The Toronto Star recently broke the news that Urbancorp has cancelled its Kingsclub Condominium complex on King Street West (read the article here).
In place of the condos, three towers of rental apartments are to be built instead.
What does this mean for anyone who bought a pre-construction unit in this development? Basically, they're screwed.
Yes, they'll get their deposits back. But all they'll have to show in return is a measly bit of interest .
Needless to say, these buyers are nonplussed.
When I first heard the news, I immediately thought of the South Park episode referenced in the photo at the top of this blog post. (If you haven't seen it, here's a short clip that sums up the episode nicely).
Aaaand... it's gone!
Over the past couple of weeks, I’ve had a bunch of clients ask whether or not anyone could have seen this coming.
I tell them all the same story:
I began my real estate career back in 2006, at a small boutique brokerage in the St Lawrence Market area.
My broker of record there had decades of experience in the real estate game, and had spent a handful of those years selling pre-construction condos.
He told us stories of how so many young buyers lost their deposits when the market crashed in the early 1990’s, because the units they had committed to buying were now worth 20% - 30% less than what they had agreed to pay and they could no longer get the financing they were counting on to close.
He also told us about the possibility (however rare it may be) that a condo development could indeed be cancelled if the right (or rather, wrong) set of circumstances were to occur.
These stories stuck with me, and whenever I have a client express interest in purchasing a pre-construction condo I provide them with a detailed list of "what could go wrong." And what happened at Kingsclub Condos is on that list.
Make no mistake, Urbancorp is within their legal right to do what they've done here. It still stinks though.
I keep going back to the question, "What else could these buyers have done with the deposit money that sat stagnant in a trust account for years?"
I'm sure some of them could've used that money to purchase a resale condo instead, rent it out, create some positive cashflow, and start building equity.
That opportunity is lost now though, and these buyers are back to square one.
If there's a positive to come out of this story, it's that we all now have a memorable, real-world example to point to when considering the risks involved in buying pre-construction.
Sure, what happened at Kingsclub Condos is a rare occurrence in the Toronto market, but I don't think any of us will soon forget it.
It'll stick around as a cautionary tale, the one about the time the developer told their buyers, "Kiss your condo goodbye!"
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