Tonight on The Brian Crombie Hour, Brian interviews Adrian Rocca. In his interview with Adrian Rocca, President of Fitzrovia, they explore how purpose-built rentals can help solve Canada’s housing crisis. With nearly 9,000 homes in the pipeline and $10B in assets, Adrian focuses on larger, family-friendly units and hospitality-inspired service. He explains why condo-to-rental conversions are rare, requiring far more equity and debt, and why the condo playbook must change for rentals. Fitzrovia’s success stems from a long-term vision, market adaptation, and resilience despite rising interest rates.
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Speaker 1 (00:00):
The views expressed in the following program are those of
the participants and do not necessarily reflect the views of
Saga nine sixty am or its management.
Speaker 2 (00:18):
Good evening, everyone, and welcome to the Brian Crombie Radio War.
Speaker 3 (00:20):
If you've been listening to me before, you know that
I'm really interested in this housing crisis that we've got
and also very interested in some developers, planners, city politicians, etc.
That have got some suggestions and how we can solve it.
I'm one of those, I think, is Adrian Rocco. He
is the founder and CEO of Fitzrovia. Fitzrovia is a
leading developer of purpose built rental communities. If you've seen
(00:41):
the development dufferin the fur one, you get a sense
of the kind of the kind of developments that they
can bring to market. And I think that he's really
perfected the purpose built rental market today and he's finding
an opportunity in a pretty pretty challenging business.
Speaker 2 (00:58):
Market right now, and so it's a real place to
have him with us.
Speaker 3 (01:00):
I'm going to give you a bigger sense, a longer
sense of who he's all about in the second segment,
but right off the right, off the top of Adrian,
tell me why personal rental not condos? And why why
are you still developing when everyone else is sort of
stuttering right now.
Speaker 2 (01:17):
In this market.
Speaker 4 (01:19):
Yeah, both are great questions. Thanks for having me on
the show, Brian. You know, prior to me, I guess
coming back moving back to Canada, I actually lived in
Europe for seven years and when I lived in Europe
what struck me was the concept around renternship and the
prior to rentorship. He didn't really have that. When I
(01:40):
came back to Toronto, it felt like there was a
negative stigma around renting, and so I was also fascinated
by it. I love the concept around selling a physical
product versus a dream off plan that you typically see
on the Kondo market. And I also saw a very
crowded space in the condo sector right It was fifty
plus developers. Everyone was kind of marketing themselves the same way,
(02:05):
and they didn't really see a strong competitive vantage to
focus on the condo market. And I thought, well, there's
a lot of institutional capital looking for long term income.
Can we create a vertically integrated development platform, operating platform
that cater site capital, that could speak their language, that
could execute like a private equity firmestrictional developer operator would
(02:29):
and innomy and disrupt the space and treat the product
like any other consumer product available in the market, like
an Apple iPhone for example. And so that was really
the genesis of the idea. And then I said, well, sure,
I can make a lot more money investing in condos
at the time where you're basically taking the deposits as
(02:50):
free financial leverage or mes financing in a deal. However,
if I could create a product that's going to cater
to institutional investors, creating more platform value and doing so,
and so that was really the genesis of that idea,
and in twenty seventeen founded Fitzroviia. Today we'd be the
largest rental developer in Canada. I don't know anyone that's
(03:14):
developing more rental housing than we are across the country.
Speaker 2 (03:18):
Hold it, you started.
Speaker 3 (03:19):
In twenty fifteen and you're already the largest developer of
rental housing in Canada.
Speaker 4 (03:25):
Is that actually in twenty seventeen? Yeah?
Speaker 3 (03:29):
Yeah.
Speaker 4 (03:30):
We have nine towers that have completed, we have fifteen
towers under active construction where we're pouring concrete in Toronto,
and we have four towers in Montreal. Well, Princely had
port in Toronto, but also have a regional office of Montreal,
and we're across the spectrum around affordability. We don't just
develop brand new new product. We buy vintage product that
we reposition over time. We buy core plus product, which
(03:53):
is five to ten year old product that was built
by other developers in a merchant built program. We do
student housing. Currently own develop and manage about two thousand
student housing bets and we're going to be expanding outside
of the GTA. In that program, we do social impact
investing and then we're also getting into the retirement space
as well.
Speaker 2 (04:13):
Why are you able to develop today when so many
other people are talking about putting projects on the shelf.
Speaker 4 (04:20):
Yeah, the biggest reason is our vertical integration. We take
advantage of our size and scale first and foremost. But
because we develop construct asset property managed entirely in house,
we don't rely on any third parties to do that work.
We can basically shift fees that a third party GC
would charge in the open market to make it economically
(04:43):
feasible to go vertical to develop. That gives us a
big advantage. The third point is we're very focused on
speed of execution. We do not sit on sites. Our
ability to bias site, get it through design, development, polar
per get to the bottom of a hole, put up
a crane. We average typically about eleven months per deal,
(05:06):
and then our ability to cash flow postset acquisition, so
complete the building would be three and a half to
four years, which is very fast. That creates a big
advantage in terms of investing, in terms of our ability
to operate and attract institutional capital. And that's primarily the
biggest reason how we slowed down on a relative basis
(05:27):
from a couple of years ago. We absolutely have, but
we are still actively developing in the downtown core and
proud to do so.
Speaker 3 (05:35):
How can you get from acquisition to construction eleven months?
A lot of people talk about how the whole building
approval process takes longer than actually building. You're saying it's
taking you, what two and a half three years to build?
That would mean that most people are taking four to
five years to get the approvals done. How are you
doing eleven months?
Speaker 4 (05:55):
The biggest thing is being super organized, taking advantage of
a vertical integration. Back to that common so our ability
daring due diligence when we're looking at a site to acquire,
We're laying out our floor plans, We're laying out our suites,
We're laying out our mechanical systems, We're laying out our structure.
In some cases we are tendering demolition, for example, when
(06:16):
we're actually in a conditional period when we're under contract
but not closed on the property. And so because we
do one thing and only one thing, which is purposefult rental,
we know the product really well. We know the product cold,
we have our design standards, we are developing and operating playbook,
and so our ability to move quickly through that phase
(06:37):
and be really organized and leverage our relationships up the
city allow us to move quickly. Is the city perfect?
They're not. But I would say there's been a cultural
shift that happens happened at city Hall, largely led by
a couple of key folks, as a lady called Blessa
who's just an outstanding talent for the city, and she's
(06:59):
been able to really move things along, get the right
people hired in the right spots. Redo the York chart
at the city. Again, it's not perfect, but there's been
a cultural shift and it is a much better place
to invest in operate with than it was a couple
of years ago.
Speaker 3 (07:15):
Are you buying zone sites or are you buying sites
that still need to get zoning. You know, I've heard
about twenty four studies that have got to be prepared
and presented.
Speaker 2 (07:23):
I've heard about, you.
Speaker 3 (07:24):
Know, public meetings that you've got to go through. Community means,
you got to go through negotiations with counselors that you've
got to go through going to the Ontario Land Tribunal.
Do you do you go through all that or do
you do you buy stuff sites that have already had
all the zoning applied.
Speaker 4 (07:39):
We do both. So if we're buying an end zoned site,
you'd add twelve months to it. We are typically not
going to the old O and B. We're not you know,
we're typically getting on the same page with the council
or the local councilor planning staff in buildings and finding
(08:00):
ways to find calmon ground. We think that's the best
way to build long term relations to the city with
the local communities that we invest in. We're really proud
of the product that we're that you know, that we're building.
It's very much community oriented. We have you know, product
that's geared to young families, downsizers, young professionals. We do
a whole host of social kind of infrastructure concepts that
(08:24):
we introduced into our buildings, like our own school, our
healthcare partnership with Cleveland Clinic. We have food and beverage
line that helps animate our lobby experiences. That's social connection.
That story really gives us a lot of good will
with the city and it allows us to you know,
get things zone, get projects zoned much quicker than you know,
a lot of others in the market. So we great example,
(08:48):
we've recently completed the zoning at three projects in under
twelve months. These are you know, forty fifty story towers,
albeit on major transit corridors of the city, but we're
able to get that done in less than twelve months.
Speaker 3 (09:04):
I had the option to take a look at your
site that's at differ in the for one, with a
virtual tour that you've got. It's got a bowling alley,
you've got a Montessory school. You've got you know, more amenities,
more and more facilities than I can ever imagine.
Speaker 2 (09:18):
Tell me what's your objective there?
Speaker 4 (09:21):
Yeah, our objective is to create an amazing living experience
and to change the optics around renting right. Well, one
of the things when I came back home from Europe,
it just felt like there's that negative, back to negative
stigma around being a renter. People weren't proud to rent.
I was a longtime renter, very proud renter, and so
(09:42):
I thought there was a way to really flip the
model on its head, you know, deliver larger, more liberal suites,
beautifully appointed suites, but create an environment for people to
create amazing long term relationships and friendships with, you know,
other members of that community. That is not only for
domestic residents where you're gonna have natural hussoal formation people
(10:04):
naturally evolving from the homa mom and dad, to also
catering to new immigrants. In some cases, we have forty
fifty percent of our resident profiles in new immigrant we
have generally a high perpensia to rent within their first
five years of landing in Toronto. And so how they're
coming here without any friends, without the social infrastructure. So
how do we create an environment for them to be
(10:26):
to integrate into the community, to meet friends, to meet
you know kind of you know feature you know, relationships
and build that social infrastructure. We thought that was a
really critical component to our business model, and so we
create beautiful, amazed spaces that we bring into life with
amazing but we think of are amazing lifestyle management ideas.
(10:46):
So we have a lifestyle manager that is on un
our staff. We do one to two events per week.
That's speed dating on Valentine's Day. That's barbecues every three weeks.
It's cool parties every three weeks in the summer. That's
going to the Blue Jay game. That's you know, hosting
a three on three basketball terma. If you name it,
we're trying it. We're doing it across our portfolio.
Speaker 2 (11:07):
Sounds like you're ready to camp and you'll be a
camp counselor.
Speaker 4 (11:10):
Very much resort style living as much as possible, and
it's not as similar to a really cool camp for
adults and families at a bowling alley. We are, yeah,
we're bowling alley. We have ski simulators, we have Formula
one simulators. Uh, you know, resorts, doll rooftop pools. We
(11:33):
are looking at pickleball courts, indoor basketball courts that are
raptors inspired. We are definitely pushing the pace around innovation.
We want to be disruptors in the rental market. We
have a Research and Developed Committee that meets once a
quarter and we challenge our staff to come up with
new ideas and we openly debate those ideas. In some cases,
(11:54):
I think the ideas are, you know, probably going to
be a tough sell and they're not going to work,
but we're going to try it anyway. And in a
lot of cases, I've actually been completely surprised. There's also
been other ideas that I thought we're a shoe and
then we're for sure going to be accepted and resonate
really well with their end consumer, and it was the
complete opposite. So we're always trying and tinkering our product.
