Graywood Developments is partnering with Japan’s Hankyu Hanshin Properties (HHP) to develop a $120-million condominium project in the Greater Toronto Area town of Oakville that Graywood president and CEO Stephen Price says could be the first of several JVs with the firm.

Claystone, a 141-unit, seven-storey condo, will be built at 2375 Lakeshore Rd. W. in Bronte Village in South Oakville. Sales are set to begin in Q1, and units are scheduled for delivery in 2028.

The venture with HHP marks Graywood’s first non-Canadian partnership, Price says.

“It’s always a challenge to find a partner you want to work with and in this case it’s such a good fit, and their commitment was long-term, large and we liked the dynamics between us,” he told RENX. “We thought this is a great fit for Graywood, and in the long-term will help us grow and continue to be a significant player in the Canadian housing market.”

Graywood usually raises equity for project development through closed-end private equity funds, and partners with several Canadian high net worth investors, institutions, landowners and developers, Price said.

Given constraints to capital in Canada, “we actively pursue joint ventures, partnerships and in this case, longer-term strategic partnership where we can supplement the capital we have accessible to us through our funds with capital from third parties.”

HHP expanding its international footprint

Price says HHP, a Japanese rail line and real estate conglomerate, decided to expand its real estate presence outside Japan about 10 years ago. 

The company initially formed partnerships with local developers in five ASEAN countries, primarily Thailand and Vietnam, as well as Indonesia, the Philippines and Singapore, before venturing into Australia and the U.S. 

HHP selected Canada as its next country based on its positive long-term fundamentals, demographics and strong need for housing.

Using Colliers Canada and Colliers Japan to vet potential partners, HHP selected five Toronto-based developers to which it could supply capital, narrowed the list to three and then chose Graywood.

Price says HHP was extremely thorough, making about half a dozen trips to Toronto starting last April, with escalating levels of senior management to meet with and vet Graywood. 

“They were highly concerned about having a partner that they could work with over the long-term. So ethics, honesty, corporate capability and a track record for execution on housing development were critically important,” he said. “They were looking for a partner that was straight up, ethical and really had the same vision for the development of housing as they do.”

While HHP is a 50-50 partner on Claystone, the Japanese company has indicated interest in having greater equity stakes in future condo or rental projects, Price said. “We’re already starting to talk to them about our next project.”

Graywood is acting as the lead developer, constructor, sales and marketing agent for Claystone but “I wouldn’t call (HHP) passive,” he said. “We hope to learn from their experiences in other markets, particularly where they operate independently in Japan. They have a number of systems, processes and approaches that we think would be useful.”

The Claystone Oakville condo development

Price believes Claystone, for which prices have yet to be determined, will appeal to downsizers and young buyers. The building will be near the shoreline of Lake Ontario, and an eight-minute drive from the Bronte GO train station providing access into downtown Toronto.

“There’s not a lot of competition or available product in South Oakville, so we think we’ve got a really great project. It’s a manageable size and we’ve given ourselves a reasonable amount of time to reach our pre-sales thresholds.”

Price is confident the condo market will come back as “it is still the lowest-cost form of housing.” 

While he’s not expecting a rapid rise in condo sales this year, “I do believe the medium- to long-term prospects for condominium housing in Toronto are very strong (as) the demand profile has not changed.”

Price says the partnership with HHP could lead to new sources of Japanese and other international capital for Canadian real estate developers.

“HHP is a public company and the fact they’ve made this move will attract attention in Japan. Others will have additional confidence in Canada based on knowing that HHP is such a rigourous organization in terms of the analysis and vetting they would have done before coming to Canada.”

Graywood considering other Canadian markets

Although Graywood currently concentrates its projects in the GTA and Calgary, “we keep our eye on other markets like Montreal, Vancouver and even Halifax,” Price said, “and believe there is potential for Graywood to develop in those markets.

“It’s a question of scale. Toronto has historically been such a strong, high-absorbing market that it’s provided ample opportunities for us, but we recognize that some of our investors would like more diversification – a Canada investment strategy, not just a Toronto investment strategy.

"We’re keeping our eye on those markets and in the future it’s possible that we’ll look at expanding beyond Toronto and Calgary.”