Thursday, October 13, 2011

Coming change to Ottawa skyline and the new condo project priced at $400/sqft

I was recently in Toronto at a conference and through some strange turn of events, I had to drive from Ottawa to the Toronto Airport to pick up a friend.  Usually, I turn off at the DVP and head down into the belly of the beast, where condo buildings are literally ten feet from your car, but on this occassion, I drove across the North End of the city.  I was quite surprised at the changes in the cityscape of Toronto, even since I lived there about nine years ago. 

What I noticed, was the groupings of new highrise buildings in what could be considered the middle of nowhere special.  Here in Ottawa, we are conditioned to think of condo buildings as being located in super cool, urban neighbourhoods, whereas in Toronto, these 20 plus storey new buildings are located right down town as well as in the suburbs.  It is pretty amazing what is seen from the 401.

I did some research on these groupings and found that these buildings are strategically located on subway system lines running throughout Toronto.  These buildings have easy access, usually within 800 meters of a subway or LRT station.  With the public transit system, buyers of condos in Toronto's boroughs can be downtown in a timely manner but purchase a condo at a reduced price, compared to the core.

Don Campbell, from REIN Canada, has estimated the being within 800 meters of a light rail transit or subway can increase values of properties by factors of 25% or more.  In Calgary, land prices have risen dramatically on the proposed West Leg of their light rail system.  This is starting to happen here in Ottawa as well, Public Works is targetting any new government buildings must be located within 800 meters of major transportation hubs.  As cities grow, transportation problems increase and one method for dealing with these issues is to increase availability and access to public transportation.

By 2018, City Council willing, Ottawa will have a functioning light rail transit system.  To my knowledge, (and maybe I am not completely up to date), the system will connect the existing "O-Train" with a downtown tunnel at LeBreton Flats.  This tunnel will cross the downtown to emerge in the heart of Ottawa U.  Eventually, we will add over time more LRT and gradually reduce the reliance on buses.  A major hub station is planned for the land on the South side of Carling, South of Champagne Ave.  This is to be the hub connecting to the West bound light rail.  This will have an amazing effect of further increasing the desirability of Little Italy and continue to revitalize the Dow's Lake and Preston Street corridor. 

By 2018, just 6 short years away, the O-Train will cease to be a Carleton University grocery train (or as many people call it, the Train from nowhere to nowhere) and will become a vital link between the downtown core, the airport, the East end and Scotiabank Place.  When this starts to happen, more high density development will occur along the lines of the light rail, leading to condo buildings "popping" up throughout the city, just like in Toronto. 

Who is going to live in these condo buildings that are "popping up"?  Consider this, over 14,000 immigrants move to Ottawa annually, usually from countries where higher density living is the norm. As well, here in Ottawa, we have approximately 15,000 baby boomers reaching 65 each year for the next 20 years.   Estimates have that over 5,000 condo units are needed annually to satisify these market segments.  These estimates do not take into account the migrants from other parts of Canada moving to Ottawa to replace retiring workers.  By following both demographics and immigration there is a very strong push towards condominium living.

In the near South End of the city, on the LRT line, there is a new building launching in late October, early November. It will be priced from approximately $400/sqft, as compared to $475 to $500/sqft in core neighbourhoods.  This building is located on the current O-Train line.  It is part of the Marriott Hotels brand and shall be an affordable, luxury building, featuring true warehouse style and look. 

For more information and to be added to the special VIP opening event, please email me at greg@bennettpros.com

Invest in syndicated secured second mortgages

Fortress Real Capital allows you to invest directly into large scale Real Estate Development projects with real security and real returns. Fortress is an RSP and non-accredited eligible syndicate mortgage product that allows a consumer to invest directly into the proven market of Canadian real estate development and construction. Your principal amount is fully secured against the subject property where you enjoy steady interest on your funds and, where available, profit participation at the end of your term.

You are not receiving shares or units that can change in value. Instead your principal is secured against the property while you enjoy steady interest on your funds and where available, profit participation at the end of your term. Fortress offers real collateral in the form of a direct charge against real estate, a feature unique to syndicate mortgages. Projects include interest reserves to ensure funds are paid out at proper intervals. Most importantly, all high-rise projects are bonded and insured to protect Fortress investors from cost over-runs.