(12:18):
We always talk about our product and generations. So our
first generation, which is the Waverley and the Parker, we're
completed a couple of years ago. The second generation asset
would be elm Ledbury, which is downtown East. Our third
generation is under construction right now, so that's Sloan at Yorkdale,
that's Marlow at Lord Dufferin and that's also rushed in
(12:39):
Station at Danforth and Maine.
Speaker 2 (12:43):
Fascinating.
Speaker 3 (12:43):
We're going to take a break for some messages to
come back with Adrian Rocco in just two minutes. I
can ask him about some of his suggestions that he's
got for policymakers on what we can do with the
housing industry. And then I also want to compare what
he's developing versus what the typical conduct has developed over
the course of the last couple of years in the
Torontal market that appears to have run its course.
Speaker 2 (13:05):
Stay with us, everyone, we'll be back in two minutes.
Speaker 3 (13:06):
We're going to have a really in depth conversation tonight about.
Speaker 2 (13:09):
Purpose built rental and the housing business. Stay with us.
Speaker 1 (13:17):
Stream us live at SAGA nine six am dot C.
Speaker 3 (13:20):
A Welcome back everyone to the Brian Crime Radio Hour.
I've got Adrian Roca with me tonight. He is the
founder and CEO of Fitzrovia. It's a Canadian rental purpose
built rental company, and we wanted to hear him out
(13:43):
because on LinkedIn he's been very vocal and also in
articles and elsewhere in the in the in the industry
talking about how we can change the purpose built rental market,
how we can change development, how we can change public
policy to ensure that we don't have of a complete,
you know, stoppage crisis within the housing business in the
(14:04):
Greater Toronto area. As you know, CMAC is saying that
we need three point five million more homes in the
Greater Toronto area.
Speaker 2 (14:09):
If we're going to get to any level of affordability.
Speaker 3 (14:13):
You know, Andrew Adrian, you you mentioned that you were
building bigger units.
Speaker 2 (14:18):
Lots of people have complained.
Speaker 3 (14:19):
That over the course of the last you know, five
seven years, we've built shoe boxes for people in the
typical U you know, investor oriented purpose built, not purpose
but rental. Apologize that, you know, the pre construction condo market.
How are yours different? Are the shoe boxes or are
they bigger than sho boxes?
Speaker 4 (14:38):
I would say they're they're about twenty percent larger what
was typically or what has been typically built in the
condo market. So, you know, just to kind of show
some rough area differences, you've got, you know, one beds
around four sixty to five hundred square feet in the
condo market, and we are around five seventy to six
hundred square feet two beds with compared to six fifty
(14:58):
to seven hundred square feet the condo market. We're about
eight hundred and eighty twenty. We've gone as high as almost
nine hundred square feet and three bets, which are really
non existing in the condo market. We're about eleven hundred
to twelve hundred square feet. So forzont A living, that's very,
very spacious.
Speaker 3 (15:15):
And lots of you know, lots of people, lots of
city counselors are talking about how we need more three
bedroom Are you actually building three bedroom suites?
Speaker 4 (15:23):
We have made actually a very deliberate call around young
families and downsizers. So a number of our second, third
and fourth generation assets which are currently getting designed right now,
about fifty five to sixty percent or two and three
better units, and I would say that the three bed
component on average, about twenty five percent of those buildings
will have three beds. So we've made a very very
(15:46):
big call.
Speaker 3 (15:47):
Lots of condo builders are switching to purpose built rental,
but they're not adjusting their sweet sizes, their layouts, their
buildings that much. Is that a mistake or is that
a smart move?
Speaker 4 (16:00):
We think it's a mistake not to. For one, there's
a lot of chatter around converting you know, what pull
was a condo to rental. We're only seeing a few
conversions actually happen when you actually run through the economics,
it is still a very challenging market. Would be one. Two,
it's about three times the amount of equity to actually
(16:21):
go vertical on a purposeful rental building on spec versus condo.
And then lastly it's about fifty to one hundred percent
of the debt would have financial recourse, personal recourse, corporate
level recourse. And so you really need large balance sheets
to play in the purposeful rental space. And so we
are seeing hearing a lot of chatter, but not seeing
(16:41):
a lot of conversions happen. Back to your question, Brian,
I do think it would be a mistake to take
the condo playbook and apply it to purpose boll rental.
It is vastly different product everything from building specs, how
you bring the building to life, how you actually operate
the building, all the back a house space, all that stuff.
Building systems have to be of a certain level of
(17:02):
quality otherwise you're going to be dealing with the contingent liability.
So we think that condo playbook needs to be amended
and adjusted if you're going to be doing purpose toul rental.
Speaker 2 (17:12):
So we had this huge.
Speaker 3 (17:14):
Wave of pre construction condos, of condos being built over
the course of the last five to seven years, still
being built today because towers are in the sky. And
yet we've got you know, huge amount of assignment sales.
We've got developers that can't finish their buildings because so
many people are defaulting on the purchases. We've got inventory
(17:35):
loans that banks are providing to allow developers to carry
the last twenty thirty percent of their units.
Speaker 2 (17:45):
Well went wrong? Did you?
Speaker 3 (17:46):
Were you just smarter than everyone else because you lived
in Europe and you saw something different?
Speaker 2 (17:50):
Or were people making a mistake or is it just
the market?
Speaker 4 (17:55):
I just felt like there is a period of time
where they're rationale is that trees are going to grow
to the sky. And I was always a bear around
the for sale hemsic market and some of the momentum
that I was minded like I was wrong for a decade.
But we also saw you know, declining interest rates which
were really you know, creating fuel to what was the
(18:17):
inferno that was happening in the condo market. You know, eventually,
I'm a big reversion to the mean type investor, and
so I, you know, felt like at some point interest
rates will start to climb. I did not think they
would climb as fast and as sudden as they did,
which basically new to the market. So, you know, we
always want, you know, what's I'm almost looking at, what's
(18:39):
my angle, how we're going to compete and anything I'm doing.
And so I saw a lot of people focus focusing
their effort in the condo market. No one was really
doing rental in a meaningful way. There were a couple
of folks doing it, but not in a meaningful way.
And I thought we could actually flip that product on
its head, have it visually looked different, borrow a lot
(18:59):
of pre schools that work really well in other parts
of the world, whether it's through Europe or down to
the US.
Speaker 2 (19:06):
UH.
Speaker 4 (19:06):
You know, I think it would really resonate with the
end consumer up in Canada, and so far that's been
the case. We're really proud of our product. We're really
proud of the team that constructs our product. UH. There's
a strong sense of purpose here at Patrolviia, and you know,
we're key to continue to see our product evolve and
uh and and and you know, change the optics around
around what it means to rent.
Speaker 2 (19:27):
You mentioned a few times institutional capital.
Speaker 3 (19:30):
Why are you able to attract institutional capital and the
condo market and or other purposeful rent to companies or not?
Speaker 4 (19:38):
The biggest thing is around speaking their language. Right, there's
a level of reporting, transparency, sophistication. I don't mean to
say that condo developers are not sophisticated. I'd say quite
the opposite, But in dealing with that relationship with a
pension plan or an institutional capital partner, h they you know,
(19:58):
they want to be involved in MA decisions. They want
to be involved in, you know, a design development decision.
They want to understand the rational as to why that
makes sense. Is it a creative to the return? You know,
why do you go through DORI versus door B. Being
patient through that process, disclosing every penny that's being spent on,
you know, on the project is not something that a
(20:20):
lot of condo developers have had to do in the past,
just given its private capital that's typically back in those projects,
and they're just a little bit less focused on, uh,
you know, financial reporting and disclosure and so that's that's
always been you know, my my experience, my work experience.
So I was in the private equity space and previous set.
I was an investment banker at Credit Swiss for four
(20:42):
years and so I know that space really well. And
we treat our institutional investment partners as clients at the
end of the day. Where service providers for that capital,
we're students of that capital, and we have fiduciary duty
not only to disclose, you know, all things related to
the project that they're investing in, but also to generate
(21:03):
attractive risk adjusted return for their capital.
Speaker 3 (21:06):
If you go on Instagram or social media, you'll see
some of your competitors raising money on social media, trying
to attract people to webinars and things like that. Is
that a successful model? Is that a different model? How
would you describe that versus what you're doing.
Speaker 4 (21:21):
It's a different model. I would just be wary around
the risk adjusting return on a lot of that product.
And what do I mean by that is typically it's
pref equity or you're capping your upside. Typically I'm not
saying all is the case, and so you are taking
full equity risk in what is a very risky proposition,
(21:44):
which is development, not knowing who the development partner is
and ultimately who the operating partner is which can vary performance,
but then you're also limiting your upside potentially again depending
on the structure and more, providing a bit of a
stereotype for some of the advertisements that I see and
you know, giving up the upside but taking all the risks.
(22:04):
So I don't love those concepts. It is giving smaller
investors access to what we believe is a desirable asset class.
But there's a whole whost of variables that tie into
whether that project is going to be successful or not.
And we think it starts with the right structure that
gives you full upside for the risk that you're taking.
Speaker 3 (22:24):
So you're long term equity investors, the pension funds are
they are they limiting their equity upside?
Speaker 2 (22:29):
Are they got full equity upside?
Speaker 4 (22:32):
No, we're we're perry pursue shoulders shoulder partners with them,
and you know they're true partners and so you know
we will do well if they do well, and vice versa.
We think alignment of interest is incredibly important.
Speaker 3 (22:48):
So you know the word is that there's more deliveries
of condominiums last year in this year than ever in history.
The questions aren't they going to be actually are they
going to close?
Speaker 2 (22:57):
And are they going to be occupied? But yet Ford,
the Ford book is very slim.
Speaker 3 (23:04):
You know, some people have told me that eighty of
eighty two projects that we're going to launch in the
last eighteen months or something like that have been put
on hold, and so we're going to have a real
dearth of new projects brought to the marketplace, at least
in the condo business. What's your sense what's going to
happen the next couple of years in the housing business
in Canada?
Speaker 2 (23:21):
In Toronto, Yeah, so.
Speaker 4 (23:23):
We're definitely seeing downod pressure on lease velocity and rent
rates right now. So if I were to take the
city of Toronto and look at Forecastle Pipeline, the next
twelve months, we have twenty seven thousand units that are
going to be delivering. If you look at her historical
run rate, that's about seventeen to nineteen thousand units, so
simply higher than our Starkle run rate, which is creating
(23:43):
download pressure. We're also seeing some pressure around new immigrants.
