Receivers report for Eden Sophia
The receivers report for the Eden Sophia condo development has just been released. Pre-sales buyers now know how much extra they’re likely going to have to pay for their units. Article from the CBC:
According to the report by the receiver, The Bowra Group, which was filed in the B.C. Supreme Court on March 11, it will cost $9.2 million to complete construction, if and when work on the building resumes.
In order to fund the construction process, it is suggested in the report that the pre-sale price paid by condominium purchasers, from January 2005 to November 2006, be increased to 90 per cent of the current market value of the building units.
Due to soaring real estate prices, the buyers will have to come up with an average of $84,600 more than they originally paid to keep their homes, the report recommends.
The full receivers report in PDF format can be found here.
On a side note, prices may be going up at the Sophia, but ‘Interested Observer’ writes in to say that prices are going down at ‘the Duke’. The following is an excerpt from the email pitch for that project:
I wanted you to be among the first to know that Duke on Dunbar’s prestigious suite #307 has now been reduced to $999,900! This 1,034 square foot two bedroom, two bathroom home includes lavish finishes and features and breathtaking city, ocean and mountain views and a beautiful, private 468 square foot balcony complete with an indoor/outdoor fireplace to ensure enjoyment year round.
This information will hit MLS late this week so I wanted you to have an opportunity to take advantage of this offer first. If you would like to book an appointment or have any questions, please do not hesitate to call.
Prices up, prices down, who can keep track!
RSS 2.0 comments feed. Both comments and pings are currently closed.
March 13th, 2008 at 10:27 am
• It is estimated that 14 units sold at price discounts of $75,000 below the then estimated current market value for a total discount of $1.37M or an average discount of $98,000 a unit
Did I miss a coupon in the Real estate weekly?
March 13th, 2008 at 10:28 am
March 13th, 2008 at 12:01 pm
March 13th, 2008 at 12:22 pm
March 13th, 2008 at 12:23 pm
Woodward’s will not complete, it will go into receivership, and if, by chance it does, it will be a losing investment for all those who lined up back in 2006 thinking a 500sf box in the DTES could go for $400k.
And housing starts continue to boil.
March 13th, 2008 at 12:26 pm
SHOCKING, say it isn’t so! You mean a luxury condo built in the worst part of town is running into trouble? Who could have seen that coming!
Oh it may be too late but if you have a sarcasm detector installed the previous statement may damage your computer.
March 13th, 2008 at 12:29 pm
And the lenders didn’t exactly read like a who’s-who’s of Canadian lending institutions.
Have RBC, CIBC, TD all decided that the risks are too high even when they will pay out 20%?
March 13th, 2008 at 12:46 pm
National is the company providing Sophia insurance coverage for the home warranty program, which was brought into effect to ward off fears of another leaky condo crisis in Vancouver. The insurer has the right to cancel coverage in the event of a bankruptcy or receivership. They bring up concerns over construction quality:
March 13th, 2008 at 1:19 pm
Does any one know what happens to Canadian mortgage debt after the banks lend? Is it securitized and sold off to investors thereby moving the risk from banks to investors? If so, that explains the relentless lending from the big banks. Also, it raises the question, is the market for securitized Canadian mortgage debt not in trouble given what is happening in the USA? I hear a lot of ads on the radio for mortgage backed investments yeilding something like 15%.
March 13th, 2008 at 1:27 pm
Yep.
March 13th, 2008 at 1:34 pm
Come on people there is enough real bad news out there, no need to make up some.
March 13th, 2008 at 1:45 pm
A couple of articles in The Economist and the list listing Vancovuer as “the worlds most liveable city” etc. boosted civic pride.
Then the Olympics came along and naiive locals *really* believe “we live in the best city on earth!”
Developers and realtors alike took advantage of this situation. Developers, fuelled by cheap credit began to frantically develop the city. Rennie was able to market “the Vancouver lifestyle” to naive locals who were already pretty receptive to the message.
The developers, marketers and realtors entered into an informal club where they bought X number of units at a price Y below market. To make up for the difference they jacked the price of the remaining units.
It became a self fulfilling prophesy. The escalating prices convinved the locals that “it’s different here” which in turn convinced them to pay outlandish prices for their units (essentially they financed the developers’ marketers’ ans realtors’ extra cheap units).
