Great deals won’t last for­ever

Calgary Herald - Calgary Herald New Condos - - New Condos -

The fol­low­ing are an­swers by Naum Shtein­bah of Street­side De­vel­op­ment Corp. to ques­tions by New Homes/New Con­dos ed­i­tor Barb Liv­ing­stone:

Ques­tion: What trends are you see­ing in this econ­omy — in your com­pany and in your in­dus­try — that are dif­fer­ent from a year ago?

An­swer: A year ago this time, we didn’t re­ally be­lieve that the U.S. econ­omy could col­lapse so fast.

We were also as­sured by mul­ti­ple an­a­lysts and economists in both gov­ern­ment and pri­vate sec­tor that the Cana­dian econ­omy was much more in­su­lated from the ef­fects of a po­ten­tial U.S. eco­nomic dis­as­ter than it re­ally was.

Th­ese as­sump­tions were ob­vi­ously wrong. The ef­fects are be­ing felt by all sec­tors of the Cana­dian econ­omy.

Hous­ing constructi­on — es­pe­cially, multi-fam­ily hous­ing constructi­on — has sub­stan­tially big­ger cap­i­tal ex­po­sure and com­mit­ment to the projects-in-progress as com­pared to, say, sin­gle­fam­ily hous­ing builders, who can choose to roll back their pro­duc­tion and “hi­ber­nate” dur­ing the slow­down.

For the large-vol­ume multi-fam­ily builders, the avail­able choices are tough. Ei­ther fin­ish projects un­der a lot of fi­nan­cial and emo­tional stress, or shut down.

Most of the first-time builders that jumped in the mar­ket on the strength of the de­mand gen­er­ated dur­ing the boom have pulled back and shut their op­er­a­tions down, al­ready.

Stronger com­pa­nies ca­pa­ble of sur­viv­ing this slow­down will learn to pace their fu­ture de­vel­op­ment plans bet­ter and, likely, way more con­ser­va­tively.

Pre-sell­ing a sig­nif­i­cant part of the new com­mu­ni­ties as a rule is re­turn­ing as con­di­tion of fi­nanc­ing but is also a de­ci­sion mak­ing fac­tor to pro­ceed with a project.

Mar­ket­ing and sales pro­grams will need to be ad­justed to al­low for longer sell­out time.

Most builders lost at least some of their well-trained em­ploy­ees that were so hard to find dur­ing the boom years.

Re-dis­tribut­ing work­load to the re­main­ing staff core is an on­go­ing task.

At the same time, con­trac­tors and con­sul­tants are now will­ing to give builders more at­ten­tion; thus, a chance to de­sign and de­liver bet­ter qual­ity homes.

Ques­tion: What are the in­cen- tives your com­pany is of­fer­ing to bring con­sumers into this buy­ers’ mar­ket?

An­swer: I am a big be­liever in the com­pany rep­u­ta­tion and his­tory. No­body in their right mind would con­sider buy­ing a ve­hi­cle or a piece of elec­tron­ics from a fel­low on the street telling them that “he made it him­self and it’s good be­cause he says so!”

Well, many buy­ers pur­chase their homes just like that. Yet, it is by far one of the big­gest buy­ing de­ci­sions most peo­ple will make in their life­time.

No­body’s per­fect. A home is a prod­uct of work of the hun­dreds of hands.

As a re­al­is­tic buyer, I would want to be con­fi­dent that my builder would be there for me to re­solve the prob­lem if one arises dur­ing (and some­times even af­ter) the war­ranty pe­riod had ex­pired.

I be­lieve Street­side has that rep­u­ta­tion.

Af­ter de­liv­er­ing thou­sands of homes in the past 20 years, we have stood be­hind our prod­uct and our war­ranty obli­ga­tions no mat­ter how costly th­ese obli­ga­tions have been to ad­dress.

This is by far the big­gest in­cen­tive we have to of­fer in the un­cer­tain times like th­ese.

We do, of course, of­fer a va­ri­ety of on­go­ing sell­ing in­cen­tives to our buy­ers.

They in­clude spe­cial pric­ing, as­sis­tance with pur­chase fi­nanc­ing, higher de­gree of home cus­tomiza­tion to ac­com­mo­date buyer’s re­quests, as well as spe­cial one-time pro­mo­tions.

Ques­tion: What do you see hap­pen­ing in your in­dus­try and your com­pany dur­ing the next 12 months?

An­swer: The fol­low­ing things could hap­pen in the next 12 months.

Cap­i­tal in­vest­ment in new land and de­vel­op­ment costs are the manda­tory pre-req­ui­sites for the new multi-fam­ily homes brought to the mar­ket.

In the past two years, this in­vest­ment prac­ti­cally did not hap­pen in Cal­gary due to in­vestors lack­ing nec­es­sary mar­ket opti- mism and fi­nanc­ing ca­pac­ity.

