No Price Too High
Happy Monday Morning!
No Real Estate developer epitomizes the Vancouver Real Estate bull market quite like West Bank. Lavish luxury towers that shine above the Vancouver skyline, sold at record breaking prices. There was seemingly no price too high! After all, it was art in the sky, and chandeliers under bridges.
Impressive sales centres, unparalleled marketing. All of which attracted deep pockets from overseas buyers, desperate to hold a trophy asset in the skies of Vancouver. Local buyers couldn’t resist either.
And then, suddenly, the music stopped.
A plethora of foreign buyer taxes, speculation and empty home taxes all slowly leaked the air out of the bubble, just before Tiff Macklem at the Bank of Canada slammed the brakes in the summer of 2022 with a 100bps rate hike.
Today we are left tracking the fallout.
As reported by Howard Chai over at The Realist, A substantially-completed rental tower by prominent Vancouver-based developer Westbank has been placed under receivership, according to filings in the Supreme Court of British Columbia. The first one to date this cycle.
The 35-storey rental project is known as Joyce 2 and is located at 5083 Joyce Street in Vancouver, directly across the street from Joyce 1. Joyce 2 consists of 360 rental units and 4,500 sq. ft of retail space and the property is held by Westbank under 5055 Joyce Property Inc.
The receivership application was filed by Toronto-based pension fund OPTrust, which bought out Westbank from Sen̓áḵw last year for an undisclosed price. Notably, however, OPTrust is the second-ranking mortgage holder and the first-ranking mortgage holder is National Bank.
“The appointment of a court-supervised receiver has been sought to ensure the project can reach final completion in an orderly and timely fashion,” said Westbank and OPTrust in a joint statement provided to The Realist. “This was undertaken cooperatively with Westbank and is consistent with shared objectives to facilitate the completion of the project.”
According to OPTrust, the loan matured on December 31, 2025 and they issued a formal demand for payment on January 13. Since then, OPTrust says they learned that at least five liens had been filed against the project and that National Bank issued a demand for payment on January 8 after at least six defaults, including failing to make interest payments and failing to comply with equity infusion obligations.
OPTrust also said that a report prepared by the project’s development cost consultant estimated cost overruns of $15.5 million, with $8.2 million related to hard construction costs.
As of March 19, OPTrust says it is owed $109,211,965, with interest now accruing at the default interest rate, which amounts to $60,136 per day.
OPTrust says National Bank, which is in support of the receivership, is not prepared to advance additional funds for the project and that the project is now “at a standstill due to a lack of available capital.”
The announcement hardly comes as a surprise, but rather it’s surpsing how long it took.
Financial issues have been well documented, and according to public reports, Westbank been an active seller in recent years in a bid to free up liquidity.
A recent lawsuit from a former employee also notes a list of issues with Westbank projects, according to an affidavit first reported by Bloomberg.
The Alberni, a distinctive high-rise tower in Vancouver designed by the firm of famed Japanese architect Kengo Kuma, has “many unsold units” and vendor take-back mortgages outstanding, the message said. The recently opened Butterfly, another unique condo tower in Canada’s third-largest metro area, “is well over budget and closings are slow and uncertain,”
Those two projects have seen some eye watering resale activity this year.
The first resale at the Butterfly has now sold firm and closed on the MLS. Originally sold pre-sale for $2,561,000 (plus GST) has now sold as a completed resale for $1,518,000. That’s a million dollar loss not including the 10% in fees on top (GST, PTT, Realtor and legal fees).
In other words, the mark to market is at $1425/sqft. That’s a far cry from the building average pre-sale price of $2800/sqft per Altus Group.
It’s a similar story over at Westbanks other marquee high-rise, Kengo Kuma, which completed a few years earlier.
Let’s be honest, there’s nothing new about a Vancouver developer having a project slide into receivership. However, one can’t deny the fascinating story of WestBank, a former bull market darling that caught the allure of what we thought was sophisticated capital.
Excellent article and I suspect that those recent resales are still overpriced. Who would have thought that losing both jobs and population might affect the real estate market? With all the potential Indian tribe land claims underway these buildings dont even have clear title to the land that they sit on.
We need this correction desparately and it has to go through the entire chain from suppliers to contractors to developers. As a professional engineer, I've seen far too much "spit balling" on tenders - only becuase you could get away with it (how can you have a 2 fold price difference on a structural steel tender - yes I've seen it).