My Experience At “2 Gladstone” (cont)


7 minute read

October 6, 2009

It’s been a few days, but I still have a sour taste in my mouth from my weekend experience at the 2Gladstone sales centre.

I’m not only disappointed that I didn’t get my hands on a unit in this fantastic development, but also how the entire process went down.

The following story contains broken promises, lies, and insider trading.  Enjoy!


Let’s pick up where we left off yesterday – I’m standing outside the sales centre for 2Gladsone on Saturday at about ten minutes before noon, and the friendly man with the clipboard comes out to greet me.

Along with my friend and client, Greg, I made my way through the throng of people to the front door and met “Dan” who resembled a bouncer outside a night club on a busy Saturday night.

Dan asked me for my name, and proceeded to look through his clipboard for my name.  He then told me that I wasn’t on the list, and that I wouldn’t be allowed to enter the sales office at 12PM with everybody else.

I asked Dan, “What is this, a frigging night club?”   But Dan smiled, and calmly explained to me what I already knew and refused to acknowledge – that they had priority scheduling, and they were only allowing people to enter the sales office who had appointments.

My blood was boiling, but Greg, who is my polar opposite and usually keeps me in check, told me to try being something called “nice” and perhaps be “polite” in my dealings with the sales people.

Greg told me, “Dave, you catch more flies with honey.”

I told Greg, “But the squeaky wheel gets the grease!”

He laughed, but I didn’t.  In my mind, I was lined up for money.  At the front of the line, there was a whole heaping pile of money, and I found myself at the back of the line with no chance to move up.  That’s basically what this was, since I was banking on buying a condo and flipping it for a pile of money, but I had to be allowed to purchase a condo in the first place in order to get my hands on it!

Dan called out Sadie, and she was polite and courteous, and she told me that as discussed on the phone, I wouldn’t be able to just “bud my way into line.”  I told her that I already knew what I wanted, and she could bring the paperwork outside and I’d sign it right then and there.  She told me, “That’s not the way it works.”

I hate sales people.  Forgive me for saying so, but pre-construction sales people are the lowest of the low.  More on this later…

A few minutes later, my other friend and client, PT, showed up to the party as well.

Fittingly, he said, “I see you boys are on the outside looking in – just like a Saturday night at The Brant House, eh?”

PT was correct – that’s EXACTLY what this was.

Ever the charismatic young chap, PT approached “Dan,” shook his hand, and introduced himself.  Dan was taken aback a little, since nobody else was even speaking to him, and I realized how perhaps Greg and PT had the right approach.

At 12:00PM, the throng of people went inside, and Greg, PT, Dan, and myself remained outside in the spitting rain.

Greg began to chat up Dan, just as you might get on a bouncer’s good side as you stand outside a night club in line on a Saturday night.  The four of us bonded a little as I realized that Dan wasn’t the devil; he was just doing his job.

PT went across the street to Country Site Cafe, which we all assumed was Country Style, but wasn’t, and asked Dan how he took his coffee.  Dan almost blushed and said, “Oh no guys, I’m good, thanks!”

During the next hour, Dan reassured us that we would be let in by 1PM.  He took a liking to us, and updated us as to what was going on inside.  I wanted to know how many of the fifty-four units were sold, and he surmised that about 8-10 deals were being written up.  He promised that we wouldn’t have to wait until 5PM as per our “appointment” and that he was bugging the powers-that-be to allow us inside.

During our discussions, Dan also revealed that “Sadie” was actually his girlfriend!

PT put out his fist for a pound and said, “Niiiice pull, brotha!”

Shortly after 1PM with about twenty people lined up behind us (those with 1PM appointments), Dan opened the doors and we ran inside.  I told Greg and PT that we had to immediately assess what was available, and then grab a salesperson and have them get us on paper!

Once inside, we went to “the wall” where all the floorplans were displayed, and there were about 25-30 red dots covering the unit numbers of those condos that had been sold.

