how soon before toronto builders pull a Beasley?
Soon, imho:
http://www.vancouversun.com/Busines...ver+offers+discount+buyers/1398690/story.html
Vancouver condo price drop leads to lawsuits and big discounts
Developers slash prices for some buyers while suing others who try to back out of deals
By Derrick Penner, Vancouver SunMarch 17, 2009
VANCOUVER — The number of developers suing pre-sale condo buyers for attempting to back out of their contracts is mounting in the fallout from British Columbia’s slumping real estate market.
At least six developers have filed a combined 74 suits in B.C. Supreme Court in Vancouver against buyers, claiming breach of contract for failing to complete their purchases for condominium units which, in many cases, are no longer worth the prices established in original contracts.
Amacon is one of the developers suing some 16 pre-sale buyers attempting to back out of their contracts in its now-complete Morgan Heights project in south Surrey.
The lawsuits are a sign of the tensions that arise when real estate markets turn from upturn to downturn, Tsur Somerville, director of urban economics and real estate in the Sauder School of Business at the University of B.C., said in an interview.
However, on Tuesday, Amacon announced it is slashing prices on a signature downtown Vancouver building where construction has not yet started.
Amacon said it is cutting prices in The Beasley project by 22 per cent, some $100,000 to $250,000 and more per unit, based on reductions in construction costs for both pre-sale buyers who signed higher-priced contracts last spring and bidders for 70 to 80 unsold units it will release to the public in early April.
Amacon senior vice-president Bob Cabral said the two cases involve completely different situations.
In the case of Morgan Heights, Cabral said only a small minority of buyers walked away from units that were complete and Amacon had already paid out all of its construction costs, which were incurred at the top of the market
With The Beasley, Cabral said, the company hasn’t started construction, and since last summer, the firm has watched as construction costs went down. Amacon plans to start construction on the 33-storey Beasley building at Smithe and Homer this summer, with completion scheduled for July 2012.
“The market has definitely gone through some transition since we started pre-selling,†Cabral said. “We viewed [reducing prices], rather than as an obligation, as an opportunity to pass on savings.â€
Ross King, the president of CONform Construction Ltd., Amacon’s form-work contractor for The Beasley, estimated that his company was able to contribute about one-third of the cost savings per unit, given that concrete work is the biggest cost and that his wage and material costs are substantially lower.
King said the construction sector has slowed so much that he has laid off some 250 workers, about half his workforce.
“The reason I wanted to do The Beasley was to keep the rest of my workforce busy,†King said. “That’s my job, right?â€
However, Amacon had already pre-sold two-thirds of The Beasley’s units at higher prices last spring, and Cabral said the price reduction does avoid potentially messy legal problems that could arise if the remaining units were sold for less money.
Buyers who try to walk away from their contracts run the risk of losing the deposits they put down; however, Somerville said developers also run the risk of losing all of their profits if they allow buyers to abandon their contracts.
Somerville said calculating how much risk the company would face from The Beasley’s buyers walking away from contracts if they didn’t reduce prices likely factored into Amacon’s decision.
Somerville said a developer’s choices are to take buyers to court to enforce the contracts they originally signed. However, even if the company wins those lawsuits, it still will be dealing with angry customers.
Developers, he added, also do not want to end up holding large numbers of unsold units.
Faced with the alternatives, Amacon has decided “the smart business decision†is to reduce prices, Somerville said.
Other developers in Metro Vancouver also have discounted their prices.
The Onni Group of Companies, which is suing 44 pre-sale buyers for walking away from units in a handful of projects, attracted headlines in January for its so-called liquidation sale of some 375 completed units at prices 25 per cent to 40 per cent off original contract prices.
Earlier this month, Morningstar Homes Ltd. said it was able to cut $100,000 off the construction costs of its new single-family homes, which it would pass directly to buyers.
New pricing at The Beasley will put studio apartments as low as $219,000, one-bedroom units as low as $305,000 and start two-bedroom suites as low as $435,000.
However, Cameron McNeil, president of MAC Marketing Solutions, which is handling the sales of Amacom’s remaining units in The Beasley, said he doesn’t believe the reductions will set any new benchmarks for downtown pricing because there are too few apartments left and a limited supply of units in development.
depenner@vancouversun.com
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Developers, Amacon, who are building The Beasley condo project in Yaletown announce price reductions March, 17, 2009. This is Bob Cabral of Amacon speaking about the development with a model.
