Weekly Buzz: Retail, recreation and green real estate

Western Canada's top commercial real estate stories, featuring coverage on money laundering through real estate and foreign buyers dominating recreation property ownership

By
Western Investor
June 29, 2018





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The week’s top stories cover a variety of commercial real estate sectors, from retail, to recreation, to new green developments. While some developers are using green buildings to aid sustainability, the B.C. government plans to probe further into money laundering in real estate after a less than savoury report revealing money laundering in the province’s casinos. Meanwhile, retail real estate continues to evolve and foreign buyers dominate B.C. ski resort ownership.

Here is Western Investor’s pick of the top commercial real estate stories published this week.

 

Savvy developers meet challenges by going green – Western Investor

New projects provide green solutions for saving threatened salmon to housing the homeless to building wood-frame highrises with emissions.

Many B.C. builders are thinking sustainability as Vancouver aims to become Canada’s greenest cities. Here are three developers who are driven by a passion for environmental stewardship.

Cultus Lake: After an aborted launch by another developer in 2007, construction is now underway on Alture Properties’ $23 million, resort-style residence on the shores of Cultus Lake. Located just minutes from downtown Chilliwack, Cultus Lake is a popular destination: it’s estimated over a million people visit every year. The lake is home and spawning ground for a diverse array of fish including the Cultus pygmy sculpin and Cultus sockeye salmon – both unique to these waters. And it was fish that posed one of the greatest development challenges.

“This site has a long, complicated history,” said Stephen Duke, Alture’s executive vice-president. “In the mid-1900s it was a Department of Fisheries and Oceans [DFO] hatchery before it was converted into a marina.”

Under the watchful eye of marine biologists, the tanks were broken down and filled to create space for a state-of-the-art concrete culvert that Duke says will provide a year-round entry/exit point for centuries. Approximately 235 of the trapped fish were netted and released back into the lake. Alture also established a 15-foot swath of endangered riparian wetlands along the shoreline, creating a protected, natural habitat.

Paper cabins: When the city of Kobe, Japan, was struck by a 6.9-magnitude earthquake in 1995, more than 200,000 people suddenly found themselves homeless. Shigeru Ban, then a young Tokyo-based architect, responded to the housing crisis by designing the Kobe Paper Log House. Using materials like cardboard and paper that were readily available and, more importantly, inexpensive or even free, he invented the paper log construction that’s become a de facto world standard for disaster relief shelters.

The paper tubes used for the walls are just 3.8 millimetres thick with a diameter of about 7.6 millimetres. The roof is made from tent canvas and the flooring is sturdy milk crates that have been turned upside down and loaded with sandbags. Simple, sturdy and easy to recycle multiple times, the logs can be made right on site and quickly erected or dismantled.

Timber tower: Poised to shake up the way highrises are built, Vancouver condo developer PortLiving is taking a daring step forward in the world of mass timber construction.

Terrace House, designed by Shigeru Ban, will comprise 12 storeys of reinforced concrete topped with seven storeys of post-and-beam mass timber. The wood used to manufacture this glued laminated timber is sustainably harvested in the Kootenays.

The glazed curtain walls are made of museum-quality, low-emissivity glass. This highly specified product is 98.5 per cent clear – visually differentiating it from the surrounding downtown towers that can appear to be colours ranging from dusty rose to orange to copper brown.

Terrace House is the tallest hybrid timber structure in North America and the first to be approved under existing building regulations. The unique tower could represent a major step forward in Vancouver’s goal of being the greenest city in Canada. Wood is a sustainable building material that stores, rather than emits, carbon dioxide for the life of the structure.

[Western Investor]

 

B.C. to probe money laundering in real estate – Business in Vancouver

A future investigation is to follow Phase 1 report on money laundering in casinos, BIV reports.

B.C. Attorney General David Eby plans to have his ministry procure a second report on money laundering that will follow-up the bombshell study that it released yesterday.

While the first report, Dirty Money, focused on how money is laundered in the province’s casinos, the second report will focus on the real estate industry, Eby told Business in Vancouver in a phone interview on June 28.

Former RCMP deputy commissioner Peter German, who wrote the 247-page first report, may be contracted to write the second report but that is not yet confirmed, Eby said. No timeline for the second report has yet been set.

“One of the troubling pieces to me is that the people who were walking the cash into the casinos, and had some sort of a connection to organized crime, often listed their occupation as being real-estate related,” Eby said. “If this is the money they’re gambling with, what is the money that they are using in the real estate industry, and where did it come from?”

Eby said that his ministry is working out details for the second report with Finance Minister Carole James, who is the party’s point person on matters related to real estate.

BIV in mid-2015 went on a tour of Great Canadian Gaming Corp.’s (TSX:GC) River Rock casino with several of the company’s representatives, including its now chief compliance officer and vice-president of legal, compliance and security, Rob Kroeker.

German’s report identified that casino as being the “epicentre” of casino-oriented money laundering in the province.

The 2015 tour of River Rock casino was arranged after BIV reported accusations from anti-gambling activist Sandy Garossino that high-rolling gamblers were coming from China and laundering money in Great Canadian Gaming facilities.

Great Canadian Gaming representatives strongly rejected those allegations and explained how corporate policies were designed to make money laundering impossible.