It was official – there was practically nothing left.

Every entry-level unit had been sold, and there was nothing left under $300,000.  The whole purpose of this investment was to buy “the worst house on the street” or the cheapest condo in this fantastic building, but everything had sold.

But it gets better…

Here are the three things that bothered me the most:

1) The $229,000, 549 square foot unit that had been advertised in the marketing didn’t even exist!  There was a 527 square foot unit for $229,900, but there was only ONE of these in the whole building!

2) The 549 square foot unit was actually $249,900, not $229,900!  This $20,000 difference made up about 30% of my expected profit on a flip, as it wasn’t the size of the unit that mattered to me (527 vs 549 square feet), but rather the price!

3) Worst of all, but not unexpected, Sadie told me that “the developer’s family purchased most of the entry level stuff.”  So in essence, of the 54 units in this project, the cheapest 8-10 of these were never even available for sale!

So there was ONE unit at $229,900, but it wasn’t as advertised, AND it was never actually for sale!

So there were a handful of sub-$260,000 units, but they were never actually for sale either!

Insiders bought up everything before the project even opened its doors, and now the rest of the peons were rooting through the garbage leftover.

To make matters worse, I had to endure Sadie’s BS sales pitch.

She had a retort for everything I threw at her.

She talked about how the resale prices for projects by Streetcar Developments are much higher than other builders.  She went on about the “integrity” of the architect and how he designs floor plans as if he was living there himself.

She pulled ideas out of nowhere by making claims like, “There is money to be made on every single unit that you see on this wall.”

She pointed to the 685 square foot, 2-bedroom, 2-bathroom unit (try and fathom TWO bedrooms in a tiny 685 sqft condo….), which was priced at $334,900, and called it “a terrific buy.”

I told her that if you added parking and locker to this price, you’d be looking at $365,400, or a whopping $533 per square foot!  I asked her how the hell the market was going to appreciate to $600 per square foot in the next two years to provide a profit, and her answer was, “Well, I put my money into the project; I bought a condo here.”

Oh well that changes EVERYTHING!  The sales girl at the project bought here!  Now I can sleep at night!

I told her, “Sadie, can we treat eachother with professional courtesy for a moment – can we speak without all the sales talk?”  All I wanted were a few straight answers from her.  I wondered how it made sense to drop $36,540 as a deposit for this unit….but before I could finish my thought, she said, “Actually it would be $54,810.”

I said, “Excuse me?”

She told me, “You made a mistake in your calculation – since it’s 15% down.”

I told her that was ridiculous, and putting down 15% makes no sense.  I’ve put down 10% on every pre-construction condo I’ve ever bought.  It’s the only way to make the numbers work!

I told her that anybody who puts down 15 – 20% (they actually got some people to put down 20%!) is a complete moron.

She pointed to the people buzzing about in the room and said, “Well clearly there are people here that disagree with you.”

I said, “Yeah…..morons!”

This is what really gets me…

Just because something is for sale, doesn’t mean you are automatically going to make money if you buy it!

Sadie was hypothesizing that everybody who bought into this project – no matter the unit, floor plan, finishes, et al – was going to make money.

That’s not how it works, but clearly this is how most people view pre-construction investing.  Sadie sure does!

Hell, if everybody is jumping off a bridge, clearly I’m the idiot for standing on the sidewalk and scratching my head!  Sadie thinks that just because the project is selling, that it must be a good deal!

I’m beginning to think the general public believes these are the four steps to investing in pre-construction:

1) Buy in pre-construction
2) Wait for condo to be built
3) Sell condo for massive profit
4) Emulate photo below


This was one of the most frustrating experiences in my career.

Greg asked me why I was so bothered by the actions of other people, more specifically, why I was upset that people were buying at inflated prices where it would be almost impossible for them to make money.

The reason is because the more people pay over market value, the more dangerous our market becomes.  I’m not worried about the guy who bought unit #417 at 2Gladstone and whether or not he’ll make money, but I am worried about how this will affect our market.

