Such Great Hype
February 20, 2011
Until now, condominiums in Toronto have been marketed like cars or cigarettes, full of glitz and tits. Meet the new generation of web-savvy marketers, entrepreneurs and real estate agents who are cutting through the hype and changing the way we buy
By David Sax – Eye Weekly
On Jan. 10, just before noon, more than 100 real estate brokers descended on the corner of The Esplanade and Scott Street. They queued on a snow-and-ice crusted red carpet, shrugging their shoulders against the stiff breeze, chatting in Cantonese, Mandarin, Farsi, Arabic, Korean and even, occasionally, English.
These brokers were so-called VIPs, and each held a specially numbered card sent out by the developer Cityzen (and its partners Fernbrook Homes and Castlepoint Realty Partners) to enter the Living Room Condo Store, a new, high-tech sales centre for Backstage condominiums. Backstage is a modern, D-shaped tower that will one day rise 36 storeys into the skyline atop an awkward 20,000 square-foot parcel of land, right where Yonge Street meets the GO train bridge.
Once cleared by security, the brokers split into two groups: half of them headed to a small buffet in the back room, where, to the soundtrack of elevator jazz, they quickly demolished the immaculately arranged crudités and espresso glasses of butternut squash soup. The other half lined up along the futuristic-looking white walls, where a row of touch-screen displays allowed them to explore various aspects of the Backstage project by swiping through virtual floor plans, panning around suite renderings and testing 360-degree views from various floors.
At precisely 12:30pm, the broker Hunter Milborne, whose company Milborne Real Estate is representing the developers, took to the microphone in a double-breasted pinstriped navy suit, which wasn’t suprising, given his impressive mane of white hair and the Anglo creed of his name. His remarks were swift and to the point: Backstage would be built by April 2013, and it would feature 284 suites, mostly one- and two-bedrooms. “Most buildings have nine-foot ceilings and granite countertops,” he said, “but this has a difference: location, location, location.” That, and it would eventually feature direct access to the underground PATH system.
Within minutes of Milborne wrapping up, the crowd cleared out (floor plans and pricing in hand), the buffet was replenished, and a lone cleaning lady with a mop made an effort to wipe grey slush off the once gleaming white floors. She didn’t have much of an impact. The next round of agents arrived seconds later, tracking in snow, and starting the process all over again.
Some 18,000 new condominium units were completed in the Greater Toronto Area last year, according to the market research firm Urbanation. Another 17,000 will pop up this year, and 20,000 will rise next year—meaning Toronto will have more condo units for sale than any other city on the continent. Despite sluggish employment in the province and the threat of rising interest rates, condo sales are hitting a near-record pace, up 20% in 2010 from 2009.
From my window at Queen and Dovercourt, I can count four cranes, five newly or nearly completed towers, two sales centres and two billboards. In the month it took me to write this article, two buildings were demolished within two blocks of me, and even more cranes went up. If I were to walk 10 minutes in either direction, those numbers would quadruple, expanding infinitely if I were to drive around the city, where pockets of condos sprout like green glass-and-steel forests.
A few of these buildings are architectural gems (One 12 at 112 St. Clair West), some are eyesores (The Bohemian Embassy, aka the Bohemian Embarrassment, at Queen and Northcote), while most fade into a background of inoffensive mediocrity. What these condominium projects all share is the need to sell—largely before they are built.
Thanks to Canada’s conservative bank policies, developers cannot receive construction loans until 70% to 80% of units are already spoken for with deposits. The industry lives and dies on pre-construction sales. This means that developers are selling nothing more than the promise of a building, based on a few computer-generated renderings, floor plans and a whole lot of hype. Condos are marketed like cars or cigarettes, full of glitz and tits, which seems like a stupid way to sell a home. But so far it has worked, and developers, being a generally cautious bunch, have been loath to try anything new. Buyers’ mass commitment—sight virtually unseen—has left the city with many poorly designed buildings and dissatisfied owners.
