Weekly Buzz: Trump Tower condo flipping, residential overheating

Western Canada's top commercial real estate stories, featuring coverage on CRA real estate probe into shadow flipping, Metro Van price overvaluation

Western Investor
July 27, 2018

trump tower

The week’s top stories cover a range of topics, from CRA’s continued probe into shadow flipping of residential real estate, to the province’s acquisition of social housing in Vancouver. Despite slowing sales, the Metro Vancouver residential market remains overpriced. In Victoria, a major site sale made news.

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


CRA probe into pre-sale condo flippers expands to include Vancouver’s Trump Tower – Business in Vancouver

The Canadian government continues to widen the net cast over Vancouver’s real estate market to catch possible tax cheats, now ensnaring the developers behind Vancouver’s Trump Tower.

The Minister of National Revenue has gone to the Federal Court of Canada again to glean information from developers about pre-sale condo buyers who assigned their contracts prior to construction completion. On July 19, the government filed three more applications in Vancouver for information on pre-sale flippers.

One application names West Georgia Development LP, West Georgia GP Ltd. and West Georgia Holdings Inc., and seeks to verify income tax and excise tax compliance of flippers who bought into the “Residences at Trump International Hotel & Tower.”

Another names Wall Centre Central Park Condominiums LP, WCCP Developments (GP) Ltd. and BJW Holdings Ltd. as respondents, and the minister is seeking information on pre-sale buyers from its multi-tower Central Park development, including the towers at 5515 and 5665 Boundary Road, the Orimdale Tower at 5598 Ormidale Street, and the “Wall Centre Central Park - Phase 2,” at 5470 Ormidale Street in Vancouver.

The third names Amacon Alderbridge Development Partnership, Amacon Alderbridge Development LP, Amacon Development (Alderbridge) Corp., Luci Marketing Ltd., and Amacon Project Management Services Corp. as respondents. In a boiler-plate application like the others, the Minister of National Revenue seeks information about pre-sale flippers at the companies’ Tempo condominium project in Richmond on Alderbridge Way.

None of the companies responded to Business in Vancouver’s requests for comment. Lise Walsh, a tax lawyer with the Department of Justice, did not respond to BIV’s request for comment.

The CRA’s forays into Federal Court are not limited to probing developers, however, as the government is set for a showdown in October with a group of taxpayers who claim their Constitutional rights have been trampled upon by the CRA’s efforts to flush out tax evaders. The court is set for a two-day hearing on a flurry of applications from both the minister and taxpayers ensnared in offshore tax compliance investigations. In its latest moves back in June, the Minister of National Revenue filed applications to keep audit techniques secret from respondents including Frederick Sharp, a Vancouver businessman and lawyer linked to Panamanian law firm Mossack Fonseca, and Richard and Mary Hethey, a couple with past links to several public companies in the U.S.

[Business in Vancouver]


Province snaps up social housing; private investment still strong – Business in Vancouver

The government is investing in social housing, rivalling a spree that took place a decade ago, columnist Peter Mitham reports.

The province’s $12.5 million purchase of the Jubilee Rooms at 235 Main Street in June and the more recent purchase of Woodwynn Farms in Saanich are a change of course from before last year’s provincial election.

BC Housing was shedding assets at the time, though communications staff attached to the province’s housing minister, Rich Coleman, at the time couldn’t provide data on how many properties BC Housing had shed. However, staff did tout a commitment of $920 million to build and renovate approximately 5,300 units of affordable rental housing across B.C.

But in a turnaround during the fiscal year ended March 31, 2018, BC Housing bought 1,019 housing units across the province, up from 462 in the previous year. It was unable to disclose a purchase price last week.

The acquisitions rival the spree that took place a decade ago. Having cancelled hundreds of social housing units after winning the 2001 election, the BC Liberals launched a major housing initiative, Housing Matters BC, in fall 2006. The initiative came as housing prices skyrocketed and housing affordability disappeared.

RBC Economics reported at the time that an apartment purchase required 38.4% of a typical household’s monthly income, up from 26.1% five years earlier. (This compares with 51.4% of monthly household income today.) To address the crisis, the province committed $80 million in April 2007 to buy 16 properties, including 10 in Vancouver, and in February 2008 bought a further six single-room-occupancy hotels in Vancouver for $23.7 million. The acquisitions totalled 1,039 units in 22 buildings.

