Metro municipalities retain industrial land control

Graeme Wood
Western Investor

— New industrial development in South Vancouver.| PC Urban

An attempt by Metro Vancouver to strengthen industrial land protection at the regional level, at the expense of municipal autonomy over land use has hit a brick wall.

A recommendation from Metro Vancouver’s regional planning committee to increase the voting threshold for minor industrial land use changes was rejected by two-thirds of the Metro Vancouver board, in a weighted vote on March 5.

The proposal to move from a 50 per cent -plus-one vote to a two-thirds majority for minor changes to industrial and mixed-employment zoned land was rejected mostly by board members from cities with the most industrial land, including Vancouver and Surrey.

The proposal came from the regional planning committee chaired by New Westminster Mayor Jonathan Cote, who wanted the higher threshold.

Cote noted the threshold recommendation came from an industrial land task force that sought ways to protect industrial land from being converted to commercial or residential zoning – a process that was popular among the region’s city councils over the past two decades.

Cote said the higher threshold would make it harder for municipal councils to convert industrial land. As it stands now, a council can approve rezoning but it still needs Metro’s board approval with a 50 per cent-plus-one vote.

“I think it definitely takes one of the strongest tools the region has to protect industrial land out of the toolbox,” Cote told Glacier Media.

Surrey councillors on the regional government’s board were united in their opposition.

Surrey councillor Laurie Guerra cited autonomy for her city and said, at the committee level, that industrial land inventory has increased in recent years.

That is true for developed industrial land, although the total inventory has dipped by a sliver from 11,430 hectares (28,244 acres) in 2010 to 11,331 in 2015. Surrey accounts for 2,584 hectares.

Although Surrey councillor Linda Annis said she opposes any removal of industrial land in Surrey, she voted against the proposal.

Langley mayor Jack Froese said, “if it’s not broken why fix it?”

Surrey Board of Trade CEO Anita Huberman told Glacier Media the higher threshold would mean more red tape for minor amendments that could be for “creative uses of industrial land to instigate job creation or business attraction.” 

Richmond councillor Harold Steves voted for the stricter measures, which would align industrial changes to that of removing land from the agricultural land reserve.

“I think these issues are so strong they are largely a regional issue, not a local issue,” said Steves.

According to the Regional Industrial Lands Strategy: “The Metro Vancouver region is experiencing a critical shortage of industrial land.”

Industrial lands comprise 4 per cent of the region’s land base, and accommodate 27 per cent of the region’s jobs, states Metro Vancouver. And to meet the demand forecast to 2050, an additional 800 to 1,600 hectares are needed.

Since 2014 to 2019, industrial land values have more than doubled and rents have increased 50 per cent on average, according to Metro Vancouver.

 

© Copyright 2020 Western Investor

$1 million barrier smashed in Toronto

Ari Altstedter
Mortgage Broker News

 by Ari Altstedter

The average price of a home sold in Toronto breached CA$1 million for the first time in February, with gains accelerating in the suburbs around Canada’s largest city.

Prices in the Toronto region shot up 14.9% from the year before to CA$1.05 million as bidding wars broke out on properties that came up for sale, according to a release today from the Toronto Regional Real Estate Board. It’s the second Canadian city to join the million-dollar club after Vancouver.

“It’s clear that the historic demand for housing experienced in the second half of last year has carried forward,” Lisa Patel, president of the Toronto real estate board, said in a statement accompanying the report. “The supply of listings is not keeping up with demand, which could present an even larger problem once population growth picks up following widespread vaccinations later this year.”

The Covid-19 pandemic caused an unexpected boom in demand for housing, with the ubiquity of remote work spurring demand for larger homes even as record low mortgage rates increased people’s ability to pay for them.

In Toronto, a stay-at-home order is still in effect and demand for upgraded living space appears to be growing. Ground-level homes in the suburbs were the drivers of February’s price gains. Detached homes in the 905 area code, which surrounds the city of Toronto, rose 27.8% to CA$1.3 million.

But the market is getting so frenzied it’s even bringing life to the downtown condo market that has been hardest hit by the flight to bigger homes. Though average condo prices were still down in February, that segment led the way in sales growth, with transactions surging 64% as bargain hunters piled in, the data show.

