We met Greybrook Realty Partners co-CEO’s a few years back and somehow they let us meet with them several times as we were trying to figure out if they were the real deal or not.
We had never met anyone who had invested with large developers like they were. They answered a ton of our questions and we’ve had a great relationship with them ever since.
On this episode of The Your Life! Your Terms! Show we go behind the scenes with D’Arcy McConvey and Dylan Kent to describe how they work. We also chat about Toronto’s real estate trends, Canada’s population trends and what we’re all seeing “on the streets” from investors all over the world.
Enjoy!
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Transcript
Hey everyone, it’s Tom Karadza. On this episode of the podcast, we’re trying to introduce you to just a different type of investing strategy around real estate. We ran into these guys, this is gray book realty partners. I don’t know, I feel like six, seven years ago. It could be off five, six, seven years ago, something like that. And they presented a a way to invest side by side with developers as though explain on the podcast. So this isn’t some big pitch for gray book by any means. The intent of this is just to share what other people in Toronto are doing and how they’re lining themselves up with developers and investing in development project this way and how you can participate in these things if you so choose. There’s different qualification criteria in Ontario and they can explain all that stuff if you ever reach out to them.
So really the intent, I just want to be super clear, it’s just to share a different investing strategy that you may or may not have heard of. Some people ask us if there’s ways to invest into real estate using your RRSP and there are, these are one of the ways, so hopefully you take a bunch of good information away from this. Dylan and Darcy are good guys. Um, we chatted about all different things. A Toronto real estate investing in general, actually all over the golden horseshoe, so hopefully enjoy that. And listen, if you are listening to this and you want some specific strategies, you can get free copies of our books. We sell these books on Amazon, but there’s no need to pay for them. You can go to rock store in her circle.com forward slash books, that’s Rockstar, inner circle.com forward slash books and you could download free copies of our books we have are the one that’s been downloaded the most has been income for life for Canadians.
That basically started the whole business, which I outlined some different investment strategies. We still get that one downloaded a ton all the time, so that’d be the place to start. But there’s actually four books total now, not three. The real estate investing blueprint is our latest one, which we put a lot of work into, a lot of good information into that book with actual examples of different things that we’ve been doing over the years. So you can get a free copy of that book there as well. So you can get copies of all four of the different books that we have available now for free at rock star, inner circle.com forward slash books and with that, let’s get on with the show.
Are you ready to live life on your terms? Is it time to take charge business building the economy, health and nutrition and it’s your life, your term show with Tom and Nick Karadza. Are you ready? Let’s go.
Hey Nick, can you hear me? Nope. All right, we’re perfect then. So Dylan and Darcy are here from grey book realty partners. Am I saying it right? That’s it. Great growth to realty partners. One. Okay, so Dylan, we’re going to very corporate. Usually it’s like entrepreneur. Now I know why I wasn’t wearing a dress shirt. Yeah, that too. That’s definitely, can we hit you guys up for sponsorship of this episode? We should try to do something like that. Yeah. Why don’t you guys look at each other there. You should get us, what should we say? Question. We would like millions of dollars in sponsorship at the beginning of this podcast. Listen, we have a question for you Dillon first and then Darcy will get to you. You raced cars. Darcy told me this about you Delane that you raised Michael Phelps in some cause you’re a swimmer.
Yeah. So I was a don’t hesitate. You’re like hesitating and like mildly embarrassed. I think if, if people were to witness the race at a racing, might be putting it positively for me. But uh, yeah. Out of word that I feel like you’re a humble guy cause you’re six foot four. I feel like those arms can propel you through water. Yeah. Yeah. So I swam. Yeah. University and in Canada obviously as well. And uh, did uh, did race against Michael Phelps couple times, had a meeting in Quebec few years ago, but um, he’s not as good as all those gold medals. Make them seem right. You know, he’s a, somehow I think we’re the same height. I think he’s six foot four and I’m six foot four but he seems like he’s like double the size of you in person. Really? I don’t know how that works. When when he walked by like, dude, I’m going to eat your lunch. Right. Not exactly how. He must’ve just dominated the pool. Oh yeah, like everyone’s looking at Phelps. Oh yeah. Yeah. That’s an Aa type
personality. The King of the jungle walking in there. This is my territory. He’s got the old tiger woods effect of, well I guess it’s the Michael [inaudible]
Phelps. A fact where people are just like, oh, Phelps in the race, this is trouble. It probably doubled the attendance of that meet that year. I think people just want it to go and race against them. Do you remember what place you came in? We don’t have to talk about the plotter and I’ll probably, yeah, way back if it wasn’t televised, but I like to describe it that if it was, I would have been one of the people that faded off screen.
Who’s that guy on the far left of the screen? Yeah. Oh Shit. Okay. And then a dark. So, um, I guess, and a great book. What’s your, uh, what’s your tea? Do you guys have titles? Great Book. What’s your role there?
We do. So, uh, yeah, Darcy and I are both on the private capital markets team. So really our day to day is, uh, is dealing with clients, um, helping on the, the raising of capital side for our different projects. And really, yeah, just educating and talking to people about the various developments and projects that we have on the go.
Okay. And, uh, that does sound very corporate telling. You’re wherever that’s going. And then Darcy, you played hockey and I remember it because the reason I like bringing this up is we were just making fun of Babcock and his decision making in the playoffs. It’s still not out of my system even though it’s so long ago. So, um, but uh, does it, is everyone a great book you have to be some x at like, is it like mandatory that you are like some ex athlete of some sort? Yeah, it’s part of hiring policy on your resume. It’s gotta be, we got to see what level sport you play it. Got It. When training camp HR violation, that’s a total of Canada. That’s massively some for sure. I don’t know what the rules are but I don’t see Archie. Our HR department is fine. It’s a tried to train my office with a bottle of Vodka Tequila. That’s what we call an HR department. You know what a Dorian guys, we’re not that corporate, you know? Um, it’s funny cause our Christmas party, there’s an athletic component. Like we have these big sort of daylong
things where it’s like breakfast athletic component or like
escape room component. I feel like there’s also, so a couple of years we did
trampoline dodge ball and then, and then another year we did a pre alcohol or we most alcohol pre. But because there is a few former athletes, it can be competitive. Right. But then when there’s a big blend, like we have 60 plus people at the gray Bruck and so obviously you know, as as, as much as we like to say, everyone’s an athlete. Definitely. There’s a blend. Right.
I see. Nice. I feel like he won’t smash anyone. I feel like you’re going to just jump there and smash somebody. I’ll only smash guys that try to smash. You know what I mean? Like I’m not just gonna Smash anybody, but if guys want to compete hard, then I’ll try and you should compete against nick. Then I remember when we went the workout, I was surprise of what kind of work on it was. We were all like just covered in sweat by the end of it. Eight games in or there was two left. Two people left me on one side and our property manager on the other side, this girl that was what, five, six youngest, he was leery. I was younger at the time too, so she was kind of young and I just, I jumped and kind of faked her as like a foot shorter than yeah, and I just jumped at faked her and I just drilled her. I’m like, I don’t care. I want to wait though. As you yelled, you just thrilled. We either win or you lose. Okay. There’s nothing in between like pregnant or something. Tom Still upset because he was on the losing team. So that’s what I think is going to play. I tore my Achilles. I don’t think I even played, I was just like [inaudible] with crutches. Yeah. Well there
guys that are competitive like v very competitive but not most of former athletes. I’ve kind of toned it down a lot.
