Baby, we got a bubble!?

[civdis]

At 1 King, you are not forced to be in the hotel pool. Many people live in the building, and some have offices there. if you are not in the hotel pool, you pay the residential tax rates which are around $2400 per year. These are assessed on a yearly basis with the condo corp giving a list of pool suites to the city. The commercial rates are about $4800 per year which are much lower than Trump. The condo fee on my unit is $570 per month, again, way lower than Trump.

Units in 1 King tend to be priced all over the place based on views. There is also a large block stilled owned by David Mervish Many of the units for sale are interior suites in the older part of the building. I am above the 40th floor with unobstructed views over the city and lake so these suites tend to get a premium. From a pure investment perspective 1 King craps all over Trump!

By the way, I had lunch in Trump's 30th floor restaurant and although the food was great, I found the decor over done and dated. That is just my taste, there is no doubt they spent money here, I just don't think it was spent well.

[CN Tower]

As an investor in 1 King, I can tell you that there was some pain in the initial years but it has turned into a profitable investment that I am able to enjoy as an "Urban Cottage". I have to laugh at the investors in Trump. I did the math years ago and there is no way that development makes any sense. There are units for sale in 1 Kingthat will casflow. We may not have quite the finish of the Trump tower, but 1 King is no slouch. I think all the initial bad press we had has kept prices artificially low. There are some steals in our building!

How big is your suite? What kind of rent can you get for it? How much insurance and utility costs do you pay on top of that?

Sounds like your op costs are under <$1000/month. Not bad depending on suite size and layout.

I've heard there are major structural problems with this building hence the deep discount and dirth of sales activity.

[civdis]

My suite is a 430 sq ft studio with a great southeast view above the 40th floor. When it was not in the hotel pool, I had no problem renting it to corporations for $1800-2000 per month due to it's location in the financial district, connection to the path, view, and hotel services available. I now average about $1800 per month in the hotel pool but have the flexibility to enjoy it myself on weekends or nights I want to stay downtown rather than commuting home. Insurance and utilities are all included in the maintenance fee so there are no other costs.

I have not heard of any structural problems with the building and I would know as an owner. We did have some HVAC issues and a problem with the cornice on the historic building ,but they were dealt with through a lawsuit with the developer. The building is actually a gem, but the early bad publicity that Stinson gave it has had a residual effect on prices.

[James]

...
The building is actually a gem, but the early bad publicity that Stinson gave it has had a residual effect on prices.

I definitely agree. I remember during the development stage of this project, I always thought it was a unique and interesting venture in the downtown Toronto financial district. I've kept tabs on this building as the years have gone by and am still pretty amazed by how lowly priced some of the units are. As indicated earlier though, if you work out the figures first, factoring in the taxes, fees, vacancies, etc. units can be had at pretty reasonable prices and there is a lot of supply, i.e. selection, in this building for prospective buyers.

[interested]

My suite is a 430 sq ft studio with a great southeast view above the 40th floor. When it was not in the hotel pool, I had no problem renting it to corporations for $1800-2000 per month due to it's location in the financial district, connection to the path, view, and hotel services available. I now average about $1800 per month in the hotel pool but have the flexibility to enjoy it myself on weekends or nights I want to stay downtown rather than commuting home. Insurance and utilities are all included in the maintenance fee so there are no other costs.

I have not heard of any structural problems with the building and I would know as an owner. We did have some HVAC issues and a problem with the cornice on the historic building ,but they were dealt with through a lawsuit with the developer. The building is actually a gem, but the early bad publicity that Stinson gave it has had a residual effect on prices.

this sounds eminently reasonable. I am guessing when you bought you were probably paying $500/sq.ft. or $215K.
If your expenses are $970. Based on $1800 revenue that leaves $930/month x12 or $11,150/$215K or a return of 5.2% and you get usage. If this is it, this is extremely good. Also, I am sure you have had some price appreciation since many years ago.

I think the one mistake with the project was Harry's decision not to licence out the hotel to a Brand operator. While I realize the
net rent would be lower, I am guessing that occupancy would be higher and more than offset. Do you know the occupancy rates.
I have read that in Toronto on average it is 68%.

One other question; what are the rates for a studio at 1King compared to Trump and do you think with the opening of the Ritz, Trump and SL shortly this will impact on your occupancy rates with resultant decrease in monthly revenue?

