Your Weekly 411: Here's 5 Real Estate Projects That Are DEEP Underwater | Realtor Memberships Declining | Student Housing Demands Drops

The Weekly 411:

Today we're covering

📉 Toronto Realtor Memberships Rates are Declining

📚 Student Housing Demands Drop Across Canada

🛑 Ontario Property Assessments Frozen Since 2016

😰 5 Real Estate Projects That Are DEEP Underwater

🤔 WTF of The Week

Read Time: 4 minutes

📉 Toronto Realtor Memberships Sees First Decline Since 2016

• TRREB membership declined by 1,363 year-over-year in July 2024, the first yearly decrease since 2016.

• Realtors face reduced profitability. Over 80% conduct fewer than five transactions a year.

• Active realtors in Ontario have decreased by 4.5%

• The membership decline trend is expected to continue

Why This Matters: Market share concentration among top agents could lead to a monopoly, resulting in reduced competition and higher prices. Naturally, the top 20% of agents will control most of the market share. With fewer alternatives, progress in the industry may stagnate, leading to lower-quality services. 

📚 Canadian Universities See Drop in Student Housing Demand

• Demand for student housing in Canadian university cities like Kingston, Vancouver, and Surrey has drastically fallen.

• The cap on international students is a major factor, with a 35% reduction in study permits for 2024. Universities Canada warns that the drop is beyond the expected 35% decrease.

• Rental rates have dropped, with an 11% decrease in rent prices in BC and Ontario.

• Internet searches for student housing near universities have also declined significantly.

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🛑 Ontario Property Assessments Frozen Since 2016

• The Municipal Property Assessment Corporation (MPAC) usually assesses all Ontario properties every four years.

• The COVID-19 pandemic led to the postponement of the 2020 assessment update.

• MPAC continues to assess properties for purchases and renovations but must use 2016 values.

• Since 2016, MPAC estimates: 

  • Residential properties have increased 94% in value

  • Multi-residential buildings have increased 104%

  • Farm values have increased 128%

  • Industrial properties have jumped 182%

Why This Matters: The outdated assessments create unfair tax burdens, with some owners paying too much and others too little based on 2016 values. This freeze introduces uncertainty in property valuation and future tax liabilities for owners. When reassessments eventually occur, many could face significant, unexpected tax increases, potentially causing financial stress and market instability.
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😰 5 Building Projects That Are DEEP Underwater

We're spotlighting some of Canada's most notable real estate projects under receivership. These projects highlight the broad impact of rising interest rates and financial mismanagement in the Canadian real estate sector.

They also offer unique investment opportunities for those looking to capitalize on distressed assets. 

The One Skyscraper - Toronto, Ontario

• Debt: Owes $1.5B to senior secured creditors, including KEB Hana Bank; an additional $500M owed to other creditors.

• Size: Planned 91-storey tower with 503 condominium units, expanded from the original 415 units

• Occupancy: 20% leased with a W.A.L.T. (weighted average lease term) of 6.8 years

• Potential: Sale or investment opportunity through court-ordered sale.

Guardian Office Building - Edmonton, Alberta

• Debt: Owes $13 million to Canadian Western Bank and additional amounts to the Canada Revenue Agency and City of Edmonton

• Size: 82,502 sq. ft. office building, built in 1971

• Occupancy: 20% leased with a W.A.L.T. (weighted average lease term) of 6.8 years

• Potential: Value-add opportunity; possible office-to-residential conversion

King Square Shopping Centre - Markham, Ontario

• Debt: Original loan of $50M increased to $82.2M; debtors still owe $52M plus interest

• Size: 340,000 sq. ft. of retail space on a 5.7-acre parcel, with an adjacent 5.9-acre parcel for future development

• Occupancy: Mall consists of 560 commercial units, with 150 still owned by King Square Ltd., 46 of which are leased

• Potential: Development land has potential for townhouses, residential tower, and a 25-storey hotel

Dundas West Site by Contessa Developments - Toronto, Ontario

• Debt: Owes $17.5M to Centurion Mortgage Capital Corporation, $5.43M to Pesciolino Holdings Inc., and $1.574M to Mapleview Pear Tree Inc.

• Size: 0.83-acre site with zoning approvals for a 22-storey, 265-unit mixed-use building (242,187 sq. ft. gross floor area)

• Occupancy: The site is unfinished and nearly vacant, with only a single-story commercial building and surface parking

• Potential: Zoning approvals in place for residential and mixed-use development in a rapidly intensifying area of Etobicoke

30-Storey Connolly Tower - Hamilton, Ontario

• Debt: Owes $12.27M to MarshallZehr, which funded the acquisition and pre-construction financing

• Size: Planned 30-storey tower with 315 condominiums and commercial space.

• Occupancy: Project is stalled at the site plan approval stage, with no construction progress since 2022.

• Potential: The project is subject to a court-ordered sale process

Other notable projects under receivership:

• High-Rise Development in Brampton, Ontario: Another distressed property pitched to Minto Group.

• Two Residential Development Sites in the Vancouver Area: These were offered to Minto but passed on.

• A Redevelopment in Surrey, British Columbia: Another project currently under receivership.

• Townhouse Subdivision in Simcoe, Ontario: Listed as a distressed property.

• Vacant Land and Residential Sites Near Victoria, British Columbia: Pitched to potential buyers, including Minto.

• Vacant Land with Drawings in Langley, British Columbia: A distressed site offered to buyers.

• Plot of Land in Hagersville, Ontario: Another receivership asset in the market.

🤔 WTF of The Week

​The Borough Condos, initially slated for completion in Summer 2023, is now facing a significant delay. As of Fall 2024, the sales center remains standing, but construction has yet to break ground. 

This raises serious concerns about the project's viability and the developer's ability to deliver on their promises. 

With a final occupancy date set for November 2025, the question remains: can the developer build 385 units in just 1.2 years?

Lesson of the Week: Buy from trusted developers with previous experience! Delays and uncertainty can be costly, so it's essential to research and choose a developer with a proven track record of delivering projects on time and to the promised standard.