By Curt Cherewayko
A City of Surrey-owned developer’s ambitious profit-driven mandate has members of the Lower Mainland development community crying foul at what they perceive is unfair competition from the public sector.
Leading the calls for Surrey City Development Corp. (SCDC) to take a step back in its land development dealings in Surrey is the Urban Development Institute (UDI), which claims SCDC is in a conflict of interest and has an unfair advantage because it was created and is wholly owned by the city.
“You effectively have a group of people acting as a regulator for the rest of the industry,” said Jeff Fischer, the UDI’s deputy executive director. “At the same time, they’re competing with it.”
The UDI, which has 500 members in the Pacific region’s development industry, sees it as a classic case of a government overstepping its bounds with the private sector. Fisher said there are areas where municipally run development corporations can contribute to growth, such as in faltering communities or undeveloped areas with a higher-risk profile. But he said SCDC is entering areas of Surrey that are highly attractive to developers and don’t need government to encourage development.
Jim Cox, SCDC’s CEO, defends the firm’s triple mandate, which is to make a profit through land development, spur development and be a development consultant for the city.
Cox claims the organization’s structure ensures that its relationship with the Surrey government remains at the same distance as any other developer in Surrey.
“We go through the same process as everyone else does,” he said, “We’ve had projects turned down, and I’m struggling on a subdivision right now, so there’s absolutely no special treatment for us.”
Founded in 2007, SCDC has largely been focused on developing Surrey’s Campbell Heights lands and the city centre. The company, which has a $1 million annual operating budget, is cash-flow negative but hopes to be in the black next year as its projects come to fruition.
It loans project capital from the city at market interest rates.Its nine-member board includes three City of Surrey employees: Mayor Diane Watts, a councillor and the city manager. The six private-sector members of the board are Allan Davies, Michael Geller, Hugh Matthews, Ken Nixon and Milton Wong.
Fisher said there’s a perception among developers that some of SCDC’s projects may have received more favourable zoning terms from the city. As well, UDI believes that potential tenants are bound to gravitate toward doing business with SCDC if they perceive there to be less risk working with a government-owned developer than one that is privately owned.
Cox said that most of SCDC’s projects are approved not because the city is biased toward the company, but because most of its projects have a community development slant. If other developers were to hypothetically align their projects more with broader city goals, Cox believes they, too, would have a similar application approval rate.
Cox acknowledges that SCDC is competing with other developers, but he said in many instances it’s spurring development in areas – such as parts of Cloverdale – where other developers have failed.
In stimulating development in undeveloped areas, Cox said SCDC is opening doors for other developers and contributing to the health of the industry.
Cox understands the frustration of developers – particularly that of Ryan Beedie, president of the Beedie Group. He said SCDC tries to avoid developing in areas or land classes where other developers clearly excel. In Beedie’s case, that area of expertise is build-to-suit industrial properties.
SCDC has competed directly with Beedie, but Cox said it has backed off.
“[Beedie’s] a great part of our economy and community, and we’re not going to try and scoop his business.”
Cox added that SCDC is acting like any responsible developer. “We don’t underprice the market; we’re not flooding the market. We’ve been careful about how we bring [projects] on.”
When reached by Business in Vancouver, Beedie said he remains frustrated by SCDC, but added that if it’s indeed backing off from build-to-suit, he’s pleased.
Nonetheless, he doesn’t see any role for SCDC anywhere and especially not in the Campbell Heights area, where Beedie’s Surrey-based industrial tenants are located.
“Why would I go and spend another dime in Surrey? Why would I go and develop another industrial park when the government is coming in to compete with me down the street?” said Beedie.
“Why is [SCDC] bringing land onto the market when we don’t need any? There are very few clients and they’re going to flood the market with more product.”
Charan Sethie, president of the Tien Sher Group of Companies, which is developing the Quattro condominium towers in Surrey City Centre, said SCDC has not competed directly with Tien Sher.
“But if they started competing with the private sector [by] putting up rental housing, that’s getting into my business.Any time a government body gets into development, it’s not a good thing.”