We've had two very large one million new immigrant years
of the last two years, half of which were non
permanent residents. The biggest debate right now is what's going
to happen to the non perm You know, we would
say most of them will stay in Canada versus leave
(24:05):
the country, but that that's a big question mark and
bit of an overhang around risk. But then if you
fast forward beyond the twenty seven thousand units that deliver
in the next twelve months, that drops the seventeen thousand
units the next twelve months. That then drops the seven
thousand units in year three, and in year four it's
three and a half thousand units. I have never seen
(24:26):
supply at seven and three and a half thousand units
in twelve years of being back in Canada, and so
we think you're in the perfect storm in year three
and four. That's not going to structurally change at all. Right,
So if you're fast, like we said, really fast as
a developer, you're going to be able to complete a
(24:47):
project starting complete a project in four years. Well, now
we're talking about year five supply, and so year three
and four is going to create a significant tailway around
RENK growth, which is not a good thing for the
end consumer. However, how hard rent's going to get hit
in the next twelve to twenty four months is going
(25:08):
to is creating a lot of noise and is also
causing a lot of capital and developer operators to be
on the sidelines today. So we're, you know, as everyone is,
is racking our brain around what do we think the
rent growth assumption is going to be over the next
three to four years in order to justify you know,
all the risk and capital to go vertical on a project.
(25:31):
That's the big debate today. And so we're a little
more bullish on what's going to happen years three and four.
And we are starting to see rents stabilize in our
in our existing portfolio, but the rest of the market
continues to see rents get eroded, right, and so that's
keeping a lot of capital on the sidelines.
Speaker 3 (25:52):
You're going to have a massive oversupply last year, this year,
next year, and then massive undersupply in the literary so
we've got bust and boom.
Speaker 4 (26:03):
We see bust and boom for sure. That the issues
around can you in your boom time, in your recovery time,
are you going to be able to make up for
some of the more than makeup for the download pressure
that we're seeing in rents over the next twelve to
twenty four months. Right, that's the biggest call right now,
and we're just we're seeing net effective rents down twenty
(26:25):
to twenty two percent if you take concessions in play.
If you look at face rates, rents are down ten
to twelve percent. So that is a big needle mover
right now. And until we actually the market seeds that's stabilized.
We're starting to see it stabilize a little bit again
on our existing portfolio, but until the market seeds it
probably stabilized, it's hard to underrate a you know, ring
(26:47):
growth number that's going to make sense to go vertical
to develop, to invest capital in the sector. The other
thing that people are not talking about is the demand side, right,
so people are focused on you know, overall immigration numbers retracting.
You still see federal numbers at three hundred and ninety
to four hundred and twenty thousand people a year, right,
(27:09):
you compare that to pre COVID numbers, so eliminate the
COVID noise. Certainly the two million immigration years, you had
a run rate of three hundred thousand people. So we're
up thirty five percent on new immigration going forward. If
the Feds do what they say they're going to do
and hit those target numbers, which we believe is going
(27:29):
to happen. And then the other thing that we're also
seeing play out, which is even more impactful than the
immigration story, is around household formation, and it's specifically organic
household formation. And then also the drop in home ownership rates.
So if you would have saw like you see in
the interior numbers from three years ago, we were about
seventy one and a half percent home ownership rates. Today
(27:50):
that's sixty nine percent. We think that's going to trend
down to sixty five percent. So we think the demand
side is going to increasingly get stronger as supplies drive
dropping all and so we have been advocating all three
levels of government to create the right incentives in place
to get as much new supply commence in the next
twelve to twenty four months, because every day that goes
(28:12):
by right now, this undersupply issue is going to compound
and turn into not only a crisis, but we think
a catastrophe.
Speaker 3 (28:20):
A catastrophe, well maybe that's a good place to stop,
take a break, and then when we come back in
and ask you what we can do about this catastrophe.
Lots of people have come up with some suggestions. Maybe
I'll challenge you about some of them and see what
you got to say, See what your prediction is for
the market.
Speaker 2 (28:34):
Stay with us, everyone back.
Speaker 3 (28:35):
In two minutes with the CEO, founder of Fitzrobia and
the largest purposeful mental company in the marketplace today.
Speaker 2 (28:41):
Stay with us, everyone back into.
Speaker 1 (28:47):
No Radio, No Problem stream is live on SAGA ninety
sixty am dot CAA.
Speaker 2 (29:03):
Welcome back everyone to the Brian Crimby Radio.
Speaker 3 (29:05):
Wow. I've got Adrian Rocco with me tonight. He's really
transforming the connecting and rental housing landscape. He's the founder
and CEO of Fitzrovia. It's the country's leading developer of
purpose built rental community Scott nearly nine thousand homes acquired, completed,
end or under development. He's got ten billion dollars in
assets center management, and if you have checked out some
(29:26):
of his developments, he's really reimagined in urban living. It's
family focused design, integrated wellness, childcare, hospitality inspired service. But
in addition, he's a vocal advocate for police to reform,
and we just sort of addressed that as he talked
about going from crisis to catastrophe. I wonder, Adrian, if
you could address some of the issues. I had the
president of the Residential Construction Workers on recently and he
(29:50):
said that he was thinking that there would be one
hundred and fifty to two hundred thousand layoffs by the
fall of this year in the construction business. That would
lead to a one point five to two percent reduction
in provincial GDP. And he's called it a nuclear winter
in the housing sector. He's saying that the forward book
is non existent, that excavators have got no business, and
(30:14):
the only people working with the people that are finishing
off the towers that were started two three and four
years ago, and that comparable to you and your numbers.
He's thinking that everyone's going to be able to work.
And he says that that's a long term catastrophe. Number
one for supply of housing for our people. Number two
for affordability long term, well, it could be beneficial in
(30:35):
the short term, long term it's going to be terrible.
And number three for actually recovering because he says, these
people are smart, capable, experienced, skilled workers and they're going
to go to Calgary. Are they're going to go to
the United States or are they going to go to
other industries? They're not going to hang around for two
years until their jobs come back. So given that, do
you agree?
Speaker 2 (30:52):
And if that's anywhere close to the truth, what have
we got to do about it?
Speaker 4 (30:57):
Yeah? I look, I couldn't agree more. I would double
down in all those commons. Very concerned about the impact
on our trade base. You know, as we see starts dwindling,
you know, where's that capacity to get to go? They're
going to go to other sectors. And eventually, when the
market does come back, how difficult are we going to
have as an industry group to ramp back up and
(31:19):
get to you know, the twenty to twenty five thousand
units that we can technically achieve in in when the
markets were really really strong. And so what are we
going to do about it? We really need government change. Right.
If you look at land, land is off fifty to
sixty percent right now in the downtown core, almost every
site is available for sale and so but typically land
(31:42):
is twelve percent of your total development budget, right, so
you know you're going to take you know, six percent
off your total development costs by just adjusting land by
fifty sixty percent. That's certainly helpful. But when rents, which
is your single biggest driver of our rent pro forma,
is down effect of twenty to twenty two percent, that's
(32:02):
going to be a problem that more than erodes the
benefit of land. We're seeing construction costs settle down a
little bit, or we're not seeing material decrease across the board.
We're seeing it in certain trades, certainly the front end trades,
the back end trades like mechanical, electrical, less so, and
so we're not seeing a benefit there. And so there's
only a couple of livers that you could really pull
(32:23):
that you control. Those are government levees and taxes. And
so if you look at the total makeup of a
project budget, both thirty percent of that relates to government levees,
development charges, municipal taxes, et cetera. And so we would say,
do a full waiver of those taxes for two years,
(32:43):
get as much new supply coming into the market as possible.
That'll be enough to kick start new supply, that'll be
enough to adjust for the loss or erosion in margins
that we currently have. If you know, if the government
were to do nothing, and then I would also advocate
purposeful rental, a twenty year property tax waiver. Right, that
(33:05):
has a meaningful impact just given the amount of operating
leverage that exists in our business. So what do I
mean by that? For every dollar that you save in
your net operating income, typically it's magnified by thirty times. Right.
If you look at the inverted cap rate that these
assets get valued at, it's about thirty times impact. Right.
But for every dollar that goes up, it's a thirty
(33:27):
dollars destruction and value. So if you look at what
happened in the Sun Belt in the US when they
really really needed to kick start new supply, they did
a twenty year property tax waiver and it got a
lot of new supply coming into the market. It's the
single biggest deal mover, and I would say the most
cost effective tool for the government to provide the private
(33:47):
sector to getting more supply into the market, and we've
been advocating all three levels of government to do so.
We would also advocate not to tangle it with affordable housing.
We think there's other ways to get affordable housing built,
namely through you tripling up the CMA c ACLP dept program.
They accelerated construction loan program. But it's you know, it
(34:10):
needs to start with bold leadership. It needs to start
with with bold policy, and we have to get that
policy introduced in the market tomorrow. We can't wait any longer.
Speaker 3 (34:20):
So the states of Florida and Texas have recently passed
legislation that's sort of comparable to what you're suggesting. Where
you get a property tax waiver, you have to include
some affordable housing in it. But in addition, both in
Florida and Texas, the state governments are overriding a lot
of the zoning rights that municipalities have and forcing down
(34:42):
increased density, increased height, and making it easier for developers
to build what they want to build.
Speaker 2 (34:48):
Do you think that makes sense?
Speaker 4 (34:51):
Absolutely, it does. The problem is the economic model right
now is challenged. Right so density speed is great, super helpful,
and I think like that they've they've made the city,
has made the province mats and very significant inroads in
making the system more effective and collaborating more directly with
the private sector. But if all that were to be
(35:12):
perfect tomorrow, the economic model does not work today for
many institutions or for many operators of developers that are
not vertically integrated. Right when you're looking at a single
digit high single digit profitle margin. When you have to
take all the risk to uh, you know, fundel your
(35:32):
capital up front, you're going to do three times the
amount of capital that is required than doing a condo project.
You have no income for four or five years until
you actually delivered, You have no idea where the market's
going to be in four or five years. There's a
lot of risk associated with it. So you need a
certain profit margin to allocate that capital from institutions, from
(35:53):
the private sector that want to develop. And you're only
going to do that when the profit margins there that
may sense that justify commencing a major project. And the
only thing we could point to when we look up
and down a project performer right now an Excel model
is municipal fees and taxes, and the quicker we get
(36:14):
that waved put a sunset on it. So we create
as much new housing in the market tomorrow, and you
create the sense of urgency amongst the private sector to
put a shovel on the ground. But nothing's going to
get built until there's a form of serious correction, whether
it's rent stabilizing and shooting back up, which we think
it's going to be two years from now, so that's
again just going to compound right now the issue that's
(36:37):
going to be a two year under supply issue that
turns into a four year undersupply issue, or you know,
hard costs are going to continue to drop, which we're
just not seeing in the market. So the one element
that is missing right now that someone has the ability
to control is government fees and levies, and we're hoping
to get that done with all three levels of government
(36:59):
working together.
