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2 more Vancouver condo project run into financing problems

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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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Dave

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.

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Mark

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… Read more »

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wisdomous.com

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

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real estate Vancouve

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…

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-A-

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".

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Strataman

http://tinyurl.com/yoblzs

The real krisssh in action! 🙂 The Guru extraordinaire!

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patriotz

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.… Read more »

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-A-

I would bet krrish1 popped a chubby and ended up chocking his chicken reading ozzie.

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krrish2

No Bdk,

That was a lesson to mess with gurus!

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Lager not Logger

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.

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bdk

Hold on a second Krissh, are you entertaining the idea that prices won't go up forever?

What prompted this turnaround?

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krrish2

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… Read more »

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vanguy

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!

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jadeeast

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"

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DaMann

"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… Read more »

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Lisa Johnson

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

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jesse

"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… Read more »

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jesse

"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.

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Anonymous

"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

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Digi

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.

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jesse

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?

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Digi

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."

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Digi

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"

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Digi

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.

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Anonymous

krrish,

At the end of the day, the buyers are screwed!

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