Paying $550 per square foot in pre-construction is a recipe for disaster.  But all that’s going to happen is the next developer will charge $560!

Doesn’t anybody remember January of 2009?  Is that really out of people’s minds already?

I recall some condos that were trading for 25-30% below where they are now!  If we let the market spiral out of control, what’s to stop us from getting back to that market low again?

Where do these units at 2Gladstone have to go?  If people are paying $375,000 for a 685 square foot unit today, how much could this possibly be worth in two years?  $385,000?  What’s the point in taking on the inherent risk?

It shouldn’t have come as any surprise that the developer’s family bought all the “good stuff,” nor should I have assumed that prices actually did start at $229,900.

Maybe I was naive all throughout this process.

I felt bad for dragging PT and Greg to that sales centre, as we spent almost an hour and a half outside, and literally spent less than four minutes inside once we were allowed, but they both chalked it up to a “learning experience.”

I learned that just because Sadie was hot (oh yeah, I forgot to mention that she was gorgeous), she could convince all the 25-35 year old guys that walked through the doors to purchase overpriced junk.

I learned that even being first in line doesn’t guarantee you anything, since insiders are everywhere.

I learned that nothing is as it seems, and just because a developer says prices start at $229,900, doesn’t mean they actually do.

And most importantly, this experience reiterated what I already learned some time ago: in every economy, in every marketplace – everybody is out to screw everybody.

Don’t get me wrong – when the tide turns, the banks and car companies cry poor and expect us to bail them out with billions and billions of dollars, but when the getting is good – you’re gonna be raked over the coals by a bank’s ridiculous fee structure, and a car company that doesn’t consider doors to be part of the base-model-price.

In the pre-construction condo world, you get incentives like crazy when the market is bad, and then you get mislead and ripped off when the market is good.

I’m stuffing my money into my mattress.

I can’t stomach another let down like the one at 2Gladstone…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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  1. Clide

    at 7:06 am

    There’s no doubt that a real estate correction is on its way…massive goverment deficits, rising unemployment, deflation, higher bond yields leading to higher interest rates, average house prices as five times average household income…these are all signs that there is trouble ahead. The last thing you want to put money into is ownership in a building that doesn’t exist.

    I would never line up to buy pre-construction in any market, think about those people who bought into the hype of 1 Bloor East. I don’t understand the risk/return of putting up with all the BS you talked about, tying up your money for years with no guarantee of then the unit will be delivered, and then having no idea that the market with be as strong when you finally sell the unit. Too much risk and unknowns for me.

    I’d rather buy an existing unit on Merton Street and rent it out knowing that I’ll get premium rent and always be able to sell based on the three principles of real estate: location, location, location!!!

  2. dave

    at 8:02 am

    Great read as always. I’m glad to hear that you sold of your investment condos recently. You seem like a fine fellow, and as someone who makes his living from RE and is also quite heavily invested in RE I was worried you were over exposed to to the asset class.

    ps. I’ve been watching our recently frothy market with some bewilderment, and it seems likely I’ll be owing you a bottle after december

  3. Frank

    at 10:06 am

    Buying hard real estate is a mugs game at the best of times, even for the pros like you. I much prefer REITs, no hassle or BS with the Sadies, lawyers, real estate agents, line ups, hidden costs, HST, floor plans with no dimensions, phantom bids, etc; and REITs pay you each month almost irrespective of what the market does. Bought in six months ago at a 12% annual distribution yield, so far the units have appreciated 50%. But then all I get to look at is a computer screen, no Sadie.

  4. BobbyV

    at 10:35 am

    flipping real estate is so 2007 ….. market is turning and those who are caught holding the bag will be taken for a ride. Those who were in the game are already out …… don’t be stupid and jump in when prices are at the peak. All underlying fundamentals are in place for a correction in the next year or so.