Speaker 3 (37:00):
So the criticism of that that I've heard is number
one that some politicians say it's rich developers that are
paying development fees, and rich developers can can can afford
to pay those development fees. And number two, well, you
know we need those development fees to pay for infrastructure.
We've got a massive amount of infrastructure. We got to
(37:21):
build growths, got to pay for growth. And so if
you're not getting development fees, who's going to pay for
pipes and sewers and water and libraries and police stations
and fire halls and things like that. How would you
reply to those two criticisms.
Speaker 4 (37:35):
Yeah, I'd say to the first, the reality is nothing
is being built depending on what data that you look at.
Seventy to eighty percent we're seeing as a drop and
you supply from two and a half years ago. Right,
So developers, however you want to characterize them, are not
getting wealthy or not putting capital up, are not going
(37:58):
forward with projects. If the pro forma and the model
worked and you know it made business sense, you would
see a lot more supply. The reality is you're not
seeing that, So you know, I think it's misguided to
say that developers could afford to pay those taxes and
poulticiple fees and development charges. They simply cannot afford to
(38:18):
do them. And I think it's important to see the
cues of what's happening in the market, what's happening in front.
Speaker 2 (38:23):
Of us, okay, and who pays for growth.
Speaker 4 (38:29):
Look, I would say zero of zero is zero Brian, Right,
So I'd say you're not going to receive any development charges.
You're not going to see receive any parkland or community
benefit charges, and unless new development's happening, right. So, we
think some of the infrastructure should be funded through an
(38:49):
infrastructure bond program, which is a very effective tool in
the US that has worked really well and bring us
cheaper forms, lower costs forms of capital to the table.
Where we're advocating, you know, the provincial and federal government
to do that. We think there's traction that it's going
to take time to issue those bonds. So I think
(39:09):
there's other ways to fund the upfront infrastructure for some
of that growth. But we also think that federal government
should be subsidizing and helping out just for a period
of time, just to get some more supply coming in
the market.
Speaker 2 (39:22):
So you've addressed development fees, what about GST HSD, what
should happen with that?
Speaker 4 (39:28):
Well, we have a full waiver for HSD right now
in purposeful rental, right, so you know that's that's already Yeah,
that's already happened. But it's not bif to.
Speaker 2 (39:38):
Get projects to be extended to condos.
Speaker 4 (39:43):
Look, I think it should be extended to condos. Albeit
it's not my business, but I think any form of
supply right now is really helpful. I think the fact
that we're not building any you know, housing significant scale
right now is battltimate for the end consumers, bad for society,
it's bad for a city. And I'm a big supporter
and advocate to you know, change the funding model for
(40:06):
all developers to get all forms of house and build.
Speaker 3 (40:09):
I'm in treated by your comment about vertical integration.
Speaker 2 (40:14):
I want to ask you about that if I could.
Speaker 3 (40:16):
You know, some people would think that you go out
and hire a general contractor or construction manager. You know,
they are expert firms that have been in that business
for a long period of time. So you really advocate
setting up your own department that's going to do the
construction itself.
Speaker 4 (40:30):
Is that kind of riskue if you have the size
and scale, I would advocate for it. And it's not
because it's a great business to be in, Brian, but
what it allows us to do is be a better designer,
a better developer. It allows us a lot more control
in terms of the end quality product that we're delivering,
and it also helps with their speed of execution. Right,
(40:52):
so we you know, create an alignment of interest with
our site staff or their construction folks there. You know
they will get bonus for visions and owner driven economics
and in that project. And we think that's that provides
the best incentives and best alignment of interest of creating
the best product possible that we can do in the market,
and so we're big believers in it. We didn't have
(41:14):
our size and scale. We cannot afford to be fully
vertically integrated, we cannot afford to self performed construction. But
given the fact that you know we have fifteen towers
underactive construction right now, we're able to build out our
own construction workforce.
Speaker 3 (41:29):
We're going to take a final break and come back
with some concluding comments in just two minutes.
Speaker 2 (41:33):
Stay with us, everyone, This is.
Speaker 3 (41:34):
A fashion conversation about about Fitzrovia and about the housing
business and some suggestions on what we can do to
kickstart it.
Speaker 2 (41:40):
Skate with us everyone back in two.
Speaker 1 (41:46):
No Radio, No Problem stream is live on Sagay ninety
sixty am dot C.
Speaker 3 (41:51):
A welcome back everyone to the Brian Crombey Radio ar.
This is I think a fascinating conversation with Adrian Rocco.
Speaker 2 (42:08):
He is the founder and CEO of Fitzrobia.
Speaker 3 (42:11):
It is Canada's since twenty seventeen, already our largest purpose
built rental company. He's got to over nine thousand homes,
over ten billion dollars in assets under management, and he's
given us, you know, a really good prescription for what
he thinks is the success and purpose built rental, and
what he thinks the government's got to do.
Speaker 2 (42:31):
And so you know, maybe I give you a chance.
Speaker 3 (42:34):
If I could Adrian to tell anyone that wants to
check out your product, where should they go if they
want to take that virtual tour that I had the
privilege of doing, or check out some of your sites.
Speaker 2 (42:45):
Is their website they should go to?
Speaker 4 (42:47):
Yeah, so we're on Fitzrobia dot ca. That's f I
t z Robia at dot ca. You'll have links to
all of our various sub brands, so Maddox, Locksley and
all projects under the Fitzrobia collection. And so you could
go to the property website, there's virtual tours, you could
(43:09):
speak with leasing associates directly and see all our availability online.
Speaker 3 (43:14):
I had someone tell me that if you walk into
one of your units, you're going to see better doors,
better kitchens, and better closets than you would and other
rental accommodation, and for sure better than you would see
in a typical condo building that you might have a
chance of either buying or renting.
Speaker 2 (43:30):
Is that true?
Speaker 3 (43:31):
And you know, if you were telling someone to walk in,
what would be the things that you would tell them
to look for to evaluate quality.
Speaker 4 (43:39):
Yeah, so I'd say starting from the front reception or
lobby experience, you'll see a highly animated front door. What
do I mean by that? You have a coffee bar
that converts to a cocktail bar in the evening. Right
in our front reception or lobby experience, it almost feels
like a hotel. Our amenity we talked about. We think
(44:01):
they're best in class, everything from resort style pools, co
working spaces, formal one similators, bowling alleys, raptors, inspired basketball courts,
et cetera, et cetera. We have a healthcare partnership with
Cleveland Clinic, which are really products. So if any of
our residents are feeling sick, they go down the Cleveland
Clinic room. There's on site diagnostic equipment, There's cameras that
(44:23):
look down in their throat. They can write them a
virtual description so they never have to go to walking
clinic again. We have our own Montessori school at subsidized rent,
just for our residents, and then we have amazing like
cell management and programming. When you go inside the suite,
not only will you see a larger, more liberal suite.
But anything that our tenants are touching and feeling have
(44:43):
to have a certain level of quality attached to it.
So we have kitchens from Italy. We have courts, backsplashes,
and countertops. We have full size appliance of these twelve
foot kitchen runs, if not fourteen foot kitchen runs. It's
about twenty to forty percent larger than what you typically
see in the condo market. We have beautiful LVT tile,
(45:06):
we have larger bathroom pods or formats. In a lot
of cases, we're doing double vanities, larger bedrooms, blinds in
all the living spaces including the bedrooms, blackouts as well,
closet organizers, you name it. You know, we're trying to
do it in our in our suites because we really
care about the resume experience. We really want to lead
(45:28):
with with the resident first approach, and so that product
continues to evolve. But we think our base product today
is is really you know, spectacular.
Speaker 3 (45:38):
If everything that you say is true, if there's a
condo across the street that's renting out on a you know,
a one by one basis, because the landlord is is
someone who just owns one or two or three condos,
they just can't be able to get the same rent
per bedroom or per square foot and like that that
you are are you finding that you're are you able
to get a premium?
Speaker 4 (46:00):
Yeah, there's definitely a premium just because the quality of
the value proposition, all the lifestyle management, all the services,
but most importantly, if there's any issue that you have
in your suite or you're building, we basically have on
site technicians that are available twenty four hours a day. Right,
so if there's a leak, if there's a broken appliance,
you you know, we have a resident app you can
(46:22):
follow work notice and it will be fixed. Hopefully you
will have someone within a couple hours up by your
room trying to trying to deal with it and hopefully
it's going to be you know, fixed in short order.
So that level of service, you know, we think is
very important to our product. It's not just a brick
and mortar offering. The actual customer service and hospitality side
(46:46):
of our business is really important and we are seeing
that resonate with our own consumer with with residents that
live in our communities and they're paying a small premium for.
Speaker 2 (46:57):
Andre And thank you so much for join us. I
really appreciate it. This has been very helpful.
Speaker 3 (47:01):
If if the Premier, if the mayor, if the Ministry
of Housing either appreciate or federally asked you to come
meet with them, what would you tell them.
Speaker 4 (47:10):
I would say, we clearly both care deeply about this city,
this province, this country, but we also have a we
have an immediate housing crisis, and we are in a
market where bold leadership and bold action is paramount, and
we have to get that policy introduce. They're doing a
great job engagement with the private sector, have been in
a number of working sessions with all three levels of
(47:33):
government over the last two years. But that those work
sessions have to now, you know, get get pushed into action, right,
they have to introduce policy that's going to change the landscape,
that's going to change the economic model, you know, for developers,
so we can get people developers who want to develop
in today's marketing any market quite frankly, creating much needed
(47:56):
housing supply and not worried about where they are in
the play spectrum. And you know what the opposition is
going to say, and maybe you know what all to
me is the most kind of popless idea. I think
it's it's really understanding these key issues are affecting the
supply of new housing and sticking their neck out and
doing the right thing.
Speaker 2 (48:17):
Adrian Rocco, founder and CEO if it's Rovia, thanks so much.
I really appreciate it.
Speaker 3 (48:21):
I think that's been a really helpful description of your company,
of the rental market versus condos, of the current status
of the housing industry, and a good prescription for what
we need government to do.
Speaker 2 (48:33):
So I really appreciate you joining us tonight.
Speaker 4 (48:35):
That's my pleasure. Thanks for having me, Brian, that's.
Speaker 2 (48:37):
Our show for toanday and everybody. Thank you for joining us.
