Surrey’s Infinity project will go on

Glenda Luymes
Province

Concord Pacific has entered into an agreement to complete the second phase of the $350-million, five-tower project in the heart of Surrey.

Construction on the second and third Infinity towers was halted in October when Korean company Jung Developments Inc. was forced to seek court protection from creditors after its main financier, American investment bank Lehman Brothers, collapsed.

“We’re certainly delighted to have Concord Pacific finish the project,” Surrey Mayor Dianne Watts said yesterday. “This announcement reinforces our confidence in the strength of Surrey‘s local economy.”

The mayor called the Infinity development a “gateway project” for the entire city.

“In terms of Surrey‘s metropolitan core, it’s a very significant development,” she said.

Details are still being worked out, but under the agreement, Concord Pacific will acquire and complete the second phase of the Infinity towers — two half-completed, 36-storey towers comprising 698 residential units.

The project’s first phase, a single 36-storey tower, has already been completed and occupied. It is unclear what will happen to plans for the final two towers, known as the Sky Towers, which were supposed be the tallest buildings between Vancouver and Calgary.

The entire development is planned for three hectares near the Surrey Central SkyTrain Station and Simon Fraser University‘s Surrey campus.

Concord senior vice-president Cliff McCracken said the company hopes to recommence construction on the two towers as soon as possible, removing “the uncertainty over this project.”

“It is also our intention to work with the stakeholders and original buyers of this development and help them to complete the purchases of their homes,” he added.

It is unclear how much money Concord Pacific will provide to complete the towers.

Media reports at the time the project was put on hold indicate sales for the two towers were expected to yield about $170 million, including the presale agreements. The cost to complete the project was estimated at less than $100 million.

© Copyright (c) The Province

Neal Hall
Sun

Quest Capital Corp. has filed a legal action against thee Vancouver businessmen who are allegedly involved in a $32-million loan that is in default.

Named as defendants are James George Pappajohn, Thomas James Pappajohn and Anthony James Pappajohn, who all live on Vaoncouver’s west side.

Quest claims it agreed to loan the money to Jameson House Properties Ltd. and Jameson House Ventures Ltd., with the defendants promising to “save” the plaintiff against all losses, costs, expenses and any damages arising out of the loan.

“The debtors have made default under the loan,” states the legal action, which seeks the appointment of an interim receiver.

Quest claims it demanded repayment of the debt on Nov. 17 from each defendant but they have failed to pay the amount demanded: $ 30.4 million, which is accruing interest at the rate of $ 10,018 a day.

Anthony Pappajohn, in other news reports, said he had to halt construction on the Jameson House project in mid-November because one lender in a syndicate of three financiers pulled its backing for the $ 180-million luxury building at the end of October.

Pappajohn said he was continuing to search for new financing, but could not justify keeping construction crews on site if he didn’t know whether his company would run out of money to pay them.

Jameson House was one of a flurry of Lower Mainland projects to hit financial turbulence in the wake of the credit crisis.

In October, Jung Development Inc. lost the main financier for its Infinity project in Surrey’s Central City when the investment bank Lehman Bros. collapsed. A second Jung project, Sky Towers, stopped when it failed to find financing.

Jameson House was designed as a 37-storey condo and office tower with suites ranging from $ 500,000 to $ 5.3 million.

Project attracted controversy as costs shot from $ 495 million to about $ 883 million

LORI CULBERT
Sun

Those who are building it gush about the Austrian glass and the B. C. artwork, but has the expansion of the Vancouver Convention & Exhibition Centre been a good investment, given today’s economic uncertainty?

And has the ballooning budget — which was harshly criticized in an auditorgeneral’s report last year — for the newer, bigger, fancier wing of the convention centre really stopped growing?

The answer is yes to both questions, according to fans of the imposing structure that juts out over Burrard Inlet.

But others raise concerns about budgetconscious companies booking fewer conventions in the future, potentially causing more money woes for the expensive jewel in Vancouver’s economic crown.

The centre’s original budget of $ 495 million spiralled out of control to $ 883.2 million, but that final price-tag was locked in last year and will not budge, Tourism Minister Bill Bennett promised in an interview last week.

“ The project will come in on or under budget,” Bennett said.

Despite the horrendous cost overruns, Bennett argued the centre is a world-class facility that will “ more than pay for itself” despite the competitive environment for convention business during tough fiscal times.

