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  1. H&R REIT hits a roadblock with The Bow LORI MCLEOD November 14, 2008 When H&R Real Estate Investment Trust signed on as the owner and developer of EnCana Corp.'s new head office in Calgary last year, the deal marked a milestone. At the peak of the real estate boom in February, 2007, the handshake between the natural gas producer and the real estate developer set in motion the creation of a unique, crescent-shaped skyscraper which is set to become the tallest office tower west of Toronto. At the time it was announced the project known as The Bow, became a symbol of Calgary's coming of age as a Canadian financial powerhouse in the midst of the commodities boom. Almost two years later, times have changed and the development that was to become H&R's crown jewel has hit a funding wall. "At present there are no financing arrangements in place on any of the REIT's development projects, and the current difficult economic conditions have impacted H&R's financing strategy," the trust said late yesterday in a release of its third-quarter financial results. The trust said it is considering selling assets, including The Bow, to address its funding challenges. So far, attempts to find an investor for the project have failed and are unlikely to succeed until H&R moves further along with its financing and construction efforts, said Neil Downey, analyst at RBC Dominion Securities Inc. H&R's biggest problem has been the seizure of the credit markets, which happened swiftly, unexpectedly, and before it secured a construction loan for The Bow, said Dennis Mitchell, portfolio manager at Sentry Select Capital. Labour and materials costs are rising, and the cost of the project has risen from $1.1-billion to $1.4-billion. Adding to the pain is the downturn in the financial and commodities markets, which is sending office vacancy rates up and real estate values down. While the large scale of The Bow was a bit concerning, in "heady" times it was an exciting project, Mr. Mitchell said. "In February of 2007 you were essentially in the peak of the market. You were talking about [real estate firm] Equity Office Properties being purchased in a bidding war. You had people talking about a wall of capital coming into the markets. It was a pretty heady time," said Mr. Mitchell, whose firm recently sold nearly all of the 55 million H&R shares it owned. His view in February, 2007, was that H&R would be able to sell a 50-per-cent stake in the project at a gain in about six months. As the project proceeds, over budget and in need of $1.1-billion in funding, H&R is facing some tough choices, Mr. Downey said. While it was not mentioned as an option by H&R, Mr. Downey has raised the possibility of a distribution cut of up to 50 per cent, starting in 2009 and continuing until the project is completed in 2011, he said. "This would be a Draconian move by REIT standards," he added. However, it would provide H&R with an additional $300-million in capital, which should be enough to make up the financial shortfall if it can secure a $500-million construction loan, he said.
  2. Builders face financing squeeze 'We can expect a solid demand for condominiums well into the future' TERRENCE BELFORD From Friday's Globe and Mail September 5, 2008 at 12:00 AM EDT Remember how A Tale of Two Cities starts? Charles Dickens writes, "It was the best of times, it was the worst of times." Stretch that theme a bit and you might be describing what is about to happen in the Toronto-area condominium market. First, the best of times. According to Urbanation Inc., which tracks condos from the Burlington border to Ajax and Whitby, there were a record 295 projects for sale at the end of June. Of these, 147 were under construction and another 38 new ones were ready to break ground. Behind those projects stood 151 different developers, and for many of them it was their first shot at building a condo. Those first-timers were mainly house builders who could no longer find building lots. Their choice was either to move into condos or fold their tents. So on the plus side, prospective buyers have never had greater choice. Now on to the worst of times. That impressive number of projects may prove to be the Greater Toronto Area's version of a Potemkin Village by the end of the year. Veteran market watchers say that up to a third of them are likely to be pulled from the market. Along with them, up to 50 developers may bite the dust. The reason? They are unlikely to find financing, says Barry Lyon. He is a 40-year veteran of the Toronto area real estate market. His company, N. Barry Lyon Consulting Ltd., provides research, marketing and project management to the condo and commercial sectors. "The U.S. credit crunch means the money to build just is not there," he says. "The tap has run dry." So, what determines who gets the money to build? In large part, GTA condo buyers. Developers need to presell about 60 per cent of the units in any project before lenders will take a look at providing the money to build. Equally important, they have to do it within reasonable time frames. As their marketing and sales teams scurry to sell suites, construction and carrying costs for high-priced land are ticking upwards. Mr. Lyon says he would not be surprised to see some developers pulling projects out of the market because those costs have risen to such an extent that they simply can't make a buck going ahead. "In some cases, even with 60 per cent sold, some developers are still going to have a hard time finding financing," he says. It is not that there is any lack of demand. It remains strong, says Jane Renwick, executive vice-president of Urbanation. But it is nowhere near the levels seen in 2007, which was a banner year for the industry. Thanks to record sales in 2007, 76 per cent of the 66,310 suites on the market at the end of June had already been snapped up. "I think a lot of last year's sales went to first-time buyers," she says. "I also think that most of them have now been absorbed so we are looking at a return