Yeah. Yeah. Anyway. Okay, so let’s circle it back to a great book. I guess the reason that you we cross paths with you guys. Nick and I stumbled into gray. Brooke, I forget actually who nick who made the introduction. It was a rav. Oh, that’s right. And uh, we s we went to go check him out and we asked you guys a whole bunch of questions and Peter and Sasha as well. And um, can I, can you guys just describe, I mean, you know, either one of you to describe like what is Gray Brooke do? Like what is your business model from the investor perspective? So someone like myself, what do you guys offer? Oh, for
sure. So, you know, as we define ourselves, we’re a private equity group, um, or an asset manager, real estate asset manager. So to sort of describe it in simple form is we’re joint venture partners, not, not dissimilar to you know, an investor being a joint venture partner with a single person on a detached home. We’re um, we’re sort of joint venture partners with very large scale builder developers. So you know, the biggest best in class sort of home builders are high rise builders in Greater Toronto area, Greater Golden Horseshoe. We joint venture with them on a project by project basis. So whether a building 70 townhouses, 200, you know, detached homes, a thousand home community or singular multi-phase high rise on a project by project basis, that joint venture, we then go out to our investor base, um, and our portion of the required equity, um, so equity effective is his cash to joint, um, acquire the land alongside the developer partner and then complete that given development through to completion.
Um, so through sales, marketing, um, construction into completion. And then we split profits with our developer partner on a, once the project is completed. So basically we a joint venture partners, a very large scale. And, and I think one of the very unique things about, about what we do is, you know, typically you can only access real estate investing, investing, you know, really one of three ways. Your principal residence or you have a rental property or condo or house or you could buy a public or private read, right? A real estate investment trust is very difficult to access the asset class of development, um, with a relatively small investment size, right? So development has really been controlled by, you know, a select few, call it 20, 25 families in Ontario. Um, because it’s very capital intensive, it takes a lot of money to get into the development game.
Um, and, and it’s hard thing to do. So I think, you know, one of the unique things that we’re probably most proud of is the fact that we sort of opened up the opportunity that people invest in the asset class being development with a relatively small check size for an in almost anybody can access it and the way we do it. Yeah. And that’s kind of what surprised us by learning what you guys, because we had heard of people kind of sort of believing they were investing in development projects by doing like some syndicated mortgage type investments. Sure. And I’d never heard of your model, which is completely different where it fee, and correct me if I’m summarizing this incorrectly, but I, I, it feels like to me that when I invest with Gray Brooke, what I’m doing is I’m investing with the developer. So a corporation is, maybe I’m somewhere, I mean maybe I’m going to summarize it to maybe make this too simple.
So just correct me if I’m wrong, but I’m buying a share in the corporation that is going to purchase this land and develop the land. So I’m actually part owner of WHO’s owning this development project. Is that, is that too simple? Yeah, effectively that like that’s it. So each project is called the limited partnership, right? So limited partnerships, just a legal entity and our investors would ultimately be unit holders in that limited partnership. Um, and so that limited partnership then joint ventures with the developer and then we joined own that land. So in theory, yes, you’re sort of an indirect beneficial owner of the land. Um, and then the profits that are ultimately generated from that development. Got It. Almost like a, a shareholder in a, and so the, the benefits of that is that I’m going to, I have a question about the developer in a second, but the benefits of that is then I get to access the profits directly just as the developer is going to access the profits at the end of this thing. Like whatever my share of that is. Sure. If it’s cut up, the negative is there’s no key. This isn’t like a cashflow type investment. It’s
not like I’m getting returns on an annual basis. If you mentioned like building 300 homes or something like that. Yeah. If it’s a subdivision or our condo, they might take three, four, five years to develop. I get nothing for three or five years. Once the profit is, uh, kicked out at the end of this whole thing, I get whatever share of that belongs to me based on the amount of money I’ve invested into this thing.
Yeah. It’d be a lump sum on the, uh, at the end on completion. You’ve got it. And so that is true. Like, I, you know, sometimes, you know, we were just talking about listening to podcasts earlier and you know, there’s a lot of research and a lot of guys are starting to talk more about, you know, people talk about liquidity, right? The ability to sell a stock at any point in time. I pressed the button and sell it and saying liquidity like the quity trades at a premium, it’s a valuable thing. But you know, sometimes behavior gets in the way totally God decisions, right? So actually, even though you can’t just sell out and there’s not cashflow intermittently in our development stuff, you know, oftentimes the fact that you, it is a liquid and tied up for a period of time, that time is really what’s creating the value in an investment.
And so as much as it’s painful for people to not be able to access their funds at times for two, three, four, five, seven years, it’s really that duration that is creating the value and ultimately generating the return. So in a way, it’s almost like a blessing in disguise for people. Although sometimes it’s a counterintuitive thing and some, you know, uncomfortable for people. It really is a blessing in disguise cause there’s no way to develop, you know, to generate substantial returns in a development in a short period of time. It’s a very difficult thing to do. It takes time, right? So illiquidity is actually your ally in, in many cases in what we do.
Yeah. And I think everyone knows, I mean great getting into that type of investment, most people are, they’re aware of that. You know what I mean? They’re not thinking that they can get their money back at any time and they’re not using, or at least I would hope, well I guess no, there’s things in place. So they’re not using the only 5,000 or one of our $20,000 of savings that they have no debt so they can’t get in. You know, so, but yeah, I agree with you. I agree with that completely. And I think like you said, it prevents, it can prevent from, especially from some people, they might be their own worst enemy by making just emotional decisions. Every time they read a headline or something changes in the economy, wherever they go into panic mode and make changes either positive or negative because they hear something, right? Yeah, absolutely. And you guys,
anyone like the headline risk in real estate is like nothing else, right? Like it’s just one day. It’s incredible. The next day the sky is falling because everyone
cause what the headlines sell because the real estate headlines are sexy. I think they sell papers for sure. Right? Well because half of everyone listening to the real estate market to collapse so they can tell their neighbors, I told you so. And the other half wants it to go up so they can tell the same the neighbor on the other side, I told you I was right. Right. So it’s just the, it’s the ultimate battle except I said sell papers and I don’t think anyone is selling papers anymore. Get Clicks. Thing. That thing too I think is
everyone to some
extent is invested in real estate. Right? So whether you’re, you have a s a home that’s very property or you’re in development like to most people that’s all the sort of saint when it’s all very, very different. But everyone’s invested to an extent. So everyone’s got an opinion in the headlines. Everybody when you, I’m curious, cause I know how I am when you guys are at like a party with friends or just like a backyard barbecue with friends that know what you do cause you’re in, you know, in this kind of world, this real estate space. Do you guys get asked just unlimited amount of questions about different developments? And what the real estate market is. What do you think it’s going to do and all this type of stuff. Do you have those conversations regularly or do you kind of shy away from them?
Um, I think it’s a, it’s, it’s based on the people you’re around, right? Like, uh, my family not so much. Some people definitely a lot more so like people that are in the industry and friends. Um, and yeah, it can be anything, right? How’s the market? What do you think of the market?
Yeah. Your friends are just waiting for you guys. It’s an easy, small talk conversation. Yeah. I want to go back just to the project itself for a second. A lot of times I’m asked when I tried to explain what Gray Brooke does is, uh, who’s the competent, like no one’s ever really heard of this type of model before. Um, do you guys have, do a lot of people do this kind of stuff? I haven’t seen it
a lot. Are there competitors while I, I do think, first of all, it’s a ridiculous thing to say. If you say there’s no competitors because obviously everyone’s thought of it.
Yeah, yeah, Todd. But, but yeah, so I’m not saying Tom said something ridiculous, but anyways, you get appointed. No, that would be valid. It’s no
is, uh, like I think that we have created something quite unique and like we talked about earlier and you know, affording people the ability to access on a project by project basis development with top tier developers because otherwise it’s really privately controlled. Like I think the question, you know, is probably best asked like, what, you know, where to developers otherwise get their capital if it’s not through Greg. And that’s what I was leading to. Like why are developers doing, like, why would a developer do this? Like, why wouldn’t the developer just say, Hey, I’m going to make a killing on this condo project in downtown Toronto. Yeah, I’ll just do it myself. So there’s a couple of reasons. And, and, and there is competition, but I don’t think it’s indirect form necessarily. They’re smaller players. And then there’s institutions and you know, leisure. There’s competition for what’s going to developers.
