(57) Mid-Rise Purpose-Built Rental: Underwriting Rent, Absorption, and Exit Risk - Mathieu Fleury -Leader Lane

Mid-Rise Purpose-Built Rental - Mathieu Fleury on Leader Lane’s Mid-Rise Mass Timber Rentals, Market Risk, and What Toronto Needs to Build More Housing Payam interviews Mathieu Fleury, partner at Toronto mid-rise developer Leader Lane Development, focused on purpose-built rental, including a nine-storey, 60-unit mass-timber project at 230 Royal York nearing occupancy, plus other Etobicoke projects and partnerships with Windmill, Elm, and the One Planet Living Fund. Fleury recounts his path from Montreal to Cambridge’s real estate finance program, early roles at Loblaw Properties, Great Gulf, Dream Unlimited, and private equity at ForgeStone, where he underwrote 100+ deals annually and identified a gap for repeatable urban infill “missing middle” projects. He describes using site plan/minor variance to avoid rezoning, the challenges of small floor plates and code thresholds, and shifting from condos to rentals as the investor market weakened. They discuss purpose-built rental risks (rent levels, absorption, servicing debt), a looming supply cliff, innovation like mass timber and modular, balcony/amenity tradeoffs, and his top policy wish: reduce government fees and taxes that drive housing costs. Fleury also notes interest in multiplex housing as a complementary solution.

• Policy Tailwinds And Bottlenecks
• Big Developer Playbook
• Condo Vs Rental Risk
• Purpose Built Rental Uncertainty
• Rent Underwriting Caution
• Supply Cliff and Immigration
• Affordability and Salaries
• Purpose Built Rental Shift
• Condo Presale Model Breaks
• PBR Returns and Alternatives
• Approvals and Underwriting Sites

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Transcript

0:00

Hello everyone, and welcome to another episode of the Real Estate Development Insights podcast, where we bring you ideas, experiences, and best practices from the real estate development industry. My name is Payam Noursalehi, and I'm gonna be your host here. My guest for this episode is Matthew Fleury. Matthew is the founding partner at Leaderlane Developments. He holds a master's degree in real estate finance from University of Cambridge in England, And for the past 12 years, he's been working with firms such as Loblaw Properties, Great Gulf, Dream Unlimited, And in 2021, he co-founded Leaderlane Developments. Matthew has been involved in more than 15,000 residential unit deliveries and over 7 million square feet of development all across Canada as part of the portfolio that I just explained. His background is in finance and accounting, so he has a lot to say about pro-project pro forma, numbers, and modeling, and I've had the privilege of working with him very closely over the past two, three years on one of their projects. As always, you can find all the relevant information on our website, realestatedevelopmentinsights.com, realestatedevelopmentinsights.com, and please remember to subscribe to the show, and even better, tell your friends and network about us and help us grow the show together. Thank you, and enjoy listening.

Payam 1:19

Hi, Mathieu. Welcome to the show. How are you doing today?

Mathieu Fleury 1:21

No, hi Payam, I'm good and you?

Payam 1:24

Fantastic. Thank you for being here.

Mathieu Fleury 1:27

Thanks for having me

Payam 1:27

worked together f- a few years, but if you could let our audience know about who you are, who's Mathieu, give us a detailed background. Oh, and we go from there

Mathieu Fleury 1:38

Yeah, Mathieu Fleury. I'm one of the partners at Leader Lane Development. we're a mid-rise developer in Toronto focused on purpose-built apartment building, buildings where you have a few projects in Etobicoke right now. one of them that we've been working on together at 230 Royal York, it's a nine-story, 60 units, mass timber building that we're gonna be occupying this summer. we have two more of those right now under construction, that's-- that are coming up for construction, in the following year, in partnership with Windmill Development. We're under construction right now on the Queensway, with, Elm Developments. we have, Yeah, we're, we're, we're, we're pretty busy in Etobicoke, but maybe I'll go back and maybe give you the, the full background, as to how, how I got here. so grew up in Montreal. I did my undergrad in management accounting. ended up going on exchange at the University of Manchester when I was doing my, my undergrad. really enjoyed living in the UK. wanted to specialize in real estate. Started applying for a master's program over there and, got in, the Master of Real Estate Finance at, at Cambridge. And, so I ended up doing my, my master's over there. that was back in 2007. Graduated in 2008 at the peak of the mortgage crisis. couldn't find a job for the life of me. Yeah. Funny how things come around. It's, we're kind of in a similar situation now

Payam 2:59

yeah, and

Mathieu Fleury 3:00

where, yeah... So I, I know the feeling, for, for some of the, the grad-- the graduates right now that are looking for work. I've, I remember when I graduated, and it was definitely, definitely challenging. yeah, so couldn't, couldn't find a job for the life of me in, in England, unfortunately. Had to come back to Canada, move back to my parents' place in, in Montreal and, there wasn't much going on in Montreal either at that time. And, started applying for jobs and ended up my first interview took, almost a year to get. Ended up, getting, an interview to work for Loblaw Properties. And, that was the first thing that, came across that was even related to real estate. And I jumped on it and, yeah, started working there and, it was kind of a new role at the time. I was, really in charge of evaluating any kind of CapEx project that they had over-- anything over a million dollars that they wanted to spend money on. I was kind of, running the analysis for that. So, so it was, pretty interesting. I worked on a lot of new stores. at the time, Maple Leaf Gardens was, was kind of, starting. there was some new store-- There was the new store, being built that was about to start at Queen and Portland. so yeah, kind of, ended up spending two years there, but wanting to specialize more in, in development. so started applying for, for roles and got into Great Gulf Homes, and, started there as a, as an analyst and, it was kind of baptism by fire there at, at Great Gulf when I started. The, the person that I was replacing had become, uh, CFO of, of H&R Developments and was filling some pretty big shoes. they had a lot of, pro formas that were, six months stale that, that hadn't been touched in a while and, was kind of, brought on to, kind of take over all of this. So, the person at the time that hired me left, within a month, and then I started reporting to one of the owners directly. And, um

Payam 4:46

about deep end

Mathieu Fleury 4:47

Yeah, I definitely got thrown in the deep end pretty quickly. I remember, one month in, I had my first, my first real test. I was kind of rebuilding everything from scratch and, we had a partners meeting for, for One Bloor East. I'll always remember, I got in the morning at like eight, was meeting with two of the owners to go over what I did and, I'd kind of taken the liberty to, adjust some of the assumptions of that-- in that pro forma, interest rates and whatnot. And, got told,

Payam 5:13

move.

Mathieu Fleury 5:13

got told very quickly that I should not have done that. And, I kind of like fixed everything before the meeting and, everything was okay and, it's like I, I, I, I made it like

Payam 5:23

Listen,

Mathieu Fleury 5:24

af-after that I was in.

