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Still lots of mystery behind the flip of two Nelson Street properties for quadruple assessed value

April 25th, 2016 · 7 Comments

I think many of you saw this fun piece by Ian Young at the South China Morning Post about the interesting doings with two Nelson Street properties, purchased by Bruno and Peter Wall just two years ago and recently sold for $68 million to a new player in town, Gao Shan.

Ian’s style can be very entertaining and swashbuckling — reminds me of the style of William Randolph Hearst’s reporters at the New York Journal in the rambunctious days of early commercial journalism. And kudos to him for getting hold of the new buyer and also interviewing the Walls’ sad-sounding architect about the building design he created for them, which now looks to many as though it was just window-dressing prior to a sale.

But I was hoping that in the Twitter/blog discussion elsewhere that a couple of questions would be answered, but that hasn’t happened, so I’ll put them here.

Question 1:

What really is the role of Suncom in all of this? This is the company that was advertising “crowdfunding” opportunities for both the Molson Brewery site and these Nelson Street sites on social media a few months ago, which various reporters wrote about. Yet the Molson Brewery site ended up in the hands of Concord Pacific and it looks as though it went straight from Molson to Concord with no intermediary, in spite of whatever Suncom was advertising.

With the Nelson Street sites, Julia Lau, who has been with Suncom in the past but it’s unclear what her role is now, also appeared to be soliciting investors, as I wrote in a story a couple of months ago. Some sharp-eyed people got screen grabs of her Facebook posts saying the following.

Julia Lau –

“The new project we just bought is 1065 Nelson St., Vancouver. Located at Burrard Corridor Area “E”. lot size is 17,292sf ( 130 x132 ), two appointments building with 50 units. Net income is $470,000/year. The SFR is 2.75 now but potentially could be up to 24.3. It could built up to 58 floors new apartment building potentially. Whoever want to invest has to prepare the deposit with bank draft tomorrow. The shares will be sold out on Monday.
The previous project we bought with $103 million at 14140 Triangle Road, 14300 Entertainment Blvd, and 14111 Entertainment Blvd Richmond on May 22, 2015, the shares were sold out in one week.
The $30 million projects at 5826 & 5860 Tisdall St Vancouver’s shares were sold out in one day on Feb 21, 2015.”

next day

“The $60 million dollars project at 1065 Nelson St Vancouver’s shares sold out in two hours! Thank you very much.”

So Lau’s posts claimed that the project sold out. But did it? We have no evidence that anyone invested. Lau hasn’t returned calls to anyone in a while and no investor has ever appeared to talk about what a good investment she or he made.

Question 2:

What is that land really worth? There are two apartment buildings, one at 1059 Nelson, the other at 1075 Nelson. The Walls bought the two in February 2014 for $16 million, though the 2015 assessment put the value at only about $14 million for the two. Gao Shan bought for $68 million, which makes it look as though he paid stupid money and the Walls made out like bandits.

However, since the time the Walls bought and now, the city passed the West End plan. That plan envisions much taller towers being allowed in the block next to Burrard, i.e. right where those two apartment buildings are. (Actually, my question 3 is, what did the Walls know when they bought those apartments back in February 2014, before the West End plan was passed.) Note: My mistake. The West End plan was passed in November 2013, as per CityHallWatch note. But I do wonder if the sites were optioned before. Their purchase price seems low, as though the owner didn’t know about potential rezonings.

Developer Bosa recently bought out all the condo owners of a building nearby (1060 Barclay) for double the assessed value on their units, precisely because of the additional density the West End plan will allow. There were 56 units in the building. One unit that I looked up had been bought by Bosa for $608,000 when it was only assessed at $354,000. If you multiply 56 times $608,000, it comes out to around $34 million. And some units may very well have been worth more. Note: David Taylor says Bosa bought 1070 Barclay, next to 1060, for $59 million. Also in the rezoning zone.

So developers are clearly willing to pay extra in that area, based on their expectation that the city is going to allow much high density in that block between Burrard and Thurlow. The Walls had proposed a 60-storey tower in their pre-application open house.

But I don’t know enough about the potential for that site and the buildable square feet that might be allowed to know what that $68 million will work out to on a per-square-foot basis.

The city also does require that 25 per cent of the units on that site be for social housing, which is definitely going to cut into the profits. And, from what I understand, the buyer has already made a couple of clumsy moves at city hall. I can’t imagine this process is going to go smoothly for him.

I look forward to your analysis.

 

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