Toronto Under Construction – Episode 63 with Lauren White From CRBE and Land Services Group, Todd Cullen from Fieldgate Properties, and Max Goyzman from Peakhill Capital

Toronto Under Construction – Episode 63: Lauren White From CRBE and Services Group at CBRE Canada, Todd Cullen from Fieldgate Properties and Max Goyzman from Peakhill Capital

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Lauren White: Executive Vice President at CBRE and a Senior Partner of Land Services Group

Lauren White is an Executive Vice President at CBRE and a Senior Partner of the Land Services Group. With a career spanning over 18 years at CBRE, Lauren has established herself as a leader in land brokerage, leveraging her comprehensive understanding of market conditions, land entitlement, development, and capital sources. Fun fact, she is acknowledged as being one of the Top 10 Sales Professionals for CBRE’s Toronto North office 6 times. 

Todd Cullen: Vice President, Acquisitions and Development at Fieldgate Properties

Todd Cullen serves as the Vice President of Development and Acquisitions at Fieldgate Properties. Fieldgate Properties is part of the well-established Fieldgate Group of companies, which has been creating communities across the Province for over 60 years. Among other developments, Todd Cullen’s contributions play a vital role in creating vibrant and supportive communities for seniors.

Max Goyzman: Vice President of Financing at Peakhill Capital 

Max Goyzman is the Vice President of Financing at Peakhill Capital. He is actively involved in the Southwestern Ontario Real Estate Forum, where he shares insights on investment and financing. A graduate of Western University, Max also holds a certificate as a chartered financial analyst. He specializes in conventional and insured real estate debt and equity. 

The Cost of Land & Interest Rates

Starting from the ground up, Ben kicks off episode 63 of the Toronto Under Construction podcast reading and except from The GTA High-Rise Land Insights Report by Batory Management and Bullpen Consulting. He reads, “on a per-buildable-sf basis (pbsf), the average estimated land price in the GTA was $93 pbsf in 2023, representing a decrease of 5% compared to 2022 ($98 pbsf) and a reduction of 22% since 2019 ($119 pbsf). Old Toronto land transactions fell by nearly 50% from 62 in 2022 to 33 in 2023 and the price per-buildable-sf declined slightly from $143 pbsf to $139 pbsf. The average price was $190 pbsf in 2019, so 2023 was down 27% from the peak. There remains a gap between vendor expectations and the much lower residual value of land based on the new condo pricing and development revenue reality. Based on industry discussions, debt lenders remain cautious and underwriting conservatively, and there is less equity capital available. It has been reported that construction costs are coming down rapidly, but the higher financing costs are making the costs to deliver essentially the same.” Ben asks Lauren do you agree with the data that shows high-density land prices down 20% in the GTA and nearly 30% in the City of Toronto and asks whether she has any commentary on the outlook of buyers and sellers right now? Tune in at 6:07 for Lauren’s insights.

Turning to Todd, Ben mentions that Fieldgate appears to be pretty active purchasing lands for multiple asset classes, and asks him to share his thoughts on land price trends. Tune in at 7:39 for Todd’s response.

Getting insights from a lender’s perspective, Ben asks Max to discuss how lower land values are impacting the market for pre-development loans and construction loans. Tune it at 10:56 for Max’s response.

As Max shares some details on how interest rates have impacted land sales, Ben reads a headline from the CBC article titled Real estate receiverships on the rise in Canada as projects stall (CBC – Feb 2024). He quotes, “residential development projects across the country are increasingly being pushed into receivership. Elevated interest rates, construction costs and delays, and a slower real estate market are all contributing to the rising frequency of projects coming under financial stress, say experts. A year ago it was maybe a call a month, a call every two months, and now it’s a call a week,” said Mike Czestochowski, vice-chair with real estate company CBRE’s land services group. High-rises are especially seeing an increase, said Lauren White, given all the challenges these projects present, and the potential for delays.” A lot of it comes down to mismanagement, as to not realizing the length and complexities of the development process,” she said. Ben says to Lauren, your team has been marketing and selling a number of distressed properties, but I understand that a number of these listings are getting no bids or only credit bids; is that accurate, and is there a specific type of buyer looking at these opportunities? Tune in at 14:21 for Lauren’s response and to hear the group compare what is happening now to what happened in ’08/’09.

The guests discuss interest rates and Ben asks Max how his client’s are responding and what sorts of discussions he is having. Tune in at 20:45. 

Ben also asks Todd how difficult it is to take over an already under construction project, and whether Fieldgate’s construction management firm is underwriting any of these distressed opportunities. Tune in at 21:42 to hear Todd’s answer and a discussion around construction costs.

Toronto Rental Market

Switching gears to the rental market, the group discusses the rental landscape in the GTA including pricing, loans, rental rates for senior living and inflation. Tune in at 25:32 for the discussions.

As the group continue to talk rental, Ben reads the 2024 Canadian Rental Report by Kijiji (with data aggregation and analysis by Bullpen Consulting), stating that the median rent levels in both Toronto and Vancouver dropped when looking at Kijiji listings from $2,600 per month to $2,500 per month in Vancouver and from $2,400 to $2,300 in Toronto. Ben mentions that this is the first signs of a rental slow down after huge upward rent growth from early 2021 to the fall of 2023. As the group discusses, Ben also quotes an article from Oct. 5, 2023 reading that “Peakhill Capital and Z Modular are proud to announce the closing of a $26M CAD deal to finance construction of the first modular apartment project in Canada to be insured by CMHC. The project, known as Fuze Lucan, is comprised of two, 4-storey apartments with 90 units and 141 parking stalls, located at 280 Main Street, Lucan Ontario.” Ben turns to Max stating that he is obviously bullish on the rental market, if he’s doing deals in Lucan, Ontario! But says that we have a record number of housing completions coming to the Ontario market in 2024. Ben asks Max, how confident he is in a developer’s ability to absorb these new rental units and to pay back their loans to you? Tune in at 34:37 to hear Max’s insights on rents in small towns across Ontario, and modular housing.