Payam 5:25

there

Mathieu Fleury 5:26

Absolutely, yeah. So a very interesting time at, at Great Gulf. when I was there, we were working on a lot of high-rise, projects obviously. Charlie was under construction at, King and Charlotte. One Bloor East was, about to start, was, y-you know, had started marketing. they had the-- just bought, Pace at Jarvis, and Dundas was going. They were replying to the RFP for, Mound on the, the waterfront. that was gonna be the first building there, kind of went through that. Went through quite a bit of acquisitions there at Great Gulf. 357 King, home at, 48 Power, um, Yonge and Rich. yeah, a lot of really cool projects. And, so I started doing high-rise there and then after a little while, there was really no one running numbers, like I was for, for the low-rise business, so kinda took that over. And, I really, really learned a ton at, at Great Gulf. Really enjoyed working there. it's really where

Payam 6:18

op- awesome opportunity there

Mathieu Fleury 6:20

Yeah, it's really where I cut my teeth, I would say. kind of being side by side working with the owners and, just being in the, the nitty-gritty of, of development and kind of, supporting that business. So, an opportunity came up after about four years of doing that to, to move to Dream, Unlimited. And, it was, it was a great opportunity, and I kinda took the jump and, rebu-- kind of build a team from scratch there. similar role, but obviously Dream being a public company, a little bit more complexity in terms of the development finance and the reporting. And, yeah, there was, it was another, another very interesting experience there working, working at Dream Unlimited. There was, a lot of projects going on also. The Panama Leeds Village was, was being built, the whole distillery district. just a couple parcels still left to build. I was dealing with the whole partnership with Streetcar Development, which, you know, which was going on at the time. And, we did a partnership with CP Rail at some point to become their, their kinda real estate, kind of real estate advisor, if you want, to try to see if there was, any redevelopment potential on all their, their underutilized land. yeah, so ended up spending, three years there. And, After I moved to private equity, worked for ForgeStone Capital, for about four years. And, private equity is a very different world, coming from, from merchant development. but I think it was the, the right order in my career. I think kind of having worked for a developer and, kind of understanding, the, the whole process, being able to, evaluate other people's project, I, I think, I think that was the, the right thing to do. and yeah, it was very interesting also at ForgeStone, was probably underwriting over a hundred projects a year, really investing in, in one or two, at the time. So, meeting a lot of people, evaluating a lot of projects was really, on top of the market. and, yeah, after that, kinda saw a gap in the market when, when I was at ForgeStone. the, the projects we were investing in were kind of on a larger side. ideally, when you're, you're deploying a hundred million dollar fund, you don't wanna do too many, two and three million dollar equity projects. So you kinda have to, to pick and choose, and they tend to be on the larger side. But there was a lot of projects that were smaller that, I thought had a lot of merit and, kind of saw a gap for, for really what, initially we thought was the, the end user market, being underserved, on the condo side at least, right? It's really the missing middle that everyone's talking about that not a lot of people have been executing on. Um, you know, partially because they haven't had to, 'cause, the, the, the fif- the 40, 50, 60 sto-story towers were, were, were still viable

Payam 8:50

time.

Mathieu Fleury 8:51

And we're working for a very long time. the investor market has been, the strongest probably anywhere in the world in our, in real estates, in the GTA. So, and the mid-rise stuff has always been very difficult, to execute. But not to say that they're not desirable from, from an end user, perspective, right? There's just, just, just hasn't been a lot built. So it kinda started with that thesis, and, yeah, ended up buying, our first site that, in Oakville, an existing three-story office building that we were gonna, tear down and redevelop as a, as a condominium building. Ended up being pretty challenging to kinda find the equity to, to do it. talk about smaller projects and talk about private equity. typically, a lot of the private equity groups, like I said, need some larger projects to make it work. So, anyway, our first project didn't really end up going anywhere. We ended up selling the land after a few years, not having done much. But, kinda landed on, the program that we're doing right now, which is the project that we worked on together at, at 230 Roncesvalles, with the intention initially to create a program out of, this specific site configuration, which is, sites on the avenues that are anywhere from, fifty to seventy to maybe a hundred feet of frontage, that you can kinda replicate, right? And, yeah. So that's, that's kinda where we are right now. Sorry, I'm just rambling. But,

Payam 10:14

was good because... So he-he-here's the two takes on that intro, intro there. that, as someone who's worked with you for the past two, three years now, you're so, calm and humble and cool that unless, like, a lot of these things that you just said are for the first time I'm hearing. The second part is that interesting, some people have 20 years of same experience, and your- yours doesn't seem to be like that. This is like 20 years of very different types of experiences, which kind of all of them somehow synergize and align, if you may, which is kind of the question. So let's-- before we dive into this a little bit more, was the idea, of the financing side was always to get into real estate, or was it, an event of luck?

Mathieu Fleury 10:57

Yeah, I knew really early on that I wanted to specialize in real estate. Like I'd say even before doing my undergrad, when I was in, in CEGEP, worked on a, on a project in our personal finance class where we were evaluating an apartment building to see how viable it would be to just, buy it and, renovate it and hold it. And I kinda got hooked right away on, the real estate aspect. Like, I just thought it was...

Payam 11:17

thing.

Mathieu Fleury 11:17

Yeah, I just thought like, okay, this is, I like the numbers part, but this is really makes it, tangible, right? Like you can kinda, you can see it, feel it, touch it, and there's, there's so many aspects to it.

Payam 11:27

Okay, so it kind of worked out then.

Mathieu Fleury 11:29

yeah.

Payam 11:29

out

Mathieu Fleury 11:30

No, it definitely worked out. I got, I got kind of, I don't know, I... I don't know if it's lucky, but you know, I guess for me it was like I, I kinda knew right away what I wanted to do, and I was able to, pursue it, and it, and it worked out

Payam 11:39

that's, that's a big advantage. That's a big advantage. So

Mathieu Fleury 11:42

Yeah

Payam 11:42

that being said, I wanna kind of switch gears a little bit. The, the-- like you said, like you've been around, you've tried different things, and I've, I've watched your portfolio personally. It, it grew quite aggressively. It has been growing quite aggressively for the past. LeaderLane, I think you've b- you guys formally, like officially have been in for like almost five years now.

Mathieu Fleury 12:04

Yeah, it's been five years now. Yeah

Payam 12:07

And for, for a five-year company, you have, a very decent sized portfolio. also, I, I have to say that you have a relatively small team, but very capable people, so kudos to them.

Mathieu Fleury 12:17

Yeah

Payam 12:18

But, how, how is that going? Like, I'm just curious. In the past five years, in the most-- some of the most challenging times that we've seen in the market, is that... Maybe walk us through that. Like, how has that happened? You've grown exponentially, and hopefully keep doing that.