“In the absence of a marked uptick in inventory, the current relationship between demand and supply supports continued double-digit average home price growth this year,” the real estate board’s chief market analyst, Jason Mercer, commented in the report.

“If we continue to see growth in condo sales outstrip growth in new condo listings in Toronto, renewed price growth in this market segment is a distinct possibility in the second half of the year.”

 

Copyright © 2021 Key Media

Amendments to improve oversight for real estate, financial services

Victoria
other

People buying or selling a home will benefit from a real estate industry with more efficient and co-ordinated oversight from BC Financial Services Authority (BCFSA).

The Province is making legislative amendments to pave the way for BCFSA to become the single regulator for real estate in B.C. later in 2021.

“Whether it’s buying a home or remortgaging an existing property, British Columbians should be at ease knowing one of the biggest purchases of their lives is conducted safely and securely,” said Selina Robinson, Minister of Finance. “These changes will help protect consumers and better co-ordinate oversight of B.C.’s financial services sector, including the real estate market. Moving to a single regulator is a significant step to help BCFSA continue to address fraudulent activities and build protections against money laundering.”

In 2019, the Province announced that B.C. would be moving to a single regulator of financial services and real estate by bringing the responsibilities of the Real Estate Council of British Columbia and the Office of the Superintendent of Real Estate under BCFSA. The amendments will help create a single authority responsible for regulating real estate in B.C. to ensure a more co-ordinated approach to all segments of the financial services sector.

Creating a single regulator for real estate was a key recommendation from the Real Estate Regulatory Structure Review in 2018, as well as the Expert Panel on Money Laundering in BC Real Estate in 2019.

BCFSA currently regulates B.C.’s financial services market, including credit unions, trust companies, registered pension plans, insurance companies and mortgage brokers. The amendments introduced to the Real Estate Services Act will give BCFSA authority with respect to:

• education and licensing for real estate professionals;
• establishing rules governing the conduct for real estate professionals; and
• investigation and discipline for licensed and unlicensed individuals.

In addition, amendments to financial institutions legislation were introduced to empower the superintendent of financial institutions with most regulatory decision-making functions. This will enable BCFSA to operate more effectively as it acquires a new major set of responsibilities around real estate.

These legislative changes will enable BCFSA to become the fully integrated financial services sector regulator later in 2021.

Quotes:

Blair Morrison, CEO, BC Financial Services Authority –

“Bringing the regulation of financial services and real estate under one roof will allow BCFSA to become a modern, efficient and effective regulator for B.C.’s entire financial services sector. By integrating and enhancing its investigative, compliance and enforcement capacity and approach, BCFSA will provide strengthened consumer protection and foster increased public confidence.”

Stanley Hamilton, chair, BCFSA’s board of directors –

“BCFSA’s board of directors welcomes the evolution of B.C.’s regulatory regime with the introduction of these legislative amendments. The board of directors takes its accountabilities relating to approving BCFSA’s strategy and providing operational oversight seriously. We look forward to working closely with the CEO to deliver BCFSA’s mandate as we move forward.”

Micheal Noseworthy, head of the Office of the Superintendent of Real Estate –

“By centralizing our expertise under BCFSA, we will be building on our strengths and streamlining our work to better protect consumers in British Columbia. As the financial services and real estate markets are rapidly changing, we will focus on innovation and continuous improvement, bringing a single lens to the oversight of financial services and real estate with enhanced information sharing.”

Erin Seeley, CEO, Real Estate Council of British Columbia –

“Today’s changes will help modernize and strengthen our regulatory system, while keeping the focus on protecting consumers. Public protection continues to be our priority as we move toward a single regulator and beyond.”

Learn More:

To read the Real Estate Regulatory Structure Review, visit: https://news.gov.bc.ca/files/Real_Estate_Regulatory_Structure_Review_Report_2018.pdf

To read the Expert Panel on Money Laundering in BC Real Estate report, visit: https://news.gov.bc.ca/files/Combatting_Money_Laundering_Report.pdf

To learn more about BC Financial Services Authority, visit: https://www.bcfsa.ca/

Copyright © 2021, Province of British Columbia.

Buyer competition heats up in Vancouver, home prices post 7% increase in February

Sean MacKay
Livabl

Photo: Chloe Evans / Unsplash

With spring just around the corner, home sales surged across the Vancouver region last month.

