Financial Mismanagement in Coquitlam

So it looks like its not just some buyers that have problems with basic math – Some developers run into issues as well. The sun has a story about CB developments $8.5 million dollar shortfall oat the Coquitlam Riverbend project.

The final phase of the financially troubled Riverbend condominium complex in Coquitlam would have lost its mortgage investors’ money even if its pre-sale contracts had been cancelled and units resold at current market prices, according to a receiver’s report.

In his conclusion, Bowra said the “best option in terms of maximizing recovery for the stakeholders” would be to sell the units at current market value and not the pre-sale prices.

However, someone would still need to pour $3.8 million into the project so subcontractors and suppliers could be paid and the project completed, which would still leave CareVest short $2.6 million.

Bowra, in his report, said other options to dispense with the project included selling the project “as is” to another developer, finishing the homes already under construction and selling off nine lots for which no construction has begun, or selling off the homes under construction and nine remaining lots separately.

All options would see CareVest lose $3 million to $4 million.

It doesn’t mention this in the linked story, and I haven’t been able to find this online, but a story on CTV news this weekend said that this mess isn’t just affecting pre-buyers that have yet to move into their homes. The liens filed against this project includes buyers that have lived in their completed homes for a couple of years and allready paid for all work done. For the time being those buyers will be unable to take out a loan on their property or attempt to sell. The CTV story mentioned the possibility of the total cost running into the hundreds of thousands of dollars for each home owner. Scary stuff!

35 Comments
newest
oldest most voted
Inline Feedbacks
View all comments
satv
satv
13 years ago

I never complain if some one wants to correct me.even lots of time i think about to quit this blogs.then i think if there was some extra help when titanic was sinking i should have been saved atleast one life.english is not my first language so i think in my language first than translate that into my poor english.but coincidently i have never seen anybody to beat my argument on issue.and despite all stars here i have never notice any body answer to related issue's.I think people like to write some things understanding is not guaranteed its similar to(big "m"small "e").even now you guys impaired what is being written you did not decide on the issues.I can not be rob chipman he is a realtor,I am a warehouse worker.but even pop indicate that chipman is right but you guys were… Read more »

freako
freako
13 years ago

"criticism on valid issue's fair good."Yes, and my criticism of you is fair. Your criticism of criticism is unfair."when elephants walks on street dogs bark", but elephants does not run behind dogs because elephant got status."I thought the person walking last had greater status in Asian culture. Good schtick though. Keep it consistent. When you go out of hte character, the effect is ruined.

digi
digi
13 years ago

"when elephants walks on street dogs bark"Thats more like the old SATV! It must be tricky to maintain a consistent level of gibberish.

satv
satv
13 years ago

freakoI thought you were traped with Brandon Steele.now you show up welcome ok criticise who ever because it doesn't matter.if you know that there is a saying "when elephants walks on street dogs bark", but elephants does not run behind dogs because elephant got status.so when some one criticise without knowledge the critic adopt status of dogs.criticism on valid issue's fair good.people should be careful before speaking the dirt out.

freako
freako
13 years ago

"be positive do not criticise some one by lack of knowledge. "Why don't you stop criticizing people who critizise people? Stinkin hypocrite.Second, make your damn mind up. Is your English atrocious or just bad? Don't go back and forth like a yoyo.

satv
satv
13 years ago

Jim said… asked on another blog(which shall remain nameless):How can the sponser of that blog own real estate, manage investors real estate, and therefore have a vested interest in continued real estate appreciation, whats wrong in owning r.e. and runing blogs.I think this is regarding chipman I have found him very straight forward that declaration he made is to hold his investment no matter what is market trend he is not alone if any body want to succeed thats the way to go,rob is not the first and last person to do that theory of owning and managing r.e. is primary issue of all successful person who takes the responsibility to put them self on risk for better future.there are three things that makes people responsible,successful,and perfect those are marry,kids,and investment.if you are not in first step you can hardly… Read more »

beta
beta
13 years ago

a rathy lengthy and junior diatribe on of all things: "trust"As he's another realtor, I assumed it was satirical. No?

Jim
Jim
13 years ago

I asked on another blog(which shall remain nameless):How can the sponser of that blog own real estate, manage investors real estate, and therefore have a vested interest in continued real estate appreciation, and yet council others as to wether a given purchase will be likely to appreciate,depreciate or stay the same? I asked it 3 times. Each time it was deleated. And then the moderator of that blog said"I did not deleate any posts" and later that:"I attacked the moderator's integrity". And then another memeber of that moderator's organization posted a rathy lengthy and junior diatribe on of all things: "trust".

satv
satv
13 years ago

most developers require to submit annual percentage in contengency fund that use to be 5% before 1997,after that its 10 per year now.as far as lien concern there are diffrent contract to sign with banks,suplier's thats why we can hardly come to conclusion this chapter we need 1000 page to write not 50 words comment so only court can deal with this case no body else.even last time there was a verdict in 1997 and judge's ruling was based on previous two cases not own his own.

markx
markx
13 years ago

"i guess that answers my question of "who should pay to complete these homes" "As a rule of thumb, it's in the first-in-line creditor's interest to obtain title, complete the construction, sell at market prices, tack on its legally allowed fees for the hassle, and distribute the remaining, if any, to creditors further in the line. In this case, the bank that hold the primary, or senior, loan, should do that. Given the strong RE market, there's probably enough cash to cover the principle loan.