Mathieu Fleury 12:34

Yeah, no, definitely, we're kind of been two streams, I guess. Like, the first, our first starts, really we wouldn't be here obviously without partners. I mean, this, after this site that we had purchased in Oakville, we kind of started looking for, for another project, to kind of, start generating some fees. And then, we kinda came across what Our House was doing at the time. they were building their pilot project at Queen and Coxwell. we knew Leeds from, our time at Dream, through the, the Brightwater project. And, we're kind of... We thought that was really interesting what he was doing. You know what, if you're not familiar with that project, it's basically two 40-foot sites at Queen and Coxwell on the, the northwest corner that, Our House at the time, which they rebranded to Assembly, were building out of mass timber, six stories. they got it done through site plan and minor variance, no rezoning, right, no below-grade parking, parking through the laneway at the rear. We're like, "Okay, that's, that's, that's really interesting. Like, maybe that's, maybe this is something that we can create a program out of it." so yeah, initially kind of started working with, with Our House on, on this initially. We bought a site to, to do exactly that, at 722 The Queensway. Queensway and Royal York, 50 feet of frontage on a corner, with a laneway at the back and, starting, started raising equity for that. And again, it's like, one site is, is fairly small, but, we kind of reconnected with, with, Windmill at the time, who we knew from our days at Dream. And, Windmill had started this fund with, with Epic Investment called the One Planet Living Fund, which is a highly sustainable, if you're not familiar, One Planet, One Planet Living is an actual framework, not too dissimilar to, LEED or WELL. it's run by a nonprofit called Bioregional out of the UK. and, that they, they thought that program was really appealing, right? Like, building buildings out of mass timber, the repeatability, the, just the desirability of the product. But again, one site was, was very small. So, it wasn't enough equity to, kinda be worth anyone's time. So, so then we kinda went out and we bought two more sites. the next one was at 230 Royal York, and that's the one that we first started construction on, and then we ended up buying another one at 430 Royal York, and we're like, "Okay, now we have three sites, right? Like, let's, let's do it." and we were pitching people at the time to do it as purpose-built rental, but, nobody really believed the story at that time. I think rents in Etobicoke were $365 a foot. We were underwriting rents at four bucks, but, at the time there was-- there had been, seven or eight projects that had launched at, I don't know, $1165 a foot that were all selling well. And, we're like, "Okay, well, that was the, the classic story of, the past 15 years." It's like, "Oh, condos, are making more money, so let's do condos." So we started on that basis, but, fortunately kind of pivoted fairly early on, I would say in 2023. We kinda saw the writing on the wall that, okay, things are not gonna be the same anymore. And, yeah, so you know, that, that kinda got us really started. And then we ended up buying another site at Jane and Bloor, also in partnership with Windmill, that, we got, we got a rezone. took quite a bit of time, on that one. and so we're, we're still working on that. then after that, we kind of focused on the, the slightly larger sites. So, 1156 kinda came after that, where it's, it's a, it's a full city block. but you know, we've been really good at, at not having to go through rezoning. the only one that we've gone through rezoning so far was the one at Jane and Bloor. but all our other sites, have been ap-approved through site plan and minor variance. And a lot of them, 230 Royal York got about 18 variances. same for 1156, The Queensway. and yeah, we are where we are. I mean, look, it's, we're it takes a while, right? Like, we're, we're five years in, but we haven't delivered anything yet, crazy enough. So-

Payam 16:38

Well, you're, you're close, you're close to it. like the first one, I think you're a couple months away, and the

Mathieu Fleury 16:42

Yeah

Payam 16:43

one seems like you're, you're not... You're, you're in pretty decent shape. So

Mathieu Fleury 16:46

Yeah

Payam 16:46

let me, let me just, if you were to simplify, if we were to work with that, y- your original thesis of repeatable m- urban infill projects, like 50, 60, 70 foot lots, what were some of-- What was your investment box? What were your criteria? Like, what were-- how were you looking at them in terms of, okay, this is right, this is a good site, this one's not? Maybe can you simplify that for us a little bit?

Mathieu Fleury 17:10

Oh, yeah, that's not an easy that's not an easy question.

Payam 17:14

it's not a fair question?

Mathieu Fleury 17:16

Yeah, no, no, it's a, it's a very fair question. It's more, what we're doing was very much pioneering, right? Like, we started with, we started with obviously like everybody does, an idea of what the underwriting was gonna be like and, I think it was very much predicated on also on time compression. because again, we're not going through, we're not going through a rezoning. We're not building any below grade or, tho-those buildings are, are slab on grade. The mass timber we thought was gonna be, very quick to build obviously, 'cause there's a big offsite component, right? So it's-- that was like the whole program was really much predicated on, on time compression, which, on the first project is not really happening, for, for multiple reasons. but, yeah, I-I'd say that was probably the

Payam 17:57

So, so pick, so pick the more, the least, the, the path of least resistance basically.

Mathieu Fleury 18:01

Yeah

Payam 18:02

that's, and that's, that's what we did I think. And like basically get, stick to the stab on grade, don't ask for too many things. Let's just like get in, get out, get as quickly possible.

Mathieu Fleury 18:11

Yeah. Although the rules of the city have changed, like, in our favor, to be honest, for midrise, right? Like, when we started the, angular planes were still very much a thing. Like, the, the schema to the 30 Royal York was very different initially. And, we had townhouses at the back of that site 'cause it's 160-foot site. And, and then even now, like w-we're actually in a PMTSA now that got enacted. Like, if it wasn't... If, if, if we would've been, two years later, probably- we probably wouldn't be even building the same building. We'd probably be going higher on that site. So, yeah

Payam 18:40

Think things are moving. It seems like I was having a conversation the other day with a friend, and I'm like, if with all this push that is coming through financing, through CMHC, through regulations, policy at the city," mind you, they're not perfect, they're not still syncing up. at the end of the day, this is the most push I've seen in the past more than a decade to get these mid-rises infill urban projects

Mathieu Fleury 19:05

Yeah

Payam 19:05

actually moving. If this thing doesn't happen in the next 12 to 18 months, then quite honestly, I don't know how it ever would, right? Because like, yes, like you said, like PMTSA, the TM- the MTSAs themselves, the whole thing about with EOHAN, major streets,

Mathieu Fleury 19:20

Yeah.

Payam 19:21

opening a lot of doors. Don't get me wrong. Again,

Mathieu Fleury 19:23

Yeah

Payam 19:25

that we deal with with Toronto Hydro, with Toronto Water,

Mathieu Fleury 19:27

Yeah

Payam 19:28

with setbacks, with SBA. Like I can, I can talk about this for hours and hours, and

Mathieu Fleury 19:32

Yeah

Payam 19:32

you can do the same. But at the same time, there is a push, and it's been the probably the best time to get into mid-rise bus- business, compared to the past 15 years, I

Mathieu Fleury 19:42

Yeah.