Speaker 3 (48:39):
I remind you I'm on every mind you through Friday
at six o'clock on nine to sixty am. You can
stream you in line even from a fancy rental accommodation
at Fitzrovia building at TRIBLEW. Songa nine sixty am dot
it because I bet they have Wi Fi. Thanks everyone,
good
Speaker 1 (48:58):
Stream us live Osaga nine sixty am dot co A
The views expressed in the following program are those of
the participants and do not necessarily reflect the views of
Saga nine sixty am or its management.
Speaker 2 (00:18):
Good evening, everyone, and welcome to the Brian Crombie Radio War.
Speaker 3 (00:20):
If you've been listening to me before, you know that
I'm really interested in this housing crisis that we've got
and also very interested in some developers, planners, city politicians, etc.
That have got some suggestions and how we can solve it.
I'm one of those, I think, is Adrian Rocco. He
is the founder and CEO of Fitzrovia. Fitzrovia is a
leading developer of purpose built rental communities. If you've seen
(00:41):
the development dufferin the fur one, you get a sense
of the kind of the kind of developments that they
can bring to market. And I think that he's really
perfected the purpose built rental market today and he's finding
an opportunity in a pretty pretty challenging business.
Speaker 2 (00:58):
Market right now, and so it's a real place to
have him with us.
Speaker 3 (01:00):
I'm going to give you a bigger sense, a longer
sense of who he's all about in the second segment,
but right off the right, off the top of Adrian,
tell me why personal rental not condos? And why why
are you still developing when everyone else is sort of
stuttering right now.
Speaker 2 (01:17):
In this market.
Speaker 4 (01:19):
Yeah, both are great questions. Thanks for having me on
the show, Brian. You know, prior to me, I guess
coming back moving back to Canada, I actually lived in
Europe for seven years and when I lived in Europe
what struck me was the concept around renternship and the
prior to rentorship. He didn't really have that. When I
(01:40):
came back to Toronto, it felt like there was a
negative stigma around renting, and so I was also fascinated
by it. I love the concept around selling a physical
product versus a dream off plan that you typically see
on the Kondo market. And I also saw a very
crowded space in the condo sector right It was fifty
plus developers. Everyone was kind of marketing themselves the same way,
(02:05):
and they didn't really see a strong competitive vantage to
focus on the condo market. And I thought, well, there's
a lot of institutional capital looking for long term income.
Can we create a vertically integrated development platform, operating platform
that cater site capital, that could speak their language, that
could execute like a private equity firmestrictional developer operator would
(02:29):
and innomy and disrupt the space and treat the product
like any other consumer product available in the market, like
an Apple iPhone for example. And so that was really
the genesis of the idea. And then I said, well, sure,
I can make a lot more money investing in condos
at the time where you're basically taking the deposits as
(02:50):
free financial leverage or mes financing in a deal. However,
if I could create a product that's going to cater
to institutional investors, creating more platform value and doing so,
and so that was really the genesis of that idea,
and in twenty seventeen founded Fitzroviia. Today we'd be the
largest rental developer in Canada. I don't know anyone that's
(03:14):
developing more rental housing than we are across the country.
Speaker 2 (03:18):
Hold it, you started.
Speaker 3 (03:19):
In twenty fifteen and you're already the largest developer of
rental housing in Canada.
Speaker 4 (03:25):
Is that actually in twenty seventeen? Yeah?
Speaker 3 (03:29):
Yeah.
Speaker 4 (03:30):
We have nine towers that have completed, we have fifteen
towers under active construction where we're pouring concrete in Toronto,
and we have four towers in Montreal. Well, Princely had
port in Toronto, but also have a regional office of Montreal,
and we're across the spectrum around affordability. We don't just
develop brand new new product. We buy vintage product that
we reposition over time. We buy core plus product, which
(03:53):
is five to ten year old product that was built
by other developers in a merchant built program. We do
student housing. Currently own develop and manage about two thousand
student housing bets and we're going to be expanding outside
of the GTA. In that program, we do social impact
investing and then we're also getting into the retirement space
as well.
Speaker 2 (04:13):
Why are you able to develop today when so many
other people are talking about putting projects on the shelf.
Speaker 4 (04:20):
Yeah, the biggest reason is our vertical integration. We take
advantage of our size and scale first and foremost. But
because we develop construct asset property managed entirely in house,
we don't rely on any third parties to do that work.
We can basically shift fees that a third party GC
would charge in the open market to make it economically
(04:43):
feasible to go vertical to develop. That gives us a
big advantage. The third point is we're very focused on
speed of execution. We do not sit on sites. Our
ability to bias site, get it through design, development, polar
per get to the bottom of a hole, put up
a crane. We average typically about eleven months per deal,
(05:06):
and then our ability to cash flow postset acquisition, so
complete the building would be three and a half to
four years, which is very fast. That creates a big
advantage in terms of investing, in terms of our ability
to operate and attract institutional capital. And that's primarily the
biggest reason how we slowed down on a relative basis
(05:27):
from a couple of years ago. We absolutely have, but
we are still actively developing in the downtown core and
proud to do so.
Speaker 3 (05:35):
How can you get from acquisition to construction eleven months?
A lot of people talk about how the whole building
approval process takes longer than actually building. You're saying it's
taking you, what two and a half three years to build?
That would mean that most people are taking four to
five years to get the approvals done. How are you
doing eleven months?
Speaker 4 (05:55):
The biggest thing is being super organized, taking advantage of
a vertical integration. Back to that common so our ability
daring due diligence when we're looking at a site to acquire,
We're laying out our floor plans, We're laying out our suites,
We're laying out our mechanical systems, We're laying out our structure.
In some cases we are tendering demolition, for example, when
(06:16):
we're actually in a conditional period when we're under contract
but not closed on the property. And so because we
do one thing and only one thing, which is purposefult rental,
we know the product really well. We know the product cold,
we have our design standards, we are developing and operating playbook,
and so our ability to move quickly through that phase
(06:37):
and be really organized and leverage our relationships up the
city allow us to move quickly. Is the city perfect?
They're not. But I would say there's been a cultural
shift that happens happened at city Hall, largely led by
a couple of key folks, as a lady called Blessa
who's just an outstanding talent for the city, and she's
(06:59):
been able to really move things along, get the right
people hired in the right spots. Redo the York chart
at the city. Again, it's not perfect, but there's been
a cultural shift and it is a much better place
to invest in operate with than it was a couple
of years ago.
Speaker 3 (07:15):
Are you buying zone sites or are you buying sites
that still need to get zoning. You know, I've heard
about twenty four studies that have got to be prepared
and presented.
Speaker 2 (07:23):
I've heard about, you.
Speaker 3 (07:24):
Know, public meetings that you've got to go through. Community means,
you got to go through negotiations with counselors that you've
got to go through going to the Ontario Land Tribunal.
Do you do you go through all that or do
you do you buy stuff sites that have already had
all the zoning applied.
Speaker 4 (07:39):
We do both. So if we're buying an end zoned site,
you'd add twelve months to it. We are typically not
going to the old O and B. We're not you know,
we're typically getting on the same page with the council
or the local councilor planning staff in buildings and finding
(08:00):
ways to find calmon ground. We think that's the best
way to build long term relations to the city with
the local communities that we invest in. We're really proud
of the product that we're that you know, that we're building.
It's very much community oriented. We have you know, product
that's geared to young families, downsizers, young professionals. We do
a whole host of social kind of infrastructure concepts that
(08:24):
we introduced into our buildings, like our own school, our
healthcare partnership with Cleveland Clinic. We have food and beverage
line that helps animate our lobby experiences. That's social connection.
That story really gives us a lot of good will
with the city and it allows us to you know,
get things zone, get projects zoned much quicker than you know,
a lot of others in the market. So we great example,
(08:48):
we've recently completed the zoning at three projects in under
twelve months. These are you know, forty fifty story towers,
albeit on major transit corridors of the city, but we're
able to get that done in less than twelve months.
Speaker 3 (09:04):
I had the option to take a look at your
site that's at differ in the for one, with a
virtual tour that you've got. It's got a bowling alley,
you've got a Montessory school. You've got you know, more amenities,
more and more facilities than I can ever imagine.
Speaker 2 (09:18):
Tell me what's your objective there?
Speaker 4 (09:21):
Yeah, our objective is to create an amazing living experience
and to change the optics around renting right. Well, one
of the things when I came back home from Europe,
it just felt like there's that negative, back to negative
stigma around being a renter. People weren't proud to rent.
I was a longtime renter, very proud renter, and so
(09:42):
I thought there was a way to really flip the
model on its head, you know, deliver larger, more liberal suites,
beautifully appointed suites, but create an environment for people to
create amazing long term relationships and friendships with, you know,
other members of that community. That is not only for
domestic residents where you're gonna have natural hussoal formation people
(10:04):
naturally evolving from the homa mom and dad, to also
catering to new immigrants. In some cases, we have forty
fifty percent of our resident profiles in new immigrant we
have generally a high perpensia to rent within their first
five years of landing in Toronto. And so how they're
coming here without any friends, without the social infrastructure. So
how do we create an environment for them to be
(10:26):
to integrate into the community, to meet friends, to meet
you know kind of you know feature you know, relationships
and build that social infrastructure. We thought that was a
really critical component to our business model, and so we
create beautiful, amazed spaces that we bring into life with
amazing but we think of are amazing lifestyle management ideas.
(10:46):
So we have a lifestyle manager that is on un
our staff. We do one to two events per week.
That's speed dating on Valentine's Day. That's barbecues every three weeks.
It's cool parties every three weeks in the summer. That's
going to the Blue Jay game. That's you know, hosting
a three on three basketball terma. If you name it,
we're trying it. We're doing it across our portfolio.
Speaker 2 (11:07):
Sounds like you're ready to camp and you'll be a
camp counselor.
Speaker 4 (11:10):
Very much resort style living as much as possible, and
it's not as similar to a really cool camp for
adults and families at a bowling alley. We are, yeah,
we're bowling alley. We have ski simulators, we have Formula
one simulators. Uh, you know, resorts, doll rooftop pools. We
(11:33):
are looking at pickleball courts, indoor basketball courts that are
raptors inspired. We are definitely pushing the pace around innovation.
We want to be disruptors in the rental market. We
have a Research and Developed Committee that meets once a
quarter and we challenge our staff to come up with
new ideas and we openly debate those ideas. In some cases,
(11:54):
I think the ideas are, you know, probably going to
be a tough sell and they're not going to work,
but we're going to try it anyway. And in a
lot of cases, I've actually been completely surprised. There's also
been other ideas that I thought we're a shoe and
then we're for sure going to be accepted and resonate
really well with their end consumer, and it was the
complete opposite. So we're always trying and tinkering our product.
