City closes Onni deal with $1M land sale.

The long and, at times, rough public process for the Onni Safeway site development has come to a definitive end. The Onni towers got their fourth and final reading from council before just a handful of council watchers in the City of North Vancouver gallery Monday night, a stark contrast to the overflow crowds that came out to the two public hearings held in March and November last year.

Onni has been on track for approval since a second pubic hearing was held in March for the 344 units of housing in 24-storey and 18 storey towers, along with an eight-storey office tower and 40,000 square feet of commercial space. Council narrowly voted in favour of the development at the end of the hearing.

In keeping with the contentious public process that dogged the project, the final approval came with one last political provocation at the council table.

Upper floors of East Hastings site empty for decades.

An iconic set of adjoining buildings on the East Hastings strip most recently home to a pawn shop is expected to undergo a major renovation that will include adding 19 rental apartments and a retail business.

The addition of housing is significant since nobody has lived in the upper floors of the former B.C. Collateral and Loans buildings at 71-77 East Hastings St. for more than 40 years.

The pawn shop on the main floor has been closed for several years and the large neon “loans” sign once mounted on the west building’s façade is gone.

Located near Columbia Street, the C-listed heritage buildings are smack dab in the middle of a neighbourhood desperate for low-income housing and engaged in a mounting debate over gentrification.

But property owner Steven Lippman of No. 380 Cathedral Ventures Ltd., which owns the York Rooms and other single-room-occupancy hotels in the neighbourhood, said his project couldn’t be considered gentrification. “We rehabilitate, we re-energize, we reinvigorate, we re-use, we recycle,” Lippman told the Courier. “It’s an old junky building and we want to fix it up and put people who are low-income back in there. That’s what we do.”

The promised land.

Is the North Shore the next big real estate play?

That’s the question posed at the April 9 Vancouver Real Estate Forum, which, for the first time in its nearly two-decade history is eying up the North Shore as the next investment hot spot.

The forum is slated to include Park Royal Shopping Centre vice-president Rick Amantea, as well as Beau Jarvis, vice-president of development at Onni, which recently won approval for its 344-unit condo development on Lonsdale Avenue in North Vancouver.

The decision to focus on the North Shore was made by a committee of about 20 real estate executives who cited the overhaul of Park Royal, the Seaspan shipbuilding contract and the possible Kinder Morgan pipeline expansion.

Those elements, combined with a scarcity of land south of the Burrard Inlet, have combined to make the North Shore a fertile ground for fresh foundations, according to Mark Stephenson, vice-president at Informa Canada, the company producing the forum.

Intergulf Development Group in conjuction with the owners of the Quality Inn at 1335 Howe Street are proposing a 39 storey, 180 unit residential tower in Downtown South.  The architect for the project is Ramsay Worden.

A preliminary open house for the project was held on April 3 at the Quality Inn. 

Cue outrage from purchasers of suites in Maddox and Salt.

How much longer can values keep going up at this rate? This is a question we are asked all the time, even by savvy and experienced investors who know the Vancouver market well. As we have documented before, there are numerous factors that have driven capitalization rates to an all-time low, many of which are external to the local market.

A trend we have noticed in recent sales however, is that many of the sellers have only held the assets for a few years.

To get a glimpse of what kind of gains these sellers are achieving, we took a look at a handful of sales in each asset class over the past two years. The criteria was as follows:

• Apartment, retail and office properties (5 each) that sold since September 2011 over $5 Million
• Properties that were acquired less than 10 years before they were sold and did not experience significant capital expenditures

From this sample set of 15 sales that took place during this period, the average annual rate of appreciation is displayed below:

Some observations taken from this sample of sales activity:

• Average property was held for 5.5 years and then sold.
• The annual appreciation ranged from 4.4% to 13.1%, and averaged 8.6%.
• Notable resales in this survey included: Bentall 5, which was sold by Deka to Bentall Kennedy after 3 years and 10% gain per year. 2450 Ontario Street sold in February 2013 also after 3 years, and also after a 10% annual gain.
• Note that the above data does not even reflect the overall return to the sellers as it does not incorporate the cash flow component of the return during the holding period. While yields have been driven to all-time lows, cash flow has historically been the bigger component of real estate returns. This should be something for all owners and buyers to think about in Vancouver.

This type of resales activity isn’t unexpected in a market that is continually being inundated with capital and buyers, many of whom are new to the market. Interestingly many of the sellers in the above survey are well-capitalized and don’t need the cash, they are simply selling based upon the view that currently achievable values aren’t sustainable in the near term. Our question is (as echoed by our clients): how long can these types of gains last?

In our view, there will be more assets coming to the market as the risks to the provincial and local economic outlook begin to pressure more owners to cash out and realize gains. In most areas, cap rates have no further room to decrease.