Payam 19:42

think.

Mathieu Fleury 19:42

Yeah, no, absolutely. Yeah, it used to be abso-- you know, it used to be almost impossible, right? Like, that's why you haven't seen a lot of them being delivered. Now, totally, like things are, are kind of, they're, they're getting done at the city. Like, the com-committee of adjustment is not, for the faint of heart though. Like, that's a whole different,

Payam 19:57

That's true.

Mathieu Fleury 19:58

process that,

Payam 19:59

very true

Mathieu Fleury 20:00

we can talk about. But, no, definitely. I would say like approvals are not even the, the bottleneck anymore. It's more...

Payam 20:05

Right.

Mathieu Fleury 20:06

Yeah, it's a lot of other things. Yeah. It's can you make the numbers work? Yeah.

Payam 20:10

Yeah, the, the, the uncertainty in the market. So I wanna go back to your older days in, in the, the more called the larger companies, larger scale projects. I read somewhere, I think on one of the websites, that you've been involved in basically 15,000 delivery of 15,000 units and like seven million square footage of projects, right? And, one of the things that I'm very curious about personally is the processes, the practices, the values, the way these companies that manage to deliver at this scale, how do they go about these? If you were to go back, take a look at the first, let's say more half of your career before you're starting on your own and lis- and look at it and say, "Listen, these are the five things, five principles, five rules, five processes that I saw that really made a difference for a first call, for a dream, for, for, for blah, blah, and this is-- I think these are the five things that I'm gonna take away and implement in our own company,"

Mathieu Fleury 21:09

Hmm.

Payam 21:09

what would those be?

Mathieu Fleury 21:11

Yeah, that's a good question. yeah, I'd say at Great Gulf, it was very much, a kind of, one building at a time kind of, at least, in the high-rise group, right? Like, we would never even looked at multi-phases or, it was very much like, "Okay, let's-- we're gonna do one building, right? And we're gonna do it really well." and it was concentrated into areas where, I guess like, they had some comfort that, like it was a good place, right? Like they were very much concentrated at King and Spadina at the time. they had a few buildings there. Charles and, and Jarvis. the waterfront was a little bit of an experiment. but you know, obviously Yonge and Bloor can't really go wrong. But kinda concentrated in those areas where, just they had conviction, I would say. And it was very much about discipline. Like even back then it was, when I started, it was very much, I need you to know every single line item in this pro forma. Like 'cause development is very much about every single assumptions that go in there, right? It's just there's no, there's no shortcut. Like you kinda, you just, you have to know everything. You, like you need to know every single things that, you need to know how to calculate it, when you're gonna spend it, where all those assumptions are coming from. And that's kind of, it's, it's the sum of all this that kinda make, make the pro forma work. But it was very much... And, and, and that's why, I learned so much in my position is because everything at the end of the day kinda comes back to the pro forma, right? It's like y-you're kind of the you kinda have to take all the information from what everybody's doing and kinda consolidate it into a, translate it into a financial model that, that really tells the story of the, of the building, right? So, and that's why I got to learn so much, is learning from, from what everybody else is doing, right? Like from, the project managers, from the, the accountants, the, the construction, people, the, the legal, the, the sales and marketing. And I was lucky at Great Gulf we had kind of everything in-house. Like we were, we were just doing it all from, from start to finish. So, and just having that, that, that owner's perspective, that, that was... And really for them, I was really just there to kind of validate what they were already doing in their head. Like, they already knew the answer. They just needed me to kind of, translate it into something more formal. But

Payam 23:16

and make it on, get on paper

Mathieu Fleury 23:18

Yeah, absolutely. So, yeah, I was, it was very much about discipline and like, you, you kind of get to see like how, just, just the efficiency of the building is just so important, right? Like if you're off by, by a percentage points, it's like, well, it goes from working to not working, yeah, there's just, there, there's

Payam 23:35

sorry, efficiency, you're talking about layouts

Mathieu Fleury 23:37

efficient, building efficiency. Yeah, like what, what you're, what you're selling over what you're building, right? So, Yeah, so

Payam 23:43

and discipline and building efficiency for layout efficiency. Anything else comes to mind?

Mathieu Fleury 23:50

no, I mean, like back then, the market wasn't even a, a concern, right? Like we weren't even talking about, oh, are we gonna be able to sell? Are we gonna be able to sell at the right price? It was more like, okay, you were underwriting a number, and it was like, okay, most likely it's gonna sell faster than you thought at higher prices. So, that was never an issue. But then it was like, okay, let's... It's, it's figuring out the timing of like, okay, we need to start construction as soon as we can, right? Like, and that was kinda the goal. a-and I guess it's, it's, it still is, if you're building a condo, right? Like a lot of groups have been getting caught by pre-selling in one market, building in another where, construction costs are escalating so quickly that, just, yeah, it's, it, it becomes very challenging. And some groups are really specialist at that of like just selling really quickly and then putting shovel in the ground, extremely quickly. Now, the formula is very different for for purpose built. It's argu-arguably a lot more risky where you're kinda, locking in your, your cost without knowing what your revenue is going to be. So you really have no safety net like building the building on spec. It's, it's a whole... And that's why a lot of groups I think haven't been wanting to, to pivot, right? 'Cause it's a, it's a very risky proposition. So

Payam 24:56

If it's from s- a condo to a purpose-built rental,

Mathieu Fleury 24:59

Yeah. Yeah

Payam 25:00

So, so you're, you're saying that in your mind, despite the somewhat of a rush that we have on the PBRs these days, you still think it's pretty risky endeavor?

Mathieu Fleury 25:10

Yeah. It is very risky, yeah. I think it's a ru- it's a rush because a lot of groups are stuck and, they're... they don't have a, they don't have a choice. which, if, if you're kinda stuck, like, we've kinda been lucky that we're not stuck with any projects, that are, that we've started selling, that we're stuck in the, in the, not being able to reach our pre-sales threshold or that, we've sold and now we're trying to close, and we have a lot of unsold unit. Like, we're not, you know-- Like, thankfully we're, we've pivoted early enough that we're

Payam 25:38

wait. Basically, you can wait and you can bear it out, I guess

Mathieu Fleury 25:41

Yeah. We're just, I- we can't wait too, too long, but yeah we're, we're, at least we're not dealing with like, kind of... It's not crisis management on like, okay, we're, we're, we're, we're really struggling in, in any of those two, those two situations, so

Payam 25:55

to be clear, like going back to the PBRs because that's, that's interesting for me to dive in a little bit more. the main risk in your mind, the, the actual s- demand in the market or like, which would translate into what your square footage rent is gonna be? Or like, are you... Like what, what is the main driver of the uncertainty there?

