SkyCity Centre Winnipeg | 45F | 575 Ft | 175.26 M | Cancelled

[Finessing]

Originally Posted by GreyGarden

I also have been curious about the stall in sales. It might have something to do with bad press/optics. I think it also has to do with a more general idea of people being tentative about putting money down for something they have only seen in renderings.

I have a friend who has a parent in glasshouse. We were having a conversation about the building and I asked if she had pre-bought the unit, she said no and that she needed to actually experience the space to see if it would be something she'd actually like to live in. She loves it now.

I have a feeling that this might be a popular sentiment amongst potential buyers. Unlike in Toronto or Vancouver where a developer can reach their pre-sale targets on investors alone I think the majority of people buying units in skycity actually intend on living in them.
I don't know but I feel like this may be contributing to the stall in sales.

But how do you explain the 50% sales they claim they hit right out of the gate? People all of a sudden decided they wanted to see the space before buying?

Aren't there a handful of other projects in Winnipeg that have hit their presales targets and are well on their way to being built?

Something is fishy here...

[GreyGarden]

It makes sense to me that a decent number of people are okay with the idea. I just think that the percentage would be lower here then in Vancouver and Toronto, where having to put money down before a project is built is a more established practice. Especially when people are intending to make this tower their home. Could be wrong though.

I may also be wrong about this but I was under the impression that both Dcondo and Glasshouse both struggled to hit their pre-sale targets somewhat.

I have no skin in this game I just think it would be good for the area if it were built.

[Wolf13]

Originally Posted by jmt18325

but they don't claim to have achieved the required pre-sales (60%). They claim 50%. Unless you have other evidence....

I'm a touch cynical, but I always thought it was 50%, and suddenly they advertise 50% pre-sold and now they need 60%.

There is a chance that the 60% requirment is to offset the commercial aspect since it's empty. If a lease was signed with a major tenant perhaps it would be only 50%. Nonetheless, 50% is the norm but 60% is not unusual. My doubts are my own.

Originally Posted by lilwayne

ya i find it kind of strange that theyve been stuck at 50 percent presales for a year now..

but i guess it would take roughly 40 sales to go from 50 percent to 60 percent so i mean its understandable in this market..

i think they may be 5 - 10 sales away from that mark.. thats what happens when you have over 380 units to sell and ask for 15 percent down payment prior to construction.

on those 350000 dollar units thats a lot of money...

It's not a shot at fortress, but it is common market practice to exaggerate pre-sales, usually to spur other on-the-fence buyers into putting down money for fear of their preferred unit/floor being sold out. Momentum isn't quite there, so even if they've been making a sale here or there, they don't have an incentive to exaggerate the number in my opinion.

The same thing happened at glasshouse... probably exaggerated pre-sales by 10 units, but as sales slowed, then 5, then 2, etc...

[Roger Strong]

Originally Posted by lilwayne

ya i find it kind of strange that theyve been stuck at 50 percent presales for a year now.

Plus of that 50%, 7 units have been for sale at realtor.ca for at least several months now. There used to be an 8th.

BTW, isn't it traditional for presale investors to cash in AFTER or immediately before the building opens?

Originally Posted by GreyGarden

Unlike in Toronto or Vancouver where a developer can reach their pre-sale targets on investors alone I think the majority of people buying units in skycity actually intend on living in them.

They've been marketing SkyCity to "syndicated mortgage" investors elsewhere.

[GreyGarden]

Absolutely they have, I just don't think they are getting the kind of response that they hoped for in terms of investors.

[cheswick]

Originally Posted by Roger Strong

They've been marketing SkyCity to "syndicated mortgage" investors elsewhere.

He's talking about the sales of the actual condo units, not the financing mechanism of the build.

[Roger Strong]

Originally Posted by cheswick

He's talking about the sales of the actual condo units, not the financing mechanism of the build.

So am I.

"Syndicated mortgages" are where a bunch of investors pool their money to buy individual units. Investors make their profit when those units are sold as the building is completed.

(Well. Except when - as Fortress's court documents show - 35% of the investment goes to pay sales and referral fee bonuses, marketing and promotional fees, mortgage broker fees and something called co-development/priority returns.)

Those mortgages are marketed by the builder's closely - but not officially - linked companies. FDS Brokers Inc., FFM and FMP are not associated with Fortress just like an American politician's SuperPAC is not associated, no sir, not at all, with the politician.

[Cyro]

Don't quote me, but it may have been BMyers in this thread or elsewhere. I always believed it was a 60% minimum pre-sale threshold to begin, not 50%, same with DCondo etc..Thread is much more civilized the last few days, Like it..The hockey/NFL posts are a little off the mark..alas, strange thread to begin with..

[Finessing]

Originally Posted by Roger Strong

So am I.