to a more stable market — less of a gold-rush mentality." Again on the plus side of demand is the lure the GTA holds for immigrants. Ms. Renwick points out that of the 150,000 people who immigrate to Ontario in any given year, 100,000 of them make their way to the Toronto area. "If that trend continues, if we continue with high employment and if the economy continues to expand, we can expect a solid demand for condominiums well into the future," she says. That demand will continue to be strongest within the old city of Toronto. That is where 70 per cent of today's projects sit, says Mr. Lyon. It is also where prices are highest — an average $461 a square foot, versus $418 a year ago, according to Urbanation. Compare that with $294 in Scarborough, $254 in Pickering, $287 in Ajax and $313 in Aurora. Much of the difference is simply the cost of land to build on. But in that area Mr. Lyon suggests the coming shakeout may bring positive benefits to buyers. He says the loss of about a third of the developers today jockeying for land and bidding against each other to arrange construction crews likely means less competition for available resources. Less competition means lower demand and lower demand usually leads to, if not lower prices, then at least a much slower rise in prices. "It is going to be an interesting year," Mr. Lyon says. "By the end of 2008, the GTA's condo market may be a quite different place." Terrence Belford is a veteran journalist covering the Toronto real estate market.
  3. Read more: http://www.montrealgazette.com/MUHC+puts+hospital+buildings+sale/8194083/story.html#ixzz2PUdxl9hL
  4. Construction loan on hold for Waterview Tower By Alby Gallun, Nov. 05, 2008 (Crain) — About seven months after agreeing to finance the 90-story Waterview Tower and Shangri-La Hotel, the Export-Import Bank of China has gotten cold feet over the stalled Wacker Drive development. The Waterview Tower and Shangri-La Hotel at 111 W. Wacker Drive remains unfinished. The bank’s refusal to approve a $400-million construction loan for the condominium-and-hotel high-rise reduces the already slim chances that the building’s current developer, a group led by Teng & Associates Inc. President and CEO Ivan Dvorak, will be able to finish the luxury project. And it increases the odds that Bank of America Corp. will move to foreclose on the property at 111 W. Wacker Drive. The Export-Import Bank has put the financing on hold until the U.S. economy improves and it sees “signs that there is a market for the condominiums,” says Zac Henson, CEO of the U.S. subsidiary of Beijing Construction Engineering Group Ltd., which was arranging the loan. While that could be a very long time, he stopped short of saying the loan had been denied. “We’re not pushing rewind, we’re not pushing eject, we’re just pushing pause,” Mr. Henson says. “I certainly think that the for-sale condo market in the U.S. needs to rebound” for the bank to reconsider the loan. The bank’s decision leaves Mr. Dvorak in a tough spot. He has been courting equity partners for the $500-million project for some time, and more recently has been trying to sell off its hotel, condo and parking components separately, according to people familiar with the development. Under one scenario, the developer would finish the hotel and sell the rights to build the condos later, when the condo market recovers. But running a luxury hotel while construction is under way on the building’s upper floors would be extremely disruptive and a potential deal-killer. Another option: Convert the current structure, a 26-story concrete shell, into apartments. “They’re looking for anything, any option for a transaction,” says one person aware of Mr. Dvorak’s plans. Mr. Dvorak and Teng executive Sean McMahon did not return phone calls for comment. Unlike most developers, who don’t break ground until they get a construction loan, Mr. Dvorak and his partners financed the early construction of the Waterview project with their own money, betting that they could secure a loan later. They took out a $20-million bridge loan from Chicago-based LaSalle Bank N.A. in February 2007, but financing sources started to dry up several months later as the credit markets froze. With U.S. banks halting most construction lending, Mr. Dvorak looked overseas for a savior and seemed to have found one in April, when the Export-Import Bank said it would finance the project. But as the loan approval process dragged on and panic gripped the financial markets this fall, the financing looked increasingly shaky. LaSalle has already extended its loan once, but the bank’s new owner, Bank of America, probably won’t be as patient given the project’s dimming prospects. The loan has yet to be transferred to Bank of America’s workout group, but it may be only a matter of time before the bank files a foreclosure suit, say the people familiar with the project. A bank spokesman declines to comment. Construction firms walked off the job several months ago, and liens for unpaid bills from them have been piling up. The list of firms that are owed money include Teng, a Chicago-based architecture and engineering firm, and its affiliates, which together have filed liens on the project for more than $32 million. Buyers have signed contracts for 156, or 67%, of the residential condos in the building, according to Chicago-based consulting firm Appraisal Research Counselors. With an average price of more than $800 a square foot, the condos are among the most expensive in new buildings in the city. The tower’s 200 hotel units are also being sold off individually as condos; buyers have signed contracts for 80 of the condo-hotel units, or 40%, according to Appraisal Research. Shangri-La Hotels & Resorts, the Hong Kong-based luxury hotel chain that would run the hotel, remains committed to the development, according to an executive. The developer “has fulfilled its obligations to us,” says Shangri-La Regional Vice-president Stephen Darling. “We’re excited about the project and we hope that everything will materialize as it should.”
