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UrbanToronto launches a new series of interviews with people involved in shaping our city. To inaugurate the series we are pleased to have had the opportunity to sit down with Mel Pearl, principal at Lifetime Developments. Lifetime has helped create such projects as The Four Seasons Private Residences, M5V, Victory Condos, Liberty Market Lofts, Lumiere, X2, Bisha and The Yorkville Condominiums. The following is a candid conversation we conducted at the Bisha sales centre earlier this week.
How did you get your start in the industry, and what got you hooked onto development in the first place?
I started off in a family business, my father was in low rise construction. After about 4-5 years I teamed up with Sam Herzog, this goes back about 20-25 years ago. There would be a challenge and we asked ourselves if we could be up to it. One thing led to the next and we're now building condos in the city of Toronto.
What was your goal when you teamed up with Sam to start Lifetime?
We really never had an agenda that we wanted to be high rise builders, it was really about doing the best we could with whatever project that we were presented with. As you gain confidence, you believe that you can always do something a little bit more, better, and larger. For the condo business, it was strategic. We saw in the low rise industry in the 905 area that because of the greenbelt, there was going to be a real restriction on product. We said to ourselves that in order to ensure the kind of volume we wanted to continue to build, the answer was in the city. The city didn't have the same obstacles, and that's how we ended up here.
How did you find the transition between suburban to urban development?
I loved it! It wasn't as competitive at the beginning, and there was a lot more opportunity. I found the City was much more cooperative, more of a partnership in terms of process. The City was ambitious about having the city developed, and the clientele was different. Younger, urban minded people buying condos, rather than families with much different requirements, plus a lot more infrastructure required when you are developing the suburban market.
You mentioned competition. What was the difference between the competition in the 905 area vs the competitive level in the city at the time, and how has it changed over the years?
Oh, things have changed dramatically. We've been doing condos now for the last 11 years, and it's very competitive now. There were a lot of people that found themselves in the same position, so you have the shift from the suburbs to the city, plus the established developers who were here already. Now you also have those young urban minded developers that never even considered the 905 market. The condominium business also allows for greater creative process, and that was the thing we really enjoyed. There was a little more procedure in the suburbs. The towns would tell you exactly what they wanted to see in terms of lot sizes, the consumer was very clear about the product they wanted, the way it should look, so the creative process was not required as much.
And you found it a lot easier to deal with the City of Toronto?
The City of Toronto was very cooperative and progressive. Not to say that there aren't challenges with every city, but there was just generally a sense that everyone understood density, the City debated this issue for a long time and they understood that in order for the city to thrive, you have to go vertical. So other elements became important: design, the right architects, the right vision, how it would blend into the city. The urban experience at grade became very important, these were just things that were never considered in the suburbs.
If you were to look at some of your accomplishments with Lifetime over the 25 years, are there any particular points of time that stand out for you both as a condo and suburban developer?
Well, I don't really see it in that kind of a context; I love all of my projects. I try to meet the market, I don't try to educate the consumer. The consumer has a pretty good idea of what they want so what we try to do is understand as a collective group what that market is really about, and try to create the best product for that particular market.
I'll tell you, as we sit here in Bisha, this is a really good example. We started thinking, 'what is the best way to utilize this kind of real estate'. Like the Four Seasons, understanding the hotel/condo experience, we felt that this particular sector of the market hadn't really been tested. Now there was the Thompson which has that kind of urban feel, but Thompson is a US brand, and we felt why not Canadians and why can't we create and design a brand for the 21st century for this market? As we sit in what I feel is centre-court, between what's happening on King Street West, and the theatre district over here, and the financial district. We thought that just to go build a condo and move on, we're leaving so much on the table. By creating this hotel, we can continue to benefit from this product and this location into the future.
So Lifetime sees more value in not just putting your money in and getting your money out, but being there for the long term?
Well that's the plan today. We just believe that there's a greater reward long-term by staying in the neighbourhood. It helps this brand that we're creating, and if we do our job well here, we'll be able to export this brand to other markets.
How does Lifetime decide who to partner with for some of the projects that you undertake?
In each case you try to bring a strategic partner to the table, whatever that means for the project. In the case of the X2 project, we sat down and asked ourselves 'what is the best way to utilize this property'? It was really obvious. X had this great success, you had Charles Street which was a great point of entry into the city, you could have these twin towers sitting across the street from each other. We approached Great Gulf, they loved the idea, and within a couple of days we had a strategic partnership.
