Great Gulf Group is well aware it’s forging ahead with one of Canada’s ritziest condo projects in a market that appears to be cooling. In fact it’s bracing for the possibility.
The developer plans to construct the country’s tallest residential buildings -- two towers as high as 92 stories plus commercial space, designed by Frank Gehry, and projected to cost more than $1 billion. Chief Executive Officer Jerry Patava is confident demand for condos will remain strong in a city that’s a magnet for immigrants, even though sales have slumped.
“That’s a lot of square footage, 1.7 million or 1.5 million square feet of residence is a lot to sell but you know obviously, the building itself is spectacularly designed and the location is great,” Patava said in an interview at Bloomberg’s Toronto office. “But if we don’t get our presales, we’re not building our condo.”
Condo sales dropped 30 per cent in the first quarter in the Toronto region compared with the year before, though average prices rose 9 per cent, according to the local real estate board. The retrenchment is happening as supply is rising, with work begun on almost 10,000 condos this year -- the most since 2015, according to Canada Mortgage & Housing Corp.
The project, located in Toronto’s entertainment district, calls for space for an art and design university, offices, retail or a luxury hotel. The first building on the west side, will be launched for presale next year, said Patava, and will total more than 1 million square feet of space. That tower will supersede the 85-story luxury condo currently being built by Mizrahi Developments at the corner of Yonge and Bloor Streets.
The two skyscrapers, which will sit on top of a seven-story podium, will carry the trademark sculptural design that shot Gehry to fame with the Guggenheim Museum in Bilbao, Spain, though in vertical form. The project has been approved for zoning as a mixed-use site and the next phase for the closely held company is to move into presales to get financing for construction.
Patava said the plan is to build the entire underground of the development first, close it off and proceed with the west tower. “I’m hopeful that we get halfway and we can sell the west well, and maybe even start construction, so we can immediately start to sell the east.”
The project is one of several under way by Great Gulf in the city, including a 34-story condo building at Yonge and St. Clair and a 46-story at King and Spadina, both of which will also start pre-sales next year in a market Patava describes as “frothy.”
“We are very selective in what we acquire in the downtown core,” he said. “We spent a year and a half before we bought the site working with Frank Gehry just to make sure we can build it right.”
A drop in immigration flows, a significant jump in interest rates or unemployment could trigger a 10 percent downturn in Toronto home prices, though Patava hasn’t seen signs of that yet. Even if that were to occur he wouldn’t be too worried. “We can withstand that kind of downturn, we’ll just cut back on production and look in the U.S.,” Patava said.
Great Gulf’s U.S. residential divisions, Ashton Woods and Starlight Homes, are two key growth drivers for the company. The company is aiming for U.S. sales of more than 4,000 units this fiscal year in markets including Orlando, Florida and Texas after reaching 3,800 in the 12 months to May.
U.S. residential markets are in “the sixth and seventh inning of a recovery,” Patava said, noting the company’s come a long way after almost filing for bankruptcy in the U.S. during the housing crash. “We still have some pricing power and we still have some volume that we can generate in the U.S.”
--With assistance from Chris Fournier