  5. Economic turmoil halts glitzy condo project FRANCES BULA Special to The Globe and Mail November 14, 2008 Tony Pappajohn's Greek immigrant parents spent half a century building up a modest empire of apartment and commercial buildings in Vancouver. After taking that business into big-time development, Mr. Pappajohn this week had to sit down with contractors and tell them that his latest project - a cutting-edge new condo tower - has become another casualty of global economic turbulence. Working with his two brothers, he had taken his parents' empire to an ambitious new level in the past decade. They built a couple of small, attractive apartment buildings in Kitsilano and South Granville that sold or rented immediately. Then, five years ago, they decided to climb even further up the ladder in Vancouver's booming development world. They bought property downtown and, as plans progressed, found themselves the developers of a 37-storey, London-architect-designed glass tower with condos priced between $500,000 and $5.3-million. Print Edition - Section Front Section S Front Enlarge Image The Globe and Mail Mr. Pappajohn loved the project, the Jameson House, which combined cutting-edge environmental architecture by a team from the prestigious Norman Foster firm with the chance to restore two heritage buildings next door. Although it was in the city's business district - an unusual location for a condo tower - and not on the waterfront, it had the cachet of being on the same block as two of the city's most exclusive private clubs, and brochures promised stylish Italian fittings. But on Wednesday, he told his contractors he was stopping construction because one of his key lenders from a syndicate of three had backed out of the $180-million project. The lender, a major Canadian bank that Mr. Pappajohn declined to identify, pulled out Oct. 28, telling the Pappajohns only that "market conditions" weren't good. There was no reference to any doubts about his ability to sell remaining condos and Mr. Pappajohn said their presentation centre had still been getting steady business. He has spent the past two weeks looking for another lender and been unable to find one. While he's still frantically working with his lead lender to fill in the missing major piece, he decided he couldn't keep people working when he might run out of cash with which to pay them. "We made the hardest decision to stop," Mr. Pappajohn said yesterday in an interview at the downtown office of his family's company, Jameson Holdings. "But I had to ask myself, 'Is that fair to keep them working when you don't know if you can pay the bills? What if it doesn't work out and I can't get the financing and I can't pay these people? They have families.' " About 40 people were working on the site, and had just finished digging a 21-metre hole. Mr. Pappajohn now has to decide what to do for the people who bought 105 of the 144 condos. His marketer, Bob Rennie, said he's waiting to hear the results of Mr. Pappajohn's efforts at financing before figuring out what to do for the original purchasers, who had to provide deposits of 15 to 25 per cent of the price. The Jameson House is one of a growing number of condo projects in the Vancouver region that have been hit by a storm of bad economics: high construction costs, an abrupt condo sales slowdown that started in June, and a global financial crisis that has resulted in some lenders collapsing entirely while remaining banks are reluctant to lend. Two projects in Surrey have been halted, while the Olympic athletes village has been making headlines because of its difficulties in getting additional financing for cost overruns. And major developers like Concord Pacific, Westbank, ParkLane and others say that they are simply putting projects on hold until the market steadies. "It's not a project failure," Mr. Pappajohn said about his situation. "It's a market failure." Analysts say it could be months before the condo market becomes stable. That's a long time for a developer to hold expensive land and outstanding construction loans from a project halfway done. Mr. Pappajohn said he'd like to find a solution sooner than that. "Would I sell the project? In a heartbeat. I need to do what's prudent for everybody. If I could pay everybody's bills and be back to where I was five years ago, I'd have the world's most expensive MBA and be happy." In the meantime, "I'm out there. I'm looking for an angel. I'm looking for help to finish a beautiful project."