So the whole question. And then there’s also funds which were not so, so there’s that, uh, in terms of why developers don’t do themselves, like I think there’s a, there’s a couple of reasons. One is that, you know, we were talking earlier before we got online is just that land generally has become more expensive right across really the GTA, greater golden horseshoe. And so, you know, the, the partners that we work with, most of them are what’s called vertically integrated. So, you know, they employ the trades themselves and they also have land holdings to develop today, tomorrow, five years, 10, 20 years out from now. Right? So if land’s getting more expensive, you know, even if you had a billion in equity, right, which most people wouldn’t have $1 billion kicking around. And if you’re, and if you inflammed is costing, you know, a million to 2 million an acre, depending on where you are, even 500,000 and you’re buying hundreds of acres, like you’re going to chew through that pretty quickly. So a lot of, a lot of these builder developers, one, we give them a higher return on their equity. Right? So, so that’s important one
because they’re putting less down on the project. Correct. So they can leverage themselves across multiple projects. Correct.
Right. And ends, which gives them the ability to then buy land out into the future 10 years out, which is not land that we’re going to be joint venturing with them on. Right. That’s land that they’re going to hold, develop and get closer to build ready. And so it gives them that ability to keep the, you know, to scale ultimately. So higher return on their equity, the ability to scale and then, you know, outside of the financial commitment in one of the things that I think is often sort of not well defined and maybe our marketing material or you know, a lot of our marketing team, their grades or not. That was a bad thing to say, but maybe people don’t pick up when they look at our website is we’re not just a financial partner. So, yeah, we do provide, you know, equity financing to a lot of these guys, but we also are a genuine developer partner, right?
Like we bring a lot to the table from a development perspective. We have a fold asset management team in house Acharei Brook, which are all former developers themselves. So a third of our team, our guys in models working with banks, lenders, sales consultants, architects, planners, really to drive success of all these projects. But we actually bring a lot of skill and a lot of expertise to our partners, which they appreciate. And that I think is what really allows the model that we’ve developed to be sustainable because it’s not just capital, it’s expertise in addition to shocked shock
that you think a developer listens to your opinion on stuff. I’m like, no, that’s taking a while. That’s amazing what they do. I just, from our experience with our father’s construction business on a much lower smaller scale being one of the subcontractors in under the general contractor on a condominium development, I found that no one Le Developers where the king of kings of the world and they would just not listen to anyone because they had all the right answers. So I think it takes time. But you still probably, yeah. Got It too big ego business, that’s for sure. Yeah, totally. But you said something interesting that I never considered. I always thought the attractiveness of what Gray Brooke does and what you guys do is that if I, the developer put up 20% now and that gray Brooke will raise the funds to fill the other 80% necessary to do a new project.
I thought the developer could then meet the developer. I like that cause I could take the rest of my money and do for other projects. So instead of doing one project from doing five 20% down on each project for sure. But you said something interesting that it, it’s allowing them to keep the, the machine working because they can take some of their money and acquire land that they’re going to develop in their future, in the future. So kind of they’re using it almost to build the pipeline and to keep everything flowing. Absolutely. Not to do multiple projects at the same time. It’s more just to allocation of their capital, what they’re doing with it. They don’t have to tie it all up into one project and they have a very unique timeline too. Right. Where there,
you know, most people’s timeline is today, six months from now, five years from now, they’re, they’re fighting, you know, and often cases intergenerationally where they’re buying five years down the road, 10 years down the road, sometimes 1520 years down the road. So to tie up capital for that long.
So as you get to know these guys, do you see where they’re buying for 1520 years down the road? Absolutely. I think it’s, I think it’s be like you guys are staring at each other again. I don’t know what we could say and what we can’t say. Well that’s one of the things that we actually say you talk about insider trading is
it’s like, because it’s private business, you know it’s difficult thing to navigate. Approvals planning is relationships and these guys are very good at what they do. Right. But is that there is a component of like legal insider information almost in development because certain relationships are stronger than others, you know, certain certain maybe counselors guys at different ages with, right. So there is a component of knowing it. Yeah.
Yeah. The pen, just a developer doesn’t want the other developer to know. They don’t want to know I’m building something out in the Niagara Region. So the land that you, you’re acquiring. So cause maybe they, after looking at the same piece of land and you’re trying to figure out a way that you can get your hands on it before they do. I, you know, a bunch of stuff like for sure that
just negotiating a piece of land that you want, they don’t, but you know, oftentimes it’s actually to their benefit to be in landowner groups. So if there’s a group of land or big block of land that’s going through approvals more than the secondary plan, more cloud, they want to be together because they all want the same outcome. Right. So it’s competitive, but it’s also clubby.
Yeah, that makes sense. That makes perfect sense. And it’s why you see so many of them when they’re lately even putting their sales centers together, they’re going for approval. Sealers just like you’re saying, just to kind of get, you know, they plan it together because they can usually try, I’d imagine trying to push through more things. That’s right. If there’s, there’s just power in numbers when they own a bit bigger piece of a, of land and whatever municipality. Right, exactly. Like think about it. Yeah.
There’s resistance in Atlanta owners group. It’s not going to be from a developer that wants to develop. It’s going to be from a, you know, a farmer in like, it’s not, it’s not all right at all costs what they do. So, I’m not saying that, I’m just saying that you know, the resistance is going to come from some of that sliver for 30 years and has no intention in selling their farm. The resistance not going to come from the other developer that wants to build a land. Right. So, so they’re better off being together. Um, in most cases.
And then just back to the, so back to the risk, to me, the investor for a second, the risk to me, because everything I’ve seen come from you guys so far has been really top quality stuff. It’s been like condos right? In the downtown core or in Yorkville or subdivision Kleinberg or Cambridge, like really kind of good location type stuff. So I guess the risk to me is that I say, okay guys, I’m going to put some money with you with, with this type of investment. The risk is the development does not proceed to me. That’s the way I’m thinking about. I’m asking you to correct me if I’m wrong. The risk is the developments like, oh shit, things didn’t go according to plan. We’re not going to develop this. Then I’m the left stuck owning this, a piece of land or this development site. She is that, is that what I’m left with?
Yeah. Like uh, so we’re, we’re regulated, right? So we disclose all the rests from, you know,
I get it. I’m just trying to cut through all that. Yeah. So I think, I think, I think at the end of the day
you’re, you know, we like to call herself sunset buyers and yet sounds it sounds, it sounds great in theory, the day the sunsets on the day we buy the land is worth, you know, we feel like we could sell it for more than we bought it far. Right. So at the end of the day, if you’re using responsible leverage or no leverage at all acquiring a site, um, and you feel like you can sell it tomorrow for at least what you bought it for, then as long as you know, you don’t have crazy financing costs. Um, yeah. Got It. Cause there’s no leverage component. You’re raising the money and then that spot cash, we had money. So in most cases, not in every case. So, you know, we just assume that could you sell the land for tomorrow for what we bought it for today? If the answer is yes, then I think you’re in a pretty good spot.
Right. Overall. Um, and, and I, you know, at the end of the day, like we feel like the biggest risks that investors should be aware of is, and as we’ve seen through 17 and 18 like ma markets can be volatile, right? So there’s gonna be ups and downs and as long as you’re in markets where over the medium to long term, you feel like there’s an upward trend, then if you have the ability to wait through that upward trend for when a down market comes back up, then you’re in a pretty good spot. And so that just dovetails into, sometimes projects can take longer than we anticipate. Obviously we want to project timelines on time or sooner and on budget or better. Right. But you know, one of the biggest risks and development unequivocally is, is just the timelines extent. Right? And so investors need to be comfortable with that. Yeah. Got It. And then I guess, could there ever be a situation where I guess you guys haven’t been, there has been no delays in projects it seems like since 2007 or 2008
I guess there have been some in different one off projects but not across the board. But I guess I’m just thinking of the worst case. You mean when you say delay there’s been delays in almost everything. Even close. You mean things where they really like pulled back her sales shutdowns. There’s like a deeper session. We’re like damn the sales office close the freaking doors. No, I’m just thinking for anyone listening they’re going to be like done. Preconstruction is always delayed. You’re right. Bad language. Thank you. Uh, I just mean a serious, I’m younger brother and that’s what hair for thinking bigger picture. That’s why my link and that’s why I’m there. But Ah, so when the recession hits, I guess there could be a cash call because on that project, not to lose it, they’re going to be property tea. There’s some costs just to carry this thing.
