A different twist in the Saskatoon condo conversion saga
In spite of the fact that approval has been obtained and the Kelsey Apartments have been separately titled, the building’s owner, Victory Majors Investment Co. has decided to abandon its plans to sell the units off. Kay Nasser, founder of the company has announced that they will hold onto all 77 units and rent them out.
The original plan was to create “luxury condo units,” but skyrocketing construction costs got in the way. Nasser told Star Phoenix business editor, Murray Lyons, “The market wasn’t there and we couldn’t get people to do the work. It was getting prohibitively expensive.”
The Kelsey has been renamed, the “Phoenix” and the property manager will begin showing the vacant 1, 2 and 3-bedroom apartments to prospective renters this weekend.
Given the extremely low vacancy rates for apartments in Saskatoon, I think we can see this as a pretty positive story. Does it finally make more sense for owners to hold and rent the apartments that they own? Could this be the first sign of a turn around that works in favour of local renters? Only time will tell, but in the mean time, 77 new apartment vacancies certainly can’t hurt.
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Norm Fisher
Royal LePage Saskatoon Real Estate
14 comments so far. We'd love to hear your thoughts.
May 19th, 2009 at 3:50 PM
Interesting.
Increases in rental units is certainly good during these times. I hope they aren’t overpriced…
May 19th, 2009 at 3:50 PM
Norm,
In the past week we’ve had 3 major condo pre-sale developments, fall into receivership leaving approximately 400 buyers without a roof. High unanticipated construction costs being the named culprit.
It’s “black speculation” but this post might be a comment on a new twist conjured by developers to put themselves back in the profit game.
My simplistic obscure black thought cycle:
Pre-sell + construction follies + oopps, give back deposits + oh shucks, lets rent at high rates + oh, now let’s sell later at higher prices.
(Well maybe in Vancouver only as prairie people don’t think like this – right?)
Nice package if it is the reality.
May 19th, 2009 at 3:50 PM
Alex,
They say rent will be up $80 on average from where they were at when they vacated the building.
Larry,
That’s certainly possible. Now that the units have their own titles they can change their mind any time an take them to the resale market. No frustrated buyers on this one though. They hadn’t even begun to market them.
May 19th, 2009 at 3:50 PM
As a previous tenant and one who got evicted, I do not see this as a “pretty positive story”.
I lived in the Kelsey Apartments for 10 years and was a good tenant. I started noticing something was up when as people moved out, nobody moved in. On January 9, 2007, we were given a notice that stated “that an application is being made to the City of Saskatoon for the conversion of the said buildings to condominiums.” This was not a notice to vacate.
On May 15, 2007, we were given a notice to vacate by June 30, 2007, “Further to (their) notice given to (us) dated January 9, 2007.”
They had not at this time, nor on June 30, 2007, made an application to the City of Saskatoon for the conversion to condos. It is easy enough to check on; one just has to call the proper department within City Hall.
We were all faced with the stress and difficulty of finding new accommodations in a shrinking market. I ended up paying more that $200 more per month in rent, not to mention the costs incurred by hiring a moving company, etc.
Needless to say, I was not filled with a warm, fuzzy feeling when these units went back on the rental market. It is sad to think that the rental shortage in this city has progressed to the point where it seems to be forgotten that many, many people were evicted from apartments in a very callous and uncaring manner, and we are now “grateful” to them for putting 77 units on the market??
May 19th, 2009 at 3:51 PM
Hi Marissa,
Thanks for the input on this and I’m sorry to hear of the challenges you’ve had to face as a result of this changing market.
To be clear, when I said “pretty positive” I was thinking more along the lines of “encouraging to see a prospective conversion go back to the rental market on the premise that it makes more sense to rent than sell.” I’m hoping that we see more owners decide to continue renting and fewer explore the option of converting. Not intended to be a note of praise for the owners of the building at all.
May 19th, 2009 at 3:52 PM
It makes more sense money-wise only. I wouldn’t be surprised to see them doing the same thing as soon as they can afford to renovate. Which is fine if that is what they want to do with their property, but they have to do it in a way that is fair to the tenants.
May 19th, 2009 at 3:53 PM
Because building costs are out of this world it has definitely becoming less profitable to convert apartments into condos that require renovations. I sure hope this is the turning point for condo conversions!
There hasn’t been a lot of positive news lately for Canada because of our U.S. relations, even our PM is bearish…
Here’s an interesting poll on Canadian’s outlook on the housing market:
http://www.globeinvestor.com/servlet/story/RTGAM.20080304.wrbcpoll0304/GIStory/
I’m excited to see the Bank of Canada cutting interest rates by 1/2 percentage point:
http://www.globeinvestor.com/servlet/story/RTGAM.20080304.wboc0304/GIStory/
The Bank of Canada has also implied that further cuts are down the road. Many people think SK, and Saskatoon specifically will not be affected by what’s happening in the US – I don’t believe that but it’s looking like Canada’s economy is in for a bumpy ride over the next year, maybe two.
May 19th, 2009 at 3:53 PM
That’s kind of an interesting situation Marissa. I almost wonder if they had this in mind all along… Vacate the entire building of low renters protected from extreme and immediate rent increases, no renos, and then put the units back on the market for a significant increase… hmmm.
J.
May 19th, 2009 at 3:54 PM
I wish that all condo flips came with only an $80 increase. My rent for the lead up to the actual kick out when the conversion actually takes place, has went up $120 a month. If it’s anything like the exact mirror building across the courtyard from me, the rent will not only go up $80…but try 400-500 more per month. A lot of the people buying these condo’s to ‘rent out’ are averaging from what i can find 800-1000 or more per month when just befor ethey were converted, were rented at $530 for a 1 bedroom.
May 19th, 2009 at 3:54 PM
According to the Star Phoenix, rents increased $80 per unit. Improvements were flooring and paint.
I heard today that these buildings are now for sale. I suppose that’s probably the rest of the story.
May 19th, 2009 at 3:54 PM
I think the star phoenix has to go out there and actually CHECK these stats. Looking on kijiji and such i see a bunch of ‘condos’ for rent now, including the meadow green ones that are WAY higher than a nice 80 dollar increase.
May 19th, 2009 at 3:55 PM
Sorry about that Norm, I read the article and see that it’s in regards to that building in particular. I’ve heard stats elsewhere that were way under the actual numbers and assumed this was another one.
J
May 19th, 2009 at 3:55 PM
Johny: If the apartments are empty when they make a condo application, they can skip the 2 year waiting period.
I think it is just a case of greed causing people to jump the gun. It is amazing that large property companies don’t do better research. With all the construction going on, labour would have to be brought in from outside the city and/or province. The decrease in the availability of rental properties, and the high increase in rent doesn’t make it worth the trip.
BTW if all they improved was flooring and paint, then I hope they wouldn’t charge too much more. Those things were probably due for a change.
It will be very interesting to see what is going on out there this Spring and Summer. It will also be interesting to see what happens with the sale of those buildings.
May 19th, 2009 at 3:55 PM
I got kicked out of Kelsey too, I was only there for 8 months but it still sucked. It was the first place I had in S’toon and I kinda liked it..