Builder blames city as Toronto-area condo cancelled

The first Toronto-area condominium project cancellation of the year has been registered by Aspen Ridge Homes, an arm of the De Gasperis family group of companies.

On January 26, investors who put down deposits to buy a condo at the project known as Union Margo on 1735 Bur Oak Ave., in Markham, Ont., received a letter from Union High Rise Inc. – the corporate entity set up to build a 20-storey building – with notice that they would be receiving their deposits back and their agreements of purchase and sale were cancelled.

According to the Home Construction Regulatory Authority, 176 agreements were cancelled, out of a potential 246 units that were planned for the building.

Aspen Ridge began marketing the project for sale in 2019 without planning approval to build the 20-storey tower as part of an existing mid-rise condo project that was already under way. In 2020, Aspen Ridge made use of home warranty provider Tarion’s “unavoidable delay” protections – which can allow builders to push back important progress dates that are spelled out in contracts – and notified investors that the COVID-19 pandemic would create unknown delays.

Nevertheless, the company blames the City of Markham in its letter to investors, saying “The City’s inability to address the site’s outstanding planning issues in a reasonable and timely manner has resulted in today’s announcement.”

Beginning sales before planning is in hand is a standard practice in Toronto-area condominium development, although the risks of delays have risen in recent years thanks to spiraling construction costs and the increasingly high interest rates that are making debt more expensive.

Condominium analyst Pauline Lierman, Vice President Market Research with Zonda Urban, argues the cancellation is likely not a sign of financial distress for Aspen Ridge, which is part of the multi-billion-dollar TACC/Condrain group of companies that has dozens of projects scattered. around the region.

Outright cancellations have been relatively rare in recent years, after Ontario condo investors saw a record number of contracts being canceled in 2018: a dozen projects accounting for more than 5,600 apartments were canceled that year. “Last year was the lowest number of units canceled in apartments since 2016: 379 units,” said Ms. Lierman.

The main damage to Aspen Ridge is likely to be reputational, as the company suggested in its letter to investors.

“We know that the termination of your purchase agreement will be a disappointment. It was to us as well,” the letter reads. “For decades, Aspen ridge has worked [sic] relentlessly to earn an unparalleled reputation … Determined to maintain that good reputation with those affected by the unique circumstances that forced the termination of Union Margo agreements, we are prepared to offer you additional benefits beyond those owed to you under Tarion.”

Self-identified investors who discussed the “additional benefit” online described it as a cash payment over and above the return of their deposit, which has accrued interest for some parts of the three years since the project began selling in 2019.

But there are questions in the industry as to whether cancellations even cause much in the way of reputational damage.

“The last time we saw a wave of cancellations in 2018, the large developers were able to subsequently launch other projects in the following years with no impact on sales. It’s really the small developers that generally don’t recover from a cancellation,” said Shaun Hildebrand, president of real estate analysts Urbanation Inc.

According to Mr. Hildebrand, two previously canceled projects relaunched in late 2022 with sales “that were fairly in line with other launches”: Highlight of Mississauga and Vic Condos. He expects that Aspen Ridge will also eventually relaunch the Margo project – without the initial investors – once zoning is obtained.

“They are a large, reputable developer with a long track record in the GTA, so I don’t think one cancellation will dent their reputation,” he said.