Getting back to land sales, Ben mentions there are a few builders buying land specifically for rental, like Fitzrovia and Tricon, but historically there haven’t been too many. He asks Lauren if that’s changing. Tune in at 41:16 for her insights and why she thinks we’ll start to see more purpose built rental developers coming back to bid. 

The group shifts to discuss their thoughts on the City of Toronto’s planning department and how the lengthy timelines and issues during entitlement are eating away at any affordability that Mayor Olivia Chow is hoping to bring to the city. Tune in at 42:36 to hear our experts discuss how to *actually* build more houses faster. “The accountability right now, in the City of Toronto Entitlement Process is none existent” says Todd.

Gentrification & Density

Moving along, Ben reads an excerpt from Peakhil Capital’s website (May 2023) Toronto’s Gentrification Hotspots: A Study of Current and Future Urban Renewal stating that “Gentrification is the process of urban renewal through the influx of deep-pocketed residents”. He goes on to mention that the article discusses some of the large scale projects underway and upcoming in Toronto, including The Golden Mile saying that it’s a stretch of relatively uninspiring big-box retail, which will be transformed into a massive high-rise community. The area is surrounded by low-rise residential to the north and industrial and employment uses to the south. It will be a strange mix of low-density neighbourhoods surrounding massive high-density. Ben imagines that many of the suburban pad retail sites Peakhill owns may eventually be upzoned and redeveloped into high-rise, and asks Todd what do you think of this form or city building? Tune in at 51:27 to hear Todd discuss why he thinks transit corridors are where urban planning makes sense.

Turning to Lauren, Ben says that we are seeing a lot of massive density proposed over the last 3-4 years, which is clearly another factor driving down land prices per-square-foot, as there are off-transit sites in the suburbs proposing four or five 50-plus storey towers and over 1 million square feet of GFA. He asks her, are we over-zoning some areas? And if so, do vendors have unrealistic value expectations based on all the square footage they’re getting permissions for? Tune in at 55:17 for Lauren’s response, “I’m nodding my head as you speak”, she says.

Circling back to the article from Peakhill’s website, Ben mentions that The Golden Mile has many heavyweights with planned developments from RioCan, Kingsett, Choice, Dream, Smartcentres, Daniels, Starlight, and Mattamy. He says a significant portion of this density will be rental, and asks Max whether he thinks Toronto is moving towards being more of an institutional rental market like the US, and whether there is an appetite among lenders to fund this many competing rental projects. Tune in at 59:39 for Max’s response.

Missing Middle

In contrast to the hyper-dense projects, is the push for more missing middle. Ben mentions he saw Max speak at Chris Spoke’s Missing Middle Summit, and wanted to discuss this form of development more closely.

He reads a March 11, 2024 article on with the following headline Leading By Example: ‘Missing-Middle’ Pilot Project Moves Forward In The Beaches: “The missing middle typically refers to buildings that have a higher density than a single-family house and a lower density than a mid-rise building. This means laneway housing, duplexes, triplexes, fourplexes, townhomes, and low-rise apartment buildings. Leading by example, in July 2023, the City allocated a Beaches-East York City-owned Green P surface parking lot site to develop a pilot project to demonstrate missing-middle housing at 72 Amroth Avenue, near Danforth and Woodbine Avenues. According to the application, the project will consist of a 6-storey building fronting on Amroth Avenue along with two 3-storey ancillary townhome buildings fronting a central courtyard, and house a total of 34 units. The low-rise buildings will be comparable in scale with those in the surrounding neighbourhood, according to the application.” Ben throws in a comment stating that “we won’t discuss how this parking lot is a 60 second walk from the subway and should be at least a 25-storey tall building, not a missing middling product.” Starting with Max he asks “is your firm providing financing for these small scale projects? And secondly, and will these properties do anything to help with the housing crisis, it seems like they are extremely expensive undertakings.” Tune in at 1:10:58 for his response.

Next, he asks Todd “has there ever been any discussion to do a full community of fourplexes, instead of townhouses or single-detached houses?” Ben mentions he’s seen a couple such communities in Barrie and Ottawa, but says that it doesn’t seem like a housing form that is too popular with production builders. He asks Todd for his thoughts at 1:13:50.

Lastly, he says to Lauren, “I know your team primarily handles larger development sites, do you have a minimum property size that you’ll take on, and when you do take on smaller properties, is the interest as high as some of the larger assemblies?” Tune in at 1:17:06.

Rapid Fire

As the episode wraps, Ben moves on to his Rapid Fire question and answer period asking the group questions like, “Vancouver has proposed a “flippers” tax of 20% on homes sold within one year, will this make housing affordability better or worse?”, “People on Twitter seem to think everyone is trying to set housing developments on fire, have you ever seen any proof of arson in any of these cases?”, “In the typical land deal, how long is it between the handshake agreement and the closing?”,  “If you had to guess, is the Eglinton Crosstown fully priced into land in the area, or will values increase further when it actually opens?”, “What is a better strategy for a residential real estate developer, value-engineer the shit out of a project to get the costs down and launch, or sit and wait for the market to return?”, “Should there be a national tenant registry, so landlords can check to see if that tenant has been evicted before?” and more! 

Tune in now to episode 63 of the Toronto Under Construction podcast!

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