Apartment development in Surrey: crowdfunding as a doorway to home ownership

Tower construction seen from alongside the proposed new development on 104 Avenue, Surrey

I recently joined our friend David Plug on a real estate investors’ bus tour around Surrey Central. The tour’s purpose was to encourage passengers to commit at least $25,000 in financing for a proposed apartment housing complex.

With a large number of smallish investments, the development company hopes to raise at least $7.5 million, a big chunk of the estimated $13.5 million cost of purchasing land. The project prospectus lays out three scenarios. In the minimum scenario, under present City of Surrey zoning, the builders would construct 210 units in a 6-storey wood-frame complex; with revised zoning, they might achieve 359 units, and a higher rate of return to investors.

Negotiations on the hoped-for property, 800 metres from the Surrey Central SkyTrain station, were still underway on the day of the tour. If the land is secured, and if the project is approved by the City of Surrey government, and if the structure is built and opened on time, and if the units sell at the target price, we were told that investment partners would earn an 18 to 20 per cent annual rate of return from 2018 to 2023. That’s the year when construction is to be completed and partner contributions paid back.

The front man for the development company is Dave Steele, and his company is the Western Canadian Properties Group, affiliated with Investment Revenue Realty Inc. He has a track record in single-family and low-rise development in B.C. and Alberta, and a partner who has 15 years of experience with bigger, name-brand companies. In a sit-down information session after the bus tour, he did not oversell the risks or the rewards of his crowdfunding approach. “You’re betting on us to execute the project,” he said.

Is this a wide investment? On the upside, the projected 18+ per cent rate of return is better than the 0.80 per cent that I am currently earning on bank savings, and re-zoning approval from the City could drive that return even higher.

On the downside, the demand for new housing in Surrey may collapse. The investment fund would be put on hold, with no return for the investors.

Of course, it’s hard to imagine a market collapse in north Surrey, with its access to transit and its growing employment base, including two new university campuses. The price of apartments in Surrey, Steele said, is $750 per square foot, compared with $1300 at Metrotown in Burnaby and $2,000 in central Vancouver. There’s strong demand for apartments in Surrey, starting as small as 400 square feet. We drove past a residential construction site called the King George Hub, where Steele said 4,000 people had submitted applications to purchase 443 units when the first phase of the project came on the market last year.

At least a couple of the passengers on the bus stepped forward to put their money down. I decided to stand clear, for no other reason other than my past inability to read markets. However, I’ll make three observations in my blogger persona.

First, the redevelopment proposal conforms to the familiar, and unfortunate, pattern where modest rental housing in Metro Vancouver is to be replaced by relatively expensive condo apartments, with no plan to provide for the evicted tenants. In this case, the target for replacement is the 1960s-era Elizabeth Manor, with 57 units. “They’re just not building rental housing fast enough,” Steele said. “It’s a problem everywhere, and we have to get more rental housing built.” True enough; but there is no current thought to include purpose-built rental housing in Steele’s project.

Second, I saw no evidence that this was a tour for foreign investors or their agents. The people I spoke with were Vancouver-area residents like myself — people approaching retirement, looking for ways to top up their insufficient retirement savings funds. Dave Steele quoted a source who told him that of the 738 units in King George Hub, 697 went to people with B.C. addresses. He also guessed, based on what I do not know, that residents of his own Surrey Central development would be about 85 per cent owner-occupants and about 15 per cent renters.

Finally, this financing model could hypothetically lead to a situation where investors are the only members of the public who get the opportunity to purchase new housing. $25,000, invested at high risk, puts you at the front of the queue; but what if the queue for all new developments is made up entirely of people who are willing to invest money at high risk?

The show office for the King George Hub development, near King George station. The same building houses a new regional office for Coast Capital Savings, one of Surrey Central’s new employers.

A quick look at Sunshine Hills

This is a perfect suburban neighbourhood in conventional terms: single-family homes distributed along nested crescents, tall trees, tranquility. Watershed Park sits on the southern edge, a wide patch of rain forest with a fine network of trails. There are no hills in Sunshine Hills, but the park slopes down to the coastal plain and provides a buffer against the noise from Highway 99, the route to Seattle (south) or Vancouver (north).

You can walk from most of Sunshine Hills to the shops at Scott Road and 64th in 20 minutes or less.  The area plan, published by the municipality of Delta in 2015, makes it Sunshine Hills Centre reducedclear there is no intention to create a more explicitly walkable ring of medium-density housing around the commercial area. The residents seem to like things as they are. We did not see a single “For Sale” sign during our visit.

