The Canada Mission
The Canada mission
Urban Capital is on a pan-Canadian mission to build from coast to coast. Brandon Donnelly finds out why.
Today the world economy is spiky. Wealth is concentrating itself in a select number of “superstar cities” around the globe. The result of these forces is something that urban studies theorist Richard Florida has labeled “winner-take-all-urbanism.”
In a recent study of housing prices, Florida examined the more than 11,000 zip codes across America using data from Zillow.com. What he discovered was that only 160 of them have a median home price of $1 million or more, and that 80% of those are located in the metro areas of just three “superstar cities”: New York, Los Angeles, and San Francisco.
The same phenomenon is playing itself out in Canada, where real estate headlines are mostly centered around two dominant regions: Greater Toronto and Greater Vancouver. As of September 2017, the only Canadian cities to see double digit year-over-year price increases were Toronto and Vancouver, as well as their respective “spillover” cities: Hamilton and Victoria.
Indeed, just this past fall, RioCan – the largest real estate investment trust in Canada – announced that it had put one hundred of its properties up for sale in order to rebalance its portfolio in favour of the Toronto region. Ed Sonshine, CEO of RioCan, told the Globe and Mail: “We are going to be very Toronto-centric when we are done this.”
Urban Capital, on the other hand, is concertedly working against this trend. While over half of its developments tend to be in the Greater Toronto Area, the firm has also directed a good part of its efforts to other cities, including some decidedly mid-sized ones. The company, it seems, is on a mission – to build high-design urban condominiums across the country and take the title of “Canada’s condominium builder.” But what is driving this mission, and how is Urban Capital able to successfully pull it off in today’s economic
landscape?
The Urban Capital backstory
To properly answer these questions it’s important to understand the genesis of the company, which was born in 1996 with a 48-unit boutique condominium development on a small side street in Toronto’s Fashion District called Camden. But the Camden Street of 20 years ago was not the Camden Street of today. Instead of being at the centre of Toronto’s vibrant King-Spadina district, Camden was a dusty nowhere. Few people believed that there was a market for residences at this location, or anywhere else in the downtown core for that matter.
Because of the perceived undesirability of the location, it took Urban Capital partner David Wex two years to sell about thirty of the units. And this was at an average price of $195 per square foot. Developers in this city now pay more than that for the land alone.
The building Urban Capital developed (jointly, with Dundee Realty) on the site – Camden Lofts – had its share of missteps, as did other pioneering downtown projects at the time, but it got built and, more importantly, it set the stage for the company’s Canada-focused growth strategy. One of the things that excited David about Camden Lofts was that he was able to act as an urban regenerator by introducing design-focused living to a then undesirable area of the city.
Toronto to … Saskatoon?
Following Camden Lofts (and its sister project Charlotte Lofts, built two blocks away a few year later), it didn’t take long for Wex and partner Mark Reeve to start looking beyond Toronto. And the first city they looked at was Ottawa. This was a natural choice: the nation’s capital is close to Toronto, and it’s in the same province, which means many of the codes and regulations are the same.
When Urban Capital acquired its first development site in that city it ended up being very similar to Camden – an underutilized surface parking lot, this time adjacent to a Salvation Army hostel, at the scruffy end of the city’s Byward Market. And what Urban Capital ended up building – its three-phase, 420 unit East Market project – was the first major condominium development proposed in the city in over a decade. Urban Capital may have expanded beyond Toronto, but it brought with it the belief that sensible and contextual infill development has the ability to regenerate important city centre neighbourhoods.
It also brought Toronto-style design to Ottawa. Think raw concrete, floor-to-ceiling windows, exposed ductwork and free-form layouts. And this became a theme for its future developments in other cities. Urban Capital now brings the same product, with the same design aesthetic, as it develops in Toronto to all its new markets.
East Market was a big success, with 50% of its first phase sold on its launch weekend. “When we started in Toronto, people said this wasn’t New York – people don’t want to live in an industrial space in a former industrial area,” says Wex. “And then we went to Ottawa, and people said this wasn’t Toronto; people don’t want to live in a ‘cool’ space downtown. But in both cases they were wrong. People were looking for something different, something that was design-forward, affordable and urban – and that something was lacking in the market. This applied in Ottawa, a city of 600,000, as much as Toronto, at 2 million, and New York, at 10.”
