Net in-migration of rats in Chinatown

[BrianPersaud]

Now a high density of rodents in Toronto`s Chinatown shouldn`t be surprising...it also has the highest density of restaurants and grocery stores in the city.

When I see Chinatown-Kensington market area I see great opportunity for some residential development. The area is a classic case of how economic fundamentals, when uncontrolled, can kill a neighborhood.
Being a neighborhood that is very accessible and close to the core, Chinatown-Kensington, has always been a highly concentrated area with business and retail. As a result, many different businesses move into the area and area becomes popular with people looking for a diverse shopping area.
Overtime, because of the super competitive nature of a neighborhood, the winners of economic fundamental dance are only a very narrow segment of particular uses, crowding out other businesses that supplied the diversity in the first place.

This is what happened in Chinatown. In its first incarnation, Chinatown started with one successful laundry business started by Sam Ching in the 1870’s.

Sam Ching, started a trend of thousands of Chinese immigrants starting laundry shops in the area, as more and more migrant Chinese started to move in they saw opportunity to open different kinds of businesses, and they opened restaurants and grocery stores. These businesses started to become really popular and profitable; as a result, more and more would be restaurant and grocery store owners starting to prospect the area and they were willing to pay higher rents to landlords than the other businesses (like the laundry shops).

The other businesses in the area started to get crowded out because they couldn’t afford the rents in the area as the rents were going up.

Fast forward to today, the area becomes super saturated with restaurants and grocery shops, driving away other businesses (i.e. to Markham). What’s ironic it’s the diversity of businesses that would create extra traffic to the area which caused the restaurants and grocery shops to be popular in the first place. Chinatown-Kensington market is now a rat infested fad neighborhood.

Toronto should increase the diversity of the area by making it economic viable for developers to increase the number of residential and office buildings available along Spadina (YES CONDO’s). The AGO and Ontario College of Art and Design are doing a great job creating a different type of anchor to attract people, however, it doesn’t make economic sense for a developer to build a condo or office building on Spadina over Markham…that’s why Markham is getting more jobs and Toronto is getting more rats.

 

[housingrental]

Brian - I might be mistaken here but doesn`t Markham (and Vaughn) have materially lower mill rates for office space and didn`t this have some impact over the last 30 years of hallowing out the core to york region?

 

[Nir]

Hi Brain, Thanks for the history lesson. Interesting.

In every city some areas develop more than others and then after a period of time other areas develop more etc..

I don`t understand what are you saying fundamentally other than that. As an investor, I prefer accepting this phenomena as a fact
as a similar story can be written about any other city. Cheers.

 

[BrianPersaud]

QUOTE (housingrental @ May 5 2009, 04:58 PM) Brian - I might be mistaken here but doesn`t Markham (and Vaughn) have materially lower mill rates for office space and didn`t this have some impact over the last 30 years of hallowing out the core to york region?

Hi Adam, good point. The overall costs of doing business are lower in York Region...lease rates increased much faster that property taxes. Lower Mill rates combined with lower lease rates of York Region made it more attractive to those other businesses that cannot generate to income to have space downtown. What`s crazy is that it`s these other businesses (that have since moved) create the diversity that drives people traffic that make the restaurants and small grocery shops popular in the first place.

 

[BrianPersaud]

QUOTE (investmart @ May 5 2009, 08:28 PM) Hi Brain, Thanks for the history lesson. Interesting.

In every city some areas develop more than others and then after a period of time other areas develop more etc..

I don`t understand what are you saying fundamentally other than that. As an investor, I prefer accepting this phenomena as a fact
as a similar story can be written about any other city. Cheers.

QUOTE (investmart @ May 5 2009, 08:28 PM) Hi Brain, Thanks for the history lesson. Interesting.

In every city some areas develop more than others and then after a period of time other areas develop more etc..

I don`t understand what are you saying fundamentally other than that. As an investor, I prefer accepting this phenomena as a fact
as a similar story can be written about any other city. Cheers.

Thanks for the acknowledgment...you are right I`m essentially pointing it out. I really enjoy understanding how economics effects real estate in every way. ..and how we can find opportunities from these phenomena we look at as facts.

Perhaps I can clarify with another example of how real estate investors can challenge the phenomena to create opportunity.