(12:18):
We always talk about our product and generations. So our
first generation, which is the Waverley and the Parker, we're
completed a couple of years ago. The second generation asset
would be elm Ledbury, which is downtown East. Our third
generation is under construction right now, so that's Sloan at Yorkdale,
that's Marlow at Lord Dufferin and that's also rushed in
(12:39):
Station at Danforth and Maine.
Speaker 2 (12:43):
Fascinating.
Speaker 3 (12:43):
We're going to take a break for some messages to
come back with Adrian Rocco in just two minutes. I
can ask him about some of his suggestions that he's
got for policymakers on what we can do with the
housing industry. And then I also want to compare what
he's developing versus what the typical conduct has developed over
the course of the last couple of years in the
Torontal market that appears to have run its course.
Speaker 2 (13:05):
Stay with us, everyone, we'll be back in two minutes.
Speaker 3 (13:06):
We're going to have a really in depth conversation tonight about.
Speaker 2 (13:09):
Purpose built rental and the housing business. Stay with us.
Speaker 1 (13:17):
Stream us live at SAGA nine six am dot C.
Speaker 3 (13:20):
A Welcome back everyone to the Brian Crime Radio Hour.
I've got Adrian Roca with me tonight. He is the
founder and CEO of Fitzrovia. It's a Canadian rental purpose
built rental company, and we wanted to hear him out
(13:43):
because on LinkedIn he's been very vocal and also in
articles and elsewhere in the in the in the industry
talking about how we can change the purpose built rental market,
how we can change development, how we can change public
policy to ensure that we don't have of a complete,
you know, stoppage crisis within the housing business in the
(14:04):
Greater Toronto area. As you know, CMAC is saying that
we need three point five million more homes in the
Greater Toronto area.
Speaker 2 (14:09):
If we're going to get to any level of affordability.
Speaker 3 (14:13):
You know, Andrew Adrian, you you mentioned that you were
building bigger units.
Speaker 2 (14:18):
Lots of people have complained.
Speaker 3 (14:19):
That over the course of the last you know, five
seven years, we've built shoe boxes for people in the
typical U you know, investor oriented purpose built, not purpose
but rental. Apologize that, you know, the pre construction condo market.
How are yours different? Are the shoe boxes or are
they bigger than sho boxes?
Speaker 4 (14:38):
I would say they're they're about twenty percent larger what
was typically or what has been typically built in the
condo market. So, you know, just to kind of show
some rough area differences, you've got, you know, one beds
around four sixty to five hundred square feet in the
condo market, and we are around five seventy to six
hundred square feet two beds with compared to six fifty
(14:58):
to seven hundred square feet the condo market. We're about
eight hundred and eighty twenty. We've gone as high as almost
nine hundred square feet and three bets, which are really
non existing in the condo market. We're about eleven hundred
to twelve hundred square feet. So forzont A living, that's very,
very spacious.
Speaker 3 (15:15):
And lots of you know, lots of people, lots of
city counselors are talking about how we need more three
bedroom Are you actually building three bedroom suites?
Speaker 4 (15:23):
We have made actually a very deliberate call around young
families and downsizers. So a number of our second, third
and fourth generation assets which are currently getting designed right now,
about fifty five to sixty percent or two and three
better units, and I would say that the three bed
component on average, about twenty five percent of those buildings
will have three beds. So we've made a very very
(15:46):
big call.
Speaker 3 (15:47):
Lots of condo builders are switching to purpose built rental,
but they're not adjusting their sweet sizes, their layouts, their
buildings that much. Is that a mistake or is that
a smart move?
Speaker 4 (16:00):
We think it's a mistake not to. For one, there's
a lot of chatter around converting you know, what pull
was a condo to rental. We're only seeing a few
conversions actually happen when you actually run through the economics,
it is still a very challenging market. Would be one. Two,
it's about three times the amount of equity to actually
(16:21):
go vertical on a purposeful rental building on spec versus condo.
And then lastly it's about fifty to one hundred percent
of the debt would have financial recourse, personal recourse, corporate
level recourse. And so you really need large balance sheets
to play in the purposeful rental space. And so we
are seeing hearing a lot of chatter, but not seeing
(16:41):
a lot of conversions happen. Back to your question, Brian,
I do think it would be a mistake to take
the condo playbook and apply it to purpose boll rental.
It is vastly different product everything from building specs, how
you bring the building to life, how you actually operate
the building, all the back a house space, all that stuff.
Building systems have to be of a certain level of
(17:02):
quality otherwise you're going to be dealing with the contingent liability.
So we think that condo playbook needs to be amended
and adjusted if you're going to be doing purpose toul rental.
Speaker 2 (17:12):
So we had this huge.
Speaker 3 (17:14):
Wave of pre construction condos, of condos being built over
the course of the last five to seven years, still
being built today because towers are in the sky. And
yet we've got you know, huge amount of assignment sales.
We've got developers that can't finish their buildings because so
many people are defaulting on the purchases. We've got inventory
(17:35):
loans that banks are providing to allow developers to carry
the last twenty thirty percent of their units.
Speaker 2 (17:45):
Well went wrong? Did you?
Speaker 3 (17:46):
Were you just smarter than everyone else because you lived
in Europe and you saw something different?
Speaker 2 (17:50):
Or were people making a mistake or is it just
the market?
Speaker 4 (17:55):
I just felt like there is a period of time
where they're rationale is that trees are going to grow
to the sky. And I was always a bear around
the for sale hemsic market and some of the momentum
that I was minded like I was wrong for a decade.
But we also saw you know, declining interest rates which
were really you know, creating fuel to what was the
(18:17):
inferno that was happening in the condo market. You know, eventually,
I'm a big reversion to the mean type investor, and
so I, you know, felt like at some point interest
rates will start to climb. I did not think they
would climb as fast and as sudden as they did,
which basically new to the market. So, you know, we
always want, you know, what's I'm almost looking at, what's
(18:39):
my angle, how we're going to compete and anything I'm doing.
And so I saw a lot of people focus focusing
their effort in the condo market. No one was really
doing rental in a meaningful way. There were a couple
of folks doing it, but not in a meaningful way.
And I thought we could actually flip that product on
its head, have it visually looked different, borrow a lot
(18:59):
of pre schools that work really well in other parts
of the world, whether it's through Europe or down to
the US.
Speaker 2 (19:06):
UH.
Speaker 4 (19:06):
You know, I think it would really resonate with the
end consumer up in Canada, and so far that's been
the case. We're really proud of our product. We're really
proud of the team that constructs our product. UH. There's
a strong sense of purpose here at Patrolviia, and you know,
we're key to continue to see our product evolve and
uh and and and you know, change the optics around
around what it means to rent.
Speaker 2 (19:27):
You mentioned a few times institutional capital.
Speaker 3 (19:30):
Why are you able to attract institutional capital and the
condo market and or other purposeful rent to companies or not?
Speaker 4 (19:38):
The biggest thing is around speaking their language. Right, there's
a level of reporting, transparency, sophistication. I don't mean to
say that condo developers are not sophisticated. I'd say quite
the opposite, But in dealing with that relationship with a
pension plan or an institutional capital partner, h they you know,
(19:58):
they want to be involved in MA decisions. They want
to be involved in, you know, a design development decision.
They want to understand the rational as to why that
makes sense. Is it a creative to the return? You know,
why do you go through DORI versus door B. Being
patient through that process, disclosing every penny that's being spent on,
you know, on the project is not something that a
(20:20):
lot of condo developers have had to do in the past,
just given its private capital that's typically back in those projects,
and they're just a little bit less focused on, uh,
you know, financial reporting and disclosure and so that's that's
always been you know, my my experience, my work experience.
So I was in the private equity space and previous set.
I was an investment banker at Credit Swiss for four
(20:42):
years and so I know that space really well. And
we treat our institutional investment partners as clients at the
end of the day. Where service providers for that capital,
we're students of that capital, and we have fiduciary duty
not only to disclose, you know, all things related to
the project that they're investing in, but also to generate
(21:03):
attractive risk adjusted return for their capital.
Speaker 3 (21:06):
If you go on Instagram or social media, you'll see
some of your competitors raising money on social media, trying
to attract people to webinars and things like that. Is
that a successful model? Is that a different model? How
would you describe that versus what you're doing.
Speaker 4 (21:21):
It's a different model. I would just be wary around
the risk adjusting return on a lot of that product.
And what do I mean by that is typically it's
pref equity or you're capping your upside. Typically I'm not
saying all is the case, and so you are taking
full equity risk in what is a very risky proposition,
(21:44):
which is development, not knowing who the development partner is
and ultimately who the operating partner is which can vary performance,
but then you're also limiting your upside potentially again depending
on the structure and more, providing a bit of a
stereotype for some of the advertisements that I see and
you know, giving up the upside but taking all the risks.
(22:04):
So I don't love those concepts. It is giving smaller
investors access to what we believe is a desirable asset class.
But there's a whole whost of variables that tie into
whether that project is going to be successful or not.
And we think it starts with the right structure that
gives you full upside for the risk that you're taking.
Speaker 3 (22:24):
So you're long term equity investors, the pension funds are
they are they limiting their equity upside?
Speaker 2 (22:29):
Are they got full equity upside?
Speaker 4 (22:32):
No, we're we're perry pursue shoulders shoulder partners with them,
and you know they're true partners and so you know
we will do well if they do well, and vice versa.
We think alignment of interest is incredibly important.
Speaker 3 (22:48):
So you know the word is that there's more deliveries
of condominiums last year in this year than ever in history.
The questions aren't they going to be actually are they
going to close?
Speaker 2 (22:57):
And are they going to be occupied? But yet Ford,
the Ford book is very slim.
Speaker 3 (23:04):
You know, some people have told me that eighty of
eighty two projects that we're going to launch in the
last eighteen months or something like that have been put
on hold, and so we're going to have a real
dearth of new projects brought to the marketplace, at least
in the condo business. What's your sense what's going to
happen the next couple of years in the housing business
in Canada?
Speaker 2 (23:21):
In Toronto, Yeah, so.
Speaker 4 (23:23):
We're definitely seeing downod pressure on lease velocity and rent
rates right now. So if I were to take the
city of Toronto and look at Forecastle Pipeline, the next
twelve months, we have twenty seven thousand units that are
going to be delivering. If you look at her historical
run rate, that's about seventeen to nineteen thousand units, so
simply higher than our Starkle run rate, which is creating
(23:43):
download pressure. We're also seeing some pressure around new immigrants.