Following East Market, Urban Capital launched ground-breaking projects in Montreal (McGill Ouest, 2003), Winnipeg (Glasshouse, 2012), Halifax (Southport, 2013) and Saskatoon (No 1 River Landing, 2016). All were very much about exporting Urban Capital’s brand
of design-focused urban living. The team was always careful to avoid a Toronto-centric attitude, but by and large it was the Urban Capital condominium gone Canada-wide.
So far this approach has worked exceptionally well, and not just for Urban Capital but for the cities in which they build. In all of the above cities, Urban Capital’s developments were the first or among the first of their kind on the market, making their mark by demonstrating that downtown residential infill could work on a large scale.
Loretta Martin, Development Manager at CentreVenture, Winnipeg’s downtown revitalization agency, spoke to Site about how Urban Capital’s Glasshouse project raised the bar for design and development in that city when it was completed in 2016. “There is a sense that the downtown is now at a turning point with respect to development and investment,” says Martin. “Glasshouse and the larger Centrepoint project of which it is part have finally created the momentum that CentreVenture was looking for since its creation.”
Canada’s local developer
A key component of Urban Capital’s expansion model is partnering with locals, typically family-owned construction firms, whether the Taggarts in Ottawa, Marco Construction in Halifax, or the Bockstaels and Nassers in the Prairies. Local partners give invaluable local knowledge and “cover” to Urban Capital outside its home base, especially in markets where there could be some anti-Toronto sentiments. “They also tend to know the good restaurants,” David adds.
The advantages and disadvantages of working across the country
Clearly there are challenges to entering a new market. Beyond learning about the local vagaries of each place, there’s the bigger challenge of often trying to “make a market.” In almost all of the markets that Urban Capital has entered, there was generally no evidence indicating that the market could support the type of product that UC builds.
This has led Urban Capital to largely eschew market studies for its new cities. “Market studies are kind of useless for what we do. They are typically retrospective rather than prospective, which means they will generally tell you that you can’t do what you’re trying to do, because it hasn’t been done before. So it’s a leap of faith,” says David. And indeed, when Urban Capital enters a new market it usually ends up setting a record for condo pricing (new high) and for unit sizing (new low).
The beauty of new, underserved cities, of course, is that there’s little to no competition. Urban Capital has also found it relatively easy to make a splash in these markets by exporting the sales, marketing, and design expertise it has honed over the last two decades in Toronto’s hyper-competitive condo industry. It gets to play big fish in a small pond.
But that doesn’t necessarily make these pan-Canadian projects easy. Making the math work is still exceptionally difficult. The land is obviously far less expensive than comparable sites in Toronto, but the end sales prices are often much lower, and construction costs can often be higher, which was the case, for example, with Glasshouse. Urban Capital also tends to pair a Toronto-based design architect with a local architecture firm, further driving up its design costs, usually by as much as 20%. And there have been cases where Urban Capital was perhaps a bit too ambitious with respect to its ability to “make a market”.
So why do it?
The reality is that it’s not just the allure of less competition and the ability to play “big fish” that keeps Urban Capital expanding across the country. It’s about something more fundamental: a mission to build a national brand that puts Canada on the map in terms of good urban design and strong healthy cities.
“I know it sounds hokey, but there’s definitely an agenda about this”, says Wex.
When you combine Urban Capital’s Canada-wide focus with its roots as an urban regenerator, you get an intrinsically motivated corporate mission to bring the company’s own varietal of high-design condominiums to cities all across the country. It’s about balancing private interests with the public good, and hopefully leaving behind a made-in-Canada legacy of good multi-residential design.
There’s more Canada left
From Camden Lofts in Toronto in 1996 to No. 1 River Landing in Saskatoon in 2016, Urban Capital has remained true to its conviction that sensible infill development can act as an urban regenerator, and that high-design urban living has a place in all Canadian cities.
As a Torontonian, it’s hard to imagine anyone ever questioning this. But we once did. There was a time when developers only wanted to build office towers in Toronto’s core and the city had to encourage residential development.
For other Canadians, this kind of urban lifestyle is perhaps a bit more novel. But the success of projects such as East Market, McGill Ouest, Southport, Glasshouse and No. 1 River Landing show that there is in fact a market for this kind of housing, even if it would never show up in a market study.