Escalating prices and demand fuelled demand for new developments, and so gave the usual suspects even more opportunity to engage in their shenanigans. THe longer it went on, the higher the prices became.
However, the cycle depends on a never ending supply of buyers dumb enough to purchase, and banks dumb enough to lend them the money. Rising costs, debt crisis etc will bring about the end of the cycle by causing the pool of greater fools to dry up.
What do you think? It’s a hypothesis that seems to fit the facts pretty well.
In this case the winners will be the people who bought in below market value.
We all know who the losers will be.
From the audit it sounds like the Sophia people should take their money and walk away grateful they didn’t buy into a poorly built development. I’m sure they see it otherwise though.
March 13th, 2008 at 2:03 pm
Well Vancouver is in Forbes top ten overpriced real estate markets, along with Monaco, Madrid, Paris, Rome, LA… see we are world-class!
Here’s the write-up & link:
Vancouver, Canada
P/E: 26.81
Vancouver has one of the lowest rental yield rates of any city measured, at 3.19%, despite high prices. Across Canada, despite the same tax system, the effective annualized return rate resulted in a much better P/E of 16.31. Owners need to be aware that such a large spread keeps the rental market strong and the market for sellers more stagnant. The pool of buyers remains relatively small as renters can get the same property at significantly less cost and invest the difference.
http://www.forbes.com/2007/08/24/housin … state.html
March 13th, 2008 at 2:06 pm
March 13th, 2008 at 2:15 pm
I pulled up Bancorp’s website and downloaded their financial statements. On construction loans, they returned something like 11.5% to their investors despite having management fees if I read it properly of nearly 12%. You thought Fidelity mutual funds had a high MER…
They note that they had one of their properties go into default (Sophia) but all others were paying off nicely.
I think we’ll continue to see the small guys go under, as they don’t have the strength to negotiate good deals with sub-contractors and they have to pay out 20-27% to companies like Bancorp. If you borrow $10mil from them for two years (time to build project) at 20%, you owe them $4million after closing. Insane…
I also agree that W is coming along nicely. Despite what we all think of the real estate market, you can’t doubt that W has had a positive effect on the area. There are lots of side projects going up around it.
Oooh, and I liked that Forbes article. I doubt that it will make the BCTV news tonight though…’Forbes magazine thinks Vancouver has some of the dumbest RE investors in the world…’
March 13th, 2008 at 2:44 pm
It’s pretty significant that Vancouver is ahead of New York and London and all the “world class” cities where no one knows anything about Vancouver (”it’s cold in Canada right?”).
Vancouver is probably 5th now because L.A. prices haven’t increased and their dollar’s dropped since that article was published.
March 13th, 2008 at 3:35 pm
If this piece is any indication, industry hype seems to have lost its confidence. There seems to be a tacit acknowledgement that the market has turned. Is this the best that Napthali can do? Not very inspirational work from a spin-miester. Don’t expect this message to help fuel a bull run.
The Real Estate Board of Greater Vancouver (REBGV) reports that residential attached, detached and apartment property sales totalled 2,676 in February 2008, a decline of 6.4 per cent from the 2,859 residential sales recorded in February 2007, and a decline of nine per cent compared to the 2, 941 sales in February 2006.
New listings for detached, attached and apartment properties rose 26.2 per cent to 5,260 in February 2008 compared with February 2007, which had 4,167 units listed. New listings this February rose 21.2 per cent over new listings figures from February 2006.
“We continue to see the market rebalance, particularly with detached properties, where listings climb and sales either hold or decline slightly,” says REBGV president Brian Naphtali. “This shift increases buyer options and allows people more time to make decisions when purchasing a home.”
March 13th, 2008 at 7:59 pm
The banks took on no risk in the first place, because mortgages of over 80% of value (i.e. virtually all new purchases) must be insured by CMHC, i.e. you and me. Nor do the investors take on any risk.
This means that the secondary market will not melt down like in the US. The party will keep going until it is exhausted by sheer physical oversupply.
Thank you Steve and Jim.
March 13th, 2008 at 8:04 pm
March 13th, 2008 at 8:21 pm
March 17th, 2008 at 10:41 pm
Man, when will you guys give it up?
First you’re talking about trucks kicking up rocks, then you say they’re bouncing off the widshield, now there’s a crack and it’s spreading.
THEY’RE MADE OF GLASS! No way it’s gonna break.
I’ll go buy one right now and prove it to you.