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Vancouver-based Concert Properties plans five residential rental buildings for Toronto

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by Brian Martin

Tumbling real estate prices in Toronto have accelerated plans by a Vancouver-based development company to create five new purpose-built rental residential buildings – four of them highrise towers.

Tumbling real estate prices in Toronto have accelerated plans by a Vancouver-based development company to create five new purpose-built rental residential buildings – four of them highrise towers.

That was the word in late March when David Podmore, president and CEO of Concert Properties gave an informal talk to the Vancouver Regional Construction Association.

Concert is one of Canada’s larger real estate and development firms and has long been active developing properties in the Toronto market.

The company is owned by 19 pension funds with interests in developing and acquiring commercial and industrial properties, rental housing, multi-family condominium housing, seniors’ living communities and resort developments in B.C., Ontario and Alberta.

Unlike many development firms which find themselves on shaky financial ground during the economic downturn, Concert is flush with cash. By June, said Podmore, it will be sitting on $800 million.

“We’re building right now in Toronto,” Podmore said. “In the last few weeks, we have committed to five new buildings in Toronto. Most will be in the ground by January. Two of them will be in the ground within four weeks.

“What we’re seeing in the Toronto market is the price of land coming off very rapidly and there is a good opportunity to get in at reasonable values.”

Podmore said the company recently bought a very large site just north of City Hall. The original asking price, he said, was $34 million. Concert got the property for $17.5 million.

“The beauty of the Toronto market from Concert’s point-of-view,” Podmore explained, “is we can afford to build rental.

“We can build rental and make it work. We get about a 6.5 per cent return going in. That will increase over the years as rents increase.”

Concert has seen a dramatic easing of construction costs in the Toronto market. The company recently tendered a tower in Toronto and saw a 15 per cent decrease in construction costs over what it had estimated going into the project.

As a result of two very firm decisions it made, Concert has found itself in a financial position to take advantage of the economic downturn.

One of them, said Podmore, was a decision made two years ago to begin pulling out of the condo market — particularly in Vancouver.

Building rental properties, he said, had become impossible. In addition he believed that land and construction costs were pushing the price of condos out of reach of too many buyers. This led to what he calls the company’s “75-25” business plan. It means the company has committed 75 per cent of its resources to income property it builds and retains. The remaining 25 per cent is committed to condominium development.

The second decision goes back to the founding of the company 20 years ago. It does not use debt to purchase land. It buys for cash.

In addition, when it is building a project, while it prefers to build with cash, if debt is necessary Concert always maintains at least 30 per cent equity.

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