Mathieu Fleury 26:15

Yeah, I'd say, I'd say the market, right? Like if you're, you've delivered the building at a certain cost, you need the rents to be at a certain level, right? And you need-- You obviously can't, you can't wait too long to fill up the building either. So it's like, absorption is a concern. Rent, rent levels are a concern. you kinda, you need the, you're, you're, you're gonna have, a fairly significant loan to service that, you need to, you need to generate enough cash flow to, to do that. Otherwise, you're gonna have to kick in a lot more equity, to, to keep afloat. So yeah, I'd say that's... And obviously, you're st- you're still dealing with the construction risk during construction, obviously, which, is kinda the, the same. But yeah, it's, it's that exit that's, that's not certain, right? Like you're not, you haven't sold anything

Payam 26:58

it's not as, as certain as it would have been if you had a pre-sold condo at, like, 75%. Yeah, that's, that's definitely a different ballgame.

Mathieu Fleury 27:05

Yeah

Payam 27:06

And, I guess with that, like, if you're modeling something these days on your pro forma, are you or how are you seeing the effect of the, the supply cliff that we're, we're forecasting to happen about three, four years?

Mathieu Fleury 27:19

Yeah,

Payam 27:20

is there... Like, how do you even deal with

Mathieu Fleury 27:22

yeah, I think you, look, I think you gotta be conservative. Like, I think we're trying to underwrite at today's rents and, with no escalations whatsoever right now, and we're trying to be conservative on our rents to, make sure that we're gonna achieve them. but yeah, in the back of your mind, you're kinda thinking like, okay, there's a real supply cliff that's coming, right? Like, the forecast for 2029 is, at the moment, zero new condo being delivered. immigration, a slowdown obviously. We're not at the one point four million that we were at, like a year, year or two ago. But still people are still coming in, right? Like inflat-- like, immigration is gonna stabilize at, levels that it was for the last ten years, right? Like, if we're four hundred thousand in Canada, you're thinking probably eighty to a hundred thousand are coming to the GTA. They need somewhere to live. And we're not... I mean, we were never delivering enough units in our market anyway, but now we're going to levels that are, just unsustainable. Like, if people think that, it was expensive before, w-you know, things are about to get a lot more expensive when there's really nothing being delivered. So it's just, I think the rents are gonna nowhere to go but up. The, the big question is kind of, the, the, just the state of the economy, which can people afford the rents that you have to charge to build those buildings, right? So it's like salaries haven't really, gone up in the last, Like for, like s-like salaries are really lagging, right? Like, I, I kinda go back to my own personal experience where, when I bought my first condo unit, back in two thousand and it would've been probably two thousand and eleven, right? Like, I bought something at four hundred bucks a foot and, I was at a certain point in my career where, I could afford that. But now that same unit, at the point that we're at right now, is at least a thousand bucks a foot, maybe a little bit less today 'cause the market's come down, but you know, it's significantly more. But, the salary that...

Payam 29:06

haven't gone,

Mathieu Fleury 29:06

But yeah, like if I was at the same point in my career, yeah, I'd probably be making a little bit more, but not, not

Payam 29:12

A double.

Mathieu Fleury 29:13

not double, or triple or, So, so I think, I don't know. I think a lot of people are gonna be forced into purpose build, which, we haven't been delivering enough purpose-built rental in our market. so I think that's a good thing 'cause I think it's a lot more desirable if you wanna rent to be renting from a, in a professionally managed building where you have security of, of tenure, right? You're-- no one's gonna kick you out. It's professionally managed. There's someone to, to call if something goes wrong, as opposed to, dealing with a one-off landlord that, might or might not be responsive. So, yeah. So there's-

Payam 29:44

So, so wouldn't-- Sorry, I-I'm just trying to wrap my head around it. So, so wouldn't that, I guess, wouldn't what you just explained make it, make the PBRs the more, guess, best performing or best, having the best opportunity in the future of, of like a risk adjustment investment type?

Mathieu Fleury 30:02

Yeah. You, you would-- I mean, it's got, it's got good things going for it, but it doesn't make it less risky in terms of the economics of like,

Payam 30:09

Right.

Mathieu Fleury 30:09

having to deliver it on that formula. Like, I think the problem with condos right now is that, the, the formula is broken, to, to be able to deliver condos the way we were delivering in, in the last 15 years, right? Where you're really relying, like you said, on... You're relying on the investor market. You need to be at least 70% presold. you're selling off-plan to investors. Like it's very few end users are making, life decisions, four, five, six years ahead. So it's really people that are, have been lucky, like that people wa- have been wanting to invest in real estate to get those projects going. But right now, it's just if you're, you, you-- the investor market is gone, for a few reason. I mean, those, a lot of those investors were banking on price appreciation, which right now is not happening, and were banking on their unit, being able to cash flow, and that's not happening either, right? Like you're... So I think the investors kinda got burnt, and who knows when they're gonna be coming back to, to the market. Like they're, in my opinion is that they're, they're not coming back, in the same fashion that, that they were before. So it's gonna be very hard to get a, even a, like a 40-story tower going when you can't presell, units. Like, so it's like the formula's gonna have to change if we wanna have a condo market. So,

Payam 31:21

like PBRs are basically the better, the better of the two evils at this moment in time, but they're not necessarily a knight in shining armor

Mathieu Fleury 31:29

No. No. No, they're not. It's just like, the, the, the returns are, are tight, right? Like there's, there's other places maybe to put your money that could generate better return, right? Like the stock market is, is probably one of them, right? Where

Payam 31:42

that's

Mathieu Fleury 31:43

you're like even,

Payam 31:44

true

Mathieu Fleury 31:44

even where, where bonds are, it's like, okay, like if I can invest my money risk-free at, at 4 or 5%, it's like, okay, am I really taking this much risk on a, It's a, it's a riskier proposition, obviously, to be buying real estate. So, so I don't know. Time will tell. but yeah, it's definitely a very interesting, interesting time in our market and

Payam 32:05

I wanna segue with that. I kinda, I think I kinda know the answer, but I wanna ask you anyways. If we were to go back to, to 2021, the, before the minute you decided that, yeah, that's, this is, I'm gonna flip this switch and we're gonna have our own development business going on, what are some of the things you wish you had known back then?

Mathieu Fleury 32:26

Yeah. Oh my God, yeah. I wish I had a crystal ball for, how this was gonna go. I mean, nothing can really prepare you. I mean, and it's probably true with, entrepreneurship in general. it's, yeah, like it's a rollercoaster, right? You just, there's, there's, there's, there's a lot of downs and very few nos, right? It's like, you're, you're, it's like no, no, no, no, no, no, no, yes. No, no, no, no, no, no, no, yes. Right? So, you kind of, you kind of have to take it in strides. But, yeah, look, it's, it's, it's definitely not easy. And like, real estate development in general, it's a very high barrier to, to entry, right? Like it's just, it's very capital intensive. you gotta provide a lot of personal guarantees on, money that you're borrowing, which, is something you or wouldn't have to do if it was in, in the States, for example. so no, I mean, you kinda have to just, I don't know, like, just, move, move forward. Like you gotta just do your, try to do your best every day and, yeah, just keep moving forward, so.