Kroeger, who was then the company’s vice-president of corporate security and compliance, showed BIV River Rock casino’s surveillance room and he pointed to cameras that would take photos of people who attempt any transaction deemed suspicious.

Similar such video was shown at the June 27 press conference, where German’s report was unveiled. That video showed people taking bricks of $20 bills out of duffel bags and providing them to a cashier.

[Business in Vancouver]

 

Retail isn’t going away, but its game plan is changing drastically – Business in Vancouver

Retail real estate might be one of the most dynamic sectors these days, with multiple channels competing for consumer attention, BIV columnist Peter Mitham reports.

Pity the retailers trying to find a place to cater to consumers who might buy in-store today, then shop online for pickup in-store for that item they forgot. During a trip back home to New Brunswick, yours truly saw the confusion among shoppers and store staff alike as the local Loblaw Cos. Ltd.-owned supermarket reconfigured its layout to make it easier for workers to fill online orders.

Vancouver is fortunate to have a population base that can support a range of options, and that includes what’s touted as the largest T&T Supermarket in Canada. The giant, 74,000-square-foot location at Lansdowne Centre backfills the former Target premises, while a 22,000-square-foot space formerly occupied by T&T at President Plaza remains vacant.

While the net result is a reduction in Richmond retail vacancies, T&T’s move underscores the challenges Colliers International outlines for landlords in the current retail environment.

When one anchor tenant leaves, the options include finding another one or several smaller tenants to fill the space or tapping a tenant from outside the retail sector. Colliers flags supermarkets as a viable anchor for strip centres, but Lansdowne is obviously hoping T&T will stay until the property’s redevelopment takes shape a decade down the road.

Then there’s the pitch that recently hit this writer’s inbox headlined, “How Fitness is Saving Brick and Mortar Retail.”

The message tipped B.C.-based Steve Nash Fitness World & Sports Clubs as helping shopping centres “combat the anticipated drop in revenue associated with the lower foot traffic to brick and mortar stores.”

However, Colliers vice-president Jim Smerdon, director of the firm’s retail consulting division, said gyms aren’t sufficient in themselves. Rather, they work best when part of a co-ordinated backfill program.

“Gyms have not proven to be the best way to reuse vacant anchor spaces as a single use,” he said. “They generate foot traffic, but the key role of an anchor isn’t simply on-site volumes of people but of shoppers.”

Redevelopment play

Whatever direction retail takes, some investors see it as a bright spot because of the broad options.

Speaking as part of commercial real estate association NAIOP’s investment panel a couple of weeks ago, Wesgroup Properties LP executive vice-president David Wesik noted that “income is the new land.”

Or, put another way, income-producing assets are being judged not on what they can do now but on their redevelopment potential.

This is blurring the line between investment and land deals, as Avison Young principal Bob Levine remarked in his review of 2017 investment deals: “The acquisition of retail assets has morphed in many cases into land deals with lesser consideration or interest for the income in place or the retail asset itself. This approach has spread to office and even industrial properties as investors seek to secure land in hopes of redevelopment.”

[Business in Vancouver]

 

B.C.'s ski resorts have highest non-resident ownership: StatCan – Western Investor 

Metro Vancouver and Island’s non-domestic real estate ownership rates pale in comparison with Sun Peaks and Whistler.

The province’s top two ski resorts are the areas with the highest proportion of non-Canadian-resident owners of residential real estate, with Vancouver lagging in third place, according to new data.

A study released June 25 by Statistics Canada says that Sun Peaks has the highest overseas homeownership in the province, at 16.5 per cent of homes. This is followed by Whistler at 15.5 per cent. Both areas are not subject to the province’s speculation tax.

Both resort municipalities have more than double the non-resident ownership rate of third-placed Vancouver (city, not Census Metropolitan Area), which the 2016 Census revealed to have just over seven per cent of homeowners not living in Canada. Vancouver CMA, or Metro Vancouver, was found to have 4.6 per cent of homes owned by non-residents. Non-resident owners in this study include any homeowners who do not live in Canada, including Canadian citizens who live overseas.

With Sun Peaks and Whistler being two of B.C.’s biggest tourism destinations, the high rate of overseas owners of homes in those areas may not be surprising. But other tourism hotspots in B.C., such as the Okanagan and Vancouver Island, saw much lower overseas ownership rates.

Victoria and Kelowna CMAs, where the B.C. speculation tax does apply, were found to have a non-resident ownership rate of 2.7 and 2.5 per cent respectively. The speculation tax also applies in Abbotsford-Mission CMA, where the rate was just 1.4 per cent, according to Statistics Canada.

However, some B.C. mountain communities such as Fernie and Revelstoke were found to have non-resident ownership rates higher than the provincial average of 3.5 per cent, at 6.6 and 5.2 per cent respectively. Other popular vacation hotspots, like the Southern Gulf Islands, Saltspring Island, Nanaimo and the Sunshine Coast, range between more than five per cent to almost seven per cent.

The rates of non-resident-owned homes varies between property types, Statistics Canada found, with condos seeing higher rates and detached homes lower. In Vancouver CMA, three per cent of detatched houses were owned by non-residents, compared with 7.8 per cent of condos. In Kelowna, four per cent of condos are owned by non-residents, and 1.8 per cent of single-family homes.

[Western Investor]


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