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.

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

Semiahmoo: 2030?

A 2008 proposal for the Semiahmoo core, looking up 152 Street from 16 Ave. captured in early 2017 from the Amanat Architect website

A 2008 proposal for the Semiahmoo core, looking up 152 Street from 16 Avenue. This rendering was captured in early 2017 from the Amanat Architect website

The City of Surrey’s 2014 official plan contemplates a city of 300 square kilometres organized around a city centre, intended to rival downtown Vancouver as it grows up, and five large-scale town centres.

Semiahmoo Town Centre within South Surrey, 2014 city plan

The Semiahmoo Town Centre within South Surrey

Each town centre is supposed to act as “the distinctive social, cultural commercial centre for its community… Support transit-oriented development…and build complete, walkable and green neighbourhoods.”  A successful town centre offers housing choice, walkable services, business and employment opportunities, and frequent transit. Continue reading

Light rail for Surrey?

Library and civic plaza seen from Surrey City Hal

Library and civic plaza seen from Surrey City Hall

Surrey’s trimmed-down, still iffy light rail project is entering the preliminary design stage. We may get details in 2018, if things go well, on how the new train line and its stations will affect streets, sidewalks and private properties.

This project is a key component in local government’s drive to knit Surrey’s pattern of subdivisions into an urban unit. The new trains would link Newton and Guildford, both sizable retail and employment zones, with City Centre and nearby Innovation Row. Surrey’s population is approaching half a million, and the 10-year-old City Centre initiative is creating a new hub for jobs and investment with the potential to rival downtown Vancouver  The LRT project is also intended to spark mixed-use development in neighbourhoods along the way. Continue reading

The Newton town centre

72nd Avenue near the site of the historic Newton farm

72 Avenue near the site of the historic Newton farm (established 1886, now vanished)

As it turns out, there’s an urban village at the Newton Town Centre in Surrey, British Columbia. Finding it requires selective vision, looking past monster roadways, big box stores and industrial yards; but in its lopsided way, the village offers housing choices, commercial services, transit, and walking trails, straddling the former main highway between Vancouver and the USA.

Areas of Surrey, from the official community plan section of the City website

Areas of Surrey, from the official community plan section of the City website

Newton is one of seven planning areas in the vast city of Surrey. The municipality covers 316 square kilometres, an area as big as Vancouver, Burnaby and Richmond combined — or four times the size of the island of Manhattan, if that’s clearer. Google Maps estimates that it might take you three hours time to cross Newton diagonally on foot. It’s too big to be a neighbourhood — a borough, perhaps — but there are broad demographic tendencies. Surrey’s fact sheet on languages reports that Punjabi is the most common mother tongue in Newton, ahead of English; in the Cloverdale area to the east, the English-to-Punjabi ratio is 10 to 1. Continue reading

Surrey’s poll on light rail transit

Light rail transit, central Phoenix, 2012

Light rail transit, central Phoenix, 2012

Kudos to the City of Surrey for posting detailed tables from its recent opinion survey on light rail transit. Too often, governments hide the results of taxpayer-funded surveys from the taxpayer.

As reported earlier, Surrey is acting outside its jurisdiction in developing a plan for local rapid transit. This activity is intended to move regional, provincial and federal authorities to come up with the cash for detailed design and construction. Surrey is the 12th-largest municipality in Canada, and growing rapidly. City government is hoping that Ottawa in particular will go beyond the conventional limit and pay 50 per cent of the cost of a new stand-alone rapid transit system. Continue reading

North Surrey’s LRT landscape

The proposed light rail transit network in Surrey, British Columbia showing potential station locations (City of Surrey website, January 2016)

The proposed light rail transit network in Surrey, British Columbia showing potential station locations (City of Surrey website, January 2016)

In a November 2015 post we described a possible route for the Arbutus transit extension in the City of Vancouver. This line would feature both high residential density and major employment nodes along much of its length.

Surrey’s light rail transit proposal, by contrast, traverses long stretches where current density is very low. As an example, this post shows something of the current state of the Guildford leg of the proposed Newton-to-Guildford “L” line. Fraseropolis associate Robert J. Smarz and the editor visited hypothetical station locations along 104 Avenue from Surrey Central to Guildford on a recent Saturday morning. Continue reading