“ I’m not a Pollyanna. I’m not suggesting to you that we’re going to be immune somehow from the economic downturn. But we’ll be in a better position to compete here,” he said.

“ Yeah, it is going to be tougher, and yeah, the conferences are probably going to be somewhat scaled back, but business doesn’t end because there is a recession.”

So far, 159 conventions are booked for the new facility after it opens next spring. But the number of people expected to attend will be lower because of corporate belt-tightening, Bennett said. However, he still maintained the events will generate $ 2 billion in economic activity.

Those 159 bookings stretch as far into the future as 2018, and 54 of them would not have fit in the existing “ boutique”sized convention centre.

Today, PavCo, the Crown corporation that runs the convention centre, will tour reporters through the facility to mark 100 days before the construction is expected to be finished in mid-March. The government insists the facility will be ready for its first convention, to start April 16 when the American Bar Association comes to town.

But Maureen Bader, of the Canadian Taxpayers Federation, is among those who are worried the costs of building the convention centre have not stopped growing, and that the government will ultimately step in to pay for the overrun because this is a high-priority Olympics-related project.

“ Only 80 per cent of the $ 883 million has been fixed, and we haven’t seen any indication at all that the government is willing to reduce the scope of the project,” she said. “ I’m sort of waiting for it to hit the magic $ 1-billion mark, but I bet you it won’t do that until after the next election.”

Bader also noted the federal Liberal party nearly cancelled its 2009 convention in Vancouver because of concerns about cost, and she believes others must be weighing the same option.

None of the 159 events booked into the new facility have so far been cancelled, said Dave Gazley of Tourism Vancouver. But he noted it is standard in tough economic times to court those clients to ensure they will still come to Vancouver.

“ With what is going on globally, for sure, we need to keep an eye on every single group that we already have on the books so attendance numbers don’t slip because of economic reasons,” he said. “ We’ve done this in the past after 9/ 11, after SARS.”

Associations such as legal and medical groups book their conventions far in advance and are more stable clients, Gazley said. But corporations are more influenced by tough times and there could be uncertainty with some of those bookings.

Among the high-end details in this convention centre is the $ 25 million in glass, which lines the exterior walls. There are about 2,500 glass panels, twobyfour metres in size, which cost about $ 10,000 each to manufacture, transport and install.

The glass was imported from Austria, which was a “ fairly unusual” step, said Regan Loehr of Inland Glass, the Kamloops company in charge of the windows in the convention centre. It was necessary, he said, because largeenough pieces of this special low-iron glass were not available in North America at the time construction began.

“ The low-iron content in the glass gives it a lot clearer views. So if you look at it standing inside the building, or even outside the building, it’s like the wall basically disappears, is the theory behind the design by the consultants,” Loehr.

The job was expensive and complex because many panels were installed in walls suspended over the water.

“ It is very much one of the highestend buildings we’ve worked on, and on cost per square footage, it’s right near the top,” he said.

In a televised address in October, Premier Gordon Campbell vowed to “ rein in avoidable government spending” during what he called the worst global financial crisis in 75 years.

But big-ticket finishings and special artwork have not been scaled back as the convention centre nears completion, Campbell’s tourism minister said. Building a high-quality convention centre, Bennett argued, will be an economic stimulus for Vancouver during tough times.

“ We’re being told by people around the world that this is going to be the most attractive convention centre in the world,” he said. “ We have to make sure that our finishes are up to that standard. So, no, we’re not planning right now on cutting back.”

In April 2007, the government appointed developer David Podmore to oversee the financially-out-of-control project, and he became the first person on the PavCo board with in-depth constructionsector knowledge. Podmore then negotiated with the centre’s main contractor to set a fixed price for 80 per cent of the budget, replacing the previous cost-plus contract.

But in a scathing October 2007 report, auditor-general Errol Price couldn’t provide assurances the centre would be on budget because its “ estimates of future costs are built on assumptions” that there will be no further changes before completion.

Price noted some of the reasons for the ballooning price tag included more public amenities, rising construction costs, and starting the building before a design was complete because of the tight time-frame to finish before the 2010 Olympics.

Those construction costs are no longer escalating, but NDP critic Rob Fleming argued that alone is not a guarantee the Liberals will keep this project in the black and economically viable.