[civdis]

I actually paid about $240k but don't forget this included a furnishing package valued at about $10k. Your numbers are pretty correct and yes it is a reasonable investment, especially since I get to actually enjoy the use of it. As to price appreciation, I could probably get $275k for my suite due to the view, but it has not been what it should be for reasons already explained.

As to using a brand operator, I believe the decision to stay independent was a good one. We own all of the asset which gives us total control of the building and keeps the rental agreements, owner friendly. Our occupancy is actually a little higher than the downtown comparables while our revenue per available room is a little lower. We had to pay buy out Mirvish in order to get full control of all hotel operations and once that loan is paid off, the revenues to suite owners will really skyrocket. We pay ourselves, not some third party operator like Trump. This is a way better formula. In the long term, we are much better positioned than Trump suite owners.

As for the effect of the 5 star hotels on our business, don't forget, we are not a 5 star product. We are a solid 4 star facility and happy to keep it that way. Our rates are in the $200 per night range so we really don't compete with SL, Trump, Ritz, or 4S. I am more concerned about the new Delta, but it isn't that large and is 3 years out. Quite frankly, with all the new 5 star facilities opening up, The city will attract more events which will help us. A rising tide lifts all ships s they say.

[interested]

Thank you very much civdis for this insight.

It sounds like congratulations are in order. While you would not make much of a profit now as you point out, it sounds like it will become more profitable in the future.

If your occupancy rates are higher than the 68% that I read for all hotels in TO, it sounds like it is no problem being independent.

You are right: 5 star hotels will demand much higher rates $400-500 for a 500 sq.ft. suite I understand and if so, that should make you just that much more attractive.

[PinkLucy]

Anecdotal, but I know someone who comes to Toronto regularly for business and always stays at 1King

[interested]

http://online.wsj.com/article/SB1000...49238626.html\

Weak Start for Trump Site

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By ALISTAIR MACDONALD

TORONTO—Donald Trump cut the ribbon on this city's latest luxury hotel and condominium tower last week, but a number of early condo buyers in the project are trying to back out, and initial sales have disappointed.

Mr. Trump flew in last Monday to officially open the Trump International Hotel and Tower, a 65-story tower in the heart of Toronto's financial district. It is one of several luxury hotel and condo projects that has either opened or is about to open here.

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Reuters

Donald Trump, with Toronto Mayor Rob Ford, licensed his name for a condo-hotel, which faces slow sales and bouts of buyers' remorse.

Talon International Development Inc., the Toronto privately owned lead developer, has been marketing residential condos starting at $2.3 million and hotel condos, where rental incomes are pooled and shared with buyers, at $967,000 and up.

At least eight sets of hotel-condo investors have hired or contacted lawyers to help them get out of their contracts and recoup their initial $212,700 deposits, according to their legal representatives. Meanwhile, the tower has sold 60% of its condos and 85% of its hotel condos, according to Talon, lower than several rival developments.

A Talon spokesman said the problem of buyers wanting to get out of contracts is "not unique to Trump." He said the weak global economy had hurt overall sales, particularly given the high price of units on offer. He said the bulk of properties had been sold and sales will pick up now that the tower is officially open.

"Their financial situation has changed, and they have been in the development for a while," the spokesman said. The project cost Talon 500 million Canadian dollars ($503.9 million). Originally slated to open in 2009, Talon said weather and the project's confined site in downtown Toronto delayed construction.

The slower-than-expected sales and the bout of buyers' remorse come as economists and some Canadian officials have warned that Toronto's condo market, where prices have soared, may be overbuilt and headed for a correction.

Mr. Trump, who licensed his name to the project but has only a minor equity stake, shrugs off worry about the market's health.

"You never know about cycles. Where does it start? Where does it end? You can guestimate," he said in a brief interview. "But it is a great city, and we built a great product."

The Trump condos are some of the priciest in Toronto, currently selling between C$1,700 and C$1,800 a square foot. That compares with a city average of some C$530 a square foot, according to N. Barry Lyon Consulting Ltd.

Lawyers for some of the buyers trying to get out of their contracts said their clients invested ahead of the global financial crisis and now find themselves struggling and unable to complete their purchase.

"They were dazzled by the Trump name and marketing, and they did not take into consideration that they were paying in excess of a thousand dollars a foot," said Bob Aaron, a Toronto real-estate lawyer who is representing several clients seeking to exit from the tower. Another Toronto lawyer, Leonard Banks, confirmed he was negotiating on behalf of a separate client who wants out of the Trump tower.