"Syndicated mortgages" are where a bunch of investors pool their money to buy individual units. Investors make their profit when those units are sold as the building is completed.

(Well. Except when - as Fortress's court documents show - 35% of the investment goes to pay sales and referral fee bonuses, marketing and promotional fees, mortgage broker fees and something called co-development/priority returns.)

Those mortgages are marketed by the builder's closely - but not officially - linked companies. FDS Brokers Inc., FFM and FMP are not associated with Fortress just like an American politician's SuperPAC is not associated, no sir, not at all, with the politician.

That's not what a syndicated mortgage is. You don't get ownership in any individual condo units as an investor in a syndicated mortgage.

Here's a decent article that explains how it works: http://www.macleans.ca/economy/realestat...gages-and-the-coming-condo-market-crash/

Here's a real live example of what can go wrong:

There’s another problem, too: if something goes wrong with a project, syndicated mortgage investors are subordinate to banks and other primary lenders, meaning they’re further back in line for repayment—assuming there’s enough money left over after other lenders have received their share. The Collier Centre project in Barrie, Ont., for example, filed for bankruptcy protection last year despite selling all of the available condo units and leasing a third of the retail space. The developer, Mady, owed roughly $30 million to Laurentian Bank, the primary lender, and nearly $17 million to the Fortress loan syndicate. Yet the value of the land in 2012 when Mady purchased it from the city, in a deal that included promises to provide parking and office space, was just $4 million. Even though property values have appreciated since then, it’s far from certain reselling it would have fetched enough to repay the project’s primary lenders, never mind syndicated mortgage investors.

The only way they are able to do this is because of Canada's disjointed regulatory regime. It's why people like Jawad Rathore and Vince Petrozza are allowed to peddle these "investments" despite being banned from selling securities.

[Finessing]

Originally Posted by Cyro

Don't quote me, but it may have been BMyers in this thread or elsewhere. I always believed it was a 60% minimum pre-sale threshold to begin, not 50%, same with DCondo etc..Thread is much more civilized the last few days, Like it..The hockey/NFL posts are a little off the mark..alas, strange thread to begin with..

I posted a link last page that said 40-50%:

Fortress Real Developments will need 40-50% in pre-sales of the planned 388 suites before it can begin construction of what would become the tallest building between Calgary and Toronto in downtown Winnipeg.

http://www.winnipegsun.com/2015/09/14/put-money-down-for-skycity

[cheswick]

Originally Posted by Roger Strong

So am I.

"Syndicated mortgages" are where a bunch of investors pool their money to buy individual units. Investors make their profit when those units are sold as the building is completed.

(Well. Except when - as Fortress's court documents show - 35% of the investment goes to pay sales and referral fee bonuses, marketing and promotional fees, mortgage broker fees and something called co-development/priority returns.)

Those mortgages are marketed by the builder's closely - but not officially - linked companies. FDS Brokers Inc., FFM and FMP are not associated with Fortress just like an American politician's SuperPAC is not associated, no sir, not at all, with the politician.

That's not what a syndicated mortgage is. They aren't buying any units. They are pooling their money together to provide financing to the builder. It's just like a mortgage someone takes out with their bank to build a home, only rather than a bank providing the financing, its a pool of investors.

"A syndicated mortgage, like every type of mortgage, is a loan from an investor/lender to a borrower. The difference between a syndicated mortgage and a non-syndicated mortgage is that there are more than one investor/lender in a syndicated mortgage. There are significant benefits of investing in a mortgage, including the fact that the borrower is contractually obligated to repay the amount borrowed with interest based on the contract. This is very different from investing in securities, such as stocks and mutual funds that do not have a contractual obligation to repay you any of your investment."
https://www.amipros.org/investors/the-to...-about-investing-in-syndicated-mortgages

You're confusing investing in a mortgage and investing in the underlying property. Its more like an MBS where you're investing in the mortgages that are secured by properties instead of a REIT which is actual properties. Regardless it differs from both in that they're completely illiquid and far riskier.

[robertocarlos]

Originally Posted by Cyro

Don't quote me, but it may have been BMyers in this thread or elsewhere. I always believed it was a 60% minimum pre-sale threshold to begin, not 50%, same with DCondo etc..Thread is much more civilized the last few days, Like it..The hockey/NFL posts are a little off the mark..alas, strange thread to begin with..

I can tie my hockey post to Sky-City. You never know what you're going to get in the end.

[Cyro]

Originally Posted by Finessing

I posted a link last page that said 40-50%:

Yeah, BMyers said in the vicinity of 50%, back in 2015, same year as the article you posted, could be higher, could be lower, that doesn't preclude how the retail/commercial componet goes either, contingent on moving forward as well.

