By Tracy Hanes

Call them builders without borders. Facing challenges such as a shortage of developable sites, steep land prices, high development fees and lengthy approval processes, some Ontario developers are looking beyond Canada for new opportunities.

Companies such as Mattamy, Minto, Brookfield, Great Gulf and FRAM are among the developers staking a claim in the United States. What’s drawn them south of the border is greater availability of sites, markets with good growth potential and easier approvals processes.

“Mattamy was fabulously successful in the GTA, but for the business to grow, we had to get out of the sheltered existence in the Greater Toronto Area, with provincial directives such as intensification and the Greenbelt,” says Brian Johnston, Mattamy COO.

Mattamy Homes founder and CEO Peter Gilgan bought several home building companies in Minnesota, Florida and South Carolina in the early 2000s, but pulled back while trying to keep a small presence in the U.S. market after the crash of 2008. Three and a half years ago, the company started expanding more aggressively in the U.S., striving to build projects of scale in Florida, Arizona and North Carolina. It still operates in Minnesota but on a lesser scale than the other states, although that’s where its homes sell for the highest prices.

Mattamy started by buying serviced lots in other developers’ American sites, then moved on to acquire larger tracts where it could build master-planned communities with its own brand.

In 1993, as the Ontario housing market was struggling to recover from recession, FRAM Building Group started building on a limited scale in Buffalo so that it wouldn’t have to lay off some of its employees. Afterward, it looked to a city where it could do larger projects and settled on Dallas. FRAM sent a few key staff there with flexible mindsets who could adapt to the Texas market rather than imposing a ‘this is how we do it in Toronto’ mindset.

“We’ve done a few condos, some lot developments and a little home building there, but we started building affordable and market rental housing, and that’s our primary business in Dallas,” says Frank Giannone, president of FRAM. “We get people moving into a building, stabilize and then sell it.”

Having operations in three major cities—Calgary, Toronto and Dallas—where the timing of economic cycles differs—has proven to be a sound business strategy for FRAM.

Great Gulf, for its part, gained a U.S. foothold two decades ago, when it started Ashton Woods Homes, now a stand-alone American company that builds throughout the Sunbelt. The company’s Canadian condominium division recently began developing projects in the U.S. and currently has two condo projects in Dallas, including a downtown 21-storey luxury building that is in the sales phase, and another site launching shortly. It also has sites in the West Palm Beach, Florida area and in Washington, D.C.

Why did Great Gulf venture south? “The number one reason was taking the platform of experience and expertise we’ve built here and expanding that to new markets,” explains the company’s president, Christopher Wein. “Number two was that it’s getting harder and harder to find opportunities in Toronto and we need to look at other markets in Canada and south of the border. If you have a great platform in one of the most aggressive markets in North America, why not export it to areas of the U.S. undergoing a good recovery?”


“Unlike the GTA or even Ottawa, it’s not hard to find sites at all,” says Mattamy’s Johnston. “There is lots of land available. A reasonable price is more of a challenge, but there is a lot of good-value opportunities. Canadians are very quiet about it, but they are major players in the U.S. in terms of real estate.”

Similar to what it does in Canada, Mattamy wants large sites where it can build master-planned, low-rise communities. But it goes to school, so to speak, when it comes to site selection. “Americans judge everything on a school district and it’s a key part of our approval process,” says Johnston.

Great Gulf researched American cities undergoing similar urbanization as Toronto, with populations of 1 million-plus, strong employment, good net immigration and stability within local and state governments with respect to tax structures and approval processes. It identified Dallas, Houston, Austin, Boston, Miami and Washington as cities with strong growth that would present good condo development opportunities. The company looks at “truly urban sites,” says Wein, within or close to central business districts.

“From a site perspective, the fundamentals we look at are not that much different from here,” Wein notes. “It must be very transit oriented, as that’s part of the reason cities go vertical. For new immigrants or young millennials entering the workforce, the access to transit is far more important than for previous generations.”

