2 more Vancouver condo project run into financing problems
The CBC is reporting that two Chandler Development Group condo projects have run into financial difficulty (yes that Chandler Development Group). A lawsuit didn’t stop construction of these projects, but H&H Yaletown and Garden City Richmond have gone into recievership. This just one week after the same problem with the Eden group Sophia development.
H&H is a 192-unit building, while Garden City is comprised of 108 units, according to a receiver manager’s report to the B.C. Supreme Court.
Both projects were scheduled to be completed by the end of June 2008.
“The company was running into cost overruns, they were running out of cash and I think the lenders wanted to complete the project,” said Bowra Group President David Bowra.
“But they weren’t convinced it could be completed without the assistance of a third party. So they decided to apply for a receiver to be appointed.”
The receiver has discovered that 23 condos in the Chandler Development Group projects were allegedly sold to insiders at prices well below market value, Bowra said.
They may get to keep their condos, but will likely have to pay today’s prices, he said.
For the pre-sale buyers that paid full market price there is a silver lining:
It appears that the other buyers will get their condos for the price paid as there is enough money available to finish the job.
Thanks to BBY and exvancouverite for the link.
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April 1st, 2008 at 3:30 am
You gotta laugh when Ozzy Jockstrap gets worried about bloggs. Next he will say the market tanked because of the Doom and Gloom forcasts. Now I know why there was the big fuss a few years ago about about internet blog sites from the media moguls. They were afraid they couldn't stop people from countering their spin they always put on the news. I remember the 1980's very well and there was hardly a mention of the impending housing crash in Alberta until it was way to late.
Maybe this time a few potential buyers will wake up and take notice.
March 31st, 2008 at 4:51 pm
Here's a Vancouver ground zero perspective. It's Summer 2007 and I'm listening in on a few couples talking about the condos they have "invested" in that year. Everyone bragging lightly about the profits that will be made after completion.
It's now Spring 2008, I'm walking the same Yaletown seawall only to hear a very different story. People talking about failed projects, lost deposits, quick flips, panic sales and problems with renters.
It was too good to be true and I might add greedy as hell. Let get real people, it looks easy on TV but in reality this game is as dangerous as the stock market. It's also a hindrance to people who really want or need to buy but can't at these artificial prices. In the past year I've have 6 sets of friends leave for Toronto which apparently has a more reasonable market. How did this happen?
March 14th, 2008 at 1:30 pm
Of course they are went into receivership. check the documents filed in court, we put a copy of the report on our blog: wisdomous.com
the development will be finished as there is enough equity to do so. the report uncovers some interesting information about the property though.
wisdomous.com
March 13th, 2008 at 2:59 am
Are you sure that H&H went into receivership? Isn`t it just a new stupid kind of promotion? (of course very bad one) It is not easy to be popular when the competition at Vancouer real estate is so high…
February 28th, 2008 at 8:46 pm
It's brainwashing, you can always tell who has been "Ozziesied" they have glossy eyes.
It's like that old movie, where Charlton Heston comes down from the mountain with the binders and that "look".
February 28th, 2008 at 8:42 pm
http://tinyurl.com/yoblzs
The real krisssh in action!
The Guru extraordinaire!
February 28th, 2008 at 8:20 pm
He has a point that one cannot be a bear forever or we’re all doomed but his conclusions seem suspect
Ideologues and religious fundamentalists always project their irrationality onto those who oppose them. They do not believe in rationality, so they believe that anyone who opposes them must hold an opposing ideology.
So if you believe that "RE is always a good investment", you also believe that any one who disagrees with you thinks that "RE is always a bad investment". You just cannot comprehend the idea that "whether RE is a good or bad investment depends on how much you pay for it, the income it yields, and the carrying costs".
I don't think the gurus really believe this crap. If they did they wouldn't be spending their time giving seminars and letting people in on their little secret. It's their "students" who do.
February 28th, 2008 at 8:15 pm
I would bet krrish1 popped a chubby and ended up chocking his chicken reading ozzie.
February 28th, 2008 at 6:17 pm
No Bdk,
That was a lesson to mess with gurus!
February 28th, 2008 at 6:12 pm
Did you notice that the receiver will be paying 24% annual interest to the firm providing the financing to finish the project.
Jeeeez! I guess its hard to get a credit card with a great introductory rate and a $3.7m limit these days.
February 28th, 2008 at 6:11 pm
Hold on a second Krissh, are you entertaining the idea that prices won't go up forever?
What prompted this turnaround?
