Double the money
Cue the forecasts: the final quarter of the year is upon us. Whiledeal-making continues, all sights are on how the end of the year might suggestfortunes for the year to come.
A wealthof uncertainties (not just the uncertainties of wealth) make for a tough call,but recent Colliers Internationaland Re/Max surveys suggest that investorconfidence remains high for most asset classes in Vancouver.
Whilethird-quarter numbers haven’t been tallied, the latest RealNet Canada Inc. data – which serves as the basis forthe reports of many firms – indicates that the second quarter was one of thebusiest on record, with residential land sales leading the charge.
“Residentialland transactions ensure another quarter of growth,” the report crowed, notingthat six of the top 10 transactions in the second quarter were for residentialdevelopment sites, including Concord Pacific’s$100 million investment as a joint venture partner of Sears Canada in redeveloping the retailer’s formerstore at 4750 Kingsway in Burnaby’s Metrotown neighbourhood.
Colliers’most recent review of land transactions noted that Burnaby “continues to be oneof the most sought-after markets for investment.” During 2015’s first half,there were 24 transactions worth $162 million – more than double the moneyspent in 2014’s first half on just 18 sales.
Wealthcreation
One of the key reasons land is in demand is because of the opportunityto create value, rather than buy it.
“We’re inthe business of creating wealth,” Bob Tattle, vice-presiden of business development with Anthem Properties Group, told commercial real estateassociation NAIOP in June. “Andit’s really, really hard to create wealth buying assets right now.”
Anthemhas therefore turned to land deals, most recently making an unsolicited offerthrough Frontline Real Estate Services Ltd. for the former Kia dealership at 725 Marine Drive in NorthVancouver. Former owner Darwin Properties Ltd.took the property through rezoning, but had yet to start construction; Anthem,eyeing an opportunity to “create wealth,” paid $9.2 million to take the projectthrough development.
One ofseveral in the evolving neighbourhood around Mosquito Creek, Anthem’s projectwill have four storeys of residential above retail at grade.
Rentboost
Purpose-built rental properties have also seen significant action thisyear. Veteran apartment property broker David Goodman remarked earlier this year thattransactions in Greater Vancouver could top $1 billion in 2015.
Canadian Apartment Properties REIT anted $170 million toward the total in Septemberwith the purchase of a 919-unit portfolio of 19 suburban properties locatedprimarily in Burnaby and New Westminster.
Soliddemand for rental units and the province’s approval of a 2.9% rent increase asexisting tenancies come up for renewal over the next year mean the properties are stable workhorses.
Still,the gain is modest compared with the overall costs of the apartment business.
Goodmansaid many landlords are raising rents by as much as 20% between tenancies,making up for the limited increases the province allows within tenancies. Theincreases reflect the 7% increase in apartment blocks region-wide over the pastyear, as well as the cost of renovations and regular maintenance needed to keepaging rental properties competitive.•
