Parents investing in “kiddie condos” for their university-level children is not a new phenomenon — many parents-turned-landlords have scooped up rental properties for their kids, leasing the other rooms as an alternative to paying rent.
But when a Toronto-based real estate developer launched a 58-unit condo development in the university town of Waterloo, Ont., in January, most of the purchasers weren’t parents. Buyers snapped up all the units of Sage Condos — starting at $359,900 for 1,800 square feet — in four days.
“The day you take it over, it’s fully rented and occupied,” said Toronto-based retail estate developer Darryl Firsten, who is behind Sage.
Unlike traditional condos, the units are all three- and five-bedroom apartments — ranging in price from $359,900 to $599,900. The building will have student-friendly features including parking, a social room in the building and on-site gym.
And the units are designed to handle the rowdy student life as well with insulated concrete walls.
“If you were to punch the wall, this concrete, you’re basically going to break your knuckles. It’s just designed in such a way that it won’t be destroyed,” Mr. Firsten said.
Mr. Firsten, president of In8 Developments, said he came up with the idea for the purposed-based units after several years of owning and renting student houses in Waterloo. “What I determined was there’s a lot of wear and tear,” he said. “It’s challenging moving kids in and out, parties in the backyards, keggers, kids punching or putting their heads through the wall. Crazy stuff.”
It offers those who want a piece of the student housing market a packaged real estate investment — furnished condo units, overseen by a local property management company, promising a lease guarantee.
Nathaniel Lipkus, a Toronto lawyer who knew Mr. Firsten from university, said he bought a three-bedroom unit as a passive investment.
“Right now it’s hard to find a market that you feel good investing in,” said the lawyer at Gilbert’s LLP. “It’s hard to say yes to the stock market when it’s so volatile. It’s hard to say yes to real estate, per se, because everybody talks about a bubble.”
Mr. Firsten said he chose Waterloo because the rental market has a demand for luxury student housing.
“There’s a lot of international students that don’t even look at the price tag. They walk in … and say ‘what is the best thing you have?’”
Parents of domestic students supplement the demand, Mr. Firsten said.
While initial sales went mainly to investors, Mr. Firsten expects parents of new students to pick up the resales when construction is completed.
In8 Developments is also gearing up to launch phase two of Sage in the fall, with smaller units at lower price points.
Another private developer is looking to appeal to parents of post-secondary parents that aren’t willing to dive into the kiddie condo investment market.
“Sometimes, people don’t always recognize that prices don’t always go up. And they don’t always realize that managing one or two beds, or one or two apartments, is sometimes a little more complicated than what they might be ready for,” said Henry Morton, president of Campus Suites.
Campus Suites announced a public-private partnership Tuesday to build another private student housing development at Toronto’s York University that will include a 770-bed residence in a gated community to be opened in 2015.
JULIA JOHNSON, FINANCIAL POST JULY 17, 2012