Even if the development, so you guys might ring up investors at some point saying, hey, to not lose this site, we’re going to need to put x number of dollars just for like property taxes or something. Correct. But that to me, the investor is not a bad thing because if I’m sold on the site, I’m like, yeah, no problem. I’ll, I’ll do that. Yeah. So there’s a, there’s a couple of things, and I’m only focusing on this Darcy deal, just so you guys know, because this is nick in our brains, we just automatically always go to worst case situation. Yeah, no, that’s good. Like then the day your investor great. My outsides. Awesome. Yeah. I’m just always thinking one of the worst,
the classic Warren Buffet. Don’t preserve your capital, right? Don’t lose money. That’s even better. That’s investment in sort of advice. Is that what he says? I didn’t even know. I think he’s done a pretty good job. Um, no, no. I, so in our agreements, you actually, we can’t call on our investors for additional capital, but if there was, that’s per the agreement. So there’s no capital calls, is it? You’re in any of our developments. However, if development is in need of additional funds and then it’s our, our developer partners obligation to put up those funds, but they will have to be paid back in some way, right? So if the timelines do extend, got it. So it might eat into the profits at the end or something, but okay. So there’s some contingency for that to be met. But you, you know what, like one of the things that I think is a very interesting point, and as you’re in development for a little bit longer, most people want to be, you know, to our point earlier in short term projects, right?
So they want to be in a three year project where you’re buying the land that’s ready to be built. So shovels in the ground the next day. Effectively you’re selling homes, building them, and you’re getting a profit and to call it two or three years, the reality is those feel like the safest projects, right? Because it’s short term and it’s relatively predictable. But if 2017 happens in the market, goes from a hundred to 80% right. And you’re in a short term project, you’re actually more vulnerable in a shorter term project in most cases than in a longer term project because of this volatility where in a short term project, what you’re doing is you’re sharing in the cost to build and the PR and the in what you sell it for. Right? So now if you sell it for less, your margin is compressed. Okay. But in the longer one year, in the longer one, usually your land cost is a smaller percentage of your overall revenue. You also have a longer timeline. So as you extrapolate over a longer timeline, you have a much higher ability to outperform and, and you’re much less vulnerable to short term fluctuate.
Makes Sense. It’s like if you’re, if you bought a property down the street to flip, if you, you know, if you, if you do the renovations in four months and then at that time the market slowed for whatever government comes out with some more regulations, all of a sudden you’re, you’re in trouble because that your, your timeline the right then to sell you have no, there’s no more wiggle room. You have more time to kind of adjust and make different demands because even if even if things change, you can even change. You can change the inventory, stock detachment. But let’s say I did go into a three year project and, and some stuff does happen like 2017 where there are real kind of the top of some of the higher price projects. You know, it comes down a little bit, but then can’t the project just be extended a year? Yeah, sure it can. It can. But if you’re just going in thinking I’m going to be in and out, this is going to be quick, easy money. It’s maybe not people that are looking for easy money. I’m always not thinking longterm. And preservation of capital, no one year time extension on a three year project,
you’ve extended it for 33% over a one year time extension or even a year and a half over on six year project. That’s fair. It’s a dif. It’s a different, the quantum, uh, like the impact is a bit different. So look, short term projects are great as our longterm projects, but this is why I think just like anything in life, you know, taking a bit of a portfolio approach makes sense because that way you’re not vulnerable, you know, it’s not an all or nothing. Yeah.
Okay. Something I’m, I’m interested in with what you guys see. Do you guys get any, any insight into how investors or people outside of Canada View Toronto? Like how, cause I think sometimes when you’re, I’m born here or were you guys born in Toronto? Yeah. Yeah. There’s no, actually, there’s no habs fans in the room. Finally, every podcast I’ve done for the last two months, there’s like a habs fan. He’s a wings fan. So, you know, wait a second. You did that swim race in Quebec. Were you there for, to watch a halves game. Okay. How’d you feel? An extra points because you ended up at Redwings fan. If you grew up in Oakville.
I was a big, uh, like grew up kind of in the dynasty era of Detroit and like stuff,
then we can jump on. It’s hard not to like ice or man Gordie Howe and I was a little kid. I started liking the 40 niners cause they were winning sue Joe Montana years when I was a kid and they were winning super bowls. I’m like, oh I like San Francisco because they are the champions and that’s the team I’m excited to. Like some of us don’t like some of these success. That also
is a very convenient, real indicator of his age. Right. Because if he was any older, if he was any old or he would have been least fan cause Gilmore and the boys played on leafs are only mind. This means that he was watching the late nineties when the Redwings just,
yeah, yeah, yeah, yeah. I’m older than everyone. Five, I’m like Rick vibe down the wing can get more back. I want to see him do his little spinner Rambo behind the net again cause we need that. We need to Spin Arama Amy, get me depressed. Um, so ah, you’re okay. Detroit fans are okay. Hubs Fans. We got to talk but wait, where are we at with the developer? The project national by International. But yeah, what do people, how do people see things if you’re not from Toronto? Because I feel like so many investors we deal with can’t see the forest for the trees. We will scream from the rooftop year. The population growth is insane. You know, you don’t understand the longterm trends here and no one seems to get it. Do you, what, what do you guys see?
Yeah, we see a lot globally. We have investors from probably 30 plus countries at this point. And uh, so we have pretty good insight to kind of what, uh, what other people are seeing. And I think when you look at the global picture, not that Toronto hasn’t gotten more expensive, certainly it has, but globally, when people look at it as, you know, where do you want to live? And kind of all the quality of life factors that go in, you know, where am I going to send my kids to school? Whereas, you know, there’s so much uncertainty in a lot of countries these days. Like, whether it’s political or economic concerns or what have you. You look at Toronto and it’s personal safety. Yeah, it’s a safe city. It’s a great city to grow up in. It’s, you know, education’s great. There’s the banks are very stable and it appeals to a lot of people.
And then when you factor in that, you know, it’s not as expensive as London or New York or places like that. It’s, it’s got, have a lot of appeal and I think, yeah, in the last, I don’t know, call it 10 years or so. You see, you’ve seen Toronto really, I mean it’s something that Toronto’s said probably for 30 years, but really in the last 10 years it’s been true that Toronto has really emerged as a, as a global city that people, people want to live in, want to be a part of. So it’s not, you see a lot of stuff in the headlines about foreign buyers and stuff like that. But really a lot of people that are buying are interested in buying from that are originally from overseas are have some sort of connection to Toronto, whether it’s to come for school or to move, um, you know, they’re invested in living and being a part of, of Toronto.