So X2 was a Lifetime initiative then?
Almost every deal that we do is a Lifetime initiative. Four Seasons is a Lifetime initiative. 90% of the real estate we buy is off market real estate. We find an area that we want to be in, and we start knocking on doors seeing if we can find a person that wants to sell. In the case of the Four Seasons, I'd heard rumours about them being frustrated with their existing hotel. I'd never had anyone verifying that, but I started thinking that Toronto needs a new Four Seasons, the flagship for the world, and we started looking for a site. I had found out who the owner was, a German owner, and we started writing letters translated into German and after about two years I was able to acquire the property. Once we acquired it, I contacted the Four Seasons and found there was truth to the rumour. They weren't overtly trying to look for a new location, but they were definitely seeking something that was more reflective of the brand. One thing led to the next, but we realized that we weren't really the people that could execute this kind of a project on our own, so we brought Menkes into the project. I think they've done a super job and we're very excited.
How do the partnerships help; is it a way to spread risk, or just a way to bring different expertise to the table?
I think it's expertise, I think it's the risk management, there's a comfort factor to bringing other people in, maybe it's an affirmation. It's a lot of things. If you look at it, X2 is a really good example. It's a great relationship, and it would have been stupid to be greedy about it. X was so successful that we didn't really have to build a sales office, because we capitalized on the brand, and on their existing momentum, marketing, vision, the whole thing. We didn't have to worry about the design because we wanted the two buildings to have a correlation. Having half of a 100% success is a lot better than 100% of a failure, so we're happy to very much participate in a co-ownership basis.
What are some of the key lessons that you have learned over your years of developing?
I'm always learning lessons in this business. I think the most important lesson you can learn is to be financially sound, that means you don't go beyond your means. Lifetime is a very conservative firm in the way we operate, and we are very financially committed to every one of our deals. Generally what we buy we will see to fruition, and we will also put the product on the shelf and wait out the market if necessary.
What kind of management style do you have. Are you very hands on, or do you have a really great set of people behind you that know what's in the back of your mind at all times?
No, my partner Sam and I are very hands on. I don't think you can do this business unless you are very hands on, because it's a very retail business. I may not sit over the counter selling a product to somebody, but I'm very much in tune with the process. You can miss the mark so easily otherwise. Our decisions are consensus. At the end of the day, I want to hear what everybody at the table has to say, from the lowest person to the highest. Everybody's input is very important. I'm not always right, but my business is to be 90% right, so I work at that, and I'm willing to have the 90% cover the other 10%. In terms of mistakes, as long as I focus on my area of expertise, you tend to not make too many mistakes on acquisition. If someone said to me I got a great site for us in Thornhill, or a great site in New York let's say, wisdom tells me that I know nothing about Thornhill, I know nothing about New York. Stay in the market which you've completely learned, you've honed your skills, and you've made your mistakes in.
So maybe I should ask, what was the first condo project you worked on?
The first condo project was a joint venture with Lanterra - WaterParkCity - and that was just at the beginning when the condo market was just started getting its legs. Our biggest competitor was CityPlace at the time. They had these big weekend sales, but still the price was $250 a square foot. It was a massive deal in terms of the number of units, but you knew it was very good for us as an entry level, that you can build one building, then two.
We're seeing that a lot of the parking lots have been bought up, there aren't as many sites available in downtown anymore, so where does Lifetime go from here? Do you ever envision a day where you might start to develop the middle ground between the downtown and the outer suburbs?
Oh, would I go to Yonge and Eglinton? Yeah, I would go to those markets, I would do that today. For me a very important thing, another very good hedge against the market, is to be on a subway line. That's for two reasons. I think that the city supports intensification along public transportation. The province has also identified those as high density areas, and I think the market loves to be on public transportation. I get a lot of feedback from my own children and how they like to live their life. They don't like to drive if they don't have too, they like to take public transportation if they can, if they can't then they'll walk. So I see that what the city wanted 20 years ago is starting to realize itself. There's that psychological thing that also has to happen. I always liked to get in my car because I'm from a different generation, but for my children it's the last thing they want to do, and there isn't sort of a status thing about going on public transportation here. It's a tool, and they use it, and now I use it too. The subway will be a very important part of how we continue to develop, and as developers we would be foolish to ignore that.
