We love our behind-the-scenes views of the real estate industry. We talk a lot about the developments planned for Toronto, but one thing that we rarely focus on is the financing aspect of the projects. Without proper financing, developments are impossible.
Enter Peter Politis and Greybrook Realty Partners. Peter is a pretty popular guy with developers: he arranges private financing to build the towers we call home. We sat down with Peter and learned more about his role in the industry and how he works with his clients, as well as his thoughts on the Toronto real estate scene.
NewInHomes (NIH): How did you get involved with real estate? What brought you to Greybrook?
Peter Politis (PP): I’m actually the only person in my family who’s not a real estate agent. Real estate has always been in my blood. My dad, my brother, my sister are all involved in the sales side of real estate. My dad’s been an agent since the late ‘70s, and they run one of the busiest residential teams in all of Toronto.
I did finance in school, which was always the route that I wanted to take. I met my partner at Greybrook Elias – he was the chairman at TLC. I was involved in a spin-off company at the time, but Elias offered me the opportunity to join him in a new venture. That was 10 years ago. We started the real estate division, and it seemed like a perfect fit for me.
I’ve always wanted to focus on the development side, and that’s really what Greybrook does; we are an exempt market dealer, so we are licenced under the Ontario Securities Commission. Essentially, we allow individuals to get developer-like returns on their money, without having to put out the same risk that a developer has. We work with top development firms such as Tribute Communities, Fernbrook Homes, Cityzen, Empire Communities, Plazacorp, and we have active projects with them. What we do is aid them in the financing of the projects. They spend their time finding top projects, they present the project to Greybrook and we decide if we want to be partners on the project. I don’t know any other groups that do what we do, taking individual investment groups and partner them with builders and developers.
NIH: We hear about purchasing condominiums as an investment, but rarely about people helping finance projects.
PP: Our investors range from athletes to school teachers, all whom contribute a varying level of capital. Developers come to us and request a certain amount of dollars, so we put up a portion of the money with them. They can never ask our investors for any more money under any circumstances; all the construction loan guarantees are handled by the developer. We just split the profits 50/50 in the end. Our investors are happy — the returns that we are getting are phenomenal.
NIH: Why do they invest this way? Why not the stock market?
PP: Real estate has leverage that no other asset class can really use. When we are done in Liberty Village (King West Condominiums by PlazaCorp) we will have sold $530 million worth of real estate just in these four towers, and we use a $31 million equity investment to do all that. There is no other industry that we can do that in. The banks give us the loan that covers over 70 percent to build the building. Everyone is happy when it’s done. You have the best real estate developers going to work for our investors every day. Real estate is a long-term asset. You buy, you hold, you sell, some never buy anything. We are just involved in the manufacturing process: we buy, we build and we sell. We don’t have a long-term exposure to any particular development.
It’s always been an interesting balance between investments and real estate. What I come back to all the time is that someone will always need to find a place to rest their head. Not everyone needs a fancy car, not everyone needs a big TV, but everyone needs a place to live. With people getting married so much later, there are a lot of single people in the market.
I don’t believe there is a bubble of any sort. I work in the industry every day. I spend a lot of time with banks, consultants, developers, and there is way too much demand for this type of product right now. Any slowdown or any perceived slowdown that we see is simply a result of the market taking a breath.
NIH: What are some of your other thoughts on our market? What do the numbers say?
PP: We are probably in the best residential real estate market in the world. I get a real kick out of newspapers and media members talking about an impending crash. Our job is to evaluate projects on an independent basis. We always look at projects under the current market conditions. It’s always real time. People spend a lot of time talking about the decrease in sales in 2012. We sold 28,000 (units) in 2011, so we have to expect a significant decrease. That year we sold the most condos ever by over 30 percent. So if we do have a 30 percent decrease in sales, that’s still one of the best years in Toronto’s history. To me, sales don’t give you a picture on the whole market. We also had a lot fewer projects come to the marketplace in 2012. The absorption rate has not meaningfully changed in the last eight or nine years. You also have to look at the vacancy rates, which is at or below 1 percent in the GTA right now. The rental market is so tight right now. The demand for rental properties is significant.
NIH: What’s one project in which you’ve enjoyed being involved?
PP: We have done a multitude of projects thus far and I’ve loved being a part of all of them. Our work in Liberty Village sticks out because it was financially successful for all involved. I have a lot of pride in what we did here. We closed the sales centre in 2008 because no one was buying, the market stalled for a bit. I had investors call me, worried about their investments because their stock portfolio fell 50 percent. We had a lot of tense customers and worried investors because of the hype in the media at the time, but the project at the end of the day was widely successful, which gives you a look at why real estate is such a safe investment. Even through tumultuous times, you can still receive extremely high returns. We stayed strong while other industries faltered.
We also did a small project by Stafford Homes at Victoria Park and Eglinton that I’m fond of. The returns were fantastic, but what truly stands out is the value that the development brought to the area. It’s off O’Connor, which has its rough patches. We turned an industrial complex into a townhome development that saw great value. It’s proof that our system works in any part of the city, not just in the high profile downtown development sites.
NIH: What type of projects do you envision being successful moving forward?
PP: Low-rise will always be popular just because of the demand, but finding land and keeping it affordable will always be a challenge. There was a project on Manning, an old school; you’re getting a townhome for upwards of a million dollars. There was another project on Ossington and Shaw that offered upwards of $1-2 million for homes. That will be viable for a select group of people, but not everyone. The projects that will appeal to everyone are the $500 to $600 per square foot projects that offer value. It’s not always location; it’s also about developers. Based on our history, we have seen that the most successful projects in Toronto are the ones that have the most experienced developers behind it. Those are the projects that we attach ourselves to, and I know you’ll see consumers do the same.
NIH: What’s next for Greybrook? What projects are you excited to get rolling?
PP: We are currently overseeing over 4,000 units that are in various stages of development. If Greybrook was a developer, which we are not, then we would be one of the biggest developers in the city. We have a multitude of projects that we have a hand in. We are working with Cityzen Development Group and Fernbrook in Liberty Village. We’re also working with a developer in Yorkville that should be really exciting. We hope to see that launched in the spring of 2013. We’re also working on a few other deals that should be fun.
We thank Peter Politis for his time and teaching us a little more about his role in the real estate industry. For more information, check out Greybrook’s portfolio of projects here.