Real estate developers shrug as flood of Chinese cash into Vancouver continues

 

‘Money goes everywhere in the world … If you have a good place, (investment) will flow there’

 

BY JOANNE LEE-YOUNG, VANCOUVER SUN SEPTEMBER 11, 2015

 

 

Belford Properties is another a Vancouver-based developer with ties to mainland Chinese investors.

VANCOUVER -- With every fall of the Shanghai stock market and report on corruption and laundering of cash out of mainland China, there is hand-wringing about the impact of money coming from this instability into the local real estate market.

Much has been said about Chinese capital flowing into luxury homes from Sydney to London to Vancouver.

When it comes to land and other buildings, 2015 has been dubbed the year of the Chinese investor, too.

Around the world, large mainland Chinese funds have been snapping up well-known and coveted sites. Then, large developers, equity investors and insurance firms, also from mainland China, followed with a buying spree in the U.S. and across Europe.

One of the largest single purchases was made by Beijing-based Anbang Insurance, which paid $1.95 billion for the iconic Waldorf Astoria hotel building in New York.

For the most part, however, these institutional and corporate players from mainland China have been absent from the Vancouver market.

Instead — along with more immigrants and investors from mainland China buying homes in Vancouver — it’s been smaller companies, often backed by consortiums of private investors, who have emerged to buy commercial land and buildings here with the aim of re-developing them into mixed-use properties with condos, townhouses and retail shops.

They are attracting attention, and sometimes scorn, in a commercial real estate market that, like the residential one, is already tight, with low supply and rising prices.

The rub is in the timeline. Critics, including local developers who say they can’t afford to sit on land purchases, argue some of these buyers are snatching up prime plots at top dollar with no pressing plans to develop them.

It’s a situation that shrinks the supply of affordable housing options as more buyers who are priced out of looking at single-family homes turn to multi-family developments like condos and townhomes.

“Nobody wants to hold land intentionally,” said Hani Lammam, executive vice-president at Cressey Development Group. “You take it through the process, look at the deal, the numbers, and then you realize there are more costs, more realities, and so you have to hold it.”

The implication is new developers are paying more, especially for the best sites, because they have grand project plans they think justify the price. But they are betting, in some cases, that current zoning can be changed and other hurdles like height or density restrictions will be easily cleared, and that isn’t always the case.

“It’s not money we would risk. Sitting on land is not a good investment,” said Lammam. “There have always been speculators. It’s absolutely normal. We don’t have to stop speculation. It’s a free market, of course. But it does (drive up prices). It forces us to be more innovative.”

So, are these claims by local developers with vested interests exaggerated?

It’s not the first time inflated real estate and land prices have been blamed on investors and immigrants from greater China. In the 1980s and 1990s, when there was an exodus of people and money from Hong Kong to Vancouver, there was a similar rant.

The 1988 sale of the former Expo 86 lands to Concord Pacific, then owned by Hong Kong businessman Li-Ka Shing, followed by the subsequent presales of condos there to buyers in Hong Kong by his son, drew public outcry. Residential homes bought by immigrants and investors from Hong Kong were derided as “monster homes” for their size and showy details.

“I think the parallels are many,” said Henry Yu, a University of B.C. history professor who specializes in migration. “Foreign capital has a yellow face. If it’s British or American or German investment, it’s not foreign in the same way. There is this perpetually foreign element.”

Yu also said the networks bringing cash from Hong Kong in the past, and mainland China now, are highly mobile, stoking up questions of “loyalty. Are you really here?”

However, the big change is that “Hong Kong wasn’t seen as an economic threat to Vancouver,” said Yu of the city with a population of 7.2 million.

Investors from the era of Hong Kong migration to Vancouver grew up “under British rule with the rule of law. They understand licenses and development permits and have the capability to use local lawyers and are well versed with local customs. This helped to de-mystify them,” said Tung Chan, former CEO of S.U.C.C.E.S.S. and vice-president of Asian banking at Toronto-Dominion Bank.

“China is scary in a different way. That is the fundamental thing,” said Yu. “These (new) migrants as investors are (seen as) coming from a looming geopolitical force, and its rise, its corruption. Therefore, it’s (even) harder to see beyond their foreignness even if some are permanent residents with children who go to school here.”

There is deeper resentment, said Yu.

There is also increasing scrutiny over the involvement of Canadian banks, lawyers and real estate agents in facilitating the illegal flow of mainland Chinese cash here when Beijing, by law, limits the amount of cash its citizens can move out of the country to US$50,000 a year.

Perhaps this is why this new wave of developers, backed by cash from mainland China, keep such a low profile.

There are others buying land and buildings with cash from mainland China, but of those contacted by the Sun, most declined to talk in depth about themselves.

Instead, they are stepping out much more cautiously and there is only a tiny glimpse of who they are and what they are proposing. Details can be cobbled from land and company registry documents, as well as their websites.

One exception is Grant Lin, who was commuting between Vancouver and Beijing a decade ago when his company, Yuanheng Holdings Ltd., started buying, rebuilding and then selling some 30 single-family homes, mostly in the Shaughnessy area.

After he and his family moved from mainland China to settle in a west side home themselves in 2008, it shifted into developing townhomes and condos, including the 10-storey Cambie +7 on West 7th Avenue.

Since then, Yuanheng has picked up a cluster of prime commercial sites in the Cambie corridor, along West Broadway and also in Richmond.

In 2012, it paid what seemed a swashbuckling $30 million for a site on West Broadway at Hemlock Street and before that, some $50 million-plus for an eight-acre site off No. 3 Road in Richmond. This year, it added other sites on West Broadway near its head office.

So far, these have not been developed and Yuanheng has leased some of the spaces.