February 28th, 2008 at 5:59 pm
The pope,
This time it was better we got some contents to read those are making better sense and here is little bit more info from inside that can help to predict the outcome out of receivership profit on the project,the holders of the pre-sale contract will have to pay a 10- to 15-per-cent bump in the prices to hold on to their contracts.
DaMann,
Thanks for the nuggets but you did not provide over all sense I mean to say"your own views" like what do you think about the market?when is the right time to buy?
when do you think the market will crash?.How long have you been thinking like that?.you must post your point of view.
Otherwise crash is like you are telling a child do not jump from the roof you may hurt your self,Do not drive a car you might going to crash somewhere.
Based on the above term in your nuggets where do you see the prices are standing today?
have you seen the hpi graph from 1977-2008? or current one from chipman for last three year?
Btw how many home owners have been paid off their mortgage since than? etc?etc?.
February 28th, 2008 at 4:30 pm
Thanks for digi's link to the receivership PDF.
Did you notice that the receiver will be paying 24% annual interest to the firm providing the financing to finish the project. I based that on 1.9%monthly + 2% fee + 0.5%monitoring fee. They are paying 700K to borrow 3.7M over 7 months to finish the project.
Eeks, would have been cheaper to put it on the credit card.
And they said in December that they thought they could get 440/sqr ft but now in February they are hoping for 420/sqr ft.
I hope they have to keep issuing reports to the court every few months so we can track the declines!
February 28th, 2008 at 4:17 pm
RE Ozzie
"The trouble is, of course, that they are always greatly respected gurus and seem so convincing at the time – and that makes them so dangerous."
It's like rain on your wedding day.
"Ozzie Jurock is a Canadian real estate adviser and author of Forget About Location, Location, Location. He is featured in Donald Trump's latest book, Trump: The Best Real Estate Advice I Ever Received"
February 28th, 2008 at 4:16 pm
"Probably the same misguided souls who forecast the end of the world in 1974 when the Dow Jones average collapsed by 40 per cent and Vancouver house prices tumbled by 20 per cent. Or perhaps it was the crowd of the '80s as Toronto's real estate prices soared and we bemoaned our stumbling ways. Perhaps it was the crowd of 1990, who fearful of the 13.3 per cent five-year mortgage term told us to move out of real estate. The trouble is, of course, that they are always greatly respected gurus and seem so convincing at the time – and that makes them so dangerous."
I love how he leaves out an all out monsterous crash of 1982, or how if you bought at peak in 1995 you would have been far better off buying in 1999. God I hate this crap. Basically all these guys ever say is look how far it goes up in 30 years. umm no shit, let me put $100k in a bank account for 30 years and see how well it does over 30 years. Jesus these guys are annoying.
As well he says to go and read past articles on the world wide doom and gloomers and see how wrong they were. Hmm why not read all the Vancouver sun articles about all the RE gurus who were so damn wrong on so many occassions. Litterally months before a crash no less.
Here aer some lovely nuggets. Compliments of a poster called VG at the Victoria housing blog.
1. "Price stability, rather than decline, would be expected for most of the housing stock . . . since underlying home ownership demand remains strong due to continued high immigration." (Frank Clayton, January 18th 1981 in the Sun. link The market crashed by about 50% over the following year. )
2. Renaud said he thinks that the trend to prices for houses has been broken by a temporary lull and that by [next year] or so prices will be equal to or greater than peak prices. (Claude Renaud, VP of Mortgage Insurance Canada on April 14, 1982. link The market took 26 quarters (over 6 years) to regain its peak in real terms.)
3. "To those who are waiting for Vancouver house prices to collapse, I can only advise them not to hold their breath . . . Unless there is a major recession or significant depopulation, house prices are unlikely to drop significantly." (Jerry Jackman, VP Royal Lepage, November 18, 1988 in the Vancouver Sun. link In 1989, prices started to drop – with an eventual 30% or so drop. Real prices did not attain these heights again for 58 quarters, or around 15 years.)
4. "We are definitely in a transition market in areas such as the West Side, Vancouver East, and Burnaby . . . it is too early to tell if the market will stall." (Jerry Jackman, April 20th 1989 in the Province. link Prices did not recover in real terms until 15 years later.)
5. "It is unlikely that prices will decline significantly." (JJ again, July 18th 1989 in the Sun. link)
6. "The whole world wants Vancouver because everybody is moving here now and everything points up, up, up." (Realtor David Goodman, December, 1989 in the Sun. link The market did not reach these heights again for 15 years.)