Al­though there are sites in Cal­gary ready for im­me­di­ate de­vel­op­ment, it takes years some­times to bring a new project to constructi­on and then a cou­ple more to the ac­tual de­liv­ery of a new home.

Once the ex­ist­ing in­ven­to­ries of com­pleted multi-fam­ily homes are ab­sorbed (be it a year or two), there will not be enough new homes ready for oc­cu­pancy.

So a short­age, be­lieve it or not, is quite a rea­son­able pos­si­bil­ity in two to three years time, I be­lieve.

In ad­di­tion, the ma­jor­ity of the smaller com­pa­nies with cur­rent hous­ing in­ven­to­ries to sell would likely exit the mar­ket for a while af­ter their prod­uct sell­out.

This would re­sult in no smaller-scale new multi-fam­ily com­mu­ni­ties brought to the mar­ket in the next 12 months.

Larger builders are also do­ing a lot of in­ven­tory sell­ing and not a lot of new constructi­on at present.

I don’t see this sit­u­a­tion chang­ing much in the next 12 months.

I am cu­ri­ous to see the trans­for­ma­tion and adap­ta­tion of the sup­pli­ers and con­trac­tors nor­mally ca­ter­ing to the new multi-fam­ily constructi­on.

Will they turn to com­mer­cial and in­dus­trial constructi­on in­stead to stay ac­tive, or sim­ply down­size? And what is go­ing to be the ef­fect on the in­dus­try?

As a com­pany, Street­side is ex­tremely for­tu­nate to be backed by Qual­ico Group, one of the largest and most es­tab­lished real es­tate cor­po­ra­tions in Canada, pro­vid­ing us with means to con­tinue and com­plete our cur­rent projects in progress.

In ad­di­tion, we have iden­ti­fied and re­ceived share­hold­ers’ ap­provals to ini­ti­ate two new com­mu­ni­ties that are cur­rently in de­vel­op­ment stages that should be ready for constructi­on in 2010.

Ques­tion: How have you posi- tioned your­self in this econ­omy with po­ten­tial cus­tomers?

An­swer: Street­side has be­come a ma­jor player in the Cal­gary hous­ing in­dus­try. Street­side is a brand and a rec­og­niz­able name in the Cal­gary and area hous­ing mar­kets.

In-house, we try cul­ti­vat­ing the at­ti­tude of do­ing busi­ness on the premise of “we’ve got nowhere to hide,” so to speak.

The com­pany is sim­ply too vis­i­ble. This at­ti­tude re­quires all of us at Street­side to treat ev­ery cus­tomer com­plaint, for ex­am­ple, from a cor­po­rate point of view.

Our rep­u­ta­tion is solid and we want to pro­tect and im­prove it as such.

We con­stantly sur­vey our cus­tomers try­ing to find the ways to im­prove our ser­vice and in­cor­po­rate cus­tomers’ feed­back into the de­sign of our new com­mu­ni­ties.

As a large vol­ume builder, we may not nec­es­sar­ily have the ca­pac­ity to be “ev­ery­thing for ev­ery­body,” but the homes we build bring a lot of value to our buy­ers.

Our cus­tomers get much more for their money then just a “hous­ing unit.”

Ques­tion: What are the ad­van­tages for home­buy­ers in this buy­ers’ mar­ket? And what are your tips for buy­ers looking to pur­chase a home to­day?

An­swer: Most of the in­dus­try in­sid­ers do agree that the real es­tate prices are start­ing to “bounce at the bot­tom.”

Ab­so­lutely great deals on new homes are still in abun­dance, but they will not last — guar­an­teed. Once the cur­rent in­ven­to­ries are sold out, it will be busi­ness as usual.

If you are ready to pur­chase a new home, now is the time.

Think about this ex­am­ple: say, you saw a new town house that you and your part­ner re­ally liked, but de­cided to wait a few months longer to see if the prices get lower.

Even if they did yield a bit, chances are by the time you get back they could be up again, your dream home might be bought by some­one else al­ready.

Buy­ing a home should never be treated like play­ing the spec­u­la­tive stock mar­ket game, but as a long-term in­vest­ment in your life­style.

If there was one tip, I’d like to of­fer to the new home­buy­ers to­day, do your home­work.

Keep in mind that there is no “free lunch.” Good qual­ity comes with a price tag. In­te­rior fin­ish­ing is quite vis­i­ble. Ask how are the walls are built in­side? Who is cer­ti­fy­ing the build­ing en­ve­lope? Can the com­pany demon­strate the ex­pe­ri­ence in build­ing and ser­vic­ing what they’re sell­ing? Treat buy­ing a home like en­ter­ing into a longterm re­la­tion­ship with the builder. Chances are this ap­proach will pay off in the end.

Cal­gary Her­ald Archive

Naum Shtein­bah, gen­eral man­ager of Street­side De­vel­op­ment Corp. Be­low, Street­side’s Pen­ncross project, win­ner of the 2008 SAM Awards for Best Apart­ment-Style Condo (wood frame).

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