Now, that’s poised to change. A new generation of web-savvy marketers, entrepreneurs and real estate agents is cutting past the hype and reshaping the way condominiums are sold in this city. They are working to democratize the sales process and make it more transparent, giving the public more of a say in how condos are designed, developed and marketed, and helping average buyers access the premium pricing reserved for so-called VIPs months before anyone else can even look at a floor plan. Until now, the developers have had all the control, but thanks to the power of social media, some of it is being wrestled back into the public’s hands. Backstage is a cautious but early experiment in how this future could play out.
Sam Crignano, president of Cityzen, fondly remembers selling during Toronto’s last big condo boom in the ’80s. Developers would take out ads in local papers and blanket neighbourhoods with flyers, advertising the launch of a sales centre. “On opening day, usually a Saturday, you’d corral potential buyers into an office,” says Crignano, the 51-year-old son of an immigrant carpenter from Italy. “We had a speaker built into the wall that would belt out ‘Unit #3 Sold!’ or ‘Unit #20 Sold!’” The developers would then shuttle buyers into a second room he called “the bullpen,” where agents would close the deal. “It was quite the rush,” says Crignano, who is now one of the larger high-rise developers in the city, and one of the most open to taking risks. Cityzen is building the Absolute towers in Mississauga, which are arguably the most architecturally bold apartments built in Canada since Habitat 67, and Crignano picked the winning design, by a small Beijing firm, through a public competition.
Today, the process unfolds in many stages, and with much more noise. Once a developer acquires a site, it usually goes to a handful of local architecture and marketing firms, who create a design and a branding campaign based on what has previously sold nearby. That’s how you get cookie-cutter towers around certain neighborhoods, with similar, toss-away names like California Condos and Beyond the Sea. A handful of real estate ad agencies, most notably LA Inc. and Montana Steele, whip up marketing campaigns that hit all major media, built around slogans promising something vague (“Your Unique Lifestyle” or “Where You Belong”), packaged with identical stock photography (a young couple on a Vespa, an old couple at a dining room table), with an estimated price attached (“From the 300s” or “From 1.4 million”), imploring buyers to “Register Now!” for exclusive access.
“I found the Toronto marketing materials to be very formulaic and frankly insulting,” says David Allison, head of the Vancouver-based real estate marketing firm BraunAllison, which has clients around the world. “I saw two to three projects that all had some version of ‘Luxury has a New Address’ or ‘Luxury Redefined,’ with an elegantly dressed woman pouting at the bottom of a staircase. You could have taken the brand name, the slogan, the photo and shuffled them all around without any difference.”
The campaigns can be as superficial as any liquor or cosmetic advertisement. Case in point is Bisha, a hotel/condominium developed by the nightclub impresario Charles Khabouth and Lifetime Developments, packaged with a glossy Montana Steele campaign: the billboard features the face of a beautiful woman with black lipstick, blindfolded with a silk scarf, her mouth open in anticipation as she awaits whatever perversions Master has in store for her. The slogan below says, “Ready or Not.” Bisha’s website is filled with floating nouns (Style, Freedom, Presence) and a trailer resembling a fragrance ad, featuring a boy-meets-celebrity love story that culminates on Bisha’s rooftop lounge. Buy here, it all says in no uncertain terms, and beautiful creatures will fuck you in ways you cannot imagine. The project has sold incredibly well.
With Backstage, Cityzen has decided to go in a different direction, hiring an upstart 12-person ad firm called Blackjet to sell the project. “Most of the real estate marketing out there is shlock,” says Robert Galletta, the 35-year-old head of Blackjet, from his small, airy office on Eglinton West. An ad man since he was still in high school, the slender, fast-talking Galletta is trying to redefine how real estate is sold in the city. In a blog post on the company’s website last spring, Galletta told real estate marketers that the “jig is up,” because their methods had become “white noise,” and even released a viral video mocking the current process. It was a shot across the industry’s bow, but it caught the attention of developers.
