We received an email from a developer yesterday informing us that they were not going to release quarterly sales data to us (their policy) - this was the inspiration for the blog post today.
Urbanation has been tracking the results in the high-rise condominium apartment market since 1981 and we have built up strong relationships with the developer and broker community and get cooperation from over 90% of the industry, but there are always a few tough nuts to crack. We don't think this post will change anyone's mind, but we want this information on the benefits of our data out there.
From the standpoint of the developer that does not want to release figures, we understand that they don't want to give their competition a leg up, to understand what they are doing, but the benefits of what we do for the industry far outweigh this concern in our minds. Seven of the top 10 developers in 2010 by total condo sales subscribe to Urbanation, and of the remaining 3, most of their sites are represented by a broker that subscribes to our reports, so one could conclude that the sharing of information has certainly not hurt them.
Here is a nice long list of why developers should cooperate with Urbanation:
1) Construction lending: The majority of the schedule A banks and many of the top secondary lenders including the larger private equity funds use our reports when they determine which projects to provide construction financing to. These clients use both the macro level analysis and the micro level project data - without this type of secondary data available in the market by an independent third party, lenders would be much more reluctant to release the funds that they do, or the rates would be much higher.
2) Mortgage Insurance: If you take a look at the suite mix for downtown condo projects these days, you will see that most projects are targeting first time buyers. For the majority of buyers purchasing their first units, they require mortgage insurance. The major mortgage insurers in this country use our reports in many of the same ways as the lenders above.
3) The HST: Urbanation data was used in the fight against the province during the finalization of the details regarding HST.
4) 3 Bedroom units: The City of Toronto reviewed Urbanation data on the slow absorption rate among three bedroom units within condo buildings in the City. Higher three bedroom shares might have been required without the assistance of Urbanation.
5) Brokers: The majority of condominium developers do not have in-house sales teams; they rely on brokerages to sell their units. Many of these top new condominium brokerages subscribe to Urbanation and use this data to help set pricing at projects all over the Toronto CMA. If you underprice your project, you are leaving money on the table, but the greater sin is overpricing your project. Reducing pricing is not generally an option outside of offering incentives and relaunching a project is very expensive. Slow selling projects and projects that do not obtain financing for several years are not only detrimental to the developer, but to other developers in the area as well. Cancelled projects and projects that take years to build shed a negative light on condo buying, and make a scary purchase for many first-time buyers that much scarier - no one wants their deposit held up for years on end, only to be released from the deal three years later when prices are 15% higher. So helping brokers set correct pricing at your competitors development can actually be beneficial to you! The funny thing is, a very high percentage of downtown condo projects are represented by just two brokerage firms, which obviously have more in-depth sales and pricing information than Urbanation publishes on these projects!
6) Suppliers: Many suppliers in the industry want to keep tabs on both the macro level analysis when making hiring and expansion decisions (and determine their market share) but also the micro level data as they target new clients though our 'proposed' or future condos section. Suppliers also like to know when projects are expected to complete so they know at what point they will be required to deliver their product or services. If your suppliers are more profitable and better organized, they can pass these savings off to you.
7) Valuation: our data is utilized by appraisers (private and public), cost consultants and developers to determine what a unit, a project or a piece of land is worth. Reliable information prevents firms from overpaying when purchasing a property or when paying taxes on it!
8) Mortgages: many lenders have policies about how they approve small or large condominium units, however as the market has changed, so has the lender's policies. One bank emailed me and said of the work we did for them "We made some significant policy changes as a result of what you provided so thanks very much." Do you think purchasers obtaining mortgages easier is a benefit? We do.
We could certainly keep going for several more points but this post is getting a little long!
Urbanation had a great conversation with Tricon Capital, a firm that regularly uses Urbanation data, they said we produce the best real estate research publication in North America (their firm is littered with the industry's brightest minds: http://www.triconcapital.com/our_company_team.html - see Harvard, Richard Ivey School of Business, Columbia Law, Osgoode Law at U of T). One of their principals suggested we print a list of the developers that don't cooperate and distribute it amongst the industry!
We wouldn't go that far, but hopefully these developers see that we are not just a firm helping their competitors spy on them, but truly a boon to the health of the condominium apartment industry in the Toronto and surrounding area.