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.

Suburban sprawl, German style

Garage entrance and back yard, Brunsbüttel

On a trip to Europe this month, Vicki and I stayed with friends in Brunsbüttel, a town of 13,400 on the North Sea. The town’s most notable feature is the entrance to the mouth of the world’s busiest artificial waterway, the Kiel Canal. Ocean-going ships sail past the eastern end of the high street on an hourly basis.

This pedestrian-cycling pathway also provides local  vehicle access to garages and laneway housing. The home on the right has solar panels on the garage and on the main roof.

Our friends are from southern Germany, but they own a retirement home in a newish subdivision on the northern edge of Brunsbüttel. They were among the first to build here in about 2002. Like its counterparts in similar-sized towns in North America, the neighbourhood is laid out in a cunning pattern of nesting crescents and dead ends to discourage vehicle traffic. Continue reading

Transforming Metrotown

Paterson SkyTrain station, looking to new residential towers south of the Metrotown shopping complex

The older retail blocks on Kingsway near the mall have struggled over the years. Tenants include payday loan shops, tattoo parlours and porn outlets.

The City of Burnaby has adopted a new long-term development plan for the Metrotown district. By 2040, Metrotown is to be transformed by the redevelopment of its signature shopping malls into a “finergrained network of public streets, lanes, pedestrian connections, plazas, squares, parks, and open spaces.” Metrotown is to become a classic downtown core in a suburban city of 240,000 that has lacked a focus until now.

The July 2017 plan replaces a 1977 document that, visually at least, had a creepy, adopted-by-aliens vibe. The old plan facilitated the growth of the Metrotown shopping complex, Canada’s second-largest indoor shopping centre, along with a surrounding ring of apartment towers. The shopping centre is a busy place with an enormous variety of services, but it shows blank facades to the outside world. As I pointed out after my 2012 visit, the streets and concrete plazas around the mall lack life and colour. Continue reading

A development surge in Vancouver’s River District

The River District, in Vancouver’s extreme southeast corner, offers a quiet riverside walk, lunch at a good pub restaurant overlooking the water, and a feeling of imminent transformation.

The area was identified for conversion from industrial to residential use at least as early as 2004. At that time, residential development was already proceeding in a former industrial area to the west, in a two-block-wide band between Marine Drive and the Fraser River. Continue reading

In the shadow of Vancouver’s traffic viaducts

Vacant lands next to False Creek in downtown Vancouver. The city government’s plan will see the removal of two elevated roadways, the extension of a waterfront park and up to 20 new residential towers.

The first Georgia Street automobile viaduct was built in 1915 as a bridge over railways and industrial lands. The current Georgia and Dunsmuir Street viaducts are orphan remnants of a failed plan to run a freeway from Highway 1 into downtown Vancouver.

2011 study reported that the viaducts carry about 40,000 vehicles every day. However, Vancouver Council voted in 2015 to tear them down and tidy up the underlying street network. The viaducts are ugly, and they’re a waste of land: it’s estimated that their removal will enable the development of housing for as many as 10,000 people. Continue reading

Pitt Meadows 1 — Osprey Village

The recently completed commercial core of Osprey Village. The brick-faced structure in the foreground was approved as a live-work development, with shopowners living above their businesses.

The city of Pitt Meadows, British Columbia, population 18,500, has shown how a small municipality can function effectively in a large urban region. Residents enjoy relatively low property taxes and much the same services as  Surrey, a nearby city with a half a million people.

Osprey Village, a Pitt Meadows neighbourhood overlooking the Fraser River, was built over the past decade with patience and (I think) good taste, at least compared with the competition in other Fraseropolis suburbs. The commercial zone pictured above is short on everyday services and heavy on dog spas and craft galleries, but it’s attractive and cozy, and is now a mini-tourism destination for cyclists and for families looking to walk along the river. (Osprey is at the western end of a regional pathway network, and not far from the Golden Ears Bridge; cycling links to Coquitlam and Langley are excellent.) The 2009 land use plan adopted by City Council in 2009 provides for up to 25 live-work units on the main street or immediately behind, and the community hall by the river park acts as a regional conference centres, so there’s continued pedestrian traffic in the Osprey village centre even on weekdays. Continue reading

They’re stackin’ ’em in at Brentwood

Space between apartment towers off Rosser Avenue in Burnaby’s Brentwood district, looking to Gilmore

A rendering of the Shape Properties “Amazing Brentwood” development plan as published in VanCity Buzz

The City of Burnaby is on track to win an award, if it exists, for the most extreme residential densification in western Canada.

Tower development at Metrotown has leapt into an affordable rental housing zone and displaced hundreds of long-term tenants. People protesting against these “demovictions” occupied the office of Mayor Derek Corrigan in early March. At Lougheed Town Centre further east, Shape Properties has set up a site office for “The City of Lougheed”, promising 23 or more “stunning high-rise towers” in close proximity, stretching as high as 55 storeys. The same developer has started construction on “Amazing Brentwood”, depicted here, to include 11 residential towers as well as a redeveloped shopping mall and street-facing retail space. Continue reading