Yeah. On that point, like, uh, you know, you hear some, you hear some chatter on the intergenerational wealth transfer from sort of the baby boomers to the next generation and that’s how some of these people are affording their homes in the GTA. Um, and the same thing is happening from a foreign buyer perspective, right. So call it foreign buyer or foreigner perspective, I should say, where people from all these countries, you know, China, Russia, India, you name it, right. Um, European countries, South American countries. Yeah. They they, for all the reasons that Dylan just stated, think that Toronto in Canada, Canada, and then Toronto is a very attractive place and they, so oftentimes they enroll their kids in school with the whole, the whole idea is not necessarily to come back to the countries that they laugh, but to now bring up the next generation in Canada. Right. And so this is a real thing that we see. Like a lot of our investors families are doing this. So it’s go to Waterloo, Toronto, wherever they’re going and Miguel and then buy a house property. Yeah. And then stay and work here. Right. And so, you know, obviously they’re getting the same jobs. We are like accountants or whatever it is. So they can’t afford to million dollar houses. But there’s this internet, generational trout wealth transfer that’s happening in Toronto, but it’s also happening from these four
in here. Cause they didn’t have status in here. And I don’t know if you guys know, I’m just pulling up this number for something. We’re putting together a on Saturday. And, uh, the immigration target for 2018 was 310,000 immigrants into this country. That was the declared stats Canada federal government plan. The final 2018 population growth numbers for Canada came out and uh, Canada grew in population over 500,000 people, which already is a big number for this country with 500,000 people. Of that 80.5%, approximately, I should pull up the exact number, um, is immigration. And if you do the math, it’s 400,000 immigrants came in, the target was three 10. We overshot the target by over a hundred thousand people. I don’t know who in the government isn’t that good at math, but when you have a target of three 10 and you overshoot it by that much, and then it’s 43, somewhere between 40 and 45% come to Ontario, right?
So 40, 40, 45% of that come to Ontario. And then a huge percentage of that comes to the golden horseshoe. We are just getting literally hundreds of thousands of people over Phil as a C. Oakville is a town that we’re sitting in here right now is 187,000 people. That means this year we probably got another Oakville kind of landed here and so on. And then on to see your student point 300,000 student, uh, permits were issued last year. 300,000. Yeah, that’s huge. Not Absolutely not included in the 500,000 number. Right? I know. Well yeah. No cause integration was, was 400 and 300,000. Well if it was, that means we only let in 100,000 immigrants in a thing or does and we’re suing him. So, yeah, right. So I mean it’s just an insane amount of population growth. Massive. And that, you know, a lot of our thesis is know not built just around that, but in some ways, right?
Like you’ve got the supply and demand side, you’ve got supply limited by, you know, the, yeah, everyone getting approvals, all this stuff. But if you think about the demand side, so call those numbers what they are and, and then just distill it down and there’s all sorts of interesting tidbits. But if you just think about the number of units that are trades can deliver a year, right in the Greater Toronto area. So say there’s 100,000 people, you need to deliver about 40,000 net new units a year and those units would be their affordable housing condo rental or a detached home. Right? Cause you’re saying on average two and a half people per year residency or whatever it is. Right. So to deliver 40,000 units a year, we don’t even have the trades necessarily need to be able to do that year over year. Nevermind if population growth is 35% higher than what we expect.
So call it, it becomes 150,000 130,000 like our trades are limited. Not to mention, you know, land supply, the right units for the right people, affordability that’s close to your job. All these things are everything to me. The next 10 years. And Toronto’s like this fascinating experience. There’s one, one study that came up from Toronto said that by 2041 we’re going to be short 220,000 household units. Like actual to your point, 220,000 that’s the same amount of um, household units in the city of Brampton. Yeah. So we’re going to be short like basically the city of Brampton and housing. We’re, yeah, we’re basically if you look 10 years ago like, cause everyone, I mean, you know, cause I know when we were doing it with just simple rental properties, people are like what the value of this is what, you know, it’s I’ve been waiting to my house cause it’s, it’s going to come down and this was 10 years ago.
Right. So it’s hard looking forward sometimes, but if you look back in the last 10 years, the same thing has happened. Like it just, that’s when it started with the immigration we were having before. But that’s when it started ramping up. Right. And that’s what’s caused a lot of what we’ve seen now as far as prices and density. I’m just driving along the highways just driving along the QEW either from [inaudible] we’re an old vessel, either going into Toronto are going to Hamilton. It doesn’t matter which way you choose. The traffic now is noticeably different. Well then it was just five years. If I get no traffic, I feel like I won the lottery. I’m like, Oh my God, I must think it’s tiny possible anymore. Going through Mississauga, there never used to be traffic going east through Mississauga and trying, now it’s like all day, every day.
Yeah. And traffic jams start in the weirdest places. I used to drive, I actually played back in the day, this will date me for the Oakville blades, which is a junior hockey team. And they used to drive from Richmond Hill four times a week and so, and that was the early days of the four oh seven no traffic. Oh yeah. You might know what I mean. I don’t see any other car. You, I’m sure I’ll get even any of the big highways and you know, you’d be stopped. Delayed flight 10 minutes. Now it’s like, oh you just to do that. No. Can we do, these are Google maps up. It’s like, forget it. I’m not even getting on the road. So the funny thing about ways to, this is a totally sidetrack is like I feel like it’s disrupted traffic patterns more than totally guys buzzing by my house.
Yeah. There’s a transport truck. There’s a lot of people on quiet streets. Yeah. Wait a second, I can go down this quiet street and shave off three seconds off my trip. Totally doing it. When it was small and there was a small number of people using it at work and now that everyone’s using it, everyone’s taking the same crazy routes. It doesn’t work. There’s going to be another app like the anti ways like here everyone on waves is going this way. You go just stay on the highway. You’re good. Yeah, exactly. I feel like that’s what always wins anyway. Just stay exactly where you are. But I want to mention one thing about the immigrants. I find that Canadians always think that um oh who’s coming into the country, it must be people with an education cause we have a points based system and you know we do have a high quality of immigrants.
But Darcy to what you were saying, and Dylan to your point also is that I find when I talk to people and new to the country, they say what you guys are saying, they’re choosing Canada because they could go to other places. Usually it’s Australia, Canada, Australia, usually one other choice. Maybe like in New Zealand I feel like I’m forgetting one place, but uh, but they choose Canada because of safety. Like they’re never talking about, oh, I have a university degree and I have a bit of money and that’s why I’m coming here. They’re always like, hey, it’s safe for my family and my kids get good education and they have a chance at getting into university. Whereas if I stayed in India or China, they would have to be in school like 15 hours a day to try to get into university. Whereas here I feel like they have a chance.
So that whole component I find is missed by most Canadians. They don’t realize what an attractive place we are to people who are mobile have a bit of money and have some education and then it, what it does and don’t jump in, sorry to jump in there, um, is it sort of makes people feel uncomfortable because now the city that we grew up in and we expect to do afford a detached home close to the city or whatever it is like is now becoming somewhat out of reach for people. And it just makes us unhappy and angry and saying, there must be something wrong here when the reality is all these things you’re talking about is good reading that, right? Yeah. Yeah. And, and as a politician I’m like, hmm, the politicians must just actually love this because it’s more tax dollars. People come in here that, you know, kind of helps the economy.
There’s this awesome professor from Berkeley. He did a study that I’m also going to reference, uh, nick coming up and he did this study that said, if as a city grows, if one for one as a person or a family unit comes into the city and there is equal amount of housing growth, all the productivity gains from that economy growing is capitalized to the individual. Like the individual gains incomes go up and that kind of stuff, right? And then the go grows. But if you enter a metropolitan city where housing does not keep up one for one, all the gains are capitalized in the land because there’s not enough land. So the prices keep going up and up. So as the new workers and family units come into that city, it’s driving the land up so much that it’s actually the land owners who really are benefiting from that growing economy.
If the housing, to your point, how we can’t keep up, and that’s always in my head, I’m like, holy crap, man. This is a very interesting study, which means to me, for me and my family, selfishly, I should try to just get that the, yeah, I should try to get as much land in my hands on rental properties, land developments. I mean I know it’s a selfish thought, but that’s the way I’m thinking just because Toronto, the way it’s kind of structured. If you look at the way that Europe was like Europe, there’s so much, it’s dense, not as dense as some other areas, right, but the way it was built, a lot of the land you can’t build on stuff. If you look at the, the the, the winners, let’s say over the kind of like the last 2030 50 a hundred years and Europe, the land owners, if you own land in Europe, so like look at Italy.