[Cyro]

Originally Posted by robertocarlos

I can tie my hockey post to Sky-City. You never know what you're going to get in the end.

Yeah,another cool way to tie the posts in would have been to bring in the lighting of the proposed pentice to red if the Jets score a goal during a play-off appearance. It's stretching it a bit but it may work, I mean, the Jets making a play-off appearance.

[Wolf13]

Originally Posted by Finessing

But how do you explain the 50% sales they claim they hit right out of the gate? People all of a sudden decided they wanted to see the space before buying?

Aren't there a handful of other projects in Winnipeg that have hit their presales targets and are well on their way to being built?

Something is fishy here...

They absolutely did not hit 50% anywhere near that fast... we're not sure they have (although I hope they have) even hit 50% today.

As far as seeing the space, much like Glasshouse had a space in Winnipeg Square, condo developers will have an office and display suite to present to the investors. Fortress has done an AWESOME job with theirs, easily rivaling some of the best I've seen in Toronto.

Originally Posted by Roger Strong

Plus of that 50%, 7 units have been for sale at realtor.ca for at least several months now. There used to be an 8th.

That could very well be Edenshaw or Fortress themselves buying those units to help trigger construction financing. Also not an unusual practice when pre-sales stall.

Originally Posted by Roger Strong

So am I.

"Syndicated mortgages" are where a bunch of investors pool their money to buy individual units. Investors make their profit when those units are sold as the building is completed.

Individual units as in shares in the mortgage, much like a unit share of any other company like Microsoft.

[h0twired]

Originally Posted by Wolf13

Individual units as in shares in the mortgage, much like a unit share of any other company like Microsoft.

Except syndicated mortgages are poorly regulated and lack transparency to the share holders.

[Wolf13]

Originally Posted by h0twired

Except syndicated mortgages are poorly regulated and lack transparency to the share holders.

I was speaking to the concept of a unit share and a unit share alone

Syndicated mortgages aren't bad in principle, but their lack of oversight makes them susceptible to incidents we've seen occur around Fortress in the past.

[Pi3141592654]

Originally Posted by Wolf13

I was speaking to the concept of a unit share and a unit share alone

Syndicated mortgages aren't bad in principle, but their lack of oversight makes them susceptible to incidents we've seen occur around Fortress in the past.

There is very much an issue with investment suitability. I can assure you that the mortgage brokers that distribute these products do not have the qualifications nor the experience to make investment recommendations or take investment action in the context of a client's total portfolio. If you have a $5 million portfolio and invest $100K in these products - and you lose the entire amount or have to wait eons for your principal (or interest) to be returned - you have no issues and shouldn't materially affect your livelihood. However, if your net worth is $200K (let's say as a senior or late in working life) even the minimum amounts typically required - any delays to interest or principal repayment can have an impact particularly when it lacks so much transparency, no liquidity, no marketability, no pricing, and subject to a lot of execution risk on the developer's end. It's laughable to see brokers pitch these comparing them to public equity market returns (along with cherry picking results for periods to the TSX) where there is marketability nor a meaningful comparison.

[OakbluffMB]

Originally Posted by Pi3141592654

There is very much an issue with investment suitability. I can assure you that the mortgage brokers that distribute these products do not have the qualifications nor the experience to make investment recommendations or take investment action in the context of a client's total portfolio. If you have a $5 million portfolio and invest $100K in these products - and you lose the entire amount or have to wait eons for your principal (or interest) to be returned - you have no issues and shouldn't materially affect your livelihood. However, if your net worth is $200K (let's say as a senior or late in working life) even the minimum amounts typically required - any delays to interest or principal repayment can have an impact particularly when it lacks so much transparency, no liquidity, no marketability, no pricing, and subject to a lot of execution risk on the developer's end. It's laughable to see brokers pitch these comparing them to public equity market returns (along with cherry picking results for periods to the TSX) where there is marketability nor a meaningful comparison.

And it would be just as foolish to assume that someone that sells securities would be more qualified, as if they fully understand real estate development and the layers of real estate capital more than a mortgage broker, let's get real here.

You're investing in the quality of the real estate and the quality of the developer in charge of that real estate.

I'd put my money in single-family housing the Toronto area, they're not making any more land.

[Pi3141592654]

Originally Posted by OakbluffMB

And it would be just as foolish to assume that someone that sells securities would be more qualified, as if they fully understand real estate development and the layers of real estate capital more than a mortgage broker, let's get real here.

You're investing in the quality of the real estate and the quality of the developer in charge of that real estate.

I'd put my money in single-family housing the Toronto area, they're not making any more land.

Good try. You don't need someone to sell you anything. Go passive. You're not managing any of the risks when you invest in developments. You have full control of your risk when you invest your money even in the most vanilla ETFs.