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Vaughan Investors can you comment: Cosmos condos 1100 unit with 100% presales giving the money back?

Matt Crowley

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Dec 14, 2013
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Can those familiar with the Vaughan market provide any commentary on this: https://www.theglobeandmail.com/can...condo-cancelled-leaving-1100-buyers-in-limbo/

My take on this is that it has nothing to do with financing ... with 1100 presales and some buyers putting down $80k+ there is no way they don't have the equity to go forward on this. Construction interest rates are minor and reserved in interest carry.

I think this is a result of hard costs going up 20-30% in Toronto area. Anyone close to this project have some insight?
 

Thomas Beyer

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Aug 30, 2007
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Financing is a function of equity provided and loan to cost. If costs go up, financing has to go up and if bank doesn’t up it then more equity ie cash has to be provided. If equity is unavailable or owner unwilling to put it up project gets cancelled as “financing” is insufficient.

Makes sense.

An underdiscussed topic is the role construction financing plays in higher and higher condo prices and/or the lack of rentals being built.

As this kind of new supply dries up prices will go higher despite all these new taxes in BC and/or ON.

Only AB oversupplied with condos so don’t buy there yet unless smokin’ deal well below construction cost. Expect little upside here until early 2020s.

Buying used from distressed sellers ( incl overleveraged REIN members ) a better option usually as financing tougher to get for folks, esp in Alberta as prices have flatlined and rents fallen 20-40% and are just starting to rise ever so tepidly.
 

Matt Crowley

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...equity should be no problem at 100% presales. Projects can go ahead with sufficient equity on 30% presales. I think this failure is due to costs increasing - and drastically. Not a "financing" problem the company discussed. Broader question is how much have construction costs risen in GTA? These are not small or unsophisticated operators.

This is 1200 buyers. Mega-mega project.
 

housingrental

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It is possible the answer is none of the above.
There might be an opportunity for higher profit to start sales again at a higher price for a slightly different offering, even an inferior offering for a higher price.
Condo prices have appreciated materially in Vaughan since the initial pre-sales.
The subway is also now open.
They could re-launch at a higher price and likely sell through.
 
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