  5. Aguduser

    at 10:36 am

    Hi David,

    There’s a way to deal with this market: buy high and sell higher. Get on the fast moving trend, decide what you want in advance and get out when you achieve that, then move onto something else. And, to make money fast, you need to be in on the big ones.

    You seem to be struggling to understand this market, and it’s because you go into it with the mindset of “buy low and sell high”.


  6. David Fleming

    at 1:13 pm

    @ Aguduser

    That is probably the worst advice I have ever received.

    “Buy high, and sell higher.”

    Gee, I can’t see that ever blowing up in somebody’s face!

    Man, I wish I had bought Nortel at $118 per share with illusions of grandeur about selling it at $124.50…

    Clearly I am struggling to understand this market. I think I’m going to quit my job and become a male model…

    I wasn’t like every other kid, you know, who dreams about being an astronaut, I was always more interested in what bark was made out of on a tree. Richard Gere’s a real hero of mine. Sting. Sting would be another person who’s a hero. The music he’s created over the years, I don’t really listen to it, but the fact that he’s making it, I respect that.

  7. Aguduser

    at 2:37 pm

    Hi David,

    When I said “you seem to be struggling to understand this market”, I did not mean that you are inadequate in your job as a real estate agent. On the contrary, I read your blog often, and listen to your opinions on what’s going on in the real estate market.

    I just say that you seem to struggle to understand the behaviors of this red hot market, meaning the market in this particular time, not the real estate market in general. I say that, based on what I read in this post of yours, and the posts about Festival Tower, as well as a few other posts. And that doesn’t mean that I’m saying you are not a good real estate agent. Because you are – but with your own limitations.

    My “advice” was not really an advice for you, it’s more of stating another point of view, from an investor to you – another investor (not to you – the agent.) How we invest reflects our personalities: how much risk can we take, how greedy are we, whether the profits or the experiences are more important to us… etc.


  8. David Fleming

    at 3:50 pm

    @ Aguduser

    I was being overly sarcastic; sorry if that came off as a personal attack.

    You make a very good point about risk tolerance.

    I feel that while I have a very high risk tolerance (I believe in debt and using other people’s money, also taking on high risk/reward projects), but I feel that the general public is taking on massive amounts of risk and they aren’t aware of what they’re doing.

    To label all the buyers at 2Gladstone as “savvy, risk/reward investors” is giving them too much credit.

    Simply put, they have no clue what they’re doing.

    They were simply buying for the sake of buying, and I would guess that many of them didn’t do ANY research into the area, developer, prices, market conditions, etc.

    I don’t think there is any money to be made at this project as a “flip” in two years, especially when you add in the Land Transfer Tax and Realtor fees.

    I know a lot of people who bought here over the weekend have been reading my posts, and I’m sorry to be the bearer of bad news or crash their parties, but keep in mind that my opinions are exactly that; just the thoughts and expressions of ONE Realtor in the city of Toronto, albeit an experienced and knowledgeable one.

    If people out there think that prices in this building could reach $600/sqft in two years, then more power to them.

    I don’t, but that’s just me.

    I don’t even see an opportunity to “buy high, sell higher” here because I think the prices they are asking are on par with the resale market, and you’d have to see a 15% increase in the market in the next two years to cover the transaction costs and make a miniscule profit.

    Thanks to everybody for sharing their thoughts.

  9. "Jenn"

    at 3:56 pm

    Dave I think the problem here is that you’re not sexy enough to sell real estate! If you were hot like Sadie maybe you’d be doing more business! Tighten those jeans!LOL!

  10. dogbiskit

    at 5:27 pm

    Timing is everything! The developer is really taking advantage of this super hot, ridiculous market (and why not! i decided to jump on the engine of this crazy train and sold my condo for significantly more than I expected). $335K for 2 beds in 685 sq ft?!! I laugh at the flippers who paid this and obviously didn’t do their homework. There will be a lot of suffering following this buy now buy anything at any price mentality. The market will turn and hopefully sooner rather than later or you may be right about developers overcharging on near-future projects.