We've had two very large one million new immigrant years
of the last two years, half of which were non
permanent residents. The biggest debate right now is what's going
to happen to the non perm You know, we would
say most of them will stay in Canada versus leave
(24:05):
the country, but that that's a big question mark and
bit of an overhang around risk. But then if you
fast forward beyond the twenty seven thousand units that deliver
in the next twelve months, that drops the seventeen thousand
units the next twelve months. That then drops the seven
thousand units in year three, and in year four it's
three and a half thousand units. I have never seen
(24:26):
supply at seven and three and a half thousand units
in twelve years of being back in Canada, and so
we think you're in the perfect storm in year three
and four. That's not going to structurally change at all. Right,
So if you're fast, like we said, really fast as
a developer, you're going to be able to complete a
(24:47):
project starting complete a project in four years. Well, now
we're talking about year five supply, and so year three
and four is going to create a significant tailway around
RENK growth, which is not a good thing for the
end consumer. However, how hard rent's going to get hit
in the next twelve to twenty four months is going
(25:08):
to is creating a lot of noise and is also
causing a lot of capital and developer operators to be
on the sidelines today. So we're, you know, as everyone is,
is racking our brain around what do we think the
rent growth assumption is going to be over the next
three to four years in order to justify you know,
all the risk and capital to go vertical on a project.
(25:31):
That's the big debate today. And so we're a little
more bullish on what's going to happen years three and four.
And we are starting to see rents stabilize in our
in our existing portfolio, but the rest of the market
continues to see rents get eroded, right, and so that's
keeping a lot of capital on the sidelines.
Speaker 3 (25:52):
You're going to have a massive oversupply last year, this year,
next year, and then massive undersupply in the literary so
we've got bust and boom.
Speaker 4 (26:03):
We see bust and boom for sure. That the issues
around can you in your boom time, in your recovery time,
are you going to be able to make up for
some of the more than makeup for the download pressure
that we're seeing in rents over the next twelve to
twenty four months. Right, that's the biggest call right now,
and we're just we're seeing net effective rents down twenty
(26:25):
to twenty two percent if you take concessions in play.
If you look at face rates, rents are down ten
to twelve percent. So that is a big needle mover
right now. And until we actually the market seeds that's stabilized.
We're starting to see it stabilize a little bit again
on our existing portfolio, but until the market seeds it
probably stabilized, it's hard to underrate a you know, ring
(26:47):
growth number that's going to make sense to go vertical
to develop, to invest capital in the sector. The other
thing that people are not talking about is the demand side, right,
so people are focused on you know, overall immigration numbers retracting.
You still see federal numbers at three hundred and ninety
to four hundred and twenty thousand people a year, right,
(27:09):
you compare that to pre COVID numbers, so eliminate the
COVID noise. Certainly the two million immigration years, you had
a run rate of three hundred thousand people. So we're
up thirty five percent on new immigration going forward. If
the Feds do what they say they're going to do
and hit those target numbers, which we believe is going
(27:29):
to happen. And then the other thing that we're also
seeing play out, which is even more impactful than the
immigration story, is around household formation, and it's specifically organic
household formation. And then also the drop in home ownership rates.
So if you would have saw like you see in
the interior numbers from three years ago, we were about
seventy one and a half percent home ownership rates. Today
(27:50):
that's sixty nine percent. We think that's going to trend
down to sixty five percent. So we think the demand
side is going to increasingly get stronger as supplies drive
dropping all and so we have been advocating all three
levels of government to create the right incentives in place
to get as much new supply commence in the next
twelve to twenty four months, because every day that goes
(28:12):
by right now, this undersupply issue is going to compound
and turn into not only a crisis, but we think
a catastrophe.
Speaker 3 (28:20):
A catastrophe, well maybe that's a good place to stop,
take a break, and then when we come back in
and ask you what we can do about this catastrophe.
Lots of people have come up with some suggestions. Maybe
I'll challenge you about some of them and see what
you got to say, See what your prediction is for
the market.
Speaker 2 (28:34):
Stay with us, everyone back.
Speaker 3 (28:35):
In two minutes with the CEO, founder of Fitzrobia and
the largest purposeful mental company in the marketplace today.
Speaker 2 (28:41):
Stay with us, everyone back into.
Speaker 1 (28:47):
No Radio, No Problem stream is live on SAGA ninety
sixty am dot CAA.
Speaker 2 (29:03):
Welcome back everyone to the Brian Crimby Radio.
Speaker 3 (29:05):
Wow. I've got Adrian Rocco with me tonight. He's really
transforming the connecting and rental housing landscape. He's the founder
and CEO of Fitzrovia. It's the country's leading developer of
purpose built rental community Scott nearly nine thousand homes acquired, completed,
end or under development. He's got ten billion dollars in
assets center management, and if you have checked out some
(29:26):
of his developments, he's really reimagined in urban living. It's
family focused design, integrated wellness, childcare, hospitality inspired service. But
in addition, he's a vocal advocate for police to reform,
and we just sort of addressed that as he talked
about going from crisis to catastrophe. I wonder, Adrian, if
you could address some of the issues. I had the
president of the Residential Construction Workers on recently and he
(29:50):
said that he was thinking that there would be one
hundred and fifty to two hundred thousand layoffs by the
fall of this year in the construction business. That would
lead to a one point five to two percent reduction
in provincial GDP. And he's called it a nuclear winter
in the housing sector. He's saying that the forward book
is non existent, that excavators have got no business, and
(30:14):
the only people working with the people that are finishing
off the towers that were started two three and four
years ago, and that comparable to you and your numbers.
He's thinking that everyone's going to be able to work.
And he says that that's a long term catastrophe. Number
one for supply of housing for our people. Number two
for affordability long term, well, it could be beneficial in
(30:35):
the short term, long term it's going to be terrible.
And number three for actually recovering because he says, these
people are smart, capable, experienced, skilled workers and they're going
to go to Calgary. Are they're going to go to
the United States or are they going to go to
other industries? They're not going to hang around for two
years until their jobs come back. So given that, do
you agree?
Speaker 2 (30:52):
And if that's anywhere close to the truth, what have
we got to do about it?
Speaker 4 (30:57):
Yeah? I look, I couldn't agree more. I would double
down in all those commons. Very concerned about the impact
on our trade base. You know, as we see starts dwindling,
you know, where's that capacity to get to go? They're
going to go to other sectors. And eventually, when the
market does come back, how difficult are we going to
have as an industry group to ramp back up and
(31:19):
get to you know, the twenty to twenty five thousand
units that we can technically achieve in in when the
markets were really really strong. And so what are we
going to do about it? We really need government change. Right.
If you look at land, land is off fifty to
sixty percent right now in the downtown core, almost every
site is available for sale and so but typically land
(31:42):
is twelve percent of your total development budget, right, so
you know you're going to take you know, six percent
off your total development costs by just adjusting land by
fifty sixty percent. That's certainly helpful. But when rents, which
is your single biggest driver of our rent pro forma,
is down effect of twenty to twenty two percent, that's
(32:02):
going to be a problem that more than erodes the
benefit of land. We're seeing construction costs settle down a
little bit, or we're not seeing material decrease across the board.
We're seeing it in certain trades, certainly the front end trades,
the back end trades like mechanical, electrical, less so, and
so we're not seeing a benefit there. And so there's
only a couple of livers that you could really pull
(32:23):
that you control. Those are government levees and taxes. And
so if you look at the total makeup of a
project budget, both thirty percent of that relates to government levees,
development charges, municipal taxes, et cetera. And so we would say,
do a full waiver of those taxes for two years,
(32:43):
get as much new supply coming into the market as possible.
That'll be enough to kick start new supply, that'll be
enough to adjust for the loss or erosion in margins
that we currently have. If you know, if the government
were to do nothing, and then I would also advocate
purposeful rental, a twenty year property tax waiver. Right, that
(33:05):
has a meaningful impact just given the amount of operating
leverage that exists in our business. So what do I
mean by that? For every dollar that you save in
your net operating income, typically it's magnified by thirty times. Right.
If you look at the inverted cap rate that these
assets get valued at, it's about thirty times impact. Right.
But for every dollar that goes up, it's a thirty
(33:27):
dollars destruction and value. So if you look at what
happened in the Sun Belt in the US when they
really really needed to kick start new supply, they did
a twenty year property tax waiver and it got a
lot of new supply coming into the market. It's the
single biggest deal mover, and I would say the most
cost effective tool for the government to provide the private
(33:47):
sector to getting more supply into the market, and we've
been advocating all three levels of government to do so.
We would also advocate not to tangle it with affordable housing.
We think there's other ways to get affordable housing built,
namely through you tripling up the CMA c ACLP dept program.
They accelerated construction loan program. But it's you know, it
(34:10):
needs to start with bold leadership. It needs to start
with with bold policy, and we have to get that
policy introduced in the market tomorrow. We can't wait any longer.
Speaker 3 (34:20):
So the states of Florida and Texas have recently passed
legislation that's sort of comparable to what you're suggesting. Where
you get a property tax waiver, you have to include
some affordable housing in it. But in addition, both in
Florida and Texas, the state governments are overriding a lot
of the zoning rights that municipalities have and forcing down
(34:42):
increased density, increased height, and making it easier for developers
to build what they want to build.
Speaker 2 (34:48):
Do you think that makes sense?
Speaker 4 (34:51):
Absolutely, it does. The problem is the economic model right
now is challenged. Right so density speed is great, super helpful,
and I think like that they've they've made the city,
has made the province mats and very significant inroads in
making the system more effective and collaborating more directly with
the private sector. But if all that were to be
(35:12):
perfect tomorrow, the economic model does not work today for
many institutions or for many operators of developers that are
not vertically integrated. Right when you're looking at a single
digit high single digit profitle margin. When you have to
take all the risk to uh, you know, fundel your
(35:32):
capital up front, you're going to do three times the
amount of capital that is required than doing a condo project.
You have no income for four or five years until
you actually delivered, You have no idea where the market's
going to be in four or five years. There's a
lot of risk associated with it. So you need a
certain profit margin to allocate that capital from institutions, from
(35:53):
the private sector that want to develop. And you're only
going to do that when the profit margins there that
may sense that justify commencing a major project. And the
only thing we could point to when we look up
and down a project performer right now an Excel model
is municipal fees and taxes, and the quicker we get
(36:14):
that waved put a sunset on it. So we create
as much new housing in the market tomorrow, and you
create the sense of urgency amongst the private sector to
put a shovel on the ground. But nothing's going to
get built until there's a form of serious correction, whether
it's rent stabilizing and shooting back up, which we think
it's going to be two years from now, so that's
again just going to compound right now the issue that's
(36:37):
going to be a two year under supply issue that
turns into a four year undersupply issue, or you know,
hard costs are going to continue to drop, which we're
just not seeing in the market. So the one element
that is missing right now that someone has the ability
to control is government fees and levies, and we're hoping
to get that done with all three levels of government
(36:59):
working together.