7. " . . .no one is panicking over the west side housing market and he insists that it has simply 'normalized'." (Jerry Jackman, January 27th 1990 quoted in the Sun. link West-side prices fell by 40% in the next 2 years.)
8. "I can't see prices reversing themselves there [in the west side] because it is still a very desirable place to live." (Same as above.)
9. "The market is entering a more 'normal' phase." (REBGV president Brian Calder, Feb 2, 1990 in the Sun. link If normal means that it takes 15 years to recover, then 'normal' it was.)
10. "A BC Central Credit Union newsletter released Tuesday said BC's housing market is currently experiencing a contractionary phase but the worst of that phase should be over by late summer or early fall." (BC Credit Union economist Richard Allen quoted in the Sun, July 5th 1995. link The decline in the late 90s was slow, but it took 28 quarters to bottom out and 33 quarters to recover to the previous peak. Some 'phase', eh?)
February 28th, 2008 at 4:11 pm
Amusing vote!
By the way, if anyone has a story they want to share about this — as a presale buyer, someone starting to rethink a decision to buy now, etc — then CBC News wants to talk to you.
Cheers,
Lisa @ CBC
February 28th, 2008 at 3:07 pm
"I think this is exactly what he would write! He’s trying to stop a psychological change that HE is seeing!"
Reminds me of a scene in the Black Adder Goes Forth series where the commanding colonel has a bizarre spurt of game theory gone horribly wrong and orders an attack on the enemy lines where the defences are the strongest.
Read his post closesly. He makes no predictions in the short term. He is observing that things have a way of working out. His comments about leverage are flawed and some of his comments comparing asset classes to real estate are misleading. He also is crafty addressing the "fear" factor that many FTBs have to overcome when taking a huge risk; it's a mistake to equate fear/scariness with risk IMO. He has a point that one cannot be a bear forever or we're all doomed but his conclusions seem suspect.
I wonder if Ozzie lived in Japan would he be writing the same article.
February 28th, 2008 at 2:56 pm
"This will give the pre-sales market a black eye. However I do not see it affecting condos already built."
I think it must have an effect. A weak presale market exacerbated by bad press like this is a portent for weakness. Presales not selling result in incentives that erode prices in the existing condo market. It will be obvious in short order who the flippers are when short-term appreciation is no longer guaranteed.
February 28th, 2008 at 2:49 pm
"Ozzie says not to listen to anyone on this blog" Actually this makes me wonder..in a real bull market Ozzie wouldn't waste the time of day on such an article, but if he is sensing a wind change, I think this is exactly what he would write! He's trying to stop a psychological change that HE is seeing!
Strataman
February 28th, 2008 at 2:18 pm
Huh. Garden city in Richmond is not even built yet and the estimated price has gone down:
"In our December 14, 2007 report, we had estimated the average selling price per square foot for the unsold units in the Garden City project would be approximately $440. This assessment was based on information provided by the Company and preliminary discussions with certain marketing agents. As a result of having the benefit of several proposals from marketing agents, we have now concluded that a more realistic average revenue per square foot in the Garden City project is $420."
Of course in the end all that really matters is what the market will bear and whether you can get people to line up in excitement to give you their money.
February 28th, 2008 at 2:18 pm
OT (for free-for all tomorrow) from the Vancouver Sun Ozzie says not to listen to anyone on this blog (and other "gloomers" too)
How does that make you feel? Gloomy?
February 28th, 2008 at 2:09 pm
There's an environmental worry in there as well:
"The South side of the H&H property used to be a gas station. The gas station completed the appropriate environmental remediation work when it shut down and obtained a clearance certificate under commercial zoning requirements. It has been determined that the gas station was leaching hydrocarbons under Helmcken Street. There is a risk that groundwater may flow from Helmcken into the H&H property discharging hydrocarbon fumes."
February 28th, 2008 at 2:03 pm
The reciever managers report to the BC supreme court is an interesting read if you want more info. Looks like the developer was playing fast and loose with changes amongst other things:
"Prior to the receivership, the Company had redesigned the penthouses on floors 15 and 16, from six two storey units to four two storey units. As a result of these changes, the permitted Floor Space Ratio ("FSR") has been exceeded by 405 square feet and the total number of units reduced from 192 to 190. No application was made to the City of Vancouver to amend the Developments Permit ("DP") for changes to the penthouses"
February 28th, 2008 at 1:53 pm
Ok thats just strange – the only useful and informative answer comes from Krrish? What is this bizzaro-world?
