Vancouver’s wealthiest men disagree on the wisdom of a bulk purchase of all remaining units at the city’s troubled former Olympic Village.
Vancouver Canucks owner Francesco Aquilini told Business in Vancouver that he wants to buy the approximately 450 unsold units at the 1,108-unit former Olympic Athletes’ Village, now known as Millennium Water.
“We’ve let the city know that we’re interested,” Aquilini said. “We’ve spoken with them about buying the entire package at a certain price. [But] the price expectation that they want is a little too high.”
Aquilini believes he’d be able to resell the units to Asian buyers.
“The money being generated in China right now is phenomenal,” he said. “A lot of Chinese businesspeople want to get their money out of China. Vancouver has always been on their radar. So, we think there’s a big market in China [to resell Olympic Village units].”
Jim Pattison Group owner Jim Pattison wouldn’t tell BIV whether he thinks a bulk purchase of Millennium Water units is wise.
However, Thomas Fung, the owner Aberdeen Centre and Fairchild Group, told BIV he doubts that many Asian investors would consider the site a strong investment.
They might buy a single unit to live in, but the chance of their buying multiple units with the aim of renting them out is unlikely, said Fung, who frequently travels to Asia.
“I can’t see those potential buyers from mainland China buying any similar properties to the [former] Olympic Village yet.”
Fung explained that those investors can count on a capitalization rate of about 13% before tax in China.
A capitalization rate is the ratio between an asset’s net operating income and its original price. For example, a $1 million property that generates $100,000 annually after expenses would give the owner a 10% cap rate.
Fung said that, after taxes, Chinese investors now usually get a cap rate of between 7% and 10%.
Fung doubts that Millennium Water would generate that cap rate.
In January, U.S. real estate consulting company Demographia ranked Vancouver as the third least affordable city in the English-speaking world.
The study noted that only Hong Kong and Sydney, Australia, have house prices that require buyers to spend more years of median household income to buy a house than buyers do in Vancouver.
According to the study, Vancouverites must spend 9.5 years worth of median household income to buy a house. In Atlanta, that figure is closer to 2.3 years.
Fung believes Asian real estate investors looking to buy multiple properties to rent would prefer:
- Los Angeles (5.9 years of median household income);
- New York (6.1 years);
- San Francisco (7.2 years); or
- Toronto (5.1 years).
“If you’re the investor and you go for something without any rental income for the time being, you will be expecting a quick appreciation in the future when the market turns around. You would also rather go to a city with a large population where there would be more transactions.”
Both Millennium Water marketer Bob Rennie and Mayor Gregor Robertson have told media that they’re interested in selling all unsold units in bulk.
Millennium Development still technically owns unsold units in the project, which is in receivership. Receiver Ernst & Young oversees all sales, and the City of Vancouver, which is the lender, would have to approve any bulk sale decision.
NPA councillor Suzanne Anton would favour a bulk sale of units. But she said the buyer would have to pay off pretty much all of the city’s loan for the project, which is roughly $730 million.
“The mayor has cost us untold millions by putting a black cloud over the project for the past two years. The result is that the project is so undervalued now that any bulk offer is going to be too low.”