If you had land in Florence that you could find it, you could build on back then, how well are you now versus if you don’t have land is the same. The same things happening in different areas in North America. It’s like really no different because let’s be honest, and Ontario, a lot less people want to move to Thunderbay than live in southern Ontario where it’s still like it still gets cold but it doesn’t get as cold. Right. It’s just really difficult for people to, with all the buzz and noise for people then to have a longterm view, which is what you need. If you’re going to be talking about like, oh look what happened in Florence. Right? Yeah. Good point. Yeah. You need to think long term. You got to look at 50 years out. You say, what would this look like in 50 years?
Oh Wow. If it’s like the, I had the most people to be fair, I feel like I’m, I’m older so I think this way it’s like when I was younger it was just about, hey, how much money am I making for my family and going to get this house. Here’s my mortgage payment. You’re not thinking it’s after a little while where you accumulate a little money. Then you can start thinking this way. Cause I wasn’t thinking this way for sure. And it might like 20s and early thirties. It wasn’t like going to target. It’s hard to get to save money to buy. Right. Oh my gosh. Like it’s very different. It’s hard to be longterm on anything just cause we were wired. You want it short term and everything. I was looking up because I was taking a picture. So to the land, um, topic, even even the single family detached homes are buying now.
If they are the same size as they were, they’re going on smaller and smaller lots. So the recent release in Oakville that came on miles, this flyer, 36 foot lots, 20 2100 square foot homes. Whereas before 2120, it was like 2150. So 21 2100 square foot home would never go on a 36 foot seven was 900 square foot house, 1400 square foot kind of. Right. So they’re just shrinking. And that’s just the width. I actually, because it was just a flyer, they don’t give you the depth of the law. The depth is smaller too. Cause if you look back yards and now it might be the size of this office, a lot of them. So it’s smaller like some people are getting the same end, the starting price of those homes. 1.1 million. Yeah. Is this in the oak? Oakville, not even Toronto to drive our father.
Our Father is 79 years old, grew up in the drywall business. He drives around this you subdivisions going up all over Toronto and he just pointed all these houses going garbage, garbage, look at this garbage like this. Like this old European guy were English is still his second language after being here for like 50 years I feel like. And he’s just insulted by these projects that are going out. You know, I could, you know there is some, I could see that. Yeah, totally. I feel like we should have to sell tours with our father and you just go around with him by the way in was going to meet his criteria though now. Yeah. Oh No. Oh no one. I just go around just hearing them go garbage and pointing. You know what houses? Well the t here and talk about a 20 foot wide lots and high park and the value of the homes on those.
He’s like, well he just, you know, and the town homes they build like on top of the street. And he was like, how can people buy these again? But funny story to share about our father, that’s a, he he, him and his buddies used to hang out at high park in Toronto and they got into a fight there. I guess they’re both drinking and our father though the story, the, the, the, the, the guy who my dad fought is uh, I’m still like good friends with his son and we always get the story interpreted a little differently. But the story from his father is that I fought your dad and he lost $100 in high park because it fell out of his pocket or no by our dad says it fell out of his pocket. He says that he won the hundred dollars that cause he lost the fight.
But apparently this guy had a few beers and he walked home to his house. You know our long high park. Yeah. This is, this is to keep the houses used to be, when these guys came to Canada, this was like, that was like the burbs around Hyde Park. Um, they, why he walked into his house, he was going up to his bedroom, up the stairs and some people were in his family room and he looks over at them. He’s like, what are you doing? Get Out of my house right in. And he’s going up to bed. And he didn’t realize he was in the wrong house. No one locked their doors back then. Right. So he just walked into someone’s house. Can you imagine you’re in your family or you see some guy walking anyway, probably shouldn’t be staring, sharing these stories. But our father that our father likes to share that part of the story that he might’ve lost 100 bucks, but he’s the, the, the guy who went into the wrong house.
Anyway, I’m way off track. What I wanted to share about, uh, Ontario was that we’re also seeing, and I don’t know if you guys might see less of this because the developers you work with are just like really in the real prize pieces of land. We’re seeing spillover effects. And what I mean by that is in London, Ontario for example, we never used to do that much in London except for student rentals by Western University. Yeah. But we’re all of a sudden seeing people in Saint Thomas. Do you guys know where St Thomas’ kind of just outside of London, um, we’re seeing people buy properties in Saint Thomas because London is getting too expensive because people from like miss saga and Milton are starting to buy like properties out in London. We’re seeing the same thing in Saint Catherine’s where people from Mississauga, Oakville, Burlington are getting pushed out to buy in Saint Catherine’s.
People in Saint Catherine’s are now buying in Welland. So we’re seeing this weird thing that not only like our area’s growing it’s Po, it’s pushing people over to the spill over places that you would never imagine that you see activity in for the same reason on uh, on Saturday I pull up some numbers, I found this awesome, these awesome numbers around that Toronto last year in lost about 30 to 35,000 people to those areas and other areas of Ontario. However, they’re so true. And so people don’t realize it because Toronto is for getting busier and busier and it’s the, it’s the international immigration that’s been back filling in Toronto, but, but the local migration trends have been out of Toronto into these areas. I have these, all these numbers around it. Like, yeah.
Yeah. London’s taken off a ton. I go up there every once in a while, my, Oh, so you’re noticing it. Yeah, my fiance’s family’s from there and grew up there and the whole deal. But uh, yeah, it’s, it’s grown a lot. I know some friends that have bought houses and stuff and even just, you know, they bought because it was affordable a couple of years ago and even, you know, if you were to go into the market now as someone right out of university or something like that, it’s not as affordable. It’s, it’s gone up quite yet.
And you know, like w w we haven’t gone as far as London Saint Thomas or, sure. I think you’re the developers you’re dealing with, they kind of do more right around. Yeah, they do. But a lot of them are Niagara, like down to AWC too. Right. We’ve invested pretty heavily in Kitchener, Waterloo, Cambridge. We’re actually, we have a pretty big development in Shelburne. So these are areas that, you know, may not be as far west, but like shall burns a good pope from core Toronto. Right. And it’s the same thing. Spill over fact affordability. Nice town. Bigger lots. Yeah. You gotta, you know, you get a, Oh yeah. It’s not an, it’s not 20 light to that lot. That lot question. Like it’s such a multidimensional thing, right. Because developers want to develop to a margin, right? So whatever that margin might be called, 10% to go home.
And in order to do that, you know, you have to use your land appropriately, right? To be able to deliver certain size house that someone wants to buy at a price point that works for them. And for the developer to make their margin, right? It’s not, it’s not a one sided thing. So that, so there’s that, right? So that’s why these things have been compressed because it’s costs have gone up. So in order to make it more affordable, you needed to build less square footage. And that might mean on on less of a guy’s land. The second thing is that, you know, a lot of what’s happened is been pushed down from the provincial government, right? So you’ve got this Ontario places to grow act that has sort of redefined density targets and a lot of areas. So you know, areas like Oakville or Richmond hell or you know, Mark [inaudible], which used to be what we know as suburbs and big detached home suburbs are now being forced to intensify. So what used to be, you know, 40 people per Hector is like the metric they use is now 80 or sometimes 120 so they almost have to develop, build what your dad thinks is junk, which are right on the street townhouses that are 20 foot wide because that’s what the province wants. Right? Otherwise you’re going to really force people to London or if you have,
yeah, there’s just not enough room. There’s just not enough room to build more density. Yeah, I, I’ve, when you lay it out like that, yeah, it makes obvious sense what’s happening. It’s just the context that I have as a kid growing up, I see those developments. I’m like, what the heck is that? And for affordability because it’s so, so yes, they have to, but also it’s the portability. They keep, you know, if, if they start just building 60 foot lots in Oakville at 3,500 square foot homes, how many of you if, if the, if the 36 square foot lot is 1.1 because of afforded the cost of land and everything, they just no one, not as many people can buy them. Like it’s not sustainable. Right. But the um, I think one of the misconceptions that we were speaking about earlier is so many people they don’t realize like the developers are making good money, right?
