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West End apartment for sale: “Rented significantly below market – need upgrades”

November 26th, 2012 · 24 Comments

Hope this one ends well. From a recent listing.

For Sale: 23-Suite West End Apartment Building
Prime West End! The Randi Lynn is a three storey plus penthouse 23-suite apartment building.  Only 3 blocks to Sunset Beach—a prime English Bay address in the heart of the popular West End district, offering tenants immediate proximity to the employment, entertainment, shopping, beaches and recreational areas of Vancouver’s downtown core. Rents significantly below market.  Needs upgrades.
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24 responses so far ↓

  • 1 Bill Lee // Nov 26, 2012 at 6:04 pm

    Hmm. 273K per apartment, 1954 build. Not cheap enough?
    See the financial details on the Goodman link that Mme Bula left us.

    It make make the schadenfreuden stories on
    Vancouver Real Estate Anecdote Archive >
    http://vreaa.wordpress.com/
    Always good for a bitter laugh there.

  • 2 Everyman // Nov 26, 2012 at 10:09 pm

    There is no way this can end well. Current zoning forbids tearing this kind of rental down in favour of higher density. So either it continues to deteriorate or one of the developers who specializes in “renovation” nabs it, and makes it into a showplace three story walk up with rents to match. Affordable, if you consider $1,100+ studios affordable. Take a look at NE corner of Thurlow & Burnaby for an example.

  • 3 Westender1 // Nov 27, 2012 at 8:47 am

    Everyman, the existing RM-5A zoning doesn’t forbid tearing the building down. The rental replacement policy requires that if the building is to be torn down that any new building would need to “replace” the rental existing suites.
    “Base” FSR under the zoning is 1.0 and maximum (apparently) “earned” FSR is 2.2, with an additional 10% bonus heritage density from be purchased from another developer.
    It’s unlikely the site would redevelop under the existing zoning with the rental replacement requirement, so we’ll probably have to wait and see what the West End Community Plan holds for sites like this – a situation that will repeat many times over in the West End for buildings of this type.
    (By the way, regardless of the rent for a renovated studio, as long as it is not owned, the current city administration deems it to be “affordable.”)

  • 4 matt // Nov 27, 2012 at 8:56 am

    it won’t get redeveloped. just an opportunity to renovate and increase the rents.

    2.6% cap rate? looks like you’d have to increase the rents just to get it up to a reasonable (if you can call it that) 4-5% cap rate.

  • 5 Ashley // Nov 27, 2012 at 10:08 am

    Maybe a candidate for a cooperative? The city keeps talking about needing a greater diversity of housing/tenure options.

  • 6 Bill McCreery // Nov 27, 2012 at 10:25 am

    Westender1:

    “regardless of the rent for a renovated studio, as long as it is not owned, the current city administration deems it to be “affordable.””

    Is this really their interpretation of affordable??? I would appreciate your letting us know where we can verify this or perhaps you can quote from the source.

    If this is the case apparently the City of Vancouver Interim “affordable” rezoning policy considers the Pacific Arbour proposal for a 6 / 7 storey, $5,000/month for a single room in Dunbar is therefore “affordable”. And, even spot rezoning such as 1401 Comox that are outside the 100 metre boundaries of the Citywide Interim “affordable” rezoning policy also qualify although their STIR rents are $2.70/sf, well over the $1.50 to $2/sf City average.

  • 7 vreaa // Nov 27, 2012 at 12:43 pm

    Bill Lee (comment 1, above) is misreading the tone of my site, the Vancouver Real Estate Anecdote Archive. Please humour my response.

    There have been a very small number of voices in this city that have for years warned of the dangers of a speculative mania in housing. Most of that small number have been anonymous bloggers like myself.
    Frances, in my opinion, numbers amongst these voices, but only in a very quiet way. She did herself say: “This is a city where we’ve built our economy, and many of us have built our personal lives, on speculating on real estate. Even our own houses, we pay crazy prices for them, in the expectation that prices are going to rise, not because our incomes can in any way cover them.” [CBC radio, Feb 2011]

    The (now very obvious) housing bubble has been very, very bad for Vancouver. It has misallocated human and financial capital, and distorted the economy of the city. People avoid Vancouver because of property prices; households spend so much on accommodation that they have little discretionary funds to support other local economic activity; individuals are drawn away from their skill areas into construction and flipping; etc, etc …the list would be long.

    The mania is now beginning to unwind. It inconvenienced and distorted the behaviours of many on the way up but it will do even more damage on the way down. There is, unfortunately, nothing that can be done to significantly ameliorate it’s consequences. It is too late for that. The problem was letting it develop in the first place; and not allowing it to unwind earlier. Almost nobody listened to any of the bears on the way up (nor, in a fascinating way, learnt anything from all the other housing bubble crises in other countries). But that is common behaviour when a population is locked in the jaws of a speculative mania; when cult thinking prevails.

