6068 Yonge Street

Commercial Real Estate.

Andrei Maliutin

1000927072
Located in Newtonbrook Neighbourhood.
(37 minutes by car from our classroom)
Geographic Features:

 Pros:
 1) Surrounded by residential area (Residential-detached/multiple)
 2) Located on Yonge (Central Street; close proximity to the road)
 3) Goulding community centre
 3) Hudson’s Bay Mall nearby (Residential prospective)
 5) 6 schools along Drewry avenue (15 min walk)
 6) Close proximity to the bus stops (3 mins away)
 7) Vacancy rates are lower than in Downtown
 Cons:
 1) Hudson’s Bay Mall nearby (Commercial prospective/Competition kills small
businesses)
 2) Lack of ongoing constructions
 3) Even though vacancy rates are lower than in downtown they are still 5%
Demographic Data
(Based on the dissemination area by Stat.
Canada)
 Average household size is 2.59
 Median Age: 46.20
 Ownership proportion based on info retrieved
from Rieltor.ca:
Low proportion is a bad or a good sign?

Indicates that whether there is not enough

a) Demand for a rent in the area
b) Supply for a rent in the area

I tend to think:
a) Generally older population
b) Lack of College or University institutions
c) Quiet residential area
d) Distant location from the downtown core
 There is not enough demand for leases,
 Workers tend to live closer to the work place
 Students tend to live closer to academic institutions
 It makes sense for students or young workers to live there
 A) if they live with a family
 B) They work in nearby schools/Hudson’s Bay Mall
 C) They prefer lower rent fees
 Sum up with demographics:
 1) Generally old population
2) Small family size
3) More owners than renters
4) Average household income of about $120,000
5) 97th place amongst 140 neighbourhoods in Toronto
according to Toronto Life
Building Structure:
(Legal Use: Retail with residential above)

The building is compressed of three levels:

Level Footage Category

Basement 877.6 sq. ft. Storage

First Floor 877.6 sq. ft. Commercial

Second Floor 877.6 sq. ft. Residential

Total 2633 sq. ft.

Floor Plans:
 Main Floor + Basement:

Status Monthly Rent Tenancy Portion paid by

Duration tenant

Leased $3,000 Until May 31,2019 • Hydro

• Portion of
taxes

• Tenant => Korean restaurant “Anzimae

Zipbap”;
• Has a right to extend the lease at expiration
• Main floor => restaurant
• Basement => storage, washrooms.
• Pays the major part of tax (appx.$14,000)
• Taxes paid by owner ($4,000)
Comment on the lease:

 The lease conditions are fortunate for the owner of a building, as basement
and main floor are rented at $3,000 a month plus partial tax coverage.

Per sq. ft. price of a

lease = 3,000*12/1756
= $20.50
DCF Valuation method:

 Assumptions:
 1) No roof replacement as east for 10 additional years (less capex)
 2) We suppose that we would find a new tenant in the upcoming year shortly
by manipulating rent price (from bad case to good case, depending on
demand)
 3) investment in renovation after each subsequent rental period for an
allowance of 5-7% each rental agreement cycle (TI)
 4) Maintenance cost would be allocated as a “rule of thumb”: one percent
from purchase value each year
 5) Growth rate of 1.5%
ASK Price 3,000,000
Creation of Value:

 Since we are locked into commercial contract, the only way for us to create a
value before the year 2019 is by leasing residential space 2nd floor.
 Since the supply of housing in the region is higher than a demand and our
apartment type does not match the preferences of households. ( It has 2
bedrooms and a living room, whereas average family size is roughly 2.5.
 Thus the idea was to divide the 2nd floor into two rooms.
Pitfalls:

 1) Shared entrance
 2) Shared kitchen
 3) Lack of washroom for tenant renting living room.
 Inconvenience arises
 Moreover given generally old age of population, and the conservatism coming
with age there would be no demand in such apartments.
2nd Option:

 Recreation of building into pub, in such case we would need to reconstruct

the whole 2nd floor.
 The first floor and basement does not need waste amount of funds spent on
TI.
 However the age of population, quiet neighbourhood and abundance of
restaurants with alcohol license around would make this idea costly and hard
to realize
Final option:

 Developing a hostel.
 Distant location from downtown and lack of site visits make this idea costly
and not appropriate.
Final thoughts:

 An investment has bad planning of 2nd floor, that does not match residential
needs in the neighbourhood.
 Far distance from the downtown core lacks demand for the renting as people
who work in the region nearby only those who might be interested in renting.
 The only thing that attracted me is a high-price of a commercial contract.
 However, the expected earnings of the building after year 2019 are unknown,
since the commercial contract expires.
 Given bubbling situation in the housing market of Toronto;
 Lack of demand for a rent;
 Low restaurant awareness
Iwould not suggest to buy the
building.