For Blackjet, social media is an opportunity to give potential buyers a real sense of ownership in a project. For Cityzen, Galletta engineered a “Name Our Condo” contest over the summer for what would eventually become Backstage. With a grand prize of $5,000, and runner-up prizes of iPads, gift certificates and other enticements, the contest drew 140,000 visitors to the site, 50,000 Facebook posts, 12,000 tweets, and 3,300 name suggestions (including Union House, Pop Can Towers, Nakatomi Towers and, inevitably, Stephen Colbert Towers). Every person who entered registered their personal information with Cityzen, and brokers will contact all of them when public sales begin shortly.
With tens of millions of dollars on the line, a developer’s objective is to sell as many units as possible, in as little time as possible. The way that’s typically done is by selling off buildings in tiers, with the price increasing at each tier. First come the Super VIP or Platinum brokers, who have access to foreign and local investors looking to park their cash in what amounts to a share in a building. About a dozen of these brokers were each given a floor of Backstage to sell back in the fall, months before the sales centre was even designed. Next come the VIP brokers (described at the beginning of this story), who have sold units with the developer before, and can often bring in one or two buyers each. They submit requests for units on behalf of buyers a few days following the event, and receive their answers via a lottery.
A few weeks later come the general brokers, a larger crowd, typically newer and younger and slightly lower down the ladder, with less access to investor capital. Then, when those sales peter out after a month or two, the developer contacts those who registered, including the thousands who entered the Name Our Condo contest. Finally, when those sales slow down, the sales centre opens to the general public. At each step, as units sell, prices rise, and by the time most of us average Joes get a chance to buy—or even see—these places, they’ve been picked over by every VIP and their mother. It’s a system that favours a small circle of brokers and those with connections, and is not one built for people who actually care about these places as a “home.”
Because of this system, developers are notoriously stingy when it comes to releasing information about floor plans, prices and other essential facts until every last opportunity to sell to select buyers has run out. Buyers are forced to request them, and generally they’ll only receive answers once sales centres finally open to the public.
But that’s changed with the recent proliferation of real estate websites. Suddenly, buyers are armed with more information than ever before. Floor plans for Backstage were uploaded to UrbanToronto.ca (a discussion forum for real estate in the city), back in October, months before the public was supposed to see them. In the past, if buyers wanted to find out about new condominiums, they had to scan the newspaper for ads or drive around the city, looking for sandwich boards and sales centres. Now, they’ll go straight to sites like BuzzBuzzHome.com.
BuzzBuzzHome was the first site to aggregate all information about new real estate for sale in the city (and in other Canadian markets), and put it in an easily navigable map, broken down by price, neighbourhood, developer. Buyers can compare floor plans, maintenance prices, ceiling heights and neighbourhood amenities, as well as read development news, or discuss a project and a developer’s reputation on the site’s open forums.
“If you’re spending $300,000 for a condo, you need to do your due diligence,” says co-founder Matthew Slutsky. Launched two years ago, BuzzBuzzHome now draws over 65,000 visitors a month. “People feel entitled to information. If they see an ad for a condo, the first thing they’re going to do is Google it.”
A new generation of brokers is blogging about projects they like, developers they don’t, and their analyses of projects for potential buyers. Agent Mark Savel, who posts at SavelBlogs.com, tries to enlighten buyers to the fundamentals of a project. “You need to look at it as if there were no marketing,” says the 25-year-old Savel (he’s been an agent since he was 20). Savel is close with fellow broker Roy Bhandari, a slickly dressed 26-year-old British immigrant of Indian descent, who recently launched the site TalkCondo.com with his brother Amit, to help investors cut through developers’ bullshit.