• A syndicate mortgage is where several investors combine funds together to create one instrument (a mortgage). The investment 'moves' as one funding but each investor is individually registered and secured proportionally.
• Syndicate mortgages allow you to have direct collateral for your investment and ongoing returns from the interest earned by the mortgage. Fortress structures opportunities for development investing through syndicate mortgages to provide investors with the ability to earn higher returns through profit participation while still maintaining solid security and collateral on their principal investment.
• The Fortress philosophy is for direct collateral through a syndicate mortgage. Owning shares in a corporation can offer a larger return and more profit but can also present greater risk (cash calls, dilution etc). FRC projects are designed to pay steady cash flow and profit upon completion.
• Developers work with Fortress as an equity partner or mezzanine lender. FRC provides them the additional capital they need outside of the funds the bank provides to buy the land and finance the construction. Developers are carefully screened and contribute their own equity and cash also at prescribed intervals.
• Appraisals are provided by AACI designated members. These professionals are tasked with providing hard, reliable valuations of land to banks, especially when land is being purchased. This baseline for value provides a key element of assessing the current value of a project.
• Appraisals are critical as they help assess the 'loan to value' ratio of a deal. This is one of the formulas that illustrate the degree of risk associated with your investment. Since you're secured against the land/property, the value of that asset is key in the event of any problem with the project; the asset can be sold to help recover your principal investment.
When appraisals aren't available (eg lack of direct comparables), Fortress engages third party research companies to provide detailed analytics to assess the value of a property or parcel.
• Everyone has heard of or seen horror stories where construction projects have either stalled or sat unfinished for years at tremendous cost to investors. This is often a result of a failure to achieve zoning or not having the proper financing in place (low pre-sales etc). Fortress chooses projects that have minimal zoning risk and strong sales objectives to protect the investor from any sort of protracted delays. Additionally, Fortress requires all high rise projects to be insured and bonded. This is an essential component to approving any build so investors are insulated from delays and budget stress.
• Performance bonds are a type of insurance taken out on high rise construction that protects the development and investors from a variety of exposures. Together with labour and material bonds and a builder's risk policy, they form a complete risk management solution. This does come at a cost to the project and is a necessary expense for any project so that the investors are protected; for Fortress, the savings/increased profit of not having these protections in place is not worth the risk.
• A default would occur if the developer cannot pay back the funds by the maturity date of the contract. Fortress would, in advance, work with the developer to find a solution that could include:

o a payment to investors in exchange for an extension
o an institutional refinance to buy out the Fortress Investors

If these cannot be achieved, then the process would commence to sell the property to recover the investor monies. This is a significant advantage to being secured via syndicate mortgage; recovery of your investment will take priority over all unsecured debts, monies owed by the corporation and even construction liens.

Centro Mortgage Inc. is proud to offer the Fortress Real Capital product.
• 8% annual return (non-compounded)
• Standard term is 3 years (shorter terms available upon request)
• $25,000 minimum
• RSP, LIRA, LIF, RIF, RESP eligible
• Loan to Value Ratios of typically 50% to 75%
• Investment is secured by a charge on real estate
• Certified appraisals and/or valuation opinions
• Also TFSA and RESP eligible ($15,000 minimum)

Monday, October 10, 2011

Apartments in Houses

Secondary Dwelling Units, By-law No. 2005 - 367 - Effective September 2005, secondary dwelling units, also known as accessory apartments or "in-law suites" are now permitted in all areas of the City with the exception of the former Village of Rockliffe Park. A secondary dwelling unit is a single self-contained, rental apartment with its own kitchen and bathroom. While many are basement apartments, a unit can be created on any floor of the house.


What does the by-law say?
No more than an amount equal to 40 per cent of the gross floor area of the principal dwelling may be developed for a secondary dwelling unit, except where a basement unit is created, in which case, there is no maximum size. The full basement area can be used.

A maximum of one unit is permitted in a detached dwelling, one in each half of a semi-detached building and only one for the whole of a duplex dwelling.

The new unit must be on the same lot as the principal dwelling unit and must not change the streetscape character along the road on which it is located.

No additional parking space is required but where a new one is provided, it cannot be located in the front yard. Tandem parking in the existing driveway is permitted.