  11. Aguduser

    at 6:19 pm

    Hi David,

    It came off to me as a personal defense, rather than attack. 🙂

    I agree with you that the mass public is often ignorant. The world that we live in is constantly changing, crises come and go, and present opportunities to make money. When the mass learns about an opportunity, they flood in and get on the bandwagon (often with little knowledge/experience), and the profit disappears. Crashes happen all the time.

    That’s why we should decide what we want in advance, and get out when we achieve it. Greed will make us hold on to the trend and die in the crash.

    You may ask why get onto it at all if knowing there is a possibility of a crash a head. Well, once in motion a trend tends to continue rather than reverse, the higher the speed, the more dangerous it is. But because of the speed, you can make fast money, if you get on the big ones. Just like with the Festival Tower’s units…

    Investors are often risk-takers, but many can’t do the “buy high and sell higher”. We hate buying high and feeling insecure. We feel angry as we have missed some of the potential profit, and want a pullback. It is mentally tough buying a trend in motion. But it’s a way to make money fast.

    The problem is if we do decide to jump on the fast moving trend, and with all the knowledge and experience that we have, we can still be part of the ignorant mass, and be crashed. However, we will be okay if we see the learning experience as more important than the profit.

    These are the things that I’ve learned from others, and I just wanted to share the thoughts.


  12. JoeBlow

    at 6:20 pm

    even at $600/sq ft, we still have a lot to catch up to like cities such as NY, Dubai, etc. where they are at $800-$900/sq ft.

    Keep on buying. City is growing and everyone wants to own a home .. you think the population will not grow every year?

    Demand is going to be there in Toronto. Its a sexy city and invest in it. Look for another project ..don’t be bitter the developer was shady. Take it as a learning experience.

  13. Perry

    at 7:17 pm

    I think just for these boutique units they will hold value. At even at $550 per sq foot per unit, it’s a great buy. But I would say that for THIS builder and their past projects, and maybe just a couple of different builders more.

    Because its a small, intimite building, its desirable.

    Location is terrific and its turned into so such a great place now, and there will always be high end players who know a product when they see it and will buy it. Its based on what they want. I just wish I was able to get in, but by Sunday there was nothing left.

    Yorkville was like this 30 years ago.
    Leslieville/Corktown is the same.
    King West/Queen West has arrived, time to embrace it.

    Big cities will have a lull, but look at NYC, SFO, Chicago, there were dips, but not huge ones, especially if you have location location location AND the right building.
    We are TORONTO afterall and the big city of Canada….

    If the building goes up, when it does, the value will hold.
    There are too many out there who want something noone else has and boutique buildings offer that cache.
    You said so yourself, who wants to live in the same kind of units everyone has at the CItyplace ghetto’s????

    If I had a unit in this building and needed to sell it 5 years from now, would’nt you want to represent me in an exclusive building?

  14. Krupo

    at 12:11 am

    @Perry – 5 years is a longer investment timeframe than the one Dave was examining though – you assume you’ll get enjoyment out of living in the unit, that’s not part of the investor’s plan…

  15. BobbyV

    at 12:31 am

    people who keep comparing TO prices to NY, Paris, HK, London prices must not get out very much ….. those are true world class cities, unlike TO who are self-proclaimed b/c mel lastman said so. TO is overpriced just like Miami and Phx was 2 years ago.

  16. Frank

    at 6:28 am

    “even at $600/sq ft, we still have a lot to catch up to like cities such as NY, Dubai, etc. where they are at $800-$900/sq ft.”

    I cringe when I read this sort of thing. Toronto will never ‘catch up to’ NY, London, Paris, etc for the same reason Winnipeg or Regina will never catch up to Toronto. They ain’t in the same league. Dubai is an artificial sun retreat and tax refuge built for rich european footballers, Russian mobsters, ageing rock stars, people hiding themselves or their money from something. It’s horribly over built and falling now.