A total of 3,727 homes changed hands in February, up 73.3 percent from the same month in 2020, according to data published today by the Real Estate Board of Greater Vancouver (REBGV). Buyers who purchased a home last month were faced with a fiercely competitive market as demand continued to outpace supply.

The intensity of the competition pushed home prices up by nearly seven percent annually and 2.6 percent compared to January.

Housing Market News Alerts

 

“Metro Vancouver’s housing market is experiencing seller’s market conditions. The supply of listings for sale isn’t keeping up with the demand we’re seeing. Competition amongst home buyers is causing upward pressure on home prices,” said REBGV Chair Colette Gerber.

“This is particularly true in the townhome market where demand is outstripping the available supply,” she added.

From a historical standpoint, it was also an exceptionally strong month for home sales. February’s transactions total was nearly 43 percent higher than the 10-year average for the month. It also represented a significant ramp up compared to the previous month. February 2021 beat out January’s sales total by more than 1,300 units.

Gerber pointed to low mortgage rates as the main driver for the strong activity, with first-time buyers and move-up buyers both jumping into the market.

Supply on the market couldn’t keep up with the surging buyer demand. While new listings increased in February by 26.1 percent annually, sales recorded an annual increase that was nearly three times that. The total number of homes listed for sale in the Vancouver region last month was more than 21 percent below the 10-year average for February.

As competition among buyers ratcheted up, the benchmark price for a single-detached home in the Vancouver region jumped 13.7 percent annually to $1,621,000. The region’s condo market recorded a relatively modest 2.5 percent increase in benchmark price to $697,500.

 

© 2020 BuzzBuzzHome Corp.

B.C. to extend rent freeze to end of 2021, increase protections against ‘renovictions’

CBC Staff
CBC Radio

 Tenants can disregard any notice of a rent increase they’ve received that would have taken effect before Jan. 1, 2022. Starting next year rent hikes will be capped at the rate of inflation. (Rafferty Baker/CBC)

The British Columbia government says it will introduce legislative changes to extend a rent freeze through to the end of this year to stop illegal “renovictions” and improve the dispute resolution process for tenants and landlords.

The province has already introduced and extended a rent freeze during the COVID-19 pandemic, and it says in a news release Monday that new legislative changes will keep it in place through Dec. 31.

It says tenants can disregard any notice of a rent increase they’ve received that would have taken effect before Jan. 1, 2022, and starting next year rent hikes will be capped at the rate of inflation.

The release says before the NDP government took power in 2017, the maximum allowable rent increase was as high as 4.3 per cent, well above inflation.

‘Progress’

“We know there’s more to do, but with these new changes, we’re continuing to make progress,” said Spencer Chandra Herbert, MLA for Vancouver West End.

The province also says the legislative changes mean tenants will no longer face so-called renovictions, or eviction notices for “phoney” renovations aimed at driving out long-term tenants and jacking up the rent.

Landlords will be required to apply to the Residential Tenancy Branch before they can end a tenancy agreement for renovations, and they will also not be able to evict tenants for renovations that are not substantial or do not require the unit to be vacant.

‘Not surprised’

Andrew Sakamoto, executive director of the Tenant Resource and Advisory Centre, said as part of the release that it is common for landlords to illegally renovict tenants without the necessary permits required by law or for minor cosmetic improvements.

“Rather than forcing tenants to dispute these types of meritless eviction notices, we are pleased that landlords will now have to go through an application process before issuing such notices in the first place,” he said.

 

Spencer Chandra Herbert, MLA for Vancouver West End, holds a media briefing Monday on behalf of Attorney General and Minister Responsible for Housing David Eby. (CBC News)

 

David Hutniak, CEO of Landlord B.C., which supports landlords in the province, says the extended period of frozen rents was expected.

“We’re not surprised,” he said about Monday’s announcement.

He said that by the end of 2021, it will be close to two years since landlords have been able to raise rents to help cover property taxes, insurance, maintenance costs and increased costs due to the pandemic

“Which is very challenging … COVID-related expenses are going through the roof,” he said.

He says his members are looking forward to increasing rents in line with inflation in 2022.

The bill with the proposed changes comes on the first day that the Legislative Assembly of British Columbia resumed its 42nd parliamentary session.

