Ian Young has produced another remarkable story for the South China Morning Post.
The implications are profoundly disturbing. Not only is the real-estate market disconnected from local supply-and-demand considerations but increasingly the ability of the City to plan for its residents looks to be threatened. When the West End plan was being considered a year or so ago, no one imagined the deal outlined below: a 60-storey tower priced out of the realm of even affluent Vancouverites, valuable accommodation being left empty, and unimaginable pressure being put on the West End and its affordable housing stock.
This will only add to the seismic forces that are building just under the surface, waiting for a political earthquake to shake the status quo – that sense that our leaders, public and private, are incapable of responding or, at higher levels, do not care about the consequences.
The prominent Vancouver property developers behind Wall Financial Corporation had spent C$16.8 million (HK$102 million) to buy two ageing walk-up apartment blocks on adjacent lots on Nelson Street in 2013. They had big plans for the downtown site: a glittering 60-storey residential skyscraper, taking advantage of the location within the city’s West End Community Plan, where a building could rise 168 metres tall under new zoning. The project was dubbed “Nelson on the Park” and the Walls turned to favourite designer Chris Doray to come up with what they hoped would be a new Vancouver landmark.
But now a consortium of investors was proposing something even more remarkable.
They would pay the Walls C$60 million for the site alone, which had just been valued at C$15.6 million by BC Assessment. The huge profit was impossible to resist, and the sale was completed in late January.
Doray, a 25-year veteran of the Vancouver development scene whose design has now been shelved, said he was “astonished” by the transaction, which he said set a new benchmark for commercial real estate in the city.
“The price on this block of land has now thrown everybody in the industry out of whack,” said Doray. “The property is worth, what, C$20 million, and somebody pays C$60 million? One wonders what’s going on. Is this New York? Is this Hong Kong?”
The scale of the purchase, orchestrated by Sun Commercial Real Estate (Suncom) – a firm that specialises in pooling wealthy investors from Vancouver’s Chinese immigrant community – was exceptional enough.
But an investigation by the South China Morning Post now reveals the strange and frantic backdrop to the transaction – including a two-hour stampede by Suncom’s investors, desperate for a slice of the deal. It is a transaction that also sheds light on the rush of Chinese money fuelling Vancouver’s soaring real estate market.
… capital outflows from China were reaching a fever pitch, as companies and individuals scrambled to send money overseas last year in record volumes ahead of a feared yuan devaluation. The Canadian dollar was also plummeting, making Canadian property relatively more affordable to yuan earners, and average detached house prices in metro Vancouver soared more than 40 per cent last year, hitting an average of C$1.8 million. …
And so, against this heady backdrop on the morning of October 12, Suncom threw open the gates for the Nelson Street sale.
The result was nothing short of a frenzy.
“The 60 million dollars project at 1065 Nelson St Vancouver’s shares sold out in two hours! Thank you very much for the supporting from all my clients!” Lau announced on Facebook on October 14. …
Fundraising tactics used in deals involving Suncom have previously drawn the attention of the BC Securities Commission, which in January announced it was reviewing the firm’s activities, partly in response to an SCMP article about whether the firm was involved in crowdfunding. …
Keeping up with the changing ownership of the Nelson Street site has been no simple matter.
The changes do not show up in land titles for the two lots, because they remain to this day in the hands of Nelson Street Residences Ltd, a firm set up by the Walls in 2013 which was added to the titles in March 2014.
Instead, it is ownership of Nelson Street Residences that has changed hands, thereby avoiding property transfer taxes of C$1.78 million for Suncom’s consortium. The share-transfer tactic is common among commercial real estate deals and perfectly lawful. …
Chris Doray, who designed Vancouver’s Wall Centre and was again commissioned by Bruno and Peter Wall for the ill-starred Nelson on the Park project, has watched the site change hands with a mounting sense of disbelief.
His innovative design for the site, nicknamed the “pixelated tower”, was shortlisted at the 2015 World Architecture Festival in Singapore. It features a lattice-like façade that seems to dissolve into the sky.
But Doray now considers the plans shelved. “[They] weren’t so much interested in the project, but more in the land, as an investment,” Doray said of the consortium that bought the site off the Walls.
The widespread industry rumour – since confirmed by the SCMP – that the site had already been flipped seemed to validate Doray’s suspicions that the previous sale was a purely “speculative purchase”. …
He said that in a quarter century of involvement in Vancouver’s real estate scene he had seen nothing like the transactions linked to the Nelson Street lot. “I cannot believe that people will pay that kind of money for a plot of land. The whole industry is astonished.” …
Designer Doray, who understands the potential of the site as well as anyone, isn’t so sure. “If the developer pays C$60 million for the piece of land, can you imagine what any condos on it would sell for, if they finally finish this project?” Doray said, laughing. “It will be untouchable – well, for the local market. It could only be an elite group of people at this price.”