Sylvester Stallone was once so poor he ate nothing but raw eggs and cottage cheese, which he shared with the pigeons outside his tenement window. One time he sold his bull mastiff to a guy outside a 7-Eleven, because he couldn’t afford to feed him.
Then he overcame his fears, he told a crowd of a few thousand gathered in Toronto last month, inside a giant hangar beneath the CN Tower. Fear came up a lot during his rambling 45-minute monologue, in fact, because he learnt to love it. If he had another child, he said, he would call it Fear.
The Hollywood star was the headline act at an all-day event called the Real Estate Wealth Expo, one of a series of events throughout North America put on by Bill Zanker, a New York-based impresario and associate of Donald Trump. Some of the speakers were dull (Alex “A Rod” Rodriguez); others were not (Pitbull). But all were there to tell attendees that they were all proven winners, just for having bought a ticket. Never mind if it were the basic silver package (C$149), which got you a fold-up chair at the back, or an Ultimate VIP at the front, within range of the T-shirt cannons. Nothing could stand in the way of every one of them becoming millionaires if they wanted it badly enough.
Receive 4 weeks of unlimited digital access to the Financial Times for just $1.
This was a strange message, at a time when large parts of Canada’s property market seem to be running on empty. Prices barrelled upwards for years, boosted by low interest rates, loose lending and waves of foreign money. But now things have cooled. New rules on bank mortgages are tightening credit, requiring borrowers to undergo stress tests to ensure they could cope with a big spike in interest rates, over and above the three increases in the base rate since July. New taxes on foreign buyers and empty homes are also hitting formerly super-hot segments like the condo market, feeding fears of oversupply.
The average selling price of homes around Toronto, the country’s largest city, fell by 12 per cent in April from a year earlier to about C$804,000 (US$630,000), according to the Toronto Real Estate Board. That was a slight recovery from the 14 per cent fall in March, but still, it was more than anything Canada saw during the global financial crisis.
Many people who piled in to the market in recent years are already finding that the sums are not adding up. Of the Toronto condo investors that took possession last year, for example, 44 per cent now collect less rent than the mortgage requires, according to CIBC Economics. Of those, more than a third are down at least C$1,000 a month.
But none of this was weighing on proceedings in the Wealth Expo’s main hall, where there was barely a mention of tougher conditions in Canada from the mostly American speakers. “The Canadian market, the US market, it’s all the same,” said Brian Allen, a fast-talking realtor from Orange County in California. “Every one of you in this room can do real estate.”
He put up a slide of “Billy B” who used to work at Costco before borrowing $2,000 from his grandfather to sign up, with his brother, for a full Brian Allen seminar. Now Billy does property transactions full-time, he said — 29 of them so far. “Want to know why I like Billy? Because he’s got the IQ of a lamppost.”
One of a handful of locals was Jin Jiang, a perky estate agent specialising in high-end condos, who talked about growing up with mice and cockroaches and how it makes sense to buy flats near subway extensions. She was flanked by another rep, Mike Donia, in a blue suit without socks, who was full of stuff like “those who see the invisible, do the impossible”. His main piece of advice was buy — and then wait. “You make money by just waiting.”
Then there was a dance-off.
The whole thing was a “circus”, says Joey Evans, a Toronto lawyer who paid C$50 for a discounted silver ticket — later upgraded, for free, to gold — because he saw ads on the subway and wanted to know if it was real. He says he heard similar “garbage advice” in the US about a decade ago while a student in Michigan, before the great housing meltdown south of the border.
He turned to his neighbour during one breakout session, seeing that she was taking “furious” notes. “I casually asked her what brought her here and she said ‘this is my only hope of becoming rich’. It really struck me: some people will believe absolutely anything they hear in the faint hope of making a quick buck.”
Plenty of amateur investors have already been scarred by the property boom. Alice Kwok, a 32-year-old chocolatier who arrived in Toronto from China in 2005, did not attend a Wealth Expo but invested C$100,000 — about half her net wealth — in a so-called “syndicated mortgage” scheme three years ago. Under such deals, brokers pool money from private investors to supply to borrowers. Kwok (not her real name) says she was promised an 8 per cent annual yield from a new lakeside development in Keswick, about an hour north of the city. Eight per cent seemed about right, she says: not too high, not too low. But about a year after she handed over the money, in the summer of 2015, the quarterly cheques stopped coming. She complained to her broker, refused a substitute investment, then demanded her money back. She’s still waiting.
In February this year Ontario’s financial regulator fined the brokerage firm involved, FDS, along with three other firms connected to the developer — Fortress Real Developments — and stripped several individuals of their licences. In April, Fortress’s offices were raided by the Royal Canadian Mounted Police.
It’s too little, too late, according to Kwok, who says she still makes the occasional trip up to the site by Lake Simcoe, hoping to see signs of activity. A couple of months ago there was nothing, “not even a hole”. She now fears she won’t be able to fulfil her dream of opening her own chocolate shop. “I never really met with this kind of evil people before,” she says. “Now I feel like I really can’t trust anyone.”
Another hard-luck story was heard in a Toronto court last month, after a seller of a five-bedroom house in Toronto’s North York neighbourhood sued the buyer, a massage therapist. The deal was agreed at C$2.02m in April 2017, the peak of the market, before the buyer put his more modest house up for sale. But as prices began to sag the buyer baulked, complaining that a typo on the contract — “OME HUNDRED” instead of “ONE HUNDRED” — made it unenforceable. The superior court judge was unimpressed, ordering the buyer to make up the shortfall after it had sold to somebody else for $1.65m. That’s a cheque for $278,000, on top of a lost $100,000 deposit.
Cases such as these are symptoms of the “psychology” fed by the Wealth Expo, says John Pasalis, president of Realosophy Realty, a Toronto brokerage. “ ’You have to rush in, you have to buy, winners make decisions, they don’t sit on the sidelines’ — obviously, it’s not that simple,” he says. “I think it does contribute to the sort of irrationality you saw in the market last year.”
Zanker, the Expo’s ringmaster who co-authored a book with Trump in 2007 called Think Big and Kick Ass: In Business and in Life, did not respond to requests for comment. But many of the techniques he described to Inc. magazine in a 2008 feature were in evidence in Toronto. The rooms were cold, apparently so that people wouldn’t feel sluggish. Attractive men and women worked the aisles, wearing tank-tops imprinted with “FUN” in big red letters. Doors to breakout sessions were kept closed until the last minute, so that long, snaking queues formed outside.
The show will head off to Austin, Texas, in June, and Los Angeles in November. If Zanker is true to form, he won’t reveal the agenda until the day of the event. But one act on both bills is Marshall Sylver, a DJ-turned-hypnotist who has a 17,000 sq ft mansion in Las Vegas, a beach house in California and two sons called Sterling and Maximus and a daughter called Prosperity.
His session in Toronto was like being grabbed by the lapels and shouted at, for an hour. At one point he asked if anyone in the room would like to buy a $400,000 asset for $5,000, referring to his Rolls-Royce Phantom.
“What are you even doing here?” he asked, to all those who didn’t raise their hand.
“Wealthy people don’t determine what they want based on what they can afford,” he said, before offering cut-price tickets to his three-day ‘Turning Point’ seminar. “They know what they want and figure out how to afford it.”
More from the Financial Times:
The threats to the traditional high street estate agent
A home for film in southern California
Let wedding flowers send a green message, says royal florist Shane Connolly
Be the first to comment