Payam 33:25

Gotcha. In terms of, with the city, dealing with the approval process, I know you and I have shared some of the experiences obviously, but, what are some of the opportunities you're seeing right now for future? Like if you, I don't know if you're in the process of buying new sites, picking up, pro- property, are you-- what assumptions are you building into your next purchases in terms of, okay, I think the policy, this permit approval, the, the financing is moving in this direction. Here's where I'm gonna make some assum- assumptions when I'm underwriting a new site.

Mathieu Fleury 33:59

Yeah. Yeah, I think we probably have a better idea now of what, what, what is gonna be able to be getting approved, at least on what we're building. the mid-rise form, the, the, the mid-rise guidelines have changed pretty sig-pretty significantly from the moment that we started. So I think we're, we have a pretty good idea now of like, okay, yeah, we think like this is doable. This is doable as a, as, as a, as a site plan or minor variance, and minor variance, quickly or depending on the site, maybe not so quickly. So, it's kinda gauging that, during your, your DD period to say like, how confident you are. You-- It's, it... we're also very much relying on having a, a, a, a pack with the, with the city early on to kind of, flush those things out to make sure that we're not, that we're not crazy. but yeah, I'm really lucky that I have, two exceptional planners on my team that are, very much on top of the policies. so yeah, and I mean, that's the thing with, with, with development also is you're always-- you're relying on a lot of people, right? Like to kind of,

Payam 34:53

It's true. It's a

Mathieu Fleury 34:54

you know... It's definitely a team sport.

Payam 34:56

Are there any trends like you, with 230 Rio York with the Hall Cell Project, guys were at the very peak of a trend in, in Toronto and Ontario with testing out and pushing the barriers, and kudos to you and also the Windmill team

Mathieu Fleury 35:12

Hmm.

Payam 35:13

for, for making all that, push and making the leap to use that new system, build, the one-of-a-kind building that we currently have.

Mathieu Fleury 35:21

Hmm.

Payam 35:22

Aside from that, or maybe in addition to that, are there any other trends that you're seeing in the market that excites you in terms of on, on, on the construction side of things or on the, innovation side of things that you would think in the next five to 10 years things are gonna be better?

Mathieu Fleury 35:39

It's tough, right? Like our industry really hasn't been moving, very fast in terms of, new methods of construction or new technologies or, we're always kind of lagging, right? Like, and it's-- I mean, part of it is like, there hasn't been the need for innovation because, things were working before, right? It was very much rinse and repeat, right? Like we built it that way the last time at work, like, why are you gonna change anything, right? So now we're at a point in time where it is more challenging. We gotta look at alternatives to see how we c- how can we make it faster, cheaper, better, right? Like more sustainable. So, yeah, and this is really what we've been trying to prove out with, with 230 Royal York. So, where-- whether we can replicate it, time will tell. but, yeah, I am excited about those, a lot of those alternative mete-methods of construction, right? Like we have been exploring fully modular. There's a lot of groups that, are doing it elsewhere that, wanna replicate that formula here that, I think could be super interesting. But, it comes with a lot of challenging, challenges to do, any kind of, offsite construction. Just the financing i-is tough. The logistic is, is hard, right?

Payam 36:46

Very true

Mathieu Fleury 36:46

but yeah, it, it is exciting. Like there's, there's definitely, a lot of cool things happening on that front. I, I don't know. For me, like, I'm still excited about the s- the, the kind of the more livable scale, right? Like, I wish we were able to build larger units. Unfortunately, it's hard to make the project work 'cause if you're... you have all large units that are all catered to end users. Like, I live in a condo building. I like living in a condo building. I, I'd like to live in a slightly smaller condo building but there's not a ton of them, right? And it's just, it's, it's hard to find suites that where you can raise, two kids in a condo. So, I wish I could deliver more of that, but, just the, the economics are, are challenging. So,

Payam 37:27

That's what we're really pushing for because it seems like, like you said, the missing middle is missing, and

Mathieu Fleury 37:33

Yeah

Payam 37:33

we're pushing for. In terms of, we have a, we have a traditional question on the podcast. If we were to give you a magic wand for the next five minutes you could change one law or one paradigm or make a wish basically to make things a little bit better when it comes to our industry as a, as a con- construction or development or investment in real estate that would lead to more affordable, livable society and community and city,

Mathieu Fleury 38:04

Yeah.

Payam 38:05

that one wish be?

Mathieu Fleury 38:06

Yeah, I think you've definitely gotta reduce government fees in general, right? Like we're-- Well, it's just, it's gotten extremely expensive to, to build, and that's kinda by design, right? It's kind of self-inflicted, as right? Like, just the amount of taxes that we gotta, that we gotta flow through in our, in our financial model, right? That all gets passed to the consumer, right? Like it's not, it's, it's-- At the end of the day, that's, that's what's happening, right? Like, and that's what people don't realize, that, it's just we need a certain margin to be able to build. Otherwise, nobody's gonna lend, lend you money if you can't, don't have the prospect of getting it back. So, you need a certain margin, therefore, you need to charge a certain price. If costs go up, then, If my costs go up, then I gotta pass it on somewhere. So, between the two line transfer tax that we have, development charges that thankfully, hopefully they're gonna go down. we'll see how that gets implemented. But, education levy, parkland dedication, community benefits charges, lane occupancy, building permit, applica- you know, applications. Like the list goes on and on, right? Like it's, You look at other jurisdictions, especially in the States, where it's like, "Oh yeah, you need a building permit, and that's gonna be fifteen hundred bucks to build, a hundred unit." It's like, okay, why not? Like it's a different, it's like it's a different model, right? Like, so you just, you re- you provide relief on that front and yeah, we'll be able to build more, hopefully. Like nothing would make me more happy to charge less rent and fill the building faster and be able to do another one, right? Like so... But

Payam 39:29

build and do more of it because at

Mathieu Fleury 39:30

I-- Yeah

Payam 39:31

of the day, is what we've talked on this podcast as, before as well, is that I personally believe that development is a, is just a community service. Like, at the end of the day, you're providing a service to a community that, enables them to bring new blood, get better buildings in place, and hopefully have a b- have a larger, more vibrant community.