The bill stems from 23 recommendations made by a B.C.’s rental housing task force in 2018, which focus on protecting tenants from situations where they are forced to move out by landlords who say they plan to renovate the property.

Monday’s bill includes expanding administrative penalties that can be levied as part of dispute resolution proceedings and grounds for the review of arbitrator decisions.

The bill also clarifies language in the Manufactured Home Park Tenancy Act to address conflicts between park rules and tenancy agreements.

With files from Canadian Press

 

©2021 CBC/Radio-Canada

Vancouver real estate: home across Trout Lake listed $1.7 million, sells $870,000 over asking for $2.6 million

Carlito Pablo
The Georgia Straight

The Straight has previously reported about homes selling over $500,000 on top of their listed price.

If some thought nothing is ever going to beat that, here’s a surprise.

A home in East Vancouver recently sold $872,134 over its original asking price.

The top-up alone is enough to buy a townhouse or perhaps two condos.

The two-storey home at 3285 Victoria Drive sold on February 24 after eight days on the market.

Oakwyn Realty Ltd. listed the five-bedroom, four-bath residence on February 16.

The listing price was $1,728,000.

A buyer picked up the property for $2,600,134.

The transaction was tracked by Zealty.ca, a real-estate information site owned and operated by Holywell Properties.

Holywell’s managing broker Adam Major informed the Straight about the sale of Victoria Drive.

According to Major, the deal for the home located across from Trout Lake is a “candidate for craziest individual deal”.

B.C. Assessment placed the 2021 value of the property at $1,741,000 as of July 1, 2020.

There may be buyers out there who have a fear of missing out as the market continues to sizzle.

They may be tempted to enter into bidding wars.

Major’s advice: don’t.

“For buyers, I would recommend caution,” he said.

The market may have become too hot that the government could decide to do something about it.

“There is a risk that the federal government steps in to cool the housing market,” Major said.

Bank of Canada governor Tiff Macklem has observed “excess exuberance” in the country’s housing market.

“What we get worried about is when we start to see extrapolated expectations, when we start to see people expecting the kind of unsustainable price increases we’ve seen recently go on indefinitely,” Macklem said on February 24 at a meeting with chambers of commerce in Edmonton and Calgary.

The central bank dropped its interest-setting rate to 0.25 percent on March 27, 2020 to ease the impact of the COVID-19 pandemic on the economic.

The bank has maintained the rate, which is the lowest, and indicated that it will stay at that level until 2023.

“We are starting to see some early signs of excess exuberance, but we’re a long way from where we were in 2016-2017 when things were really hot,” bank governor Macklem said on February 24.

Holywell’s Major noted that the central may be “only six months late” in issuing a “warning about the housing market overheating”.

“But better late than never.  At some point, the rules could change and it could happen overnight,” Major said.

Major cited the case of New Zealand.

In April 2020, the Reserve Bank of New Zealand lifted lending restrictions to prop up the economy amid the COVID-19 pandemic.

The measure eased credit flow, and led to strong sales in the country’s housing market, with price increases setting new records.

Moving to cool the market, New Zealand’s central bank decided to reimpose so-called loan-to-value ratio (LVR) restrictions.

Starting in March 2021, banks can allocate only 20 percent of their residential mortgage lending to owner-occupiers with a down payment of 20 percent.

Moreover, banks can lend not more than five percent to investors with a down payment of less than 30 percent. Starting on May 1, the deposit requirement for investors will increase to 40 percent. 

                                                         Back of 3285 Victoria Drive.

 

Here at home, Holywell’s Major said that the last week in February 2021 was the “busiest for weekly sales since 2019” in markets served by the Greater Vancouver, Fraser Valley, and Chilliwack real estate boards.

According to Major, 1,998 sales were reported in the combined areas of the three real estate boards.

“In the last week of February 2020, there were 1,109 sales, so we are up 82 percent over the same week last year,” he said.

Zealty.ca tracking also indicates that the last week of February 2021 was the highest since January 15, 2021.

Major also noted that the Canada Mortage and Housing Corporation has been “awfully quiet”.

He recalled that CMHC predicted at the beginning of the pandemic in 2020 that housing prices would fall 18 percent.

“The exact opposite happened,” Major said.

He speculated that an increase to down payment requirements by CMHC could be come “any day”.

So again for buyers out there, caution is the word.

