Original article reprint from the torontosun.com, Nov 8th, 2024
https://torontosun.com/life/homes/developers-join-forces-to-save-multi-tower-project
• Special to Postmedia Network
First of four Elevate Condo towers in Kitchener to be delivered in 18 months
There’s been no shortage of high-rise developments that have become insolvent since the demand for condos has flat-lined in recent years but that doesn’t mean they’re dead in the water.
One such example is Elevate, a four-tower project at 1333 Weber Street East in Kitchener, which was brought back to life by a consortium composed of Dorr Capital Corp., ELM Developments, and Gentai Capital Corp.
Brian Dorr, president and CEO of Dorr Capital Corporation, says it took just over a year to acquire the property from its distressed owner, and that, thanks to his background in default management restructuring, he was confident the project could be rehabilitated.
“The previous developer had experience, maybe not a lot in Canada, but he wasn’t as well capitalized as he should have been,” Dorr said.
Another reason developments devolve from distressed to insolvent is a breakdown in communication with their lender. Some developers have a propensity to avoid their lender in such cases, but Dorr advises developers instead be open and forthright with their lender.
“You just got to be very transparent with what you’re doing, but also you have to make sure that you catch problems really early in the process and tell your lenders so that they can work with you,” he said.
“Those are the people that, even if they don’t have enough capital, lenders are working with now and are going to make it through.
“Conversely, the ones who aren’t straightforward with their lenders, or who try to hide problems they may have, or don’t do what their lender recommends, those guys are doing it at their own peril. I’ve seen that happen many times.”
Granted, a developer has their own vision for a project, but Dorr says they need to remember their lender is essentially a partner.
There could be a slew of more insolvent properties in the Greater Toronto Area. According to Dan Wootton, a partner at Grant Thornton, a lot of condo investors are listing their units on the resale market.
Resale condominium units are cheaper than on the preconstruction market, not to mention they’re move-in ready, and Wootton anticipates the recent run of insolvent condo projects isn’t over.
But it will almost exclusively involve small- and mid-sized developers.
“There are a lot of inventory of used units on the market and buyers have choice, and the cost of a new unit is generally higher than a used one,” he said. “There’s more supply than demand. Demand is impacted by higher interest rates, and interest rates have also impacted developers as well because the cost to borrow money to build over the project is higher.
“The larger developers typically have more cash resources.”
Elevate was purchased for $75 million and anticipates delivering the first tower in no more than 18 months.
Tower A, which is halfway through construction, will be 15 storeys and have 177 units, while the second building, also 15 storeys, will have 193 residential suites. Towers C and D, both 12 storeys, are planned for 159 and 93 units, respectively.