Like if you’re a smart developer, you’re making good money. Like no one’s crying over to developers, but the margins aren’t what I think a lot of people might think they are in, in, you know, for what the developers are making because costs, like we were talking about land and all the municipal costs and the government regulation and that type of stuff. Construction all gone up to the margins. I think the majority of margins for developers as the, even as the prices have gone up and they’ve raised prices, I think their margins have shrunk from the numbers that we’ve seen. At least for sure.
The things is that, you know, it’s something that will constantly wrestling with is people are like these crises are egregious but costs run in line with prices. Right? And, and so if you think about when you hit, you know, something like 2017, your costs, or I should say they trail pricing to an extent and so costs are running up, prices are going up, and then prices hit sort of a point in 2017 and come back down. Well guess what costs don’t come back down as quick as pricing. Good point. So now your margins are really, really compressed. And so to your point, margins are down and um, and costs are up. So it’s not, yes, they’re doing well. But back to even our earlier conversation is a lot of the value has it. A lot of the upside in, in, you know, we called development, but there’s a component of land development. And then construction, the margin and construction is one thing we’re most of the value has accrued is in the land. Right? So where are these big developers have made most of their money?
It’s just the value and the value over time. You guys know where the fastest growing place in was last year. Wait, let me get actually fastest place in Canada. Sorry. I think I know. I should know this. Know I know the answer is Peterborough. Yeah. Oh yeah. Can you believe it? I heat up bro. Now it’s percentage based. Right? So it is small it and take as many people. But I mean like would you ever think Pete, maybe a, you know, at nine oh five region, like closer to stronger, but Peterborough, yeah. Number one in all of Canada and buy a chunk to, you know what’s up there too. And maybe you’ve looked at the stats more recently. Kitchen is way up there. One of, uh, one of the top five, I forget, but the, it’s all spice. I Gwelf berry. It’s all these people buying it. Are Your friends buying in London? I mean, that’s kind of what’s happening. We’re going to have a top five all in Ontario. Peterborough, KWC number two, Ottawa, Windsor, London. I then Kingston’s number, just a couple of assets.
And I think all of those are our cities or towns that, uh, you know, maybe historically people have kind of thought of as, for lack of a better term, like B level
boring. But, uh,
but they’re now there. When you look at kind of what your, your options are there. You know, there are cities that have good job basis. We just did a project recently and in Kitchener, Waterloo and you see, you know, they’ve got a huge tech hub there. There’s education jobs, there’s, you know, and I’m sober fest. Yeah, October, great October fest. Um, so that’s key. But, uh, so from a kind of an equation and in an average person’s mind that you can still get a detached home for relatively affordable price. You can, you know, it’s a diverse job base and that’s why you’re seeing a lot of these, these other kind of periphery markets grow.
Look, we know people in buying these rental properties, these like a duplex or triplex down here in Windsor in Sarnia, these small little about 12 just cause the, the rents to the value of the properties are great. Just from a cashflow perspective. You know, the tenant profiles different, there’s a whole different set of challenges is not really there. It’s different but, but yeah there’s, there’s, you know, it, it can make sense. The only thing to me that I think about with that, and it doesn’t apply so much to some of these areas, but in the past places like Windsor’s in Sarnia and those places, um, when the economy does turn, cause it’s inevitable, right? It can’t just be this strong economy forever. There’s ups and downs. Sure. Those are the places typically that often when there’s manufacturing problems or things like that, if China decides to, you know, fluctuate their currency more and take more manufacturing, that’s when they lose those jobs.
There’s like a stream of people leaving those places as opposed to like the Greater Toronto Golden, Greater Toronto Hamilton area. There’s just more stuff, more. It’s just more sustainable for, there’s more foundation still built there. The foundation’s being built in those areas, but it’s just not as strong as it for obvious reasons. Right? Yeah. They diversify like you need a diverse employment base. Right. If you don’t have it in and there’s a shock to one or two industries that the town is relying on, it hurts more susceptible for sure. Right. Well remember Hamilton when the steel industry got now Hamilton’s diversified
client base, but when the Steelers sure got hate loves that 20 years ago now or so, like they worked, it was a 20 longer. Yeah, it took a, I installed and installed an oracle database right in the middle of the fast goes like, I dunno whatever. I can’t believe you went into that drive. What goes on in there and it was like this IBM server that I had to go and install oracle databases on and it was like some expensive server. Like I had never seen something so beautiful and so big in a shed that was like you would keep some crappy lawnmower in. There was like three guys in there playing solitaire on it. I was like, what does happen? Get me Outta here. Like what am I doing? I thought this was like, I worked in some tech company and I was super cool.
I don’t, I don’t think, I thought it was super cool. I just felt like that wasn’t right what I was doing. But, uh, I just want to give you a stat that uh, on Toronto, the top three cities in the u s New York, La and Chicago, they make up 17.6% of the u s economy. So the GDP of those three cities, the top three cities, just to show you how we’re concentrated differently. Toronto, Montreal and Vancouver make up 35% of Canada’s economy, but it gets crazier. Toronto by itself is 18. Yeah, it’s crazy. Toronto by itself is the same percentage of this GDP that the top three cities are in the u s like our, our GDP is so concentrated right here. And I’m not even trying to say that’s a good thing. I just, I mean, we need to be aware of it. Yeah.
I don’t know if it’s good or bad. Like I think it’s, it’s probably good if you’re an investor, right? A real estate investor in a way a real estate investor. But, but uh, but uh, you know, you know, like it’s, that’s why when we think about the Canadian real estate market, it’s hard to paint a broad stroke, right? Like the media is like, well, Canada’s overheated. Like that stat right there shows you that the market is separated, you know, Canada really, Toronto and Vancouver, Montreal is emerging. We Love Montreal for sure. But like in Toronto and Vancouver are very different from each other like that. The headline should be about the cities and why these certain cities are up or down or why you believe that not Canada broadly because it’s, there’s so different from the rest of Canada. Even beyond that, not even just Toronto, Vancouver, because just in Toronto you have Hamilton Kwc Yoga, we have Barry like it’s whatever, take your pick on these different areas and for different reasons they might be stronger or weaker.
But the population base here is so he, what percentage is this population base of like southern Ontario, older or she was about 9 million. We’re a population base of 36 so what’s that? 25% of the population. So probably more if you can include a little even like the further areas to right. Maybe 25 to 30% of the entire country entries here and over and over like this statistic over the next, I don’t know, seven years, nine years, whatever it is expected to add, you know two and a half million people or 200 of us that it’s 3 million people by 2041 from 2016 to 23 million. Think about that. 33% increase. No roads must explain bars. That’s a good point because if you think about that, the Toronto population is 2.7 million. I think right now we’re going to add another Toronto
by 2040 [inaudible] it’s not that far away far. I know it’s, it’s crazy. It’s 20 years isn’t that long. When you talk to people about kitchen or cause you mentioned that you guys had a project out in kitchen or do you have to educate people on kitchen or do you find or do people get it, they’re like, oh yeah, university jobs manufacturing high tech or do you find you’re having to educate them?
I thought going into it that we would a lot more, I think people are a lot more in tuned with with Kitchener then, uh, then surprising I thought Toronto people, if some of your Toronto core clients might be like Kitchener, well I think a lot of people, especially people that are obviously we’re in Oakville now and people that are kind of on the, this sort of west end of the GTA, like they kind of see both sides of it, right? Where they see Toronto that’s really taken off, you know, real estate prices have gone way up. Condo market’s been great. But then on the flip side of that, you know, there’s, I think there’s always, you know, party you that kind of looks out east or a west and um, you know, sees the option of having the detached home for the more affordable thing and you know, what’s out there. And Kitchener’s always been a bit of a, a tech hub. It’s gotten a bit more kind of diversified and taken off a bit more recently. So I think people have always paid a bit of attention to it. I think it’s one of the ones not so dissimilar to Montreal maybe where it’s in the last little bit. It’s had a, it’s kind of taken off and gotten a little bit more recognition.