“Are you sure you want to win a bidding war on a teardown in the sticks to wake up to the next morning to discover the feds changed the rules so nobody else makes the same mistake?” Major said. 

 

© 2021 VANCOUVER FREE PRESS

Businessman and well-known Chinatown figure Jack Chow dies at 90

CBC Staff
CBC Radio

 Jack Chow was known for operating his business out of the historic Sam Kee building on Pender Street in Vancouver’s Chinatown. (asdf)

Jack Chow, known for his contributions to Vancouver’s Chinatown neighbourhood, has died at the age of 90.

His family confirmed his death in an obituary, writing that he passed away peacefully at Vancouver General Hospital in early February.

Chow was well-known for operating his business, Jack Chow Insurance, out of the Sam Kee building at 8 West Pender Street in Vancouver’s Chinatown — the thinnest and shallowest commercial building in the world.

He was born in Cumberland, B.C., where his family ran the Chow Lee General Store, and moved to Vancouver while he was in high school.

“In business, Jack was sharp-minded, passionate and inventive, taking him from being a successful top Chinatown Realtor to creating what may be the most recognized and unique family owned insurance brokerage in the world,” his family wrote in the obituary.

“Jack will always be loved, and his family will always be grateful to him for all his dedication to family unity and togetherness.”

Chow is survived by his wife Jean, their four children, and their seven grandchildren.

 

 ©2021 CBC/Radio-Canada

Investors are choosing Cranbrook, the Base Camp of the Kootenay’s

City Of Cranbrook
Western Investor

 Cranbrook has seen building permit values nearly double in the past year. It has 200 acres of industrial land poised for development, and housing sales are forecasted to increase a further 9.2 per cent this year after surging 17.4 per cent year-over-year in 2020. 

Yet, the average house sells for $384,000, half the average price across British Columbia.

The numbers represent an opportunity that real estate and business investors have learned to respect. Because, while many cities boast that they are “open for business,” Cranbrook put its own money on the line.

The future lies in commercial and industrial development for the city. – Photograph by City of Cranbrook

“If you want someone to invest in your community, they want to see that you are also investing in your community,” says Cranbrook Mayor Lee Pratt, a former financial advisor and automotive industry executive and now co-owner of OK Tire in the city.

The investments Cranbrook has made underlines the potential of the town of 21,000, which incidentally is backdropped by the Rocky Mountains, with some of the best skiing in North America and every imaginable outdoor activity.

In 2018, the City of Cranbrook purchased a 99-acre former forestry mill site for $3 million. It sold the land in November 2020 for $6 million to Peak Renewables, which plans extensive development.

The profit on the sale will be plowed back into future initiatives supporting jobs and tax revenues, Pratt explains.

Cranbrook offers affordable housing  and outstanding, all-season recreation. – Photograph by City of Cranbrook

In the past four years alone, Cranbrook has invested $50 million in upgrading and replacing city infrastructure. The city has also streamlined the development approval process, cutting the time it takes to get anything built in half.

Depending on re-zoning, Cranbrook can turn a real estate development application into shovels in the ground within 30 days. A 292-unit multi-family rental building, now being built, took less than eight months which included rezoning, public engagement and approval by council.

Cranbrook Mayor Lee Pratt. – Photograph by City Cranbrook

That project is part of $93 million in building permits issued by Cranbrook in 2020, which was up from $48 million a year earlier. Over five years, more than $245 million building permits have been approved.

While residential has led the permits recently, the real future lies in commercial and industrial development, according to Darren Brewer, Business Development Officer for the City of Cranbrook.

Brewer notes that development of the Peak Renewables site may lead the charge.

“Peak Renewables brings decades of success and innovation in the forestry sector to Cranbrook,” Brewer says.

Peak founder Brian Fehr is known as a pioneer in automation and artificial intelligence, particularly in the growing biomass and cross-laminated timber markets.

In November 2020, Calgary-based Kanas Corporation, an award-winning “green” developer, purchased a former big-box retail building and land on Victoria Avenue North, Cranbrook where it is planning a 44,000-square-foot industrial/commercial complex, mid-rise, mixed-use residential development with assembly warehouse.

“We are impressed with the opportunities to grow within the East Kootenays, and believe Cranbrook is a great place to begin that growth,” says Kanas President Robert Sipka.

