Unlocking value
Commercial sale-leaseback arrangements appear to be rising, on the back of strong valuations for commercial properties.
In a sale-leaseback agreement, an owner sells a property and leases it back for the long term.
Avison Young has listed 1476 West 8th Avenue, home to the Girl Guides of Canada, and 1985 West Broadway, owned by Wawanesa Mutual Insurance Co., touting the properties’ proximity to the rapid transit line planned for Broadway from VCC-Clark station to Arbutus Street. Farther afield, Colliers International has a sale-leaseback in place for the Sleepy Lodge Motel beside Burquitlam station in Coquitlam.
Calls to the various brokerages in town found few able to comment on the emerging trend. Most sources said such arrangements are more common for industrial properties.
The last wave of commercial sale-leaseback transactions occurred in 2007-09. Ottawa kicked off an ambitious sale-leaseback program for 40 federal properties in 2007, including Sinclair Centre on West Hastings and 401 Burrard. Ritchie Bros. Auctioneers Inc. followed suit in 2008 with the sale and leaseback of its Richmond head office pending construction of its new headquarters in Burnaby the following year, also subject to a sale-leaseback deal. QLT Inc. recouped the equity from its Great Northern Way headquarters in 2008, too, reaping $65.5 million from the deal.
Unlocking land
Yet another facet of the housing affordability issue recently opened as the BC Real Estate Association argued that property listings aren’t keeping pace with demand. Combined with housing starts that continue to lag behind new arrivals – Urban Development Institute (UDI) analyses indicate 1.4 starts for every newcomer, and UDI maintains there should be at least a one-to-one ratio – the market remains undersupplied, helping underpin ongoing increases in house prices.
The combination clouds the future Andrew Ramlo of Rennie Marketing Systems outlined in his data-driven presentation to UDI last month, which argued that density in Metro Vancouver has to increase 40% in the next two decades to handle a net increase in population of about 988,000 by 2036. Density would rise to 12.6 units per acre from an average of 9.6 units today.
The ambitious target would require building 22,000 units a year, something the region did just once – last year, with 27,914 starts. The only other years when starts exceeded 21,000 units were 1989 and 1993.
Golden mean
Vancouver residents might be used to hearing that the city will never designate another single-family lot, even though there’s plenty of fight left in local neighbourhood associations before densification’s seemingly inevitable triumph.
Yet across the Fraser River in Richmond last week, local residents argued against a bylaw – supported by the Richmond Farmers Institute – aimed at allowing residences of up to 10,764 square feet within the Agricultural Land Reserve. The bylaw would be the city’s first restriction on what area a house can be, but still too liberal for residents who urged council to restrict houses to the staff recommendation of just 5,332 square feet (many non-farm speakers said they lived in homes half that size).
By not taking action earlier, various speakers said the city had neglected its responsibilities to both implement provincial guidelines regarding house sizes on farmland and protect land that could generate far more ongoing jobs than a single home start.
One woman pointed out that the city, while working to focus density along No. 3 Road, had neglected to regulate house sizes across the municipality. This made farmland an attractive place to build homes well out of proportion to what exists elsewhere in the municipality.
Regardless of where in the debate one stood, it was clear that density requires a comprehensive approach and consistent implementation municipally and even regionally to avoid incurring the wrath of locals who say they’re either being asked to absorb too much or – in the case of East Richmond residents – too little.
pmitham@telus.net