“ How can a building that is double its original budget — but it’s the same building you planned for — earn twice the amount of revenues to service that enormous debt? How many events can you cram in there?” asked Fleming, the NDP’s tourism critic.

Fleming was also skeptical of the $ 2 billion in economic activity that the 159 conventions are predicted to create.

“ They are using wildly optimistic estimates for the number of packs of gum and restaurant meals people will be buying.”

He also questioned the need for such a large facility, noting that 105 of those future conventions could still have come to Vancouver without the new building because they would have fit in the existing centre.

But Gazley maintained the centre will be a good investment, despite the inflated cost. “ If you look at that building amortized over 25, 30, 40 years, it is going to bring an awful lot of money into the community,” he said.

Of the total $ 883-million bill, the province’s share is roughly $ 538 million. The federal government has agreed to pay $ 225.5 million, Tourism Vancouver $ 90 million, and PavCo $ 30 million.

DERRICK PENNER
Sun

Real estate markets in 2009 will be mired in the economic slowdown and their performance will depend on how government stimulus affects consumer confidence, the realty f irm Re/ Max said Wednesday.

In its 2009 outlook, Re/ Max said the threat of global recession will weigh on markets, and estimated that half of the 22 major Canadian cities it surveys will see market declines, with B. C. markets seeing some of the steepest drops.

Elton Ash, Re/ Max regional executive vice-president for Western Canada, said the beginning of 2009 will look a lot like the end of 2008.

“ The confidence issue, certainly from our perspective, [ will be key] when we look at 2009,” Ash said in an interview. “ The first quarter of 2009 will certainly be a continuation of the trend we’re seeing now, with reduced transactions and average prices coming down in Vancouver and throughout British Columbia.”

Ash said consumers should have a better idea after the first quarter of 2009 what kinds of stimuli governments plan to inject into the economy, which should bolster confidence through the rest of 2009.

“ The good news, from the first-time homebuyer’s perspective, is that homes will become slightly more affordable, provided they have the confidence to buy,” Ash said.

Re/ Max said Metro Vancouver will have experienced a 33-per-cent drop in sales by the end of 2008, and 2009 sales should end at the same level. Vancouver’s average price at the end of 2009 should be seven per cent below 2008’ s average price.

Victoria and Kelowna, after experiencing 23-per-cent and 37-per-cent declines in sales, should see sales decline a further 11 per cent and 10 per cent, respectively. The 2009 average prices in those cities, in Re/ Max’s assessment, will dip 10 per cent from 2008.

Nationally, Re/ Max expects sales to decline 15 per cent by the end of 2008 to 440,000 units and stay at that level for 2009. It believes the national average price will decrease three per cent to $ 300,000 in 2008, and a further two per cent to $ 293,000 in 2009.

Re/ Max’s assessment is the latest of the fall forecasts tracking B. C. and Canadian real estate markets. Not all came to the same conclusions.

Canada Mortgage and Housing Corp.’ s 2009 forecast is for B. C.’ s average price to decline nine per cent in 2009 and provincial sales to fall just under one per cent.

Central 1 Credit Union’s forecast calls for 13-per-cent declines in B. C.’ s average price for 2009 and a further five per cent in 2010, when it expects the market to recover. It expects sales to drop 17 per cent in 2009.

Other analysts have estimated that prices in B. C.’ s markets overshot their equilibrium on the up-cycle, such as Carl Gomez, vice-president of research at Bentall Investment Management, who believes prices might have spiked as much as 30 per cent over equilibrium.

However, Ash said B. C.’ s markets have geography and demographics going for them in the long run.

“ There’s no reason for British Columbians to be overly concerned about the value of the real estate they’re holding today,” Ash said.

Victoria, Kelowna prices hit hardest by this year’s market decline

Province

Victoria and Montreal will share the dubious honour of posting the sharpest decline in home sales next year, at 11 per cent, a national real-estate firm predicts.

Victoria and Kelowna will share another dark honour as the two B.C. cities post the nation’s steepest drop in average home prices in 2009, at 10 per cent, Re/Max said in a forecast released yesterday.

As for Vancouver, sales will plunge by 33 per cent this year but stay flat at 26,000 in 2009, Re/Max said.

Average home prices in Greater Vancouver are expected to rise two per cent this year to $585,000 and fall by one per cent to $580,000 in 2009, the real-estate company said.

For Canada as a whole, home sales are expected to stabilize in 2009 after a double-digit drop this year, while prices will edge down slightly following this year’s single-digit decline.