Giannone says FRAM looks for Dallas sites that are mainly urban, and while it has done some suburban rentals, FRAM prefers to stay within the Dallas metropolis, particularly with plenty of opportunity to be had and a ready availability of land in that market, though competition for prime sites is getting tougher. A fairly straightforward and quick approvals process has also helped to keep the price of housing at affordable levels.

It’s not surprising then that FRAM, Mattamy and Great Gulf are looking to develop long term in the U.S. locales they’ve chosen and to reap the benefits of relationships they’ve cultivated. “We are all about partnerships and supporting local economies. We want to be in a city for 25 years,” says Wein. “We try to find a city where we believe there is an opportunity to have infrastructure for a whole generation.”

“We feel these markets (that Mattamy has a presence in) are relatively large and growing and there plenty of opportunities to expand,” says Johnston. “You want to take advantage of the people you have and expand your trade base, rather than going off to another market where you are going have to relearn everything.”

The Approvals and Building Process

“It’s a lot easier to get approvals (in the U.S. markets),” says Johnston. “We have a lot of red tape in this province and I personally believe it’s a source of house price inflation.”

Johnston says some areas of the U.S. actively encourage development and a builder can get through the planning process in short order. “In some areas, you can go from raw land to your first house in two years. But that means competition can pop up very quickly. It’s a more elastic market.”

Lower development charges are an added bonus. “Development fees for a single-family home are $100,000 in Milton. In the United States, $10,000 would be high—and people would be horrified. We are not building in California, though, where they charge outrageous amounts.”

Wein says the key is to understand the local needs and political dynamics. “We take our experience from Toronto, but don’t head into a U.S. city saying, ‘This is how we do it in Toronto.’ We use lots of local consultants, meet with local officials and politicians to determine their needs and pressure points and craft a development that works best for them.”

Wein says if a developer pushes his agenda too quickly, “it can be extremely difficult,” but “if you’ve taken the time to understand the administration, politicians and general public, it’s a relatively smooth process. Many cities don’t have the level of activity we have here, so you get more time and attention. Many cities are still in recovery mode, open for business and excited to have new development.”

Finding skilled trades hasn’t been difficult either. “Labour is one of the things that ebbs and flows, but there is a very large labour pool to draw from and people are drawn to where there is employment,” says Wein. “Because we focus on residential condo towers, there is a lot of crossover labour, mainly with commercial trades that are building hospitals, office buildings and universities.”

“In Dallas, if you pay bills and show that you know what doing, they (trades) will work for you,” says Giannone. “It’s tougher doing business in Ontario outside the GTA than in Dallas in terms of finding trades. If you move 90 minutes outside the GTA, you are into a whole different market and it’s tough finding workers.”

“We’ve been in Florida for seven years and the industry is getting busier,” says Johnston. “A lot of trades who left after 2007 and 2008 are coming back. Trades always respond to what you are paying and it’s always good to hire someone local and knowledgeable. They carry with them their reputation and trust. Local content is key and we try to get senior management that is local. Those relationships are important.”

Florida building codes require hurricane proofing, dating back to the devastation caused by Hurricane Andrew. “If you are a builder and have to deal with condo corporations, it can be a recipe for a lawsuit,” advises Johnston. “You have to be super careful about how it’s built and don’t mess it up and document the construction process. There are lawyers who will convince boards of directors of condos that if they don’t sue the builder, they themselves could be sued. It’s not wise to go into Florida without being very, very careful, (including) how you are building and who is building it.”

Financing and Pre-sales

Another more complicated factor south of the border is mortgage financing. “Canadians understand how financing rules work and how to get a mortgage,” says Wein. “We have only a few banks in Canada. But there are thousands in the U.S. and the rules can be different at each bank or in each county. It’s not a simple or consistent system. On the flip side, a lot of customers on the condo side don’t require financing. We are seeing a lot of empty-nesters taking their home equity and using it to fund a purchase.”