    Bill should not mistaken the documentation of this socially and economically important process for some kind of relish for the damage.

    At our site we have attempted to document the whole process through the collection of personal stories from the boom (and will do so from the coming bust). We have also added opinion regarding the nature of the bubble, and the implications thereof.

    True, the occasional commenter at VREAA will express the opinion that they will gain pleasure from the losses of speculators… but this is far from the commonest position.

    The very few Vancouverites who have seen this speculative mania for what it is most commonly express genuine concerns about the potential consequences for themselves, their families, and their fellow citizens. Don’t kill the messengers.

  • 8 bablu1 // Nov 27, 2012 at 1:10 pm

    Some further perspective here. According to BC Assessment Authority records, it seems the Grewals have owned this since about 1980, and paid about $380,000. The assessed value of the property was $3,841,000 in 2012. Quite the mark up. And who knows if the Grewals still own it. Obviously, the old walk up is a knock down. This will be the future of many three-storey buildings in the West End. Every one who comes to Vancouver wants to live there or in Kits. And folks are still coming. Condo owners know this and, while I don’t live there, this could be part of the reason for their near pathological behaviour their anti-STIR campaign.

  • 9 brilliant // Nov 27, 2012 at 2:39 pm

    @bablu1-if people are still coming then the demand should be enough to stimulate demand for rental construction. STIR wouldn’t be needed.

  • 10 bablu1 // Nov 27, 2012 at 3:15 pm

    Not without some form of subsidy; either a tax break, dcc easing, or direct cash input.
    David Goodman said in a November 2011 edition of Business in Vancouver: “A developer is going to lose millions of dollars if he builds strictly rentals, because you’ve go to pay so much for the land.”
    Condos are so lucrative compared to rental units, developers would be crazy to build without some form of incentive. Look Brilliant and others, developers can’t afford to build rental units because while our rents, the highest in Canada are completely out of line with our land costs. What’s so hard to understand about this?

  • 11 Westender1 // Nov 27, 2012 at 6:06 pm

    I’m not aware of any “near pathological behaviour” regarding opposition to STIR and given that only 18% of West End residents are condo-owners, I would be surprised if they were dominating the neighbourhood discussion. I have however heard some compelling arguments against defining development potential on a “site by site” basis with little regard for land economics or impacts on liveability and neighbourhood character. It’s particularly unfortunate for sites like low-rise West End rental buildings that the City has adopted the “Rental 100″ program which precludes mixed rental/condo developments. (The project at Bidwell and Davie Streets was presented as a “culturally-sustainable” tower – a building where (gasp) renters and condo-owners would share the same elevator. Horrors! Since the approval of that mess of facadism and brutal podium development shading Davie Street, staff and Council have decided that only 100% rental buildings should be encouraged through rental incentive programs).

    With regard to Bill McCreery’s inquiry on the City’s definition of “affordable housing” I regret that I’m unable to provide a citation. Reports on “affordable” housing and STIR projects include statements like “provides a measure of affordability” and “part of the continuum of housing” but the City has been very vague on their definition of “affordable.” CMHC defines affordable housing as that which results in not more than 30% of gross income being spent on housing. Does anyone think that water-view townhomes proposed in the Beach Towers rezoning – housing that will benefit from a density increase and a waiver of DCL’s and is expected to rent for between $2500 and $3000 per month will meet the CMHC definition? The scary thing is that it may – for people making $120,000 a year. I think most would agree that such folks have other housing options available and shouldn’t be occupying expensive housing created through the shifting of development costs to other taxpayers.

  • 12 Another Westender // Nov 28, 2012 at 1:09 am

    There is some great info. above — thanks to all (esp. FB for the OP). Price and workmanship aside, I am for providing better quality living options.

    Can a correction occur if a (hypothetical) steady influx of people moving here are willing to accept much lower living standards? (i.e. 3 people in a 1-bed, sub-grade, bedbugs, squatter unit next-door, etc.) On the other hand, squatter drug dens aside, these are likely the people that make the WE good — young, diverse, filling jobs that don’t pay a living wage while studying or on a work/travel stint. It appears as though vacancies in the WE have been increasing over the last six months, though I can’t find any data so recent.

    From a purely geographical standpoint, I’ve loved living in the West End for the last five years. However, aside from a few small, standout pockets, downtown on the whole is a dump. The overwhelming negative atmosphere in my West End neighbourhood has long worn me down; count my departure as me voting with my wallet.