I also like to be where the competitive market is. If all of the sudden the East end started to become very popular, I'd want to be in that market. If there are 5 developers, 6 can do just as well. I'll give you an example, when we did WaterParkCity, CityPlace was the big guy down there. How do you compete with CityPlace? We figured, we'd let them get 70% of the market, we'll be happy with 30% of the market, and meanwhile we were able to build 2000 units over there. The people that bought and believed in it have done exceptionally well. At those times they were buying a condo for $149,000. We sold bachelors, and I remember we had a special for $99,900, something crazy by today's standards.
Where do you see the development industry in Toronto heading?
I think it's going to be very challenged. I think it's good for the consumer, but I think it's just because the sites are starting to become very limited. It will be very difficult for us to find sites. Hopefully we will be imaginative enough to find opportunities, see things, or expand our requirements. The number of developers has increased astronomically as well, and some of the unsophisticated developers are less onerous in their acquisitions. We really really evaluate sites, and because they know they just have to get into the market, they're paying higher prices, assuming a lot of things, and that will be interesting to watch.
So you don't think they're doing their due diligence?
I don't think so, but you know somebody said that about me 10 years ago, so you never know. Remember what I said about the 10% mistakes right. There are sites that I don't drive by today because I totally read the market wrong! Just anecdotally, I had the Mirvish site across John Street tied up - the parking lot with the historic building in the corner - and the city owned the laneway between the two properties. I just felt that I could not overcome that particular obstacle, because at the time the City was against intensification around here, and I bowed out gracefully. Well David Mirvish, not a developer, overcame all those hurdles and obstacles and today it's on the market. So that's business. I believe that this is going to be just one of the best places to live, and the really nice thing you get here, compared to a lot of the suburban areas, is that you're going to get tremendous animation coming off the street. You'll have restaurants, and bars, and shops, and coffee places. You'll have all that stuff so you have this relation between the street and the condos. Victory is a really good example of that. We have two restaurants going into the main floor - not clubs, restaurants - and they're all really designed for the neighbourhood.
How easy or difficult was it to get approval for a patio, or a restaurant space in a back alley?
I'll tell you, we're very lucky here, Adam Vaughan is a very progressive councillor, he's tough, but very progressive, and we're lucky to have him in this neighbourhood. I don't get everything I want, trust me - we wanted 18 storeys with Victory, and we ended up with 12 - but he understands that you need people, and you need people to have that relationship between where they live and where they entertain themselves, and where they work, and that's a very important relationship. So he was pretty supportive about that sort of thing. You're really going to have all these restaurants and places all along that street in a very New York example, it'll be a very urban kind of experience. People realize that we don't need to have these silly huge lobbies. They want their amenities, but you don't need lobbies that take up the whole main floor.
Do you foresee the type of development we're seeing now in the Entertainment District migrating farther north?
I don't think the city is going to allow it. I think the city is going to be very sensitive about heights and neighbourhoods, maybe you'll see 8 or 10 storeys, but that's about it. I expect a lot of intensification will happen in the Queen's Quay area - that whole corridor east of the Guvernment - but there is a comprehensive plan, and they're really defined heights and corridors.
Is Lifetime interested in getting into that area?
We've looked and tried to buy pieces there, and we haven't been successful to date… but we are always working at it.
Do you have a favourite Toronto building?
What's my favourite building?
I like modern buildings, and I'd have to say TD is my favourite. I just think it was so ahead of its time, and it has stood the test of time. We take for granted now everything around it, but if you really see some of the pictures when they were building the TD Centre, and look at it within the context it was built in, it's amazing how progressive that was at the time. I don't know if you'd have the courage to do something like that today, in the same way. I don't know what would be something equal to it today in Toronto. Perhaps L Tower was supposed to be that, but they bailed on that whole 'boot' idea. I guess the Absolute World towers are having the same kind of impact out in Mississauga. I gotta tell you those two buildings are outstanding. So I'd have to say that while those are bold, I don't think that in residential you have to be as bold architecturally as you should be with commercial space.
Do you think we'll see another time when the city might be ready for another TD Centre type of development?
I think that the business right now is prohibitive, owing to the cost of constructing these buildings and the rents you get, it's not really aligned right now. I think the real challenge is also the architects out there. There are only a handful of really good architects in Toronto, in my opinion. Whether it's in the commercial or in the residential sphere, you know the same firms that we go to over and over again. The guys that are doing it well now, they're doing it well.
UrbanToronto thanks Mel Pearl so much for sitting down with us!