There is a much higher risk of cancellation of sales in the U.S., and in some areas laws don’t allow builders to take deposits, says Johnston. “You have to build a lot more inventory and you have to have inventory that’s move-in ready. And in many cases, you will not sell well unless you first have an amenity centre built by the developer.”

While it’s rare that Canadians don’t think about money and how much they can afford and what their carrying costs will be, Americans often don’t,” says Johnston. And financing and down payment rules can be varied: military veterans need not make any down payment and those living in a designated rural area require a 2.5% down or 0% down payment, says Johnston. “Some of our sites are in rural areas, and the boundaries of rural areas are arbitrary.”

Mattamy has addressed some of the financial monitoring issue by establishing Mattamy Home Funding to help buyers find a mortgage and get them qualified, as most purchasers have a difficult time pre-qualifying. It has also introduced credit repair programs that offer buyers advice on how to improve their credit so they can qualify for a mortgage.

On the condo side, while it’s something Toronto condos are very comfortable with, the practice of presales is still something buyers are adapting to in the U.S. Wein notes that a developer can still conduct presales, but closer to the construction start—perhaps six months. However, in markets that are heating up, such as south Florida, buyers are more willing to buy prior to construction starts.

Giannone says the Dallas rental market has plenty of demand, although the vacancy is 4%-5%, so not as tight as Toronto’s 1.7%. “In Dallas, you have a constant rental market that’s being addressed by the building community, with 15,000 to 18,000 new units a year,” he cites. “Purpose-built rentals work there and have a return of about 7% for a developer, while in Toronto it’s only about 4%. In Toronto, many of the condos built are bought by individual investors to rent out and they are happy with returns that are lower.”

Design Differences

As with every community it builds in Canada, Mattamy gives each of its U.S. sites an individuality to provide it with a unique style that will appeal to the local market, while building everything from townhouses to large singles to accommodate three or four market segments.

Florida is very backyard-oriented and there must be substantial outdoor living spaces, says Johnston. And buyers in master-planned communities expect an amenity centre with a pool, patio, fitness centre and party room.

And whether it’s a starter project or high-end condominium, everything revolves around the closet, says Wein. “The suite size is also different. Toronto is a leading North American city in terms of ultra-efficient design, but in a lot of U.S. cities, condos are still relatively large with not as much emphasis on efficiency.” Wein says a 900 sq. ft. unit in Toronto is considered large, but in Dallas, that would be a small one-bedroom suite.

“Parking ratios are higher too,” says Wein. “They rely more on automobiles and we have to build two parking stalls for every unit, which is double to quadruple what we provide in Toronto.”

Great Gulf’s Toronto architects have partnered with local architects and designers in each American market to get a feel for what designs will be well received locally, “then we take what they want, add a twist of innovation and hope it proves to be a success.”

Condo amenities, meanwhile, differ slightly. In Dallas, valet parking is common, concierge is more service than security based, and there are pet-based features including pet washing and grooming stations, as well as areas for dogs to walk on site. And pools are also a must-have feature.

The Snowbird Market

Although Mattamy has been building in the U.S. chiefly for American buyers who want a primary residence, it is also looking to the snowbird and retiree market and sites further south than its current projects, including an Orlando project geared to this market in 2016. In many counties, however, zoning doesn’t allow for seasonal residents or for people to rent out their homes, but it will be permitted at this development. Johnston says most buyers are people who will occupy their unit for two to three months and rent it out for the rest of the year.

“There still is significant interest in Florida by Canadians despite the high dollar,” says Johnston.

As with all ventures in new markets, due diligence is paramount, says Johnston. “Get people you trust and can rely on,” he advises. “There are lots of great Americans who are qualified and experienced who will work with you. It’s not the guy who is cheapest—that would be a mistake. Do your homework. It’s as simple as that.”


For readers to learn more about Mattamy Homes, please visit their website here.