Arriva condo tower on hold

The Calgary Herald is reporting that a high profile residential condominium tower near Stampede Park has been put on hold after the owner of the site recently filed for protectionunder the Companies' Creditors Arrangement Act (CCAA).

Calgary developer John Torode said work has stopped on the 42-storey second tower of the Arriva project in the old Victoria Park neighbourhood which has about 60 per cent of its 221 units pre-sold.

"What we've done is put the limited partnership which is the owner of that site--the second tower--into CCAA," said Torode, president of Torode Realty Advisors Ltd. "What that does is gives us a chance to restructure the deal which would include finding new financing. The financing we had with the bank did not go well given the credit crunch and we think that we need to find alternative financing to proceed with the tower."

The article by reporters Mario Toneguzzi and Kathy McCormick goes on to say that the Companies' Creditors Arrangement Act is a federal act that allows financially troubled corporations the opportunity to restructure their affairs. This allows the company an opportunity to avoid bankruptcy and allows the creditors to receive some form of payment for amounts owing to them by the company, according to Pricewaterhouse Coopers.

Torode said it could take anywhere from one month to six months for the financial restructuring to take place.

The Arriva project includes a 34-storey tower that has been built and is close to sold out. Torode also recently announced that a planned third tower, which was to be another condo complex, would be a boutique hotel instead. A fourth tower that was part of the original plan was cancelled early in the development process.

The project is on a block between 12th Avenue S. E. and 11th Avenue S.E. and Olympic Way. At the construction site, small signs by Torode Construction Ltd., on the fence, say: "The Arriva 42 project is on-hold and this job site is secured and not operational."

Several condo projects in recent months have been delayed or cancelled in Calgary.

"There's been a number of projects stopped and I think many of them have to do with financing. We're no different," said Torode. "The financing market is difficult. We're committed to this project and we want to see it through to completion, but you can't do it without construction financing. So that's in a nutshell the bottom line."

Torode has a number of proposed projects for the Victoria Park area and Ramsay, but he said the filing under Companies' Creditors Arrangement Act is unrelated to the other projects. Each of those projects has its own investors and owners and they will each proceed or not proceed based on what decisions are made for those projects, he said.

But Torode also said: "Well, certainly we wouldn't start one of the other ones if this one's (Arriva) not going. This is sort of the key project. And you know phase one has turned out very well."

He said work has stopped on the project now. The tower is at grade on one side and close to grade on the other side.

"It's 20 per cent built, and we hope to finish building to grade -- and ideally, to build the whole tower," he said. "I will still be looking after the site because it is partially built, and all deposits received from buyers are insured."

"If credit markets loosen, we hope to get financing to build."

Recently it was reported that the City of Calgary is monitoring nine condo projects that have been halted due to the slowing economy. Eight of the nine sites are in the Beltline.

According to Lai Sing Louie, senior market analyst in Calgary for Canada Mortgage and Housing Corp., there were 7,039 condos under construction at the end of February in the Calgary census metropolitan area. That's down 12.6 per cent from a year ago when it was 8,052.

Louie said the number of condos under construction in the Calgary area is expected to continue to decline as more units are completed and the rate of starts slows down as well.

In February, the Altus Group Housing Report said new unsold condominiums are becoming a concern in the Calgary market. The report said most of the unsold units in Calgary are already completed or under construction and the expected decline in new condo apartment sales this year could lead to a "sizable" increase in the number of completed and vacant units.

"Many buildings in Calgary began construction with less than 50 per cent of the units pre-sold," said the Altus Group Economic Consulting report.

There are indicators of a "much more serious problem for Calgary," said the Altus Group. Those indicators include a high level of condominium starts in 2008 (5,335 units) and a high level of condos under construction. The pace of condo starts has also declined "dramatically" since the end of July, but "very few projects in Calgary have been formally cancelled so far."

"Excessive investor activity has also been a concern in Calgary," said the Altus Group report. "While the percentage of condominium apartment units offered for rent declined in Calgary between 2007 and 2008, the vacancy rate rose significantly from 0.7 per cent to 3.5 per cent."

The report said there is "clearly a large oversupply of product" in Calgary and" more project cancellations would help move the market back into balance more quickly."

The Arriva announcement is the second major construction project in Calgary in the past week to be affected by the current economic malaise.

Last week, H&R Real Estate Investment Trust announced it was deferring the south block of the Bow skyscraper project and construction for the time being would be stopped at grade level on that site.

Comments

[condo in Philippines]

Wow! that was nice. I want to live in that 34 storey tower. I was even interested with the facilities and the privilege they offer.

Mitch

[condo in Philippines]

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Deirdre G

[condo in Philippines]

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Deirdre Gonzales