“Nationally, 440,000 homes are expected to change hands in 2008, down 15 per cent from record 2007 levels,” Re/Max said.

“Canadian housing values are expected to hover at $300,000, a nominal three per cent decline from last year’s historic peak.”

Sales are expected to drop further in the early part of 2009 before recovering by the end of the year at the 440,000 level, Re/Max said.

The average price is expected to slip by two per cent to an average of $293,000, it said.

“Global economic uncertainty weighed heavily on residential real-estate activity in most major Canadian centres during the latter half of 2008,” it said. “Although the forecast for 2009 promises more of the same, most markets are expected to weather the storm.” And average prices have held up “remarkably well” across the country despite what were double-digit declines in 13 of 22 markets, thanks to solid gains early in the year, it said.

The outlook is for “somewhat static” activity in the first six to nine months of 2009, given continued volatility in financial markets and the threat of recession. However, as stability returns to the financial sector, housing markets are expected to recover.

“The landscape is definitely changing — with most markets shifting into either balanced or buyer’s territory,” said Elton Ash, Re/Max’s regional executive vice-president for Western Canada. “Sellers no longer rule the roost.

“Opportunities exist for purchasers like never before, including lower interest rates, greater inventory levels, the luxury of time to make decisions, and the upper-hand at the negotiating table,” he said, adding that sellers now need to take that into account in setting their asking prices.

Still, of the 22 major markets in Canada, half are expected to see home sales in 2009 match or exceed this year’s levels.

The relatively upbeat forecast was seen as evidence of the relative strength of the domestic housing market.

“News that house prices are in decline in Canada should not come as a surprise to anyone,” said Mark Frey, vice-president foreign exchange at CustomHouse, an international payments firm. “Instead, the simple fact that the declines come via a low, single-digit figure perhaps should.

“Certainly, this report should serve as yet another example of how the underlying fundamentals of the Canadian economy remain comparatively sound, especially compared to much of the industrialized world as plunging real-estate values from San Francisco to London to Barcelona and Auckland lead the world economy further into the abyss.”

And that resilience should, in turn, help support the domestic side of the Canadian economy, Frey added.

“While it may not be enough to avoid a recession outright, it should translate into a shallow and less prolonged downturn than what is being experienced elsewhere,” he said.

© Copyright (c) The Province

 

Stephanie Armour
USA Today

The number of home buyers applying for mortgages surged by a record amount last week in response to aggressive federal efforts to lower mortgage rates.

Mortgage applications more than doubled in the holiday week ended Nov. 28 vs. the week before, according to a report Wednesday by the Mortgage Bankers Association. The association’s index, a measure of mortgage application volume, was up 112% on a seasonally adjusted basis from the week earlier. And the refinance index lept 203%.

The record jump in applications comes as the average rate on a 30-year fixed-rate loan dropped to 5.47% last week, lowest since June 2005, from 5.99% the prior week. At the current rate, monthly borrowing costs for each $100,000 of a loan would be about $565.91, down $71 from three months ago.

“Interest rates fell way down. It’s because of the (federal) action to buy up Fannie Mae and Freddie Mac assets,” says Patrick Newport, an economist with IHS Global Insight. “I was surprised. This may have exceeded the Fed’s expectations. People are jumping into the marketplace.”

The government in November said it will buy up to $100 billion of direct debt of Fannie Mae and Freddie Mac and the Federal Home Loan Banks, and it will buy up to $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae. The goal, in part, was to lower mortgage rates on loans for home buyers by pumping cash into the mortgage market.

Those efforts have led to a significant drop in mortgage interest rates.

But despite the unprecedented surge in applications for home refinance and home purchase loans, economists caution that many hurdles remain before the housing market stabilizes.

The major challenges:

• A glut of unsold homes, which is continuing to drive down home values.

• A growing number of homeowners who owe more than their homes are worth. Nearly one is seven homeowners is underwater, which means they owe more on their mortgage than the home is worth. That’s about 12 million homeowners, nearly double the 6.6 million underwater at the end of 2007, according to Moody’s Economy.com. That significantly hampers the ability of legions of homeowners to refinance.

• Tighter lending standards mean even though applications for mortgages and refinancing may be up, that doesn’t mean those applications will be approved. To qualify, borrowers must meet ever stricter lending requirements and come up with higher downpayments.

