxury bastions.

"Condos as a neighbourhood form have their own personality. When they march into a community they have an impact," Mr. Vaughan said. Park usage, traffic patterns, retail presence: All are influenced by what springs up in the immediate vicinity.

That's why he is pushing council to protect aspects of downtown life. He wants developers to invest money in affordable and public housing, and to include a greater number of larger, family-friendly units to ensure a better mix of residents.

"People that can afford to live in a cottage in Muskoka for the summer, they don't understand the on-the-ground societal conditions that exist in the city in the summer," Mr. Vaughan said.

"You end up with a much more inward-looking group of people than you have in normal neighbourhoods, where you see each other in the yard and parking is a communal problem. ... [They] don't participate in creating neighbourhoods."
 

VANCOUVER'S EXAMPLE

Some of this has already been seen on the other side of the country.

Vancouver experienced a flood of foreign investment in the 1980s and 1990s that plowed about $40-billion into that city's economy, keeping real-estate prices on the rise, while the recession drove real incomes down.

Today, luxury condo living is entrenched in Vancouver, and prices remain above Toronto's. That can be seen as a direct result of overseas investment, said David Ley, a geography professor at the University of British Columbia and an expert in foreign real-estate investment.

While the Vancouver experience was fed by different motives - many Hong Kong residents were leaving the territory before it went back to Chinese control - the effect trickles down the whole property ladder, Prof. Ley said, and now even lawyers are having trouble getting into the Vancouver market.

"It's gentrification run riot," Dr. Ley said. "It's good for car dealerships, high-end retailers, but more modest living becomes increasingly difficult." (Ms. Cooper adds cosmetic surgeons and cosmetic dentists to the list of likely winners in the luxe influx.)

 "The amount of discretionary income at the top end is quite astounding.

These people at the top end can follow their desires and live where they want to live," Dr. Ley said.

 Yorkville is at the forefront of the super-luxury boom, with eight of the14 biggest projects planned for that region. It's hard to imagine Yorkville won't feel the crush.

But that could be the area's saving grace, said Toronto Centre-Rosedale Councillor Kyle Rae. "This idea that Yorkville is under threat ...Yorkville was eviscerated in the 1970s with horrible development," Mr. Rae said. "What Yorkville needs is more people living in Yorkville. You can't depend on American tourists to sustain Yorkville. It needs a resident population."

 How Toronto will absorb a resident population that considers property speculation to be a red-carpet affair and can spend a small-village-worth on one downtown apartment is a question on many people's minds.

 But Vancouver real-estate mogul and Shangri-La Toronto marketer Bob Rennie said the downtown core must develop a community feeling, or this market of international globetrotters, wealthy empty-nesters and a market-in-waiting of propertied Torontonians won't survive. "It's great to go to Holt Renfrew, but you have to be able to get your day-to-day groceries. We need more Pusateri's and more Whole Foods in the central business district," he said.

 No matter how high the property price tag or how glamorous the ceremonies surrounding development, he said there is one inescapable truth: "I've gotta be able to buy my milk and bread."
 


Posted on Saturday, November 10, 2007 at 07:18PM by Registered CommenterElaine | Comments1 Comment

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