All roads lead to Cranbrook, which  is halfway between the West Coast and Manitoba. – Photograph by City of Cranbrook

Cranbrook is a logistics hub – exactly halfway between the West Coast and Manitoba, just four hours from Calgary and 50 miles (80 km.) from the U.S.A.

An average of 500 transport trucks roll through Cranbrook every day; it is served by CP Rail, and the city owns the Canadian Rockies International Airport, with scheduled service from Air Canada, WestJet and Pacific Coastal. 

Aside from 99 acres of heavy industrial at the Peak Renewable site, the city itself holds more than 100 acres of serviced industrial land, including 52 acres at the airport. Industrial land sells from around $100K to $140K avg per acre, compared to $500,000 to more than $1 million an acre in big-city Alberta or B.C.

“Choose Cranbrook” is the city’s new message for 2021, and as the record-breaking building pace shows, it is a message already being heard loud and clear.

 

© Copyright 2020 Western Investor

Tom Bradley: SPACs are being billed as a better way for pre-IPO companies to go public, but better for who?

Tom Bradley
other

 SPACs are mostly a U.S. phenomenon whereby high-profile investment managers, rock star executives and actual rock stars raise money based on reputation alone. Photo by Carlo Allegri/Reuters files

We’re taught at an early age to never sign a blank cheque. Today, blank-cheque companies, or what are called special purpose acquisition companies, are driving the red-hot IPO market in the U.S.

SPACs have been around for a long time but 2020 was their coming out party. They raised US$82 billion, well above the 2019 number (US$13 billion), and almost as much as conventional IPOs.

SPACs are mostly a U.S. phenomenon whereby high-profile investment managers, rock star executives and actual rock stars raise money based on reputation alone. They create a shell company with the intention of using the cash to buy a business.

Initial buyers of a SPAC receive units typically priced at $10, each of which contain one share and a fraction of a warrant which gives them the right to buy an additional share at $11.50.

After the issue is completed, the SPAC becomes a public company with its only asset being cash held in trust. When an acquisition target is found and deal proposed, shareholders have the choice of either continuing to own the shares or redeeming them for $10 plus interest.

Story continues below

SPACs are being billed as a better way for pre-IPO companies to go public, but better for who? Let’s look at how the different players make out.

Companies going public 

For private companies, merging with a SPAC can be a good route if the terms of the deal are right and there’s compatibility with the sponsor. For young, growing companies, mergers are less onerous than IPOs. Less disclosure is required, and forward-looking projections are permitted, which is not the case for IPOs. This allows companies with little or no revenue to trumpet their growth.

The other benefit for emerging companies is they get an experienced hand to guide them into the public arena. An effective sponsor can smooth the process and get the deal done.

Promoters

There’s no need to do the pros and cons here. The sponsors make obscene amounts of money. They receive 20 per cent of the outstanding shares for free (the “promote”). Their only risk is reputational. If their acquisition turns out badly, they’ll still make gobs of money, but may have a tougher time doing the next SPAC.

Hedge funds 

Historically, SPACs have been heavily supported by hedge fund managers. Today, this loyalty is being rewarded when it comes to allocating shares. Hedge funds receive the lion’s share of the initial offerings. Individual investors get little or no allocation.

The math for the initial buyers is as good as it gets in investing. The rewards far outweigh the risks, even when leverage is used (which is usually the case). The upside comes from excitement around the sponsor and/or a deal that investors like. Meanwhile, the downside is minimal. There’s no capital risk (they can get their $10 back), some time risk (if the deal cycle drags out) and mark-to-market risk (if the price dips below $10 prior to redemption). It’s the holy grail — lots of potential upside with limited downside.

The amateurs

If the economics are outstanding for sponsors and hedge funds, what about individual investors? Well, they’ve had some big wins too fuelled by the bull market, but longer term, the odds are stacked against them.

Remember, the amateurs don’t get to play until the SPAC is trading. They don’t get the warrants and often pay too much. A SPAC should trade close to its issue price prior to a deal being consummated, but as with many things in this market, prices get bid up due to excitement around the sponsor and the deal they may do.

Paying a premium for cash certainly dilutes future returns, but that’s just the start. Remember, the sponsor gets 20 per cent of the company, so from the opening bell SPAC holders only have $8 of cash backing their shares. The warrants can also cause dilution if they’re exercised.

