Vancouver Condo Auctions
Over the past 2 weeks, at least two condo developers have put condo developments for sale under auction.
The problem with auction type sales is the absence of full disclosure. Now 10 days after one auction has taken place, the problem is that the developer will not disclose the status of the auction. All we know is that far less than 50% of the units to be sold, under a so-called Dutch Auction method, were sold, for prices 25-40% less than list price.
We seldom recommend buying using the auction process because it is so difficult to know the details of each sale. For instance if the developer sells a condo under auction that was never pre-sold, the buyer has 10 days to back out of the contract. But if the developer sells a condo that he has taken back from a buyer, then it is a resale and the buyer can't back out. In addition, when units are auctioned, they are often "made-up" meaning that high end appliances, electronics etc are placed in the unit, but when the transaction closes, regular appliances show up. Often the auction contract will simply state "stove, fridge, washer/dryer" making it impossible to get recourse.
We are very focused on proper disclosure in contracts. And of proper disclosure of market conditions. In one Vancouver development, the developer is bragging that he is still getting sales despite not lowering prices. What was not disclosed is that for every unit now being sold, he is now throwing in a $70,000 2009 Mercedes SUV!
Friday, January 23, 2009
Saturday, January 10, 2009
Athletes Village Profile
On November 9th, 2008, we made recommendations to pass on condo purchases at the Vancouver Olympic Athlete's Village.
http://canadapacificrealestate.blogspot.com/2008/11/impact-of-athletes-village-on-market.html
Today, one local newspaper ran a headline that the City of Vancouver might be on the hook for $1billion in backstops to the athlete's village. The headline is very deceiving. If the city does have to provide $1 billion in credit back-up to the village, it would realize or end up owning the entire project, which would likely be worth somewhere between $600 million to $750 million. The city would have to sell off the assets to recover cash, and there would be a shortfall which might creep up to $400 million. And there would likely be some sort of work-out take place in which an additional building becomes not-for-profit housing, and another building becomes a condo-hotel.
In the meantime, there are virtually no reported sales at the village construction site. We did do a site visit this week. Our only concern is the absence of infrastructure improvement in the area: no school capacity increases, an absence of parking, no additional policing plans etc.
We continue to recommend passing on the project.
http://canadapacificrealestate.blogspot.com/2008/11/impact-of-athletes-village-on-market.html
Today, one local newspaper ran a headline that the City of Vancouver might be on the hook for $1billion in backstops to the athlete's village. The headline is very deceiving. If the city does have to provide $1 billion in credit back-up to the village, it would realize or end up owning the entire project, which would likely be worth somewhere between $600 million to $750 million. The city would have to sell off the assets to recover cash, and there would be a shortfall which might creep up to $400 million. And there would likely be some sort of work-out take place in which an additional building becomes not-for-profit housing, and another building becomes a condo-hotel.
In the meantime, there are virtually no reported sales at the village construction site. We did do a site visit this week. Our only concern is the absence of infrastructure improvement in the area: no school capacity increases, an absence of parking, no additional policing plans etc.
We continue to recommend passing on the project.
Tuesday, January 6, 2009
Collateral Damage
Once investors start to walk away from their real estate investments, developers start to mitigate losses by cancelling projects.
Unfortunately, because of public/private joint infrastructure initiatives, when developers cancel or restructure projects, public infrastructure can be impacted. Its called collateral damage.
Richmond's huge Sun Tech City project and the proposed Capstan Way Canada Line station are now in jeopardy as Richmond council prepares to vote on whether to shelve the 16-tower development. These 16 towers were supposed to provide housing for 4,000 people, community centers and additional social housing.
A city staff report says the developers, Pinnacle International and Concord Pacific, have not lived up to their end of a deal in which they would help finance the additional Canada Line Station.
If investors have made investment decisions based on proposed improvements to local infrastructure paid for by new developments they need to check for changes to the developments and possible fallout.
Unfortunately, because of public/private joint infrastructure initiatives, when developers cancel or restructure projects, public infrastructure can be impacted. Its called collateral damage.
Richmond's huge Sun Tech City project and the proposed Capstan Way Canada Line station are now in jeopardy as Richmond council prepares to vote on whether to shelve the 16-tower development. These 16 towers were supposed to provide housing for 4,000 people, community centers and additional social housing.
A city staff report says the developers, Pinnacle International and Concord Pacific, have not lived up to their end of a deal in which they would help finance the additional Canada Line Station.
If investors have made investment decisions based on proposed improvements to local infrastructure paid for by new developments they need to check for changes to the developments and possible fallout.
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