Mathieu Fleury 39:50

Yeah, absolutely. Yeah, you need people to make a place vibrant, right? Like, it's just... And, I don't know, like that's, that's, that's what we're trying to do is, create, places where people actually wanna live and where there's, there's stuff to do and, so

Payam 40:05

And I think I, I was, this is, I'm a little bit biased here, but I think your, the Royal York project, especially with the exposed mass timber ceilings and the, the type of the product, I... I have joked about this before on the site that, it's, it's a Bentley of a product. It has... I don't think there's anything in the market that you guys have not put on that

Mathieu Fleury 40:24

I know

Payam 40:25

a Le- LEED Platinum, geothermal, mass timber,

Mathieu Fleury 40:28

Yeah

Payam 40:28

modular, net zero, passive house grade. Like, is there, like, there are probably, like, 16 different checkboxes

Mathieu Fleury 40:35

yeah, and somehow, and somehow we're not able to get the top TGS tier on this building, It's just like, how, right? Like,

Payam 40:43

that. Like, yeah, I

Mathieu Fleury 40:44

it's just-- it's hard to find. I mean, there, there's been no really, like when you talk about incentives, right, like from any levels of government, there really hasn't been any... We haven't been fast-tracked to, anywhere. We haven't cut any breaks, right? Like, talk about dealing, having to deal with Toronto Hydro, right? How-had to relocate poles across the street as you remember, right? Like, how much, how much does that cost, right? It's just like, and y-it's you're dealing with a monopoly. You only have one, you can only go to Toronto Hydro if you need this to happen. So when they send you the bill, it's like, "Oh, if you wanna build your building, you better pay it." So, so it's a lot of those things where it makes it, you know talk about this is another form of, of government fees, right? Like, that's kind of disguised where it's just like, you start then you're not thinking that, "Okay, like I wasn't planning on having to, to do that." It's like the rules change midway through our SBA submission where, okay, the face of our building was now too closed because they changed the rules midway, midway through, right? So, so I don't know. But yeah, it's the, I wish it was easier to build the smaller scale buildings like the 60-unit building, but it's very challenging. It's just like, the, the buildings are not efficient enough, right? It's just the build- the, the floor plate's too small, but we can't go e-e-- we, we didn't even have the option here to, to go and buy the neighbor to make it bigger because then you get over 60 units, and now you gotta provide Type G loading. And now, well, guess what? I r- I don't have room to do Type G loading. I can't... There's no, there's not enough room. So, and it's just like there's

Payam 42:07

a

Mathieu Fleury 42:07

a-

Payam 42:07

maze that we have created for ourselves as, as a community that you kinda have to-- stuck in it. Like you said, hey, you're real- you're absolutely right, and, you get more than 60, you go over 60, you have type G loading, the turn-turning the radius doesn't work, whole bunch of other things kick in, and then at the same time, also a waste because you, you're, you are in the PMTSA

Mathieu Fleury 42:28

Yeah

Payam 42:29

now, and the next neighbor who wants to go there is gonna have a much harder time because now they don't have the access.

Mathieu Fleury 42:34

Yeah. And there's a lot of fixed cost, right? Like, it's like you're still building, you're, you're still building one ground floor, one lobby, right? Like one gar- you're still building a one garbage room, one bike. It's like, but now you're only building so much above that's leasable. so

Payam 42:49

Yeah

Mathieu Fleury 42:49

yeah. And, and that's one thing, when we're discussing like, the pitfalls of, of development and, underwriting. It's like, adding or removing a floor to a building has a huge impact. It's very, it's not linear at all. Like you gotta, there's people, people in my career have loved doing, rule of thumbs of like, "Oh, we're building, 5,000 square feet more. 5,000 times your margin, that's how much more we're making." No, it doesn't work that way. Like it's absolutely not. It's just,

Payam 43:13

very true.

Mathieu Fleury 43:14

so

Payam 43:14

It doesn't work like that, that way and especially for, for when you hit the threshold floors

Mathieu Fleury 43:21

Mm.

Payam 43:21

from the three to four, when you go through s- six to seven and

Mathieu Fleury 43:24

Yeah

Payam 43:25

and then, and, and so forth. There are thresholds. There are thresholds in code, and this is where all the complexity... I, I'm sure you and I can talk about this for hours in terms of discrepancies and, and non-alignment that, ex- exists between the code and Enbridge and Toronto Hydro and Toronto Water and planning and transportation and the fun stuff that we get to go through. And I, I feel like y- we, we can have a venting session here for quite some time.

Mathieu Fleury 43:50

Yeah. Well, there's there's a lot of complexity, but that's what keeps it interesting also. Like, and, you're, you're still learning something new every day, I'm sure, right? Like, there's always something that you haven't come across that, you're like, "Oh, wow, didn't know that," or, "This is different," or every project is different. Every, and it just-- To me, that's what keeps it interesting. but yeah.

Payam 44:12

Yeah, that's, that's, that's pretty good. Thank you. Before I let you go, I wanna ask you about the balconies. this, the balcony is one of the, is one of the other trade-offs that

Mathieu Fleury 44:21

Hmm.

Payam 44:21

is, is happening. Like we used to traditionally, we used to have a lot of balconies on, on these buildings.

Mathieu Fleury 44:26

Yeah

Payam 44:27

I know on that particular project, at some point we got rid of the balconies. It had deal many different reasons, and one of them obviously, one of them was cost, the other one was the thermal performance of the envelope, the, the passive house requirements, which

Mathieu Fleury 44:41

Yeah

Payam 44:42

difficult to get balconies. But on Performa, I'm curious, how do you deal with existence or non-existence of balcony?

Mathieu Fleury 44:49

Yeah, it's tough. It's tough to, to see if it's gonna create a... historically, when you-- when it was a for-sale product, the brokers would always tell us like, "Oh, well, you're not gonna be able to sell it if you don't have a balcony," right? So it was like, "Hmm, okay, well, if we wanna sell it, whether people are gonna use it or not," you never wanted to take the chance of not, of not doing them, right? Like rental, it might still be a gamble not to have balconies, but maybe it's less of a concern depending on how it's used. To me, personally, depending on the depth of the balcony, it really depends if it's making it usable or not. Like if, if you only have five feet of depth and you j- you know... I've been living in, in condominiums for the last, I don't know, 20 years almost, maybe more now. I can tell you my ba- balcony utilization has not been very high. Like, maybe, maybe because of the location, or, but mostly because, yeah, because the size of the, the, the balcony that I have is just not conducive to... if, if you can't put a f- if you can't put a full dining table, on it, then are you really gonna go, sit there? Like, just to... I don't know. Some people do, don't get me wrong. Like, but to me, unless, unless it's a, it's a more of a terrace that has, 10 feet of depth, let's say, where you can actually, it actually become almost like a bonus room. I think you can live without it, right? Like in the right neighborhood where it's like, just, just the, the, the, the neighborhood is really your amenity at the end of the day, where you're like, "Okay, let's just, let's go outside." Like, and, so

Payam 46:13

Neighborhood as your amenity, that's, that's, that's... I love that concept and we've been talking about that as well, is that that's one of the things that we're hoping that the city looks into and doesn't force, the, every building, regardless of their location, to have to carry the same amount of burden on their, on their,

Mathieu Fleury 46:29

I agree.