  • 13 Michael Geller // Nov 28, 2012 at 12:42 pm

    Some excellent comments above, and lots of partisan mis-information. That being said, I’ll offer the following additional thoughts since I think this is an important topic.

    There is a serious problem in Metro Vancouver related to older rental buildings that are in poor condition and under-utilizing the site relative to current zoning, and current rezonings elsewhere around the city.

    While the City’s rate of change policy and requirement of 1 for 1 replacement of rental units would seem reasonable, especially from the point of view of renters, the realty is that very few older rental buildings are being redeveloped with a mix of condo and rental units since the numbers generally don’t work…not just in the West End but in other parts of the City.

    In our report to the Mayor’s Affordable Housing Task Force we did look at the possiblity of ‘laneway apartments’ that might be added to some sites occupied by older buildings, and there could be some opportunities for this…but they too are limited.

    As we generally seem to be accepting increased densitities around the City, I suspect that what will be needed is some further density increases in the RM zones where many of these buildings are located, if we want to see older rental units replaced by newer rental units (along with condominium units).

    Now I can hear some of you gasp at the thought of newer units since you know they will likely be more expensive to rent than the older units. This is true…just like new cars are generally more expensive than old cars. However, at a certain point older cars are taken off the road since they are no longer roadworthy or worth the cost of maintaining.

    Unfortunately we are not taking older apartment buildings ‘off the road’. Instead , in many cases, they are being allowed to further deteriorate, since the owners don’t want to renovate them for fear of being accused of ‘renovictions’, or they under-utilize the site and the costs for major redevelopment do not make sense.

    I am in conversation with a number of apartment building owners who are interested in exploring whether they might be able to obtain approvals for an FSR above current zoning in order to redevelop their sites with a mix of new rental units and condominium units.

    With a mix of rental and ownership units, they will not need the almost fivefold increase in density that the developer of 1401 Comox rental building sought…and ultimately received. But they will need some increase.

    Otherwise, as noted above, in many instances the buildings will simply deteriorate (and yes, provide lower rents) until they burn down or fall down, or are destroyed in an earthquake, putting lots of tenants out on the street.

    Then we will all ask why wasn’t this situation predicted and why didn’t we do something before it was too late?

  • 14 matt // Nov 28, 2012 at 12:53 pm

    @michaelgellar13
    I wouldn’t say that the 1401 Comox site “needed” a fivefold increase, but with the limited guidelines surrounding STIR, they sought the maximum that they though would be approved. From my experience, an FSR of 4-5 (approx. threefold increase over most RM sites) would make the numbers work on most sites, and even moreso on this site, which had little value as an investment as there was very limited income being generated.

    I think a few 10-12 storey rental buildings in the Westend would be appropriate and should be welcomed. Mixing rental with strata in the same building poses some problems, but assembling a few adjacent apartment sites opens up the possiblity of building two new buildings – one rental and one strata.

  • 15 Michael Geller // Nov 28, 2012 at 1:53 pm

    Fair comments Matt…let’s see if anyone else agrees with us! :-)

  • 16 brilliant // Nov 28, 2012 at 2:43 pm

    @Michael Geller 13-do the numbers work if you take a long term view? Private or family-owned rentals wouldn’t require an
    immediate return.

  • 17 Everyman // Dec 2, 2012 at 11:32 am

    @Westender 1
    A belated thanks for the clarification. It is too bad this topic didnlt generate more discussion. There’s a huge amount of density tied up in these aging walk-ups. I know many West Enders wouldn’t agree, but it seems to be that redveloping them with higher building makes perfect sense. The existign units could be replaced with smaller ones (a trend that has happened with privately owned condos) and new units could be added. This would allow higher density not just in the West End but Marpole, Kits, Kerrisdale, Mount Pleasant etc. No quickly built post-war wood frame walk up was meant to last forever. it is time we stopped pretending that they should.

    Now, I know some will say this will lead to higher rents which will force lower income earners from the city. That’s overstated IMHO, if the replacement stock is capped at a certain rate vs. the unit it replaced.

  • 18 Michael Geller // Dec 2, 2012 at 2:31 pm

    I agree Everyman. This is an important topic. What I would also like to see is a discussion on ‘supply side subsidies’ vs ‘demand side subsidies’.

    In other words, should we be subsidizing developers to build new rental housing, and expect landlords of older properties to subsidize tenants, or should we be subsidizing those renters who are in need and allow the market place to function a bit better than it is right now.

  • 19 Westender1 // Dec 2, 2012 at 9:23 pm

    You’re welcome Everyman. I suspect some people may have stopped commenting due to a concern that they not be accused of “partisan mis-information.” I suspect most West Enders are not opposed to some increases in height or density. But as a very dense community already, the question will be how to define the amount of increase that is appropriate, and how to ensure that other community objectives are achieved.