In addition, mounting unemployment — the unemployment rate rose from 6.1% to 6.5% in October, and the next report by the Department of Labor is widely expected to be even more dismal — is undermining a housing recovery. Many who lose jobs are moving in with relatives or putting homes up for sale, adding to the glut of homes on the market.

“Homes on the market are still at an all-time high,” Newport says. “(The record number of applications) is good news, but over the next month, the housing market will continue to deteriorate.”

 

Derrick Penner
Sun

METRO VANCOUVER — The correction in Lower Mainland real estate markets deepened in November, in another month of turbulent economic news that continued to hold buyers at bay.

In Greater Vancouver, realtors saw transactions drop 70 per cent to 874 MLS-registered sales compared with the same month a year ago, according to Real Estate Board of Greater Vancouver statistics released Tuesday.

The so-called benchmark house price hit $665,525 in November, an almost 14-per-cent fall from May and nearly nine per cent below the November 2007 benchmark.

Fraser Valley saw 507 MLS sales in November, a 62-per-cent decline from the same month a year earlier. The average house price in the valley dipped to $511,698, down almost seven per cent from May, and nearly even with the average price in November 2007.

“I guess it is a deepening of the existing trend we’ve seen since the spring,” Robyn Adamache, senior analyst with Canada Mortgage and Housing Corp., said in an interview. “I’d say it’s mainly due to uncertainty stemming from developments we’ve seen in economic and financial markets.”

Price declines will be a relief for potential buyers, who have been saving money waiting to get in, she said. However, when prices will stop declining is an open question.

Adamache’s forecast is for a nine-per-cent drop in 2009 compared with 2008, assuming B.C.’s economic situation does not worsen.

Dave Watt, president of the Real Estate Board of Greater Vancouver, said markets started to turn when some in the market could no longer afford to buy.

“It was affordability, and now we do have some return to affordability,” Watt added. “I know there are buyers out there, and they are just looking for good value.”

Other analysts, however, suggest prices in B.C.’s real estate markets could continue dropping until they’ve knocked 25 to 30 per cent off peak prices seen early in 2008.

That is how far real-estate economist Carl Gomez says he believes B.C. prices overshot their equilibrium point, based on comparing the per-capita incomes of British Columbians against the average prices of homes.

“Fundamentally, what has shifted is psychology,” Gomez said in an interview. “There is recognition that some residential real estate may be far overvalued.”

His analysis for Bentall Investment Management showed that since 1981, B.C. house prices averaged about nine times a working British Columbian’s annual per-capita income.

However, since about 2001, B.C. prices have shot up to the equivalent of 14 times per capita income, which proved to be unaffordable for too many potential buyers.

Gomez said the correction that markets are experiencing doesn’t yet account for the real impacts of job losses and other effects of B.C.’s and Canada‘s slowing economies.

He also says the beginning of Vancouver‘s housing decline has been much steeper than in U.S. markets such as San Francisco, Los Angeles and San Diego.

“The markets that went up the highest [and] the fastest are the ones that will come down the fastest,” Gomez said. And that’s in the absence of the same exposure to subprime lending that helped inflate American house prices.

Gomez argues that it was the unaffordability of housing in many U.S. markets that started to squelch demand and triggered initial price declines.

However, the house-price-versus-income comparison isn’t quite a complete picture of a market like Vancouver‘s, where housing supply is constrained by geography and regulation, says another expert.

In such markets, the average prices will rise compared to income, and buyers respond by moving into smaller units, said Tsur Somerville, director of the centre for urban economics and real estate at the Sauder School of Business at the University of B.C.

Somerville conducted his own analysis of Vancouver prices earlier this year that compared the cost of buying a house versus the cost of renting a similar unit. He concluded Vancouver real estate was 11-per-cent overvalued.

“There are different ways to think about it,” Somerville added, but both his and Gomez’s analyses show the market is in a down-cycle. Where it stops, however, is another question.

Somerville said in current economic conditions, it is difficult to see the bit of positive economic news that would turn around sentiments in B.C.’s housing markets.

“When I talk to people who are looking to buy, I say, ‘Use this as an opportunity to look for the unit you want,’ ” Somerville said. “In all likelihood, prices are going to continue to decline, but it’s not like I can tell you when they will hit the low point.”

People need to remember, “You should be buying a house for a place to live, not as an ATM machine,” he said.

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