A $16 million investment in a failed lakefront residential development near Kelowna has already surpassed $20 million in sales for Vancouver-based Macdonald Developments Corp. (MDC)
Lakestone, a 550-acre development site on and above Okanagan Lake, hit rough waters during the financial crisis in 2008, leaving developer 20/20 Group Inc. with low sales and heavy debt.
That's where Macdonald Development stepped in.
“I suggested they just pay off their debt and hang on to the property,” said Rob Macdonald, president of MDC. “[20/20] just wanted to sell the property, so I ended up buying it for $16 million, which was the bank debt.”
The deal closed in 2011, and Macdonald set about reconfiguring the project, jettisoning a planned golf course and vineyards, downsizing a marina and rearranging home sites.
MDC also slashed the prices, offering one-third acre lakeview building lots at an average of $285,000. This compares with starting prices of $750,000 per lot that the original developer had listed them at.
“We had 82 lots in the first phase and we sold 70 of them,” said Jason Koverchuck, director sales and marketing at Lakestone. “Buyers who know the Okanagan realized the value.”
While local buyers dominated the early action, this year more than a third of buyers are from Alberta, Koverchuck said. He suggests that Alberta buyers, fearful of a further softening in Alberta real estate prices, are “hedging their bets” by buying in the accessible Okanagan. “We are only 10 minutes from the Kelowna airport, with direct links to Calgary and Edmonton.”
Lakestone lot buyers have two years from the time they purchase to begin construction of a house.
Lakestone’s next phase includes 16 villas (“a fancy name for duplexes”, said Koverchuck) in its Waterside development, with prices from approximately $700,000 for attached units of 2,000 square feet.
The Lakestone experience may be indicative of a turnaround in the central Okanagan new home market, which has been in the doldrums for seven years.
Kelowna-area housing starts are forecast to reach 1,500 units this year, the highest level in more than a decade but still 1,200 homes below the 2007 peak, according to Canada Mortgage and Housing Corp. The current inventory of new multi-family homes in the region is a mere 37 units, the lowest level in more than 10 years.
(Image: Jason Koverchuck, director of sales and marketing for Lakestone | Photo: Macdonald Development Corp.)