    As a follow-up on the City’s definition of “affordability,” I did come across some wording in the recent Staff Report below:

    http://vancouver.ca/files/cov/secured_market_rental_housing_council_report.pdf

    This statement from the report in particular highlights the City’s approach to developer subsidies for market rental housing:

    “Under the STIR program, affordability was targeted towards moderate-income households with the intent of creating market rental for households that cannot afford ownership. Affordability was to be achieved through the tenure, level of finishing, size of units, and other design considerations. STIR has accomplished this goal — rents for all proposed STIR units are significantly more affordable compared to the monthly costs of home ownership.”

    These units being created are not “targeted” to moderate-income households or to anyone else – there will be no “means test” to rent or to move into a STIR unit or a “Rental 100″ unit. The concluding statement highlights how far the City is stretching the definition of affordability: renting a Mercedes costs less than owning it – but that doesn’t make the car “affordable.”

    CMHC and Metro Vancouver continue to use the “30% of gross income” measure to define housing affordability. If the City wants to create rental housing, then explore that, but don’t sell it under the guise of affordable housing.

  • 20 Everyman // Dec 3, 2012 at 11:53 pm

    @Westender 1
    It would be interesting if there was an inventory detailing how many of these walk-ups remain in the West End. If the city was able to coordinate some program whereby, say, for every four sites redeveloped, one was given over for a pocket park, I wonder if the neighbourhood would be more receptive.

  • 21 Jon Petrie // Dec 4, 2012 at 8:31 am

    Michael G #13 writes: ” …at a certain point older cars are taken off the road since they are no longer roadworthy or worth the cost of maintaining. Unfortunately we are not taking older apartment buildings ‘off the road.'”

    I question both the metaphor and the word “unfortunately.”

    Buildings do need care, maintenance and every
    forty years or so significant upgrades. Generally in my opinion, the urban human, physical and ecological fabric is better served if buildings are upgraded rather than torn down. And if increased density is desirable sometimes that density can be accomodated on site or density can be transferred to an adjacent site IF planners etc don’t get in the way.

    A property I owned in California, a single family residence between 1904 and 1945, was converted into apartments (rentals) in 1945, and I organized the renovation and strata conversion of those units in the
    1990’s — expanding without building department permission into the basement. It took a fight and some lucky misinterpretations of old documents from the 1945 renovation to get post facto approval for that basement expansion. (Permission in advance would almost certainly been denied or if granted would have required way too expensive alterations to the basic structure of the basement.)

    I live now in a 1975 walk up located a few blocks north and east of Kingsway and Main. We in the building did a significant renovation in 2005 — the worst building visually within a few blocks became the best. That renovation cost about 10% of what a new building would cost. The property was I think zoned 1.5 FSR in 1975, the same as it is today. Because of parking requirements the developer built to only 1.0 FSR. (The parking lot is half empty at peak occupancy.) At some point in the future it would make more sense to sell the unused .5 FSR to a neighboring site along with some of our parking than to redevelop (two vacant lots immediately adjacent to my building). But if the City prevents the sale of density (and parking) to neighbors then probably the building will be knocked down.

  • 22 Westender1 // Dec 4, 2012 at 1:26 pm

    Everyman, the City has this data – it is part of the background information being used to craft a new West End Community Plan. Open space would probably make re-development of these sites more palatable, but the only way I can see your “four for one” system working is if a developer were to assemble four of these sites and leave one for park, or if the City were to purchase one of the sites for park, for every three that are subject to private development. Otherwise the owner with the “park” designated property would be penalized. The bigger issue still remains, what is an appropriate level of development on the other three parcels, and the community hasn’t yet had that discussion.

  • 23 Everyman // Dec 4, 2012 at 10:49 pm

    @Westender 1
    The City could purchase the property, or swap for something in their land bank.

  • 24 PendrellSt // Dec 6, 2012 at 4:32 am

    @Babulu10

    In response to your comment …”Brilliant and others, developers can’t afford to build rental units because while our rents, the highest in Canada are completely out of line with our land costs. What’s so hard to understand about this?”

    Okay this is what I have trouble understanding. First please remind me how it helps renters when developers are allowed to convert existing decent condition rental stock into condos? (ie 1265 Barclay) Second, how does anyone expect land prices to go down when Vision’s spot rezoning hijinks cause developers to assume an automatic CD-1 rezoning and therefore bid land into stratosphere? Third, considering that the Coal Harbour developments drove West End rents through the roof please explain how anyone actually believes that turning a lower/middle income rental zone such as the West End into a forest of luxury condo towers marketed to overseas investors is really going to lower anyone’s rent?

    Just curious.

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