Krrish is right, receivership is essentially repossession by the lender. The lender will then liquidate the project to retrieve their money. This is why they will revoke contracts for the units that were sold to friends and family for less than market value, or charge them the difference if they want to keep the unit.
February 28th, 2008 at 1:01 pm
krrish,
At the end of the day, the buyers are screwed!
February 28th, 2008 at 12:50 pm
recievership?=Bankruptcy.
Because of financial difficulty developer filed for receivership the project goes back to lenders, receiver ship(financial institution-Mortgage company) then lender hired some one to complete the project and look into the legal matters to fix repricing if buyers are agree to pay the difference they can keep their units or their deposit get refund unit will relist for sales on new prices.Krrish told me that please tell no body.
or
The common law has long recognised the concept of a receiver. Following the development of the floating charge creditors were effectively able to take security over a company's entire business by means of a floating charge over the undertaking. Security documents generally contained very wide powers of appointment such that on default the creditor could take over the business immediately and without the input of any court. A receiver appointed to the entire business became known as a receiver and manager. The receiver and manager would typically have extensive powers over the business, including the power to sell it at a time and on terms that suited the appointing creditor.
February 28th, 2008 at 12:27 pm
Wow! I am surprised even H&H went into receivership. Chandler Development is no small potato.
This will give the pre-sales market a black eye. However I do not see it affecting condos already built.
February 28th, 2008 at 12:23 pm
Comment by Anonymous
2008-02-28 11:58:44
Sorry if its a stupid question, but can somebody please explain what it means to go into recievership?
Comment by Rob Chimpman
2008-02-28 12:11:08
It means you’re broke as fuck.
I think it means the develops walks away and the buyer is F'd.
February 28th, 2008 at 12:11 pm
It means you're broke as fuck.
February 28th, 2008 at 11:58 am
Sorry if its a stupid question, but can somebody please explain what it means to go into recievership?
February 28th, 2008 at 11:57 am
Lots of suburban condo projects finished without even selling many of their units in pre-sales. According to the Real Estate Weekly ad rag, Cora in Coquitlam is only 60% sold in one tower and 85% in the other. These buildings completed months ago. They are offering financing as low as 2.99% with 20% down.
The problem for Cora is not just its ultra-high prices (for the area) but that its not a short walk to the Skytrain. Just a little too far away for commuters.
February 28th, 2008 at 11:50 am
The Vancouver equivalent of visiting the confessional. It seems the party's over for pre-sales, with all the recent bad press. Next come incentives, followed a few months later by price drops and cancellations galore.
Grab a beer, get out the reclining lawn chair, and watch the show. It'll be faaaan-tastic.
February 28th, 2008 at 11:39 am
Krrish is Tom Cruise?!?
February 28th, 2008 at 11:28 am
Guys you're disrupting this city's Karmic energy, just keep pulling up on your bootstraps like everyone else and think positive thoughts. It's not economics that causes these collapses but negative energy.
Actually I have a secret. I know what really causes the collapses elsewhere but don't tell anyone, Krrish told me on the condition that I had to keep it a secret.
whispering
Thetans, it's the ghosts of trillions of aliens who were murdered billions of years ago by the evil emperor Xenu. But don't tell anyone I told you.
February 28th, 2008 at 10:53 am
Probably two categories could be rolled into one…
-Lenders feeling 'iffy' about Vancouver real estate, and
-Fallout from global credit market problems
Oh, wait, Vancouver is singularly different. It is the only self-watering oasis on the planet and is delinked from the effects of Globalism. My bad.
February 28th, 2008 at 9:52 am
Last week Bob Rennie said "Bob Rennie, who makes his living marketing presales, says reputable developers welcome new laws"
Yet he was still doing business with Chandler even after this fiasco last year
http://vancouvercondo.info/2006/07/rennie-dengin-…
"George Dengin’s lawsuit alleges unusual or apparent dishonest conduct including chandlers alleged failure to put money into trust and selling some units twice. Bob Rennie supports dengins lawsuit – he has provided an affidavit to support Dengins claims and has stopped marketing chandler properties."
February 28th, 2008 at 9:43 am
The receiver has discovered that 23 condos in the Chandler Development Group projects were allegedly sold to insiders at prices well below market value, Bowra said.
Nice..friends helping friends…how many other projects have this situation? Most.
February 28th, 2008 at 9:35 am
The receiver has discovered that 23 condos in the Chandler Development Group projects were allegedly sold to insiders at prices well below market value, Bowra said.
Wonder how many other projects have this situation?
February 28th, 2008 at 7:54 am
tictoctictoc…indeed!