Toronto Storeys’ Housing Issue of 2018: Condo Cancellations
The size and sheer volume of GTA condo cancellations in 2018 sent shockwaves through the industry and left thousands of purchasers stunned and upset.
According to condo analytics firm Urbanation, from January 1 to mid-December, 2018, 4,202 units (or 12 buildings across nine developments) were cancelled.
That’s staggering, considering that in 2017 there were 1,678 cancelled units in eight buildings and just 379 cancelled units across three buildings in 2016.
“You can usually expect 300 to 600 units a year as there’s always a misfire or two,” says Pauline Lierman, Urbanation’s director of market research.
Cancelled Projects In 2018
Two large Vaughan three-tower projects, Liberty’s Cosmos and the Gupta Group’s Icona, with 1,453 and 1,633 units respectively, were the main contributors to 2018’s tally.
Some of the others included LeMine Investment Group’s Central Park Ajax, Lamb Development Corp.’s Wellington House and the James, Time Development Group’s Kennedy Gardens in Scarborough and The Residences of The Hotel McGibbon in Georgetown.
In a year when the condo market performed very well with low supply and stable demand. News of the Cosmos and Icona’s cancellations were a surprise. Sales numbers certainly weren’t to blame. According to BILD, in May 2016, sales of 780 units in Cosmos Tower A and B and LeMine’s sales of 400 units in Central Park Ajax helped propel that month’s high-rise sales to the second-best on record.
“All projects that cancelled in the last year had more than 80 per cent of the units sold,” says Lierman. “The biggest factors are cost and financing.”
Cosmos Condos, near the TTC’s new Vaughan Metropolitan Centre Station, was scheduled to be complete by 2020. In April, a letter from Liberty director of sales and marketing, Shawn Richardson notified purchasers that their Agreements of Purchase and Sales were being cancelled due to “circumstances beyond our control and Liberty’s best intention” as financing could not be arranged on terms satisfactory to the project vendor.
Icona, with its 51 and 53-storey towers, launched in February 2017. The condo sold out quickly but was cancelled in September. The Gupta Group also cited an inability to obtain satisfactory financing as the reason for their project’s termination.
In the case of Central Park Ajax, the City of Ajax pulled the plug. The town owns the land and was a partner in the project. It terminated its partnership with LeMine after discovering the developer didn’t have financing in place. Construction has yet to start at another LeMine project, The Academy, a student rental housing project in Scarborough that sold out in 2014. LeMine is a relatively new development company, without a prior track record in the GTA.
“If you are inexperienced or this is your first major project, it’s an uphill climb,” says Lierman. “It’s difficult to get your ducks in a row, you may not realize how long it will take and you have to have planned for the unexpected.”
The Residences of the Hotel McGibbon project began in October 2015. Silvercreek Commercial Builders Inc. proposed to tear down the McGibbon Hotel in downtown Georgetown and replace it with a 125-unit residential condominium building. Early in 2017, Silvercreek reached an agreement with the Town of Halton to preserve a portion of the heritage building, while keeping the condo building to 10 storeys. But Silvercreek cancelled the project in early December citing “circumstances beyond our control that make the project un-financeable.”
Lamb Development Corp. pulled the plug on Wellington House after it was forced to alter the original design of the building. The new design would reduce the project from 23 to 17 storeys to get rezoning approval from the City of Toronto. With approvals still months away, Lamb released purchasers’ units and returned deposits.
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Early in 2018, Lamb cancelled the James condo at 452 Richmond St. W. due to a rezoning issue. The condo was pre-sold in 2014. This spring, the Ontario Municipal Board also ordered the council to allow for the construction of a 17-storey building with 245 units that Lamb is relaunching as the Woodsworth.
“If projects come to market without approvals, the time frame can be elongated and combined with other cost factors, they end up not going forward,” says Lierman. “Costs are a big factor and with the labour market, tariffs and material costs going up, it can be it hard for a project at a specific stage to get financing.”
What’s A Buyer To Do?
When condo projects are cancelled, purchasers get their deposits back but lose out on the appreciation their unit may have accumulated between when they signed and when their suite is completed.
READ: Toronto Condo Developers Tell You Where They’d Buy Right Now — If They Couldn’t Choose Their Own Projects
Generally, there little buyers can do when a project is cancelled. In the case of 451 Cosmos, buyers filed a class-action lawsuit in late August against Liberty Development Corp. and the outcome may give developers pause. The buyers asked the court to declare their contracts void so they can sue the developer for appreciation lost in the two years between when they bought their units and when their deposits were returned. The application claims the sales contracts went beyond what the province’s new home warrantor, Tarion, permits for pre-construction agreements.
Lierman says buyers can protect themselves to some extent by doing their due diligence and researching builders and developers. That wouldn’t have worked for Cosmos, however, since the builder was well-established. Lierman also advises checking if a project has its approvals in place. The good news is she doesn’t expect a rash of cancellations in 2019.
“There might be one or two projects that are vulnerable, but we should see more evening out in 2019,” Lierman predicts.