If you are familiar with Toronto you would definitely know its entertainment district. Around 2004 there was 88 clubs crammed into a square kilometer area. There would be about 50,000 visitors from Thursday to Sunday evening. Completely inefficient way to use land.

When their is inefficiency there should be opportunity!

So here`s the opportunity....over the past few years the city is trying to increase the diversity of the area via city policy to make the area different. Allowing condo`s to be built on parking lots to change up the make up of the neighborhood was the central platform for creating the diversity (along with enforcing city by-laws more strictly making it more difficult for new clubs to open up when an old one would leave).

This gives us ample opportunity to buy property and used the forced appreciation route to drive up ROI`s. Being a real estate investor who can understand these opportunities takes you to another level... a superstar like Stephen Diamond who raised $70 million in the blink of a eye last fall.


I know by diligently going through a city, seeing how deals are done and how opportunities are created helps me to think up ways to create amazing opportunities like Gord Nevin and the Genosha hotel in Oshawa. By constantly asking these types of questions I create so much value to investors ...I`m so glad that Don has lead me to think with the paradigm of economics and real estate....I`m so glad that I have a forum like myreinspace to air out my crazy ideas...you guys challenge me to be better...I love real estate!!!!

 

[housingrental]

What opportunity for rezoning are you investing in currently Brian ?

 

[BrianPersaud]

QUOTE (housingrental @ May 6 2009, 09:12 PM) What opportunity for rezoning are you investing in currently Brian ?

i`m currently working on severing one property into 2 lots on a rental property that cashflows with 10% down. check out my blog, its been a ride.

 

[housingrental]

Your blog is long and confuses me

What town ?

 

[BrianPersaud]

QUOTE (housingrental @ May 7 2009, 05:15 PM) Your blog is long and confuses me

What town ?

Thanks for the advice on the blog...the latest development type deal which involved rezoning was in Cornwall.

 

[bizaro86]

QUOTE (BrianPersaud @ May 6 2009, 07:53 PM) i`m currently working on severing one property into 2 lots on a rental property that cashflows with 10% down. check out my blog, its been a ride.

I read the blog you have linked in your signature, which doesn`t have any mention of rezoning in Cornwall. Is that in one of your other blogs, which is invite only? I`m just curious because I know I`d be interested in hearing a bit of your story, and I`m sure others would be as well.

Michael

 

[BrianPersaud]

QUOTE (bizaro86 @ May 12 2009, 01:13 PM) I read the blog you have linked in your signature, which doesn`t have any mention of rezoning in Cornwall. Is that in one of your other blogs, which is invite only? I`m just curious because I know I`d be interested in hearing a bit of your story, and I`m sure others would be as well.

Michael

Hi Michael, its the post from Sunday March 22nd my partner details the experience getting the deal done. Essentially we were buying a property with two homes on one lot and we had a hell of time getting financing. We haven`t begun the rezoning yet.

Just a quick history of my life in development: I started out doing land deals 2 years ago and Don told me that continue to hit those singles and doubles....boy he was right...these deals require lot of time money and effort. I`ve been working away at a subdivision deal for a long time. i`ve met countless lawyers, private investors, developers and builders. From my experience, the most important for REIN members to know, is that they`re are so many investors out there that love doing JV`s. Most of these big guys get money thrown at them.

In my opinion the reason why they get so much JV money is simple: real estate investors are the best relationship managers in the world. They have to deal with sellers, they have to deal with trades, they have do deal with community groups, lawyers, bankers, governments...the entire scale of society.

I`ve been a big sponge in learning everything I can and i`ve been really lucky to meet these folks. I`ve seen some amazing deals negotiated, I seen so many ways they eliminate risk, and in turn i`ve seen what they have done to get hosed (even Tridel nearly went bankrupt). I`ve seen people present deals to these private investors and developers and get picked apart so bad they didn`t know what hit them.

Constantly learning about the art of the deal and hearing that most of these guys started out doing the same thing we are doing has really energized my passion for real estate. Today i`m a better real estate investor than I ever could have been and knowing them has given me perspective on where I have come from and where I am going to be.

Thanks for the interest, I will definitely be sharing some of the experiences I have had. Email me if you ever wanted to talk about something specific [email protected]