    Notwithstanding the perpetual cheer leading by the Star and real estate developers, Toronto is not ‘world class’. Second or third tier, on a par with Chicago, Dallas perhaps. Live in London for a few weeks each year as I do, you’ll know the difference.

  17. dave

    at 8:19 am

    I have a photography project in mind. Photograph 100 people who moved to live in Toronto, from a representative demographic. Then photograph 100 people with identical demographics who were born here. Place the photos side by side and compare.

    I think that the type of person who waxes lyrical about Toronto being the big city, and who compares it to NYC, London, Dubai (where prices have crashed btw), is someone who moved here and did so specifically because they wanted to live in a big city. Thus they are looking at the world through “world class city” glasses, because we see the world as we are or as we want to be.

    I was born and raised here. I’ve travelled quite a bit, and have been to the BIG cities many times. I think Toronto is firmly entrenched in the second tier of big cities, and we have a long way to go before we can compare ourselves to NYC, London, Tokyo, Moscow, Rome, Chicago. Paris, Berlin, etc.

  18. Liza

    at 3:36 pm

    Thank you! Finally! Why is Toronto so hell-bent on insisting “we’re world-class”?
    Mayors and condo salesman say it and all these poor people who have never actually been anywhere just agree.
    Toronto is a very nice B city with overpriced real estate. And I love the comparison with Phoenix. Catty, but true.

  19. WB

    at 7:34 pm

    You can find many articles in 1989 at the peak of the real estate market where so-called experts were saying that real estate in Toronto is a bargain because it is cheaper than London, NY, etc.

    That being said, Toronto is really coming into its own and has a great future and will likely narrow the price gap to some degree that it has with London, NY etc. But to say it is cheap relative to these other cities and thus real estate will continue to rise here may not be accurate.

  20. Perry

    at 8:28 pm

    I love a heated discussion and the fact that we mention we are world class is based on 2 things. Set aside the real estate issue here…

    1. If everyone here, who is from Toronto, believes we are not world class, then we will never get there. It’s about attitude. You don’t believe it, then your not there. It’s like there is this attitude of we are not good enough…. BS! Many people think its a great city otherwise we wouldnt be here…It’s the cynics that need to deal with it.

    2. Toronto is a baby compared to those cities. But comparible still in many other ways. We may not have the years of heritage not the years of architecture, but we are getting there. Our city is based on immigrants and thats why it takes alot longer for it to grow… their children will benefit the move to Toronto as will the city.
    And they will get jobs in the city and want to live in the city. More and more people are moving in, regardless of race and/or income. Year after year we have seen that trend ..i dont think its a trend you can deny.

    So if your reasoning of why you dont buy into Toronto is because its not world class enough and that will dictate your price, then maybe a condo in Cityplace is just right for you… and if we are a tier 2 city is that how much you are willing to pay?

    @dave…i’m not sure what you are trying to say about this….I have a photography project in mind. Photograph 100 people who moved to live in Toronto, from a representative demographic. Then photograph 100 people with identical demographics who were born here. Place the photos side by side and compare.
    do you mean we are more ethnically diverese? and thats an issue to prices? I read it in a different way and I’m not sure I like the tone of it.

  21. dave

    at 7:49 am


    I said “identical demographics”. Ethnicity is a part of demographics.

    I await your apology. 🙁

  22. Aguduser

    at 12:58 pm

    An acquaintance told me today that he’s got a unit at 2Gladstone – 685 sqft, 3rd floor, with terrace, East view (looking at the Gladstone Hotel) – for $299,900, from the brokers’ event. That sounds like a pretty good deal to me, comparing to the $334,900 price tag that they gave you above.

    Anyway, it’s high demand, so for the few units that came back 10 days after the sold-out launch, they’ve put even higher price tags on these!

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