I walked through Watershed Park and along the Sunshine Hills streets with our friend Robert Smarz, who used to live in the area and has a keen eye for lot sizes and likely values. He praised the range of services available at the Sunshine Hills Centre, a busy shopping mall that offers a supermarket, a fruit and vegetable market, a liquor store, a popular restaurant, and veterinary, insurance, dental and financial services. There are more shops and services on two other corners at the Scott Road/64th intersection, although these malls are not as busy.

Apartment housing on the Surrey side of Scott Road

East of Scott Road you enter the City of Surrey, a municipality that has made different zoning decisions leading to the construction of apartments and townhomes. I will return here in the future to see if we can cobble together an “urban village” by putting together the housing choice on the Surrey side with the shops and services on the Delta side. As a side note, you are in the outer ring of transit service here; a trip to the Scott Road SkyTrain station to the north requires a transfer, and the direct bus to SkyTrain in New West takes 35 minutes.

Bob and I ate lunch at the Sundowner Pub, which has no craft beer but serves a $5.00 breakfast on weekends.

Sunshine Village, a shopping mall just south of 64 Avenue, with a retro look suggestive of the 1920s Cloverdale uban village further east

Vancouver’s Chinatown: heritage site, urban village, tourist zone

Gore Street at Keefer in Vancouver’s Chinatown.

Vancouver City Council voted in November 2017 to seek World Heritage Site status for the Chinatown district. This founding neighbourhood began as a segregated zone for Chinese-speaking labourers and merchants outside the railway and lumber camp that covered today’s Waterfront and Gastown areas.  It functioned for many decades as a commercial and cultural hub for Chinese-speaking immigrants, and takes a prominent place in the modern English-language literature of  the Chinese-Canadian community. The retail hub, it should be said, has been supported by apartment housing, Chinese seniors’ housing and small-lot detached housing, either in the core or in the old Strathcona neighbourhood to the east. Continue reading

Surrey Central — Retrofitting or replacement?

Rendering from the 2017 Surrey City Centre Plan, a fantasy perspective showing library (middle background), SkyTrain line, future light rail line and new towers

About 10 years ago, the term “Retrofitting Suburbia” came to describe the art or science of converting automobile-dependent sprawl into liveable urban landscape.

Coincidentally or not, it’s about 10 years since then-Mayor Dianne Watts announced her vision of a City of Surrey downtown, a focus for Surrey’s hodge-podge of malls and paved-over farmland. Simon Fraser University and the Fraser Health Authority had just moved to a new Surrey Central tower close to rapid transit; the City has since add a civic plaza with a City Hall. Residential and business towers are springing up close by. Continue reading

Governments gamble on a minimum wage hike

On January 1, Ontario raised the  general minimum wage in its jurisdiction to from $11.60 per hour to $14.00. British Columbians are promised a similar jump in the near future, though the timing is subject to the work of a government-appointed commission.

Members of the Tim Hortons restaurants’ founding family reacted to the Ontario increase by taking petty revenge on their own workers, stripping them of non-wage benefits at the locations they still own directly. This triggered a brawl within the Tim Hortons organization, with the corporate head office urging franchise owners to handle the issue more discreetly. Continue reading

Yaletown encore

We last visited Vancouver’s Yaletown district almost five years ago, in early 2013. We noted that the Yaletown brand was so hyper-trendy that developers were making use of it across a wide swath of what used to be called the South Downtown.

With its towers, cafes and rapid transit, Yaletown is now the prototype for much recent or proposed pop-up development in Vancouver’s suburbs, for example in Coquitlam Central, the still-pending Coquitlam waterfront project, and the rumoured Metrotown 2.0. Continue reading

Sapperton in bits

Columbia Street, showing the Sapperton area’s “Brewery District,” a nearly-complete development built on the site of a vanished industrial brewery. The head office of the regional transportation authority (TransLink) sits in the foreground. A new residential tower peeks out from behind.

An abandoned house, pre-1900, across looking across Columbia Street to the new Brewery District offices

Sapperton, as defined in the City of New Westminster maps, is a long rectangle with no adjacent residential neighbourhoods to the east or north. With recent development, Sapperton has become more self-contained and livable; proposed further development would add thousands more residents at the eastern edge, with unforeseeable results.  

As I drove to meet co-tourist Bob Smarz for a walk through Sapperton, an item on the radio reminded me that this is, in one sense, the birthplace of British Columbia. The Fraser Cemetery on the hill is the oldest in the Lower Mainland region: its dead include veterans of the American Civil War who moved to Canada, and presumably some Sappers, or British Royal Engineers, who landed on the Fraser River shore around 1860 to build B.C.’s first administrative capital. Continue reading