grant
grant
13 years ago

Drachen,Umm no, the new owners pay the agreed price MINUS the estimated completion costs. It's not complicated.Actually it IS complicated. The bank isn't going to release those pesky liens on the properties for the already extended. This money has been spent to get construction as far as it's gone, and the banks want it repaid.If you actually read the article:The liens filed against this project includes buyers that have lived in their completed homes for a couple of years and allready paid for all work done.It sounds like you suggest the BANK take the haircut, by forgiving loans which won't be paid back. (Because now the buyers are only paying "O-R=$" which is much less than has already been lent & spent on construction.)Now why would the bank do that? Out of charity? i guess that answers my question of… Read more »

beta
beta
13 years ago

Yes, they take on price risk. I don't think builder f*ck up is part of the discounting process.Agree with the former, disagree with the latter. There is always risk of non-completion involved when you agree to purchase something that won't exist for another 2-3 years. satv, I congratulate you on your miraculously improved English.

scoop
scoop
13 years ago

jim,I understand and agree with you to a point. You are posing the question as to who should bear the risks. Well, developers should be expected to act in their own interest. Government should continue to regulate fraudulent and deceptive real estate marketing practices, as they do, but we don't want them interfering much further than that. The buyers who are spending gobs of money are in the best position and have the most interest in assessing and managing the remaining transactional risks.

satv
satv
13 years ago

Can anyone confirm whether a presale deposit bears interest or not.freako some developers gives special offer to earn interest on deposit.if there is no offer then there is no interest.in otherwords developers who are not sure about their project or to encourage people to buy their project quick those developers offer interest rate.developers who knows their projects are hot and will sell on snap shot does not offer any interest on deposits.in best of my knowledge bosa properties and infinity towers developers offer interest rate on deposit,but concord pacific development does not offer any interest rate.interest rates on deposit if some one offer in the past are 5.5% and thats yoy not mom.

freako
freako
13 years ago

"Umm, actually pre-sales SHOULD be discounted because the money is free to the seller. Instead of getting investors or loans he can take pre-sales money to help him build. "But he only takes a deposit (though this amount has been increasing lately, most likely due to increases in perceived risk).Can anyone confirm whether a presale deposit bears interest or not."They already have the land, so it doesn't matter if that price goes up – Has labour and material costs gone up THAT much since they originally budgeted for this project? Did they have NO contingency fund? "It sounds like a mess. Did somebody have a gambling problem? Did they get soaked by a contractor? Is there collusion? "The risk should be relatively inconsequential, they are paying less because their money is tied up for a few years while they have… Read more »

markx
markx
13 years ago

gracie: Did you purchase title insurance? Maybe you should contact the title insurance company first, to see why they didn't discover that. I thought the title insurance company would refuse to write a policy if there's lien discovered, and banks would refuse to write a mortgage without title insurance.

Gracie
Gracie
13 years ago

Further to the comment about liens filed against completed homes in the development that have been lived in for a number of years and fully paid for, this is true. I am one of those homeowners and discovered a Claim of Builders' Lien had been registered against my property by one of the developer's creditors when I conducted a search of my property in the Land Title Office with a view to selling my property at some future date. After calling both the creditor and the lawyer who filed the lien on the creditor's behalf, I discovered it was a blanket lien that was filed against all the lots on the property due to a time limitation to file a claim. I have been assured by both parties that the claim will be discharged from my property. (And I'll be… Read more »

cape
cape
13 years ago

jim, what kind of questions get edited out at rireb? I prefer not to get caught up in the pro- and anti-chipman battle, but would like to know if there really are some simple, reasonable issues that are banned from there. I find it surprising anything would be offlimits given that his site is already quite the bear v bull battleground.

Drachen
Drachen
13 years ago

GrantUmm no, the new owners pay the agreed price MINUS the estimated completion costs. It's not complicated.So, original price = OCost of remaining construction = RAmount the new owners owe = $O-R=$Get it?

Jim
Jim
13 years ago

Somebody should go over to Chipman's and recruit Domus to this blog. I have been edited out for asking a couple of awkward questions or I would do it.

Jim
Jim
13 years ago

scoop: No. However buyers need to more carefully consider the risks involved in presales.I also think a light is being shone (as a result of this RE cycle) on just how imablanced the playing field is. Developers,indeed the the whole REIC should take a higher standard of care in dealing with FTBs in particular, and buyers in general. The knowledge imbalance is profound. Somehow "buyer beware" doesn't cut it when asking people to commit life savings and 25 years of payments on a "might happen".I used the BMW analogy becaase its an equally illogical transaction.Too obtuse I confess.

scoop
scoop
13 years ago

jim, I'm trying to understand where you're going with your BMW analogy.If the builder of a house, boat, custom car, whatever, goes bankrupt in the middle of the project and as a result can't deliver on a contract, has the builder "abused" the buyer?

grant
grant
13 years ago

Drachen, if the "new owners" are paying a new, higher price, then the original contracts are not being honoured!If you think the eventual purchaser should make up the shortfall then my question was not directed to you.

scoop
scoop
13 years ago

beta – Maybe after this fiasco more buyers will consider and properly price the risks in buying a presale home. drachen – Presale deposits are held in trust and therefore don't lessen the need for construction financing. They are not free money. But they are insurance. They protect the developer against the risk of a weakening sales market during the construction period.

Drachen
Drachen
13 years ago

GrantQuite easy actually. The courts pick an arbitrator, the arbitrator has each house assessed, the new owners pay the arranged balance minus the cost of work to be done according to the assessor. It's not rocket science.betaThe risk should be relatively inconsequential, they are paying less because their money is tied up for a few years while they have to continue renting.