Payam 46:30

wasted space

Mathieu Fleury 46:31

I know, like, look, some, some amenities for sure make sense, and I-- some are getting used, but I also, depending on how it's programmed, I think some of them are very much not getting used, right? Like, if you have a, a lot of the party rooms, depending on the size of your building and the location of the party room, is probably not gonna get a lot of use, right? Like, so, at 230 Royal York, we're hoping it's gonna get used 'cause the city really forced us to, to do it.

Payam 46:55

it has a m it has a great view, by the

Mathieu Fleury 46:57

It has a fantastic view there, on the top floor where you're kind of overlooking the city. You have a l-- view of the la-- a hundred and eighty degree view of the lake, which is kinda phenomenal. And, to me, if I was living in that building and I was, if I was working from home, then I'd wanna go use the co-working space on the top floor, and I think it will get a lot of use. But sometimes it's like, forcing you to, to stick amenities where, you're like, "Okay, like, this, this could actually be leasable area and actually improve the, the, the, the improve the performance of the, of the building and make, make the project be viable." And I think it's just, yeah, it's kinda silly, I think.

Payam 47:32

Thank you very much, Mathieu. I appreciate you being here. Do you have any sh- thoughts that you wish to share with our audience before we wrap this up?

Mathieu Fleury 47:39

No, thanks, Payam. It's always interesting to talk to you. we can, we can keep going for a while. I'm really curious to, get your thoughts on, on a lot of things. one thing that we're kind of exploring right now that we haven't talked about is the, the multiplex. we-- I saw you at the, the, the Missing Middle Summit there, which was very well attended, and I think a lot of people are looking at that, that build form and that product

Payam 47:58

I think, yeah, I think that's, that's also... It has its own challenges, to be honest with you, but I also think that it's, it's a good option. It's a very good option. It's more than good. It's, it's a very good option for diversification and enabling, a lot of, people to get into the market. It's interesting now that, you mentioned it because the n- the type of investors and type of people that w- I'm dealing with who's interested in that would not be the same type of people who are interested in a mid-rise building,

Mathieu Fleury 48:26

Yeah

Payam 48:26

and in a good way, in a good way. It means that they are-- we're in-- we're bringing capital, fre- fresh innovation into the industry. And I've always said that I think we have a, we have a very competent low-rise sector that

Mathieu Fleury 48:43

Yeah

Payam 48:43

little bit of an upgrade can easily handle a-- They still, I still, I think a lot of them need the upgrade, but they can handle the multiplexes.

Mathieu Fleury 48:51

Yeah

Payam 48:52

I'm very excited to see. We're involved in a few, so I'm, I'm ex- very excited to see how it goes. What

Mathieu Fleury 48:57

Yeah. Yeah. No, yeah, I'm, I'm really excited to see where it goes too. We're kind of softly exploring it, seeing if, if, if this is a model that can work. But, I don't know, to me it's... I, I like, I, I like the idea of it, of, going straight to building permit, no development charges. Like we-- That's-- There's my wish being granted of, reducing a lot of those government fees, right? No DCs, no parkland, no community benefits charges. Like that, that adds a big burden. You're building stick frame, which, is a lot cheaper than building in, in concrete. slab on grade. Again, just faster construction. And I think you're creating units that should be very desirable from an end user perspective, where if you're able to deliver a three-bedroom unit in, I don't know, 1,200, 1,250 square feet that lays out well, that's a, that's a walk-up. don't have to deal with elevators. I don't know, I think, and you can charge, let's say, 3,500 bucks a month for it if you can build it at the right price. And, I don't know, I think that's got a lot of appeal to it, is the, the thing is you, you-- It's just, you gotta be kinda have to do a lot, like, you kinda have to build a lot of them to, kinda replicate, what I'm doing right now at 200 units. But, but

Payam 50:04

And,

Mathieu Fleury 50:04

yeah, I

Payam 50:05

saying. I, I don't think this is gonna replace that. Like it's, I

Mathieu Fleury 50:08

Yeah.

Payam 50:08

we should never, we should never think about it as

Mathieu Fleury 50:10

No

Payam 50:11

the multiplexes are gonna fill the gap and, and replace the, the, the eight-story 200-unit building, because that's just not gonna

Mathieu Fleury 50:19

Yeah

Payam 50:20

But it, it's an addition, it's an augment, if you

Mathieu Fleury 50:22

Yeah

Payam 50:23

to, to the process, which hopefully, like, not hopefully, it will play a role

Mathieu Fleury 50:28

Yeah. No, I agree. No, look, I think all forms of housing are, are good. Like, we need, we need as much as we can. So, and, I'll leave it... You're ki- you're kinda seeing it right now, right? Like, there's a lot of deliveries right now, and the rents are going down, and that's supply and demand in action. Like, and that's what, that's what people should want, right? Like, for years, we've had the fight of like, "Oh, no, this is not a, this, this is not a supply problem," right? Like, it's just... No, it i- it very much is following, economics,

Payam 50:56

problem

Mathieu Fleury 50:56

101, right? Like, of supply and demand. Like, and you're, so you're seeing it right now. So, and I think you're gonna see it on the other side when there's no more supply. So, yeah, so I don't know

Payam 51:06

Hope-hopefully we find a way to do a soft landing on that cliff because that is a scary cliff.

Mathieu Fleury 51:12

Yeah,

Payam 51:12

hoping

Mathieu Fleury 51:13

s-

Payam 51:13

this

Mathieu Fleury 51:13

don't know how soft it's gonna be, but,

Payam 51:15

there will be a, there will be a

Mathieu Fleury 51:17

m-

Payam 51:17

of a bump I'm sure.

Mathieu Fleury 51:19

yeah

Payam 51:19

hopefully not, we get-- we keep our bones intact,

Mathieu Fleury 51:22

Yeah.

Payam 51:22

way

Mathieu Fleury 51:22

Yeah, no, that, that's what we're hoping for. We're hoping to make it through the other end of that cycle and kind of better, being better positioned to, to do more, so yeah.

Payam 51:32

Thank you, Mathieu.

Mathieu Fleury 51:33

Thanks, Payam

Payam 51:33

and hopefully in a year or two we do a round two of this,

Mathieu Fleury 51:37

Yeah, that'd be great.

Payam 51:38

updates.

Mathieu Fleury 51:39

Thanks, Payam.

Payam 51:40

much

Mathieu Fleury 51:40

Thank you