Speaker 3 (37:00):
So the criticism of that that I've heard is number
one that some politicians say it's rich developers that are
paying development fees, and rich developers can can can afford
to pay those development fees. And number two, well, you
know we need those development fees to pay for infrastructure.
We've got a massive amount of infrastructure. We got to
(37:21):
build growths, got to pay for growth. And so if
you're not getting development fees, who's going to pay for
pipes and sewers and water and libraries and police stations
and fire halls and things like that. How would you
reply to those two criticisms.
Speaker 4 (37:35):
Yeah, I'd say to the first, the reality is nothing
is being built depending on what data that you look at.
Seventy to eighty percent we're seeing as a drop and
you supply from two and a half years ago. Right,
So developers, however you want to characterize them, are not
getting wealthy or not putting capital up, are not going
(37:58):
forward with projects. If the pro forma and the model
worked and you know it made business sense, you would
see a lot more supply. The reality is you're not
seeing that, So you know, I think it's misguided to
say that developers could afford to pay those taxes and
poulticiple fees and development charges. They simply cannot afford to
(38:18):
do them. And I think it's important to see the
cues of what's happening in the market, what's happening in front.
Speaker 2 (38:23):
Of us, okay, and who pays for growth.
Speaker 4 (38:29):
Look, I would say zero of zero is zero Brian, Right,
So I'd say you're not going to receive any development charges.
You're not going to see receive any parkland or community
benefit charges, and unless new development's happening, right. So, we
think some of the infrastructure should be funded through an
(38:49):
infrastructure bond program, which is a very effective tool in
the US that has worked really well and bring us
cheaper forms, lower costs forms of capital to the table.
Where we're advocating, you know, the provincial and federal government
to do that. We think there's traction that it's going
to take time to issue those bonds. So I think
(39:09):
there's other ways to fund the upfront infrastructure for some
of that growth. But we also think that federal government
should be subsidizing and helping out just for a period
of time, just to get some more supply coming in
the market.
Speaker 2 (39:22):
So you've addressed development fees, what about GST HSD, what
should happen with that?
Speaker 4 (39:28):
Well, we have a full waiver for HSD right now
in purposeful rental, right, so you know that's that's already Yeah,
that's already happened. But it's not bif to.
Speaker 2 (39:38):
Get projects to be extended to condos.
Speaker 4 (39:43):
Look, I think it should be extended to condos. Albeit
it's not my business, but I think any form of
supply right now is really helpful. I think the fact
that we're not building any you know, housing significant scale
right now is battltimate for the end consumers, bad for society,
it's bad for a city. And I'm a big supporter
and advocate to you know, change the funding model for
(40:06):
all developers to get all forms of house and build.
Speaker 3 (40:09):
I'm in treated by your comment about vertical integration.
Speaker 2 (40:14):
I want to ask you about that if I could.
Speaker 3 (40:16):
You know, some people would think that you go out
and hire a general contractor or construction manager. You know,
they are expert firms that have been in that business
for a long period of time. So you really advocate
setting up your own department that's going to do the
construction itself.
Speaker 4 (40:30):
Is that kind of riskue if you have the size
and scale, I would advocate for it. And it's not
because it's a great business to be in, Brian, but
what it allows us to do is be a better designer,
a better developer. It allows us a lot more control
in terms of the end quality product that we're delivering,
and it also helps with their speed of execution. Right,
(40:52):
so we you know, create an alignment of interest with
our site staff or their construction folks there. You know
they will get bonus for visions and owner driven economics
and in that project. And we think that's that provides
the best incentives and best alignment of interest of creating
the best product possible that we can do in the market,
and so we're big believers in it. We didn't have
(41:14):
our size and scale. We cannot afford to be fully
vertically integrated, we cannot afford to self performed construction. But
given the fact that you know we have fifteen towers
underactive construction right now, we're able to build out our
own construction workforce.
Speaker 3 (41:29):
We're going to take a final break and come back
with some concluding comments in just two minutes.
Speaker 2 (41:33):
Stay with us, everyone, This is.
Speaker 3 (41:34):
A fashion conversation about about Fitzrovia and about the housing
business and some suggestions on what we can do to
kickstart it.
Speaker 2 (41:40):
Skate with us everyone back in two.
Speaker 1 (41:46):
No Radio, No Problem stream is live on Sagay ninety
sixty am dot C.
Speaker 3 (41:51):
A welcome back everyone to the Brian Crombey Radio ar.
This is I think a fascinating conversation with Adrian Rocco.
Speaker 2 (42:08):
He is the founder and CEO of Fitzrobia.
Speaker 3 (42:11):
It is Canada's since twenty seventeen, already our largest purpose
built rental company. He's got to over nine thousand homes,
over ten billion dollars in assets under management, and he's
given us, you know, a really good prescription for what
he thinks is the success and purpose built rental, and
what he thinks the government's got to do.
Speaker 2 (42:31):
And so you know, maybe I give you a chance.
Speaker 3 (42:34):
If I could Adrian to tell anyone that wants to
check out your product, where should they go if they
want to take that virtual tour that I had the
privilege of doing, or check out some of your sites.
Speaker 2 (42:45):
Is their website they should go to?
Speaker 4 (42:47):
Yeah, so we're on Fitzrobia dot ca. That's f I
t z Robia at dot ca. You'll have links to
all of our various sub brands, so Maddox, Locksley and
all projects under the Fitzrobia collection. And so you could
go to the property website, there's virtual tours, you could
(43:09):
speak with leasing associates directly and see all our availability online.
Speaker 3 (43:14):
I had someone tell me that if you walk into
one of your units, you're going to see better doors,
better kitchens, and better closets than you would and other
rental accommodation, and for sure better than you would see
in a typical condo building that you might have a
chance of either buying or renting.
Speaker 2 (43:30):
Is that true?
Speaker 3 (43:31):
And you know, if you were telling someone to walk in,
what would be the things that you would tell them
to look for to evaluate quality.
Speaker 4 (43:39):
Yeah, so I'd say starting from the front reception or
lobby experience, you'll see a highly animated front door. What
do I mean by that? You have a coffee bar
that converts to a cocktail bar in the evening. Right
in our front reception or lobby experience, it almost feels
like a hotel. Our amenity we talked about. We think
(44:01):
they're best in class, everything from resort style pools, co
working spaces, formal one similators, bowling alleys, raptors, inspired basketball courts,
et cetera, et cetera. We have a healthcare partnership with
Cleveland Clinic, which are really products. So if any of
our residents are feeling sick, they go down the Cleveland
Clinic room. There's on site diagnostic equipment, There's cameras that
(44:23):
look down in their throat. They can write them a
virtual description so they never have to go to walking
clinic again. We have our own Montessori school at subsidized rent,
just for our residents, and then we have amazing like
cell management and programming. When you go inside the suite,
not only will you see a larger, more liberal suite.
But anything that our tenants are touching and feeling have
(44:43):
to have a certain level of quality attached to it.
So we have kitchens from Italy. We have courts, backsplashes,
and countertops. We have full size appliance of these twelve
foot kitchen runs, if not fourteen foot kitchen runs. It's
about twenty to forty percent larger than what you typically
see in the condo market. We have beautiful LVT tile,
(45:06):
we have larger bathroom pods or formats. In a lot
of cases, we're doing double vanities, larger bedrooms, blinds in
all the living spaces including the bedrooms, blackouts as well,
closet organizers, you name it. You know, we're trying to
do it in our in our suites because we really
care about the resume experience. We really want to lead
(45:28):
with with the resident first approach, and so that product
continues to evolve. But we think our base product today
is is really you know, spectacular.
Speaker 3 (45:38):
If everything that you say is true, if there's a
condo across the street that's renting out on a you know,
a one by one basis, because the landlord is is
someone who just owns one or two or three condos,
they just can't be able to get the same rent
per bedroom or per square foot and like that that
you are are you finding that you're are you able
to get a premium?
Speaker 4 (46:00):
Yeah, there's definitely a premium just because the quality of
the value proposition, all the lifestyle management, all the services,
but most importantly, if there's any issue that you have
in your suite or you're building, we basically have on
site technicians that are available twenty four hours a day. Right,
so if there's a leak, if there's a broken appliance,
you you know, we have a resident app you can
(46:22):
follow work notice and it will be fixed. Hopefully you
will have someone within a couple hours up by your
room trying to trying to deal with it and hopefully
it's going to be you know, fixed in short order.
So that level of service, you know, we think is
very important to our product. It's not just a brick
and mortar offering. The actual customer service and hospitality side
(46:46):
of our business is really important and we are seeing
that resonate with our own consumer with with residents that
live in our communities and they're paying a small premium for.
Speaker 2 (46:57):
Andre And thank you so much for join us. I
really appreciate it. This has been very helpful.
Speaker 3 (47:01):
If if the Premier, if the mayor, if the Ministry
of Housing either appreciate or federally asked you to come
meet with them, what would you tell them.
Speaker 4 (47:10):
I would say, we clearly both care deeply about this city,
this province, this country, but we also have a we
have an immediate housing crisis, and we are in a
market where bold leadership and bold action is paramount, and
we have to get that policy introduce. They're doing a
great job engagement with the private sector, have been in
a number of working sessions with all three levels of
(47:33):
government over the last two years. But that those work
sessions have to now, you know, get get pushed into action, right,
they have to introduce policy that's going to change the landscape,
that's going to change the economic model, you know, for developers,
so we can get people developers who want to develop
in today's marketing any market quite frankly, creating much needed
(47:56):
housing supply and not worried about where they are in
the play spectrum. And you know what the opposition is
going to say, and maybe you know what all to
me is the most kind of popless idea. I think
it's it's really understanding these key issues are affecting the
supply of new housing and sticking their neck out and
doing the right thing.
Speaker 2 (48:17):
Adrian Rocco, founder and CEO if it's Rovia, thanks so much.
I really appreciate it.
Speaker 3 (48:21):
I think that's been a really helpful description of your company,
of the rental market versus condos, of the current status
of the housing industry, and a good prescription for what
we need government to do.
Speaker 2 (48:33):
So I really appreciate you joining us tonight.
Speaker 4 (48:35):
That's my pleasure. Thanks for having me, Brian, that's.
Speaker 2 (48:37):
Our show for toanday and everybody. Thank you for joining us.
Speaker 3 (48:39):
I remind you I'm on every mind you through Friday
at six o'clock on nine to sixty am. You can
stream you in line even from a fancy rental accommodation
at Fitzrovia building at TRIBLEW. Songa nine sixty am dot
it because I bet they have Wi Fi. Thanks everyone,
good
Speaker 1 (48:58):
Stream us live Osaga nine sixty am dot co A
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