The secret’s out. We’ve been talking about kitchen her for like over a decade now. I feel like it’s finally out. If you’re on the west side, you know, if you’re on the east side, you might be thinking about what areas, yeah, Durham, but the full seven runs through like Brooklyn, Ontario, think it’s just north or right through Brooklyn. Whereas people in oak point, you talk about Brooklyn on terrorism and we’re like, what the hell are you talking about? And yeah, but you talked to people in Pickering about Brooklyn and be like, Oh yeah, it’s right there that, so there’s a little bit of that going on to probably the east is,
I know you guys are in the west side and you know we try to invest in the West and the east for the East is really interesting from a transportation infrastructure pricing. It’s actually down a little bit from the West. Like just, you know, if you try to do a relative distance and probably saying in, in China sort of make those match. The West is a little, you know, a little more expensive and there’s a lot of opportunity there. Like a lot of the big developers and Curtis Brooklyn where they are having, I think we have like seven or eight projects. Awesome.
My theory on that was, and I don’t know, cause I never went back to actually look at the numbers and this was before I really kind of started looking into, into real estate. But I feel like when as Toronto started to grow areas like miss areas of like kind of more to the west grew first. So like some are like Mississauga was one of the biggest sub, we’re still is, right. One of the biggest suburbs and the prices, they’re starting to escalate, escalate and then it went kind of around and went north and around. Even Barry, because Barry was so, the prices were so low that Barry kind of exploded and stuff. And then over time as those prices went up, people just went, oh they looked at, cause for so long I’ll sholl was like, oh you live in the Schwab. Right. And then then all of a sudden they’re like, well why not look at the prices
over on the east side? Why are we not moving there? Like you said, similar distance, but the prices are lower. And then over the last white, about five, seven years, maybe five, six years, Durham’s really got like really strong appreciation because of that. And I don’t know, I never went back to look at like facts around that. That’s just kind of what I feel happened. A lot of it’s probably transportation related a little bit too. You know what that makes sense. You’ve got multiple north south highway is now, you’ve got four oh seven extended to Peterborough. Effectively the [inaudible] was out was first, right? You have, what is it, the four 25 or four 12 what’s the highway that goes from the four oh seven two the four oh one now for 18 is the 14 perhaps you’re way off. Okay. So that’s how much I know on that and that, but that, but to your point, all that infrastructure is being built out now.
Yeah, absolutely. And like, you know, go train access is huge. Right? For people. I heard a really random thing, and this is not empirically based, so it’s just some Kook probably told it to me. We’re holding each other where you’re about to say this better be right. [inaudible] sense. So I’m going to spend it, I’m going to throw it out there and say is that almost every city in the world develops to the west before the east. Oh really? And it’s because in a lot of the industry is on the east. Typically it’s because the wind blows to the east.
That’s amazing. And so any, any anything? I believe it, anything being built, the nasty odors are so no one wants to live on the east coast. They want to get the odor to this. Now I’m going to the next city that’s built this by, I’m just buying land on the west side. Wait a second. Hello. Steel factories were in Hamilton on the west side either. That’s the stupidest common [inaudible] on the podcast. The most enlightening. But no one really lived west west of Hamilton fall apart too. So Darcy, can you come back talking about the way the wind blows again? So listen, if any. So we wanted to ask you a bunch of gray broke stuff. We kinda got there in the middle of all this other stuff. Thank you for sharing so much as there’s some like obvious stuff that we, people ask you guys about the gray book that we should be sharing or did we get out enough that we, we did our, we did what we wanted to do. We didn’t have really even an agenda.
I think one of the, the kind of big things on, on talking about all of these different markets and you know, what, what has impacted different markets and we’re in some other markets in the u s as well. We’re in south Florida, Miami, uh, Houston, um, really is more so than just is the market up or is the market down? Is building and developing the right product for the right market. Right. So, you know, people in Durham are going to have, you look to Durham to live for a different reason. Then you look to Yorkville to live and you, you look to the product type in Miami where you know, you’re, you’ve got a high millennial renter base is going to be a lot. You’re going to cater to that more than an area that maybe has a lower or a an older demographic. So it’s one of the big things. I think just in general with real estate and especially now as you know, as the GTI has grown a lot more and it’s become kind of a, a much deeper market is you don’t see to the point about areas like Peterborough and Oshawa and places like that growing so much in population, you really don’t see as many kind of one industry towns anymore. So finding the right product to the right area is becomes a lot more important.
Oh sure. That’s where the expertise lies. Never really thought about it. I always just kind of thing up Peterborough, I dunno, build some houses I think. I think to Dan’s point is like, you know, delivering the right product to the right people is that there is someone that wants to live in Durham. There’s some of them wants to live in Oakville there someone who wants to live in Yorkville, this someone to list them and water of, right. It’s different person. But the end of the day, there’s a product that needs to be delivered for that person because they’re going to be bonding there one way or another, right? So it’s about delivering the right thing to the right person. And just because you don’t want to live in wherever and I don’t maybe want to live in wherever, it doesn’t mean that it’s not a good investment, right? Someone does want to live there as long as we’re capturing them.
Um, you know, it’s like we look at all of our investments, like you look at your children and you treat them all equally, loved them, all the same. So, so that’s uh, that, that’s kind of our approach, right? And as long as you’re in good areas with good macro trends and you, and you don’t over leverage and you buy well and you have great partners, then then you should be okay. You have how many young, young children? Two or two and a third on the way. How, wow. So let’s just extrapolate this out. How are they laid them all the same. I’m just wondering what they’re going to be so far. So far the last 20 years, houses have basically easily doubled in price. You’d be silly. Were like well beyond doubled. We’re talking way more than doubled. Holy smokes. Quintupled so dark. How old are you?
How old your oldest? Uh, turning four and turning for he buys a property is 24 average house. 1 million bucks. So he’s going to have to buy a house of $2 million. Darcy to her. She’s going to get busy shoveling every neighbor’s driveway already to help the wind to blow some money into your, yeah, you’re going to live on the east side. I was trying not to bring it back. Bring it. Do you have children? You don’t have children. Okay, got it. So you’re good. You’re money’s, you are saying you get to keep it. I was trying not to think about that. So I appreciate you bringing it for contact information for you guys. Do we hand out that rock story email? Do we have, what’s the, what is the best contact information? Tanto yeah, probably like, I think that’s it. You know, do, it’s a great relationship that you know, gray record rocks our have had over a long period of time. You know what you guys are doing here is awesome. So I think it makes sense to to deliver that email address which is, it’s just rock star@greybroke.com and that goes to either one of you guys.
It’s easier for people to remember then giving them my uh, my, my name is spell out, so uh,
Rockstar at gray rock dot rock star. Great book.com. I think that’s it. Nick, anything else? Nope guys. Anyway, anything else? No. Appreciate you guys having us in. Thanks for having us. Definitely
follow up on that asinine comment and we’ll go from there. That’s good. Give us a reason to follow up. Great. I love those types of comments. Thanks guys. Thanks guys. Thanks. Hey everyone at some crowds again, so hopefully you enjoyed that chit chat with Dylan and Darcy from grey book. Good guys as I mentioned, and a, if you are listening to this and you want to check out some real estate investing information for yourself, you can grab free copies of our books at Rockstart, inner circle.com forward slash books. That’s rock star, inner circle.com. Forward slash books. You get access to all free copies of our books. Some people have paid good hold, good hold cash, good cold, hard cash, uh, for copies of our books from Amazon. You can buy the books if you want to do that, but you can get free copies from our website.
I always chuckle because there’s a few people who came out to me and said, Tom, I never took you up on your offer for free copies of your books because I didn’t understand your motives and the motives are so that you know that if you enjoy the information in the books enough, we hope that one day you might reach out to us and we’ll, we’ll be able to work together and there’ll be a business relationship between us. So that’s the motives of handing away free copies of our books the way we do. So there you have it so that you know, and you can get those at Rockstar, inner circle.com forward slash. Books. That’s it for now. Until next time, your life, your terms.