Presale promise: The Surrey development where buyers can get their money back if the market goes south

In a cooling condo market, one developer is trying a bold strategy to move units.

Construction on Skyliving, a 32-storey luxury highrise in central Surrey, will begin next month. Many units are already under contract, but the developer is noticing presale buyers are a little skittish right now.

“They have a lot of uncertainty in the market and the headlines, and that’s causing a lot of people to freeze,” said Mohamed Mansour, vice-president of sales at Allure Ventures, which is building Skyliving.

So Allure is taking the risk out of buying presale at Skyliving by offering a guarantee, of sorts. When the tower is complete, buyers will have the option to sell their unit back to the developer at the original purchase price, minus taxes and fees.

“This isn’t a gimmick. This isn’t a discount. This is us standing behind our product and willing to put our money where our mouth is,” said Mansour, who added it’s not just protection from market volatility.

“If something comes up and your life circumstances change, we will buy it back for what you bought it for.”

There is some skepticism of the plan, which is a first of its kind in B.C.

“I’d be very surprised, to the extent that they’re borrowing money, which builders usually do, that a lender would be comfortable with the builder taking on this risk,” said UBC Sauder School of Business professor Tom Davidoff.

“How good is this word? Will this entity be there in a bad state of the world where they’ve got to buy a lot of condos back at prices that don’t really work?”

But Allure is confident the condos won’t drop in value between breaking ground and completion, which is scheduled for summer 2028.

“We have confidence in where the market is going to be, especially with Skyliving as a project and as a community. And so when we’ve done our underwriting, we’ve looked at it and said, ‘No, we believe the value is going to be there,’” Mansour said.

Allure is also offering a lease-back option to new presale buyers. Upon completion, the buyer can rent the unit to the builder at a premium rate, returning the equivalent of 20 per cent of the purchase price over a 24-month period.

“When you do the math on something like that, a $750,000 unit, a two-bed, two-bath, we’re going to rent back for $6,250 a month for two years,” said Mansour, adding the builder believes the promise will give buyers confidence to sign presale contracts.

“Historically, the buyer has borne all the risk. And when we looked at it, we said that no, it’s time for the developer to share in that risk.”

Davidoff said buyers need to be cautious with any presale purchase.

“You have to have great confidence that the builder is going to complete the building, that they’re going to do a good job with completion, and they’ve got the deep pockets to perform what they claim they’re going to be able to perform,” he said. “But in the sense that it’s de-risking for buyers, I think that is a good feature of the contract.”

Assuming Skyliving sticks to its construction schedule, the company will know in three years if assuming the presale risk paid off.