Our neighbors to the north--known for being more social--have pioneered a new way to invest in condo projects that adds many more pieces to the pie and spreads the triple-digit returns around. (We already share Niagara Falls--why not condo profits as well?)
A crowd-sourced funding strategy for a downtown Toronto condo project has resulted not only in the completion of the project, but a 233% return ($143M profit) for its base of accredited investors. (That's a way better investment than all these comic books we keep buying.) Plazacorp always has required significant capital injections for its projects, and the traditional route is institutional investors and banks. In May 2007, Plazacorp and Cranson Capital Securities raised $31M from over 150 high-net-worth individuals (including Postmedia CEO Paul Godfrey) to fund its 1,633-unit King West Condominium project in Toronto's tony Liberty Village neighborhood.
The capital-raising strategy evolved after the collapse of Lehman Brothers (a large player in financing Toronto development), which caused Plaza to look for capital beyond traditional sources of equity from large institutions. Says Cranson prez Devon Cranson (top photo): "These types of returns are typically reserved for people who have been partnering with the developer for years. We're focused on opening up this investment opportunity to a large audience." Expect more of these types of funding projects going forward, Devon adds, pointing to the housing supply issues caused by the Green Belt Act, the reduction of low-rise houses being built in the GTA, and the need for builders to focus on building multi-rez units instead.
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