By March 31, 2012, BC Housing accommodated 41,043 households in independent social housing. Today, it accommodates just 39,945 households.

Demand buoyant

The mid-year outlook for purpose-built rental properties is holding the course, with statistics tracked by the Goodman team at HQ Commercial putting this year’s aggregate values on par with last year.

“Demand remains buoyant, despite the NDP’s newly introduced taxes and rising interest rates,” the team observed last month, and numbers for the first half of the year support the claim.

[Business in Vancouver]


Metro Vancouver housing market still 'highly vulnerable' to risk factors – Western Investor

For the ninth straight quarter, federal housing agency warns of high levels of price overvaluation in metro region

The Vancouver Census Metropolitan Area (CMA) housing market has been assessed as at a “high degree of vulnerability” from various risk factors by the Canada Mortgage and Housing Corporation (CMHC), in a report released July 26.

The federal housing agency’s quarterly Housing Market Assessment, which for this edition assessed market activity in 2018’s first quarter, has pegged the region as highly vulnerable for nine consecutive quarters.

As in previous editions, the latest report said that the main risk comes from overvaluation of homes, with price levels “far higher than the upper predicted values from price models based on demand and supply fundamental factors such as population, income, financing costs, and land supply.”

Eric Bond, CMHC’s principal analyst for Metro Vancouver, said, “Tight market conditions for lower-priced properties continue to exert upward pressure on the prices of these homes, accentuating CMHC’s detection of overvaluation in the Metro Vancouver housing market.”

The quarterly Housing Market Analysis analyzes real estate markets across Canada, assessing a combination of four key risk factors: overheating, when demand for homes in the region outpaces supply; sustained acceleration in house prices; overvaluation of house prices in comparison with levels that can be supported by economic fundamentals; and overbuilding, when the inventory of available homes exceeds demand.

Despite home price growth slowing recently in many areas, the overall year-over-year price growth seen in 2018’s first quarter was enough for CMHC to flag the region as being at “moderate” risk of both overheating and price acceleration.

“The HMA framework detected moderate evidence of overheating, although price growth has been slowing considerably over the last two quarters, and has turned negative in some areas,” said Bond. “Declining prices for detached properties in some areas, particularly Vancouver’s Westside and West Vancouver, are due to high inventories that have accumulated due to sustained falling sales volumes.”

Once again, the only area where the risk was deemed low in Metro Vancouver was overbuilding. “Despite record-breaking new home construction over the past two years, new home inventories remain low as developers have not been able to keep up with the demand,” said the report.

[Western Investor]


Downtown Victoria YMCA-YWCA property sold for $22M – Times Colonist

The 1.42-acre site was acquired by Vancouver-based Concert Real Estate Corp., Times Colonist reports.

The downtown Victoria YMCA-YWCA property has been sold to Vancouver-based Concert Real Estate Corp. for nearly $22 million, but the fitness-social facility is not relocating immediately.

It is aiming for a smaller, more efficient facility to be built somewhere downtown with a development partner. Under the agreement with Concert, the Y can stay at 851 Broughton St. for up to seven years.

The $21.969-million sale closed Friday on the 1.42 acre site, said Christine Gleed, chairwoman of the board of directors for the YMCA-YWCA of Vancouver Island.

“We have a building that is aging,” Gleed said Wednesday.

It was not feasible to renovate the 62,000-square-foot building, given that much of it is unused and inefficient and its need for seismic upgrading, she said.

Only 30,000 square feet of the Y building is being used now. “It is just an older style building,” Gleed said, adding that it has a lot of hallways and decommissioned office space that is no longer used.

Brian McCauley, Concert’s president and chief executive , said: “While our plans for this site are yet to be confirmed, we are committed to thoughtful planning and engagement that reflects Concert’s commitment to be a community-builder.”

Concert has developed condominiums in Victoria, converted the former Queen Victoria Hotel into rental units and is now building a seniors building with a 15-storey tower at the former Crystal Court Motel site on Belleville Street.

An agreement has also been struck that the non-profit organization will place $1.89 million with the city of Victoria as security for the Y’s commitment to provide health, fitness and recreation services downtown.

When the Y has relocated in the core and continues its services, the city will return the money to the organization.

If that doesn’t happen, Victoria will keep the money for a capital project dedicated to recreation and wellness.

This deal replaces a covenant that was put on the land in 1965 when the city donated some of the land for the project.

[Times Colonist]

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