And shareholders who hang on through the deal are further diluted when the hedge funds redeem their shares, which most do. By taking back $10 plus interest (not $8), they effectively increase the sponsor’s promote to well above 20 per cent.

In a paper published in the Harvard Law School Forum on Corporate Governance, the authors calculated that on average, the shareholders effectively have been diluted down from $10 (or the actual price paid for the shares) to $7 by the time the deal is approved.

SPACs are lucrative for sponsors and initial buyers because other investors get excited about innovative companies coming public. Unfortunately, it’s like gambling in Vegas. They may win occasionally, but the house always wins.

If you want to own a cool company that’s going public via a SPAC, it may be preferable to buy after the waves of dilution have subsided.

Tom Bradley is chair and chief investment officer at Steadyhand Investment Funds, a company that offers individual investors low-fee investment funds and clear-cut advice. He can be reached at [email protected].

 

© 2021 Financial Post

Upgraded building infrastructure slashes maintenance fees

Neil Sharma
Canadian Real Estate Wealth

Empty nesters transitioning to vertical living often make the mistake of moving into older condominium buildings because the units are bigger and, on a dollar per square foot basis, they’re priced competitively.

“People can get 1,500 sq ft not realizing they may be buying into a potential problem now or in the future,” said Sunny Sharma, broker and co-owner of Leading Edge VIP Realty. “We shy away from older buildings, and while they usually have larger units, which tend to be attractive for people transitioning from a house, they’re gravitating to older buildings not realizing a lot of problems will come their way shortly thereafter. They can do their due diligence, and that can help identify upcoming repairs, but what if it’s a major one?”

Maintenance fees rise for reasons ranging from property taxes to a condominium’s location, but older building infrastructure is also a major contributor to escalating costs. Although that problem can be rectified, the price tag is astronomical.

“To upgrade a 200,000 sq ft building, it costs about $1 million,” said Chandra Ramadurai, co-founder of Efficiency Capital. “To save $20,000 a month you may have to invest $1 million up front to optimize the equipment, which most buildings owners don’t want to do.”

There’s no shortage of the capital required for these upgrades, but Ramadurai noted that it is usually allocated toward constructing brand new buildings rather than upgrading boilers.

“Social housing is seriously underfunded as well, so it’s more allocation of capital than availability,” he said. “It’s not that upgrades are inherently risky; the problem with efficiency is you’re saving on something compared to what you did last year, and when you can’t measure something, you don’t know how much you’re making. “Baselining is important, but it’s also not easy. There are mechanisms available but they aren’t widely used, meaning there’s little to no standardization in the industry.

“Capacity is also a problem—most managers struggle to keep up with their day-to-day activities, so targeting reductions doesn’t happen much because they’re trying to keep their heads above water.”

The way Ramadurai sees it, closing the fissure between capacity and technological availability is the missing piece of the puzzle. However, that was before the COVID-19 pandemic upended the world and redirected reserve funds towards unplanned costs.

Efficiency Capital replaces outdated building infrastructure for no or low upfront costs, subsequently receiving monthly instalment payments while retaining ownership of, and operating responsibilities for, the technology. In replacing the technology, for which Efficiency Capital provides building officers maintenance training, Ramadurai says reserve funds are no longer needed. And given that the company has already done 55 buildings, there’s clearly a need in the market.

“The building gets new equipment at a reduced cost because instead of paying $1 million, they pay $20,000 upfront and $10,000 a month, and in 10 years we give them the equipment and they get the savings,” he said. “We’re not lenders; we own and operate the equipment. We’re equity investors who don’t own the building, we own the equipment in the building.

“Because we replace the equipment, you no longer need the reserve funds, which means the $1,000 in maintenance fees goes down depending on how underfunded the building is. A condo with adequate reserves will have reductions that are even higher because they don’t need to collect these reserves for the next 10 to 15 years, so there’s a 10-20% reduction on energy costs and another 10-20% on reserves, which means 20-40% is being saved.”

In addition to benefiting condo unit owners, the entire building’s value increases too, added Ramadurai.

“Typically, cash flows are counted into value, and by reducing the cost we increase the cash flow, which means that, at the same cap rate, you end up having higher value of the building.”

 

© 2021 Canadian Estate Wealth. All Rights Reserved.