High returns or security
A cautionary tale in todays Vancouver Sun for those seeking high returns AND security in a real estate investment: Two time real estate loser leaves investors high and dry.
A former bankrupt, Hauff made his first stab at developing the 35-acre residential project on Bullock Lake near Ganges in 1996. To fund the development, he borrowed millions of dollars from Multimetro Mortgage Corp. at up to 20 per cent per annum.
Multimetro, run by Vancouver businessman Ken Megale, raised most of the money from mom-and-pop investors. He promised them extremely high rates of return and assured them it was a safe, fully secured investment.
In fact, the project was mismanaged from start to finish, and ended in foreclosure. Multimetro lenders, who were owed $11 million including accrued interest, lost everything.
… but dreams die hard, so Hauff bought the property back out of foreclosure for $9 million and started all over, this time with money from Calgary based Gibraltar Mortage Corp at a 24% per annum rate.
Like Multimetro, Gibraltar raised the money from many small investors, promising them high returns on a supposedly fully secured basis.
Alas, under Hauff’s stewardship, the project once again stalled. In February 2007, Gibraltar called its loans and David Bowra was appointed receiver.
Subsequently, the resort lodge and spa burned down. The insurer has agreed to pay $7.4 million compensation. The property, as is, is estimated to be worth another $18 million to $20 million. So in total, creditors might realize anywhere from $25 million to $28 million.
Meanwhile, there is about $36 million worth of debt on the property, most of it owed to Gibraltar investors. Interest is accruing at the rate of about $600,000 per month. There are also property taxes and professional fees to be paid. So even on a best-case scenario, creditors are going to take a serious hit.
Read the full article here.
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June 11th, 2008 at 9:31 am
June 11th, 2008 at 9:37 am
June 11th, 2008 at 9:39 am
June 11th, 2008 at 9:41 am
June 11th, 2008 at 10:04 am
…And some people have the gall to say we don’t have a ’sub-prime’ problem in Canada.
June 11th, 2008 at 10:14 am
June 11th, 2008 at 10:22 am
June 11th, 2008 at 10:31 am
TORONTO - Lundin Mining will move its head office from Vancouver to Toronto, the company’s chief executive said Wednesday, as he gave assurances the miner would hold on to its 25-per cent stake in the Tenke Fungurume copper-cobalt deposit in central Africa
June 11th, 2008 at 10:31 am
June 11th, 2008 at 10:38 am
Morons like Thumsup2 ,or whatever he’s calling himself today (Krissh, Satv,time informer), are the same idiots who invested then without doing their due dilligence, I know that was harsh and some people “innocently” forked over their life savings but c’mon be careful with your life savings! The rambling idiot has already denyied that he even knows Krissh and he’ll be crying for his Mummy when he goes bankrupt. Serves him right, he’s an ignorant illiterate cocky fool. Hey Satv I have a real estate investment for you, give me your whole $1,500 life savings and I’ll make you rich!
June 11th, 2008 at 10:55 am
A history tid bit.
“All the boy said was, ‘I give you my word it isn’t on a cliff or under water, and before long the town ought to move out that way.’ And I took it as easily as a man buys a piece of tobacco. I became owner of 400 well-developed pines, thousands of tons of granite scattered in blocks at the roots of the pines, and a sprinkling of earth. That’s a town lot in Vancouver. You or your agent hold onto it till property rises, then sell out and buy more land farther out of town and repeat the process. I do not quite see how this sort of thing helps the growth of a town, but the English boy says it is the ‘essence of speculation’ so it must be all right. But I wish there were fewer pines and rather less granite on the ground.”
Rudyard Kipling writing about his investment in Mt. Pleasant in 1892.
June 11th, 2008 at 11:08 am
Don’t try to bark on me like female dog you scary bear, do you even go to take P by your self in the bathroom. you dum head!
the topic above is an individual story of hightech developer/investor but we are the Middle classs or poor class end peoples where some of you don’t even have any principle residence you bearish tenents.
If the guy like the one in article is losing his shirt -it’s not a big deal because the first step to learn in bussiness or invetments required an interpreneure skill,the first thing to learn is a loss- if he hit the loss button first that’s it, if he don’t he should have join the $billion club.
Regarding the post-What can we expect from the post? on bears blogs?, why don’t you post article about Concord Pacific or Bosa?
June 11th, 2008 at 11:13 am
“The people of Vancouver smilingly consoled him: “You bought that from Steve, did you? Ah-ah, Steve! You hadn’t ought to ha’ bought from Steve. No! Not from Steve!”
June 11th, 2008 at 11:34 am
June 11th, 2008 at 11:40 am
June 11th, 2008 at 12:17 pm
Okay Krissh.
So I work at one of the worlds largest companies where a grade 5 education simply wouldn’t cut it.
What is it that you do?
How is driving a pallette jack related to being an entrepreneur?
June 11th, 2008 at 12:24 pm
June 11th, 2008 at 12:52 pm
It’s pallet. A palette is a board for paints. A pallet is a platform for transportation and storage of goods. Pallette is not a legitimate word.