  6. With a goal to make John Abbott College a leader in health-related fields, a symbolic groundbreaking ceremony took place Tuesday for the CEGEP's new science and technology building. The new five-storey, $30-million project will house facilities to train nurses, ambulance technicians and pharmaceutical technicians. "This will train students in English in areas where we have a shortage of qualified workers," said Education Minister Line Beauchamps. To be completed in 2012, the building, equipped with geothermic heating, will benefit from $8 million in financing from federal and provincial governments. http://montreal.ctv.ca/servlet/an/local/CTVNews/20100831/mtl_JAC_100831/20100831?hub=Montreal
  7. Wanted: biotech plan By DAVID CRANE, FreelanceFebruary 19, 2009 Sector in peril. New financing schemes are needed to maintain health of industry vital to Quebec's future New financing schemes are needed to maintain health of biotechnology industry vital to Quebec's future New financing schemes are needed to maintain health of biotechnology industry vital to Quebec's future Photograph by: Chris Schwarz, From Gazette Files Montreal has big ambitions to become a major biomedical centre in North America. The hope is that this will lead to jobs and wealth creation, just as promoting the aerospace industry has done. And it could. There's an obvious reason why. The world is on the verge of a biomedical revolution that will be a source of good jobs and prosperity for those societies that succeed in developing and commercializing the new knowledge. If the 20th century was known for great advances in the physical sciences and engineering, giving us the information and communication technology revolution, the 21st century could very well be the century of the biological revolution. But with all the new knowledge flowing out of universities and research hospitals, there's a huge problem - how to finance the growth of young startups commercializing this new knowledge into viable companies with a steady flow of revenues and profits. Montreal, for example, has dozens of such companies - like Theratechnologies, ConjuChem Biotechnologies, ProMetic Life Sciences, Enobia Pharma, Akela Pharma, Thallion Pharmaceuticals, Haemacure Corp., CryoCath Technologies, Paladin Labs, Ambrilia BioPhage Pharma, MethylGene, Alethia Biotherapeutics, Supratek Pharma, AngioChem and many more. Quite a few have products either now reaching the market or close to commercialization, or have promising projects in the clinical testing pipeline. But they must be able to attract the financing they need to keep on the road to potential success. In Canada today, the biotech industry is at a crucial point. Venture capital funding is drying up and many companies are running out of cash. Promising young companies may have to delay development of promising compounds. Or they could be forced to sell to bigger, usually foreign, players at bargain- basement prices. According to Thomson Reuters, which tracks venture investing in Canada, Montreal-area life-science companies raised only $69.9 million in venture capital last year, compared with $219.4 million in 2007. This year could be even more difficult. According to the Canadian Venture Capital and Private Equity Association, only $1.2 billion in new money for investment by venture firms in all high-tech sectors was raised last year, the lowest level on record since the mid-1990s. This is why we urgently need new financing mechanisms to sustain and grow our own life science companies. This should include a capacity to bring about mergers between young Canadian companies where complementarities exist. The industry had hoped the recent federal budget would help address their problems, but advocacy by groups such as BIOTECanada and the Canadian Venture and Private Equity Association were ignored by the Harper government. BIOTECanada had sought several initiatives. These included a one-time redemption for unused tax losses, limited to the lesser of $20 million or twice a company's annual R&D spending, and an exemption from capital-gains taxes in 2009 and 2010 for investors making new direct investments. Both measures would have required companies to reinvest in Canada. The venture-capital industry had sought creation of a $300-million fund of funds to invest in young companies and changes to the R&D tax incentive. British and U.S. biotech companies are facing many of the same challenges. In Britain, some 20 industry and academic leaders have urged the government to set up a $1.8-billion biotech fund, with half coming from government and half from the private sector. The group also wants a separate $900-million fund to make equity investments of $85 million to $170 million to help a small number of companies become more significant companies. British Prime Minister Gordon Brown has established a task force to follow up on this. The biotech industry is especially hard to finance. Not only are the human body, and disease, quite complex. But biotech development cycles are long and costly - projects can take up to 20 years to become successful and cost between $200 million to $300 million, or more, to bring to market. Few compounds succeed. All of these factors make R&D financing a challenge. But the goal to improve human health is important and the economic rewards can be high. This, though, depends on finding a better financing model if either of these is to be realized in Montreal or elsewhere. David Crane is a Toronto-based writer on innovation and globalization issues. He can be reached at [email protected] © Copyright © The Montreal Gazette
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