One U.K. investor tried to negotiate an exit with Talon and recoup his deposit last year but ultimately abandoned the effort after deciding it would be too costly, according to another attorney representing the investor. A group of Irish investors has also contacted this attorney and was considering trying to get out of their contract.

Real-estate observers say Canadian contracts are harder to break than those in the U.S. and U.K., but it isn't impossible.

In 2009, U.S. investor Richard E. Schneeberg won approval from a Canadian court to exit his contract and reclaim his deposit. He argued that since the project was delayed, he could break his contract.

Talon challenged that, saying it had a right to extend closing the transaction. But last year, the decision in Mr. Schneeberg's favor was upheld in an Ontario Court of Appeal. Mr. Schneeberg wasn't available for comment.
—Chip Cummins contributed to this article.

Write to Alistair MacDonald at alistair.macdonald@wsj.com


From the Wall Street Journal today.

It appears the problems at Trump with Hotel units is now being picked up by the International Papers:

[Eug]

Toronto Teranet numbers are out for January 2012:

2011-01 126.370
2011-02 126.370
2011-03 126.820
2011-04 127.700
2011-05 129.800
2011-06 132.440
2011-07 134.860
2011-08 137.010
2011-09 137.740
2011-10 138.810
2011-11 138.550
2011-12 138.150
2012-01 138.910

2009-01 110.620

2010-01 121.430

The numbers are now out for Feb. 2012.

2012-02 138.980

That's a 10% increase over Feb. 2011.

[urbandreamer]

So Andrew LaFleur hints that some recent downtown condos launching now aren't selling so well, especially ones without approvals in place. Anyone have an idea which projects these may be?

[cdr108]

So Andrew LaFleur hints that some recent downtown condos launching now aren't selling so well, especially ones without approvals in place. Anyone have an idea which projects these may be?

it doesn;t even have to be recent launchings.

i received an email from BJL's office ... king charlotte is only 65% sold.
how long has that project been on the market? 1 1/2 years - launched in late 2010 to VVVIPs and public VIP broker sales in March 2011

[macookie]

it doesn;t even have to be recent launchings.

i received an email from BJL's office ... king charlotte is only 65% sold.
how long has that project been on the market? 1 1/2 years - launched in late 2010 to VVVIPs and public VIP broker sales in March 2011

I'm sure that both investors and end users would gladly consume more condos if developers just lowered the prices on these projects. Given the 5 reasons from the remax blog... http://www.remaxcondosplus.com/blog/ (Apr 23 entry) ...it just makes economic sense that the price point is the problem, because all the other reasons point to the conclusion that there should be a huge demand for all those units.

[interested]

My belief as echoed by others is that a number of developers are rushing projects to market. They are doing this as they are worried we are long in the tooth on this bull market.

Some very high profile condos....INDX and the one on Yonge Street (sorry don't remember the name) have been frenzies but I suspect when ready there will be some buyer's remorse. I just don't see prices catching up to these $650-700/sq.ft. levels by the time they are complete so the "flippers" if I am correct will be out of luck. The longer term investors will not make money in the immediate term. Long term they may in fact do well, I just don't know.

I think a number of projects will not get to the required numbers which actually will be a help to the rest of the market and those that do get built.

[cdr108]

My belief as echoed by others is that a number of developers are rushing projects to market. They are doing this as they are worried we are long in the tooth on this bull market.

Some very high profile condos....INDX and the one on Yonge Street (sorry don't remember the name) have been frenzies but I suspect when ready there will be some buyer's remorse. I just don't see prices catching up to these $650-700/sq.ft. levels by the time they are complete so the "flippers" if I am correct will be out of luck. The longer term investors will not make money in the immediate term. Long term they may in fact do well, I just don't know.

I think a number of projects will not get to the required numbers which actually will be a help to the rest of the market and those that do get built.

if a developer is relying solely on sales, then it may be tougher for some.
alternatively, some developers may have to pony up more equity and get it done.
better off for the developer if they go forward with a substantial % sold b/c if the peak has already been reached, they'll have a tough time getting the same number of buyers at the higher prices as before.

best scenario for buyers is return of deposit and projects get cancelled.
the buyer won't be stuck with overpriced unit that they'll have to close, like some remorseful purchasers at trump.