“I don’t want to say so, but we are able to wait, “ said Lin.

Yuanheng is one of the more visible names and it has been around for some time.

Some others have emerged more recently. Most have local offices and operations that are managed by young, bilingual and Mandarin-speaking executives who grew up in Vancouver, some with degrees from the University of B.C. or Simon Fraser University.

In general, wealthy investors, including Canadian citizens and residents, with ties and cash from mainland China are behind many of their purchases.

Lin is a native of Fujian province on China’s east coast, but worked in Beijing before moving to Vancouver. He is outgoing and prefers to chat in Mandarin when possible, but is also comfortable reaching out to host Canadian politicians who are equally keen to try, through Lin, to connect with mainland Chinese immigrants and students. Lin is current vice-chair of the board of the social services agency S.U.C.C.E.S.S.

In a wide-ranging interview at Yuanheng’s Broadway office, Lin brushed aside a reporter’s query about the company’s backers, insisting he is the company’s single shareholder.

He was also very careful when addressing the suggestion that cash from mainland China is raising Vancouver land prices.

“We are just a single (company),” he said.

Pushed to elaborate, he said: “Money goes everywhere in the world (now). San Francisco. Hawaii. If you have a good place, (investment) will flow there. Lots of people are like a frog sitting at the bottom of the well. They can’t see the world around them. They can’t see the change.”

Yuanheng is just one of several real estate development companies in Vancouver with connections to cash from mainland China. Here are some others:

COROMANDEL PROPERTIES

In late 2014, CM Bay Properties paid $15.8 million for a 15,860-square-foot site at the northeast corner of Cambie Street and 41st Avenue, across from Oakridge Mall. With a proposal for a 12-storey mixed-use condo and retail complex, the purchase was notable for its record-setting price per buildable square foot, pegged at $402.

Land documents show CM Bay has since spent about another $15 million picking up single-family home lots east of that former gas station site. It is marketing a condo development on West Broadway that is slated for completion fall 2016, and another in Fairview in 2017.

More recently, CM Bay renamed itself Coromandel Properties. In a statement, it also put forth Jerry Zhong as its principal and, without too many other details, acknowledged the company’s mainland Chinese ties.

“The name Coromandel is derived from the valuable screens that were created in China and shipped all over the world via the Coromandel Coast of southern India,” said Zhong. “We chose (it) to honour the heritage of our company’s principals who travelled from China to make Canada their new home.”

Zhong declined to be interviewed.

BELFORD PROPERTIES

It has an Anglo-sounding name, but Belford Properties is also a Vancouver-based company with ties to mainland Chinese investors. It, too, owns and has sold some single-family homes on the west side. More recently, it paid $38.7 million for an 80,000-plus-square-foot site in Burnaby near the Metrotown SkyTrain station that is occupied by five low-rise rental apartment buildings. It plans to build two towers on the site. It has also applied to redevelop four single-family lots at the corner of West 63rd Avenue and Manitoba in Marpole into 18 townhouse units. Company principals declined to be interviewed.

WESTLAND INTERNATIONAL INVESTMENT CORPORATION

Lucy Xu and Alex Zhang are listed in company documents as directors of Westland International Investment Corporation, which was established in 2006.

It, too, focused first on custom building multimillion-dollar properties on the west side. The company’s website highlights a few of the luxury homes, which are marketed with names such as Evian Capital, Shaughnessy Fenddi, Swarovski Home and Crofton House.

Later, Xu and Zhang started assembling and buying commercial lots in Kerrisdale and in Dunbar.

In early 2014, through West Boulevard Property Ltd., they bought three lots on a city block along West Boulevard in Kerrisdale for $19.95-million.

After investing hundreds of thousands of dollars to design a condo proposal, the couple sold the parcels to Cressey Development Group in April 2015 for $26.3 million, or a 32-per-cent lift.

Now, they are focused on putting together a city block of land at Dunbar Street and 16th Avenue. In April 2015, Xu and Zhang, through Exeter Property Ltd., paid $9 million for a building at the corner, long the location of Dunbar Lumber Supply. Farther down the block, there are several low-rise apartment buildings and a few homes.

Xu and Zhang, who have been living in Vancouver for some 10 years, declined to say too much about their plans.

“We would prefer to be more low-key since we don’t know if we will be able to make any money. We are just trying it out,” said Zhang, describing plans for a “Dunbar 16” condo project listed on the company website as their “first time with apartments.”

Reached at the company’s English-speaking contact number, director Austin Zhang was a little more specific: “Our plan is to buy the entire block and do a single development. If the owners (in the existing apartment buildings and homes) don’t want to sell, then our plan will be delayed. But if they do, we can go ahead.”

LANDA GLOBAL PROPERTIES LTD.

One of the most talked about new players, even though it sees itself as being slightly different from this group, is Landa Global Properties Ltd. It’s headed by Kevin Cheung and Scott Wang, who both grew up in Vancouver and are backed with capital from their Hong Kong-based fathers, who develop real estate in Shanghai.

In Vancouver, Landa’s Belvoir Homes division has also been building and selling luxury west side homes, but the company has been most noticed recently in commercial real estate circles after reportedly paying over $11 million for the Burritt Bros. site on Main Street. The deal has not been finalized.

The young company has been very active since it was started two years ago, recently closing a $24.6-million deal for a two-acre property on Elmbridge Way in Richmond. In 2014, it bought a retail building site at the corner of Oak Street and Laurier Avenue in Shaughnessy for $7.9 million. It also bought a site in Point Grey for $13.7 million. It has hired architects and has plans to develop multi-family condos on these properties. It is now building its first, a 30-unit development named Bold at Fraser Street and East 19th Avenue.