Up to 70% of pre-construction sales in Toronto go to investors, and more often than not, Bhandari’s clients are buying units without even setting foot in a sales centre. “I don’t care if they’re living in it eventually or not,” said Bhandari, “but anyone who buys pre-construction is an investor.” They want to know how much the price is per square foot, what the developer’s reputation is, and what are the prospects for growth. Amit and Roy put all of that information on TalkCondo.com. On their page for Backstage, they break down the building’s costs (approxiately $600/sq. ft.) and potential monthly rents ($3/sq. ft.) compared to others in the neighbourhood, and recommend it as a solid, longer-term investment, with a higher cost of entry than others, but one that’s less prone to flipping and volatility.
Standing above them all, yelling as loud as he can, is David Fleming, the take-no-prisoners voice behind TorontoRealtyBlog.com. A broker with Bosley, Fleming is a fearless, tireless thorn in the side of many condo developers. He calls it like he sees it, sarcastically documenting, in hilarious videos and blog posts, his disdain for sex-driven marketing: (“I don’t concern myself with things like ‘return on investment’ when smooth legs and boobs are thrust in my face!” he wrote); murky purchase agreements (“You may have thought you were getting a sleek glass tower, but they’re going to build it out of mud and sticks instead”); shoddy construction (“This development is an embarrassment to builders everywhere”); and poor planning, as evidenced by perennial whipping boy CityPlace (“It’s so loud, it’s so awful. There’s the Gardiner, there’s the lakeshore, and there’s nothing but condo after condo”).
With Backstage, Blackjet has moved the goalpost a little, hinting at future ways that condominiums could be sold in Toronto. The cornerstone of their marketing strategy was the “Virtual Broker” program, where users compete to get their friends to register with Backstage. “Brokers” win prizes as they hit benchmarks for registrants (iPads, gift certificates, etc.), and if a referral actually buys a condo in Backstage, you nab a $2,500 commission. Virtual Broker, like the Name Your Condo contest, was meant to build a database of potential buyers for Backstage. Galetta envisioned the Virtual Broker system as a way of levelling the playing field, cutting past the brokers, the events with the engineered crowds, and the flaming hoops and diversions to put interested buyers directly in touch with the developer. But in the end, insiders still got first dibs, and it proved to be more lipstick on a pig than a game changer.
“All this talk of ‘VIP Pricing,’ ‘Register Now!,’ ‘Last Chance Pre-Construction pricing!,’ this is the kind of shit you see now,” says Galletta, in frustration. “People go and register for the VIP events, and the developer will sell every last fucking unit to a broker, before a shmuck like you or I ever get hold of a floor plan.”
Still, Galletta knows this is the way things will eventually turn. He is already selling developers on a more collaborative process, where developers purchase land, then facilitate a conversation with potential buyers about architecture, design and amenities online. Think of it as a sort of crowd-sourced WikiDevelopment, where future residents shape their home’s look and feel, and then buy into it. You wouldn’t need renderings of pool orgies or million-dollar sales centres—buildings would sell on their fundamentals, and would be better fits for their communities. That’s the goal, anyway.
The night after the VIP broker mob scene, a more exclusive cast of players gathers at the Backstage sales office for Friends and Family night. The muzak soundtrack has been replaced by a live jazz duo, and the food, by caterer Toben Food by Design, is stratospheres above the snacks served the day before: ahi tuna tacos, lamb burger sliders, panko-crusted chicken lollipops. The crowd is decidedly well-heeled in rich leather, supple cashmere and real fur, and sales agents are back at the touchscreens, explaining the views to one family.
Over at a corner table, Sam Crignano and Hunter Milborne huddle together, discussing the pace of sales activity. Over their shoulder, a young Chinese woman and her mother sit with a broker, filling out paperwork as her father, giant gold Rolex dangling, Louis Vuitton fanny pack wrapped around an impressive gut, calculates the cost on his iPhone. Hunter Milborne’s second-in-command, a large man with slicked hair, broad shoulders and a Bluetooth earpiece comes over, leans in, and sotto voce tells Milborne and Crignano, “our numbers are looking really good.”