Sorry, I’m not normally one to jump all over improper language but I just found the image of Krrish driving a forklift around with a little artist’s palette amusing
June 11th, 2008 at 12:58 pm
Rudyard Kipling also wrote a book called “THE ROAD NOT TO BE TAKEN”the story apply to the guys who Scientifically are bears look for the reason to ride market cyclically as Bears say:Oh prices are going up there is a bubble against fundamental,Oh prices are going down there is no bottom in sight then countinue….btw the road they have chose has nothing to do with the life term other than lurk!lurk!lurking to kill their option and oppertunities when they realise sometime in future then they come to know that was a road not to be taken.
Bdk,
It doesn’t matter what we drive when we know what is entrepreneur we can easily drive bears out with bubble.
“How is driving a pallette jack related to being an entrepreneur?”
I don’t have to confirm weather you are right or wrong but told you already most jobs are not based on education but jobs are based on rates of pay,likeness, and oppertunities. no body like to sit on eggs but attempts make our dreams come true some time,some time not.I had chose my occupation and bought a principle residence and side kicks to make it big in 2011 that would be the final milestone with in 13 year -11 included -nothing to worry after that so i have decided the bearish road not to be taken in my life.
June 11th, 2008 at 1:15 pm
Is she trying to do a book report on a book which she hasn’t read? Imagine Satv reading a book!
It’s good she has a dream. You haven’t told me anything you’ve written a bunch of words, I know five year olds with more brains than you.
June 11th, 2008 at 1:39 pm
When it sounds too good to be true…….
I won’t shed a tear.
Hey Thums up,(Rob) I stopped posting on your blog, but somehow it’s become a gong show without any effort on my part. Gongrats, have you thought of charging people to visit? It’s quite entertaining.
June 11th, 2008 at 2:42 pm
June 11th, 2008 at 2:45 pm
June 11th, 2008 at 2:46 pm
June 11th, 2008 at 2:57 pm
June 11th, 2008 at 3:25 pm
No, what makes the sector a bad investment is the fact that its overpriced driven by loose credit and speculation. That combined with a negative outlook for the economy in general, falling incomes and skyrocketing inventory as people try to cash out make the sector a bad investment in most of BC.
June 11th, 2008 at 3:28 pm
June 11th, 2008 at 3:38 pm
Bubbles are the most fascinating and frightening stories in finance. The dot-com and housing market bubbles are only the most recent episodes of speculative frenzies, a legendary history that includes debacles such as tulip mania, the South Sea Bubble, the Mississippi Bubble, and the Roaring ’20s”
But none of these manias come close to the Vancouver Housing Bubble.
http://www.businessweek.com/investor/co … _top+story
June 11th, 2008 at 3:55 pm
June 11th, 2008 at 4:28 pm
I especially liked this part. Perhaps as a joke a few of us can buy Satv/Krissh/idiot/thumsup crappy studio when he goes bankrupt.
One other thing dunce, did you imply earlier that a Bosa has never gone bankrupt? I know you won’t answer that but you’re mistaken if you think it hasn’t happened.
Secondly if you really sold your place give me the MLS number I can check it on the Xchange.
“”The stuff built during infrastructure bubbles—housing and telegraph wires, fiber-optic cable and railroads—doesn’t get plowed under when its owners go bankrupt,” writes Daniel Gross in Pop! Why Bubbles Are Great for the Economy. “It gets reused—and quickly—by entrepreneurs with new business plans, lower cost bases, and better capital structures. And when new services and businesses are rolled out over the new infrastructure, entrepreneurs can tap into the legions of users who were coaxed into the market during the bubble.”
June 11th, 2008 at 5:42 pm
Yeah. How do I tap into those owners with negative equity exactly?
June 11th, 2008 at 6:30 pm
Well none of it really makes much sense. It’s kind of like saying it’s great when your arm gets amputated because you get to try out the wonderful new prosthetics these days!
It’s looking at the positive side of a bad thing but ignoring the bad side. I’m quite certain the positives of the housing bubble will not outweigh the bad, except perhaps if governments finally decide that the boom/bust culture needs better regulation.
June 11th, 2008 at 6:39 pm
June 11th, 2008 at 7:02 pm
http://tinyurl.com/6r8bo8
interesting!
June 11th, 2008 at 9:13 pm
Of course it never really works out for the early adopter, as they get stuck with a piece of obsolete hardware they paid way too much for (HD-DVD, anyone?), but their willingness to throw money at this stuff benefits the industry as a whole.
I hope that’s a decent analogy…
June 12th, 2008 at 6:50 am
June 12th, 2008 at 6:51 am
June 12th, 2008 at 7:58 am
I guess I was thinking more of infrastructure. High property value means high taxes, which means stuff like the new skytrain line, etc. Those things won’t all go away once the correction comes.
June 12th, 2008 at 12:54 pm
June 12th, 2008 at 12:59 pm
Please provide a link with the amount of these cost overruns.