Luckily, Urban Capital has never been one to shy away from the unproven. So watch for “Canada’s condominium builder” to add more locales to its ever growing list of cities in the new year. This pan-Canadian mission is far from over. Urban Capital is determined to make Canada a little less spiky or, at the very least, a little more urban and a little more modern. UC
Case Studies: Urban Capital’s two newest markets.
No 1 River Landing, Saskatoon
In 2016 Urban Capital entered the Saskatoon market to develop what eventually became known as No. 1 River Landing.
Located along the largely unadulterated shore of the South Saskatchewan River, the site is an idyllic interface between the city’s
downtown to the north and waterfront to the south. But before No. 1 River Landing, the site sat empty for nearly four decades; this despite its being clearly identified as a precinct of incredible city building potential.
Raymond Moriyama’s Meewasin Valley Project 100 Year Conceptual Master Plan of 1977 – also known as “The Moriyama Plan” – was the study that first set the stage for development in the River Landing area. It is what subsequent planning documents were built upon and it is what spurred the creation of the Meewasin Valley Authority, the current steward of the river valley.
But for a number of reasons, one of which is the fact that for over the last half century Saskatoon’s growth has been mostly suburban, nothing ever happened at River Landing. It sat dormant until the early 2000’s, when a significant public investment was made in the hopes of kickstarting private development.
But even then, the private investment never quite followed like everyone had hoped. An 11-storey seniors residence was erected, but the perception remained that the public money spent on the area was largely a waste because it failed to spur meaningful investment. That was until Urban Capital, partnering with local developer Victory Majors, proposed a crisp 21-storey condominium known as No. 1 River Landing.
“While not the first development in the area, No. 1 River Landing really became the symbol for its revitalization”, says Michael Velonas, Planning and Conservation Manager at the Meewasin Valley Authority. “It’s the first modern high-rise condominium in Saskatoon. It introduced a new kind of urban lifestyle to the city. And because of its success, we are seeing it act as catalyst for more infill development in the downtown.”
Given how long it took to develop the site, one has to wonder whether it would have ever happened without Urban Capital’s love for all things Canadian. “I asked David if he had completed a market study before doing the project,” says Velonas. “And he told me that if he had done one he would likely never have come to Saskatoon.”
Glasshouse, Winnipeg
In 1999, the City of Winnipeg created an arms-length agency known as CentreVenture Development Corporation. Its mandate was and continues to be centered around revitalizing the downtown core.
At the time of its inception, Winnipeg’s downtown hadn’t seen a privately funded commercial high-rise development since the 1980’s,
according to Loretta Martin, Development Manager at CentreVenture. And in terms of residential development: “Who knows?,” says Martin. “It had been decades since anyone had built multi-family in the downtown.”
In the early years of the agency, CentreVenture completed a number of small developments, including heritage projects and area plans. Eventually something known as the Sports, Hospitality, and Entertainment District (The SHED) was formed in an attempt to leverage the city’s new Bell MTS Place hockey arena as an anchor for urban revitalization.
This led CentreVenture to assemble a development site just to the north of the arena with one fairly simple goal: catalyze a true mixed-use development that would, among other things, introduce additional residential uses into the downtown core.
To kickstart the project, CentreVenture managed to secure Stantec as an anchor tenant and then found a group of local developers to build the office component. But in order to fulfill the mandate of creating a true mixed-use development, the team and uses needed to grow.
This led to the Group Germain coming onboard to develop an Alt Hotel, who then brought in Urban Capital so that residential uses could be added to the broader project – now known as Centrepoint. This was the birth of Glasshouse, a 194-unit condominium tower and Urban Capital’s first foray onto the Prairies.
Completed in 2016, Glasshouse had an immediate impact. “This kind of housing and level of design sophistication simply didn’t exist
in downtown Winnipeg before Glasshouse”, says Martin. “Today it has become a bit of a status symbol to say you live there. There’s a certain degree of prestige attached to it.”
But perhaps more importantly, Glasshouse and the larger Centrepoint project have finally created the momentum that CentreVenture was looking for since its creation.
“There is also a sense”, says Martin, “that the entire industry has had to step up their game because of how high the bar was raised with Centrepoint.”