By KERRY GOLD
Friday, May 24, 2019
VANCOUVER -- A Vancouver developer has built an ultraexclusive, three-unit, prime beachfront property in English Bay aimed at the international buyer who has so much extra cash to spare that they won't care that it won't make any money.
It is, he promises, the most luxurious apartment building in Vancouver.
"The perfect thing is, roughly, how many billionaires are in the world?" developer Stanley Dee asks rhetorically.
"The Forbes list is almost 3,000. Those are guys with public companies that they can measure. There are as many guys who stay quiet and low-key, and so we think there are more than 6,000.
Of those, how many have been to Vancouver and want a place here? There will be enough. We are only going to reach 1 or 2 or 3 per cent of these guys.
"A lot of them have five or six homes around the world, and they want [a home] here when they get here that is well kept, hassle-free, no worries and it's safe, and they can keep art and things there without any trouble, and they would prefer to spend less money than more. It's the perfect pied-à-terre for the wealthy."
Mr. Dee, who is founder of Deecorp Properties Ltd., says his family-run company is selling units in their Eventide property at 1460 Bute St., at the corner of Beach Avenue, as 30-year leasehold properties, which means Deecorp will maintain ownership. It's similar to paying one's rent upfront, but without the conventional landlord.
The lease is not renewable, so it will revert back to the owner at the end of the term. A big advantage for the buyer, he said, is that it skirts the property-transfer tax (PTT) because it's a 30-year lease.
The property-transfer tax is 20 per cent for foreign buyers; property leases that are 30 years or less are generally exempt from the tax.
"The main thing is, the buyer doesn't need to speculate, the buyer gets certainty and a high level of service and the side benefit is they save a lot of taxes."
Mr. Dee says that if the units get hit with the school surtax on expensive properties, he will help share in the expense. The school surtax is 0.2 per cent on properties more than $3-million and 0.4 per cent on homes more than $4million. Other perks include not having to deal with strata councils and having far more control over one's building, including who gets to live there. Mr. Dee says they are screening buyers for suitability, similar to the way an exclusive New York co-op screens residents.
Once the province's tax measures were announced in 2018, he says the company came up with a business model that would help clients avoid the extra taxes.
Wealthy global buyers, he says, have already been hit hard with the taxes aimed at empty homes.
He says he just needs to get the message out to the world about his leasehold property. The demand is there. For example, he says, he has a client and partner who owns a condo in Coal Harbour that is assessed at more than $10-million, and he is looking at extra taxes of about $300,000 for the province's speculation and vacancy tax of 2 per cent for foreign owners, and the city's 1-per-cent empty-homes tax.
"That's just the two new taxes that relate to vacancy, because he's only there three months a year and he's not Canadian," Mr.Dee says. "He loves [the new project], but he needs 3,000 square feet on one level."
Because the buyers of Eventide will most likely be occasional occupants, they will also be looking at empty-homes taxes.
"Empty Homes Tax and spec tax are tricky," Mr. Dee says in an e-mail. "But we would work with the buyer to minimize if possible."
Deecorp is owned and operated by more than one family, Mr.Dee says, and they wanted to keep the property in the families for long-term future income.
Developing affordable-housing units has quicker yields, he says, whereas with this project, the returns are far down the road.
"Usually, the returns and yields are much higher on affordable stuff, where you can pack density in, [build] small units, with a lot more people per square foot or floor, that sort of thing. You get an income stream, then you can refinance it, sell it, you have a bunch of options. Here, we are creating an income stream, but not as good a yield as on a typical multi-family [rental] building.
"In Vancouver, people want to make north of 4 per cent - if they put in $10-million, they want to make $400,000 a year, roughly speaking. This may be a lot less, but that's okay, because we think in 30 or 50 or 100 years, something like this might be quite valuable."
The owners, he said, "have extra wealth they want to park for future generations.
"But the fact that all these taxes sprung up last year, we looked into it, and it made it obvious that [we needed] to convey the units in a way that didn't trigger all the taxes - I shouldn't say that's the primary motivation, but it's a big consideration.
"The provincial government, they have all these taxes for empty homes and expensive homes, and this [project] is not exactly the kind of thing they are encouraging," he says. "They want affordable units - but affordable units don't really belong in a location like this."
Mr. Dee says he will start showing the building in July and the units will not be publicly listed.
The sales will be private, because his clients prefer exclusivity, and Mr. Dee has a list of about a dozen qualified buyers.
"In quite a few parts of the world, if you have money, you don't stick your head up or it can get chopped off. A lot of wealthy people we know don't want their name out there."
In Canada, leasehold properties are pretty much a Vancouver idiosyncrasy, and were more common prior to the proliferation of strata condos, back in the 1950s and 1960s. The majority of leaseholds in Vancouver are on university-, city- or Indigenousowned land, usually leased out for 99 years. Mr. Dee doesn't know of another developer selling leasehold on private property.
But he said the practice is common in parts of Asia and Europe.
In England, leaseholds are quite common, and have been controversial because of landowner-lessee disputes. Realtors often advise clients against them because they generally depreciate as the lease ends its term.
Mr. Dee declined to say the asking price on the three units in the four-storey building, which includes a 3,200-square-foot, twolevel penthouse. Each floor, or unit, is 1,600 square feet.
"I can't get into it, but I can tell you, roughly speaking, on a prepaid lease basis it would be roughly half the market value."
Realtor Ian Watt, who specializes in the downtown and west end, says a high-end freehold property at 1483 Beach Ave. sold recently for $5.992 million. It was 3,028 square feet, which means it sold for about $2,000 per square foot. He couldn't identify a comparable luxury leasehold because he has never encountered one.
But he guessed that half the value of a freehold strata property would be accurate. Realtor Bryan Yan says in the English Bay area freehold strata units are anywhere from $1,400 to $3,000 per square foot.
However, Mr. Dee says he's set the bar higher than what's already out there.
"There's nothing quite like this," he says of the building, designed by Merrick Architecture.
"It's very special."
Mr. Dee got his start with the 1994 Landmark on Robson downtown rental tower, which, according to his website, "commands some of the highest rents in the country." In the 25 years since, the company has acquired, developed, financed and managed a portfolio worth more than $300million, according to its website.
Mr. Dee says the company also manages a few expensive homes in Point Grey. Otherwise, the Eventide is its first entry into the luxury residential market.
"We've seen this [model] a lot around the world, and we studied it, and figured we could pull it off.
"It's not too common. But it makes sense now in the environment, with the tax being so high on transfers. Foreign buyers pay 20 per cent."
Buyers can either purchase a prepaid lease or an annual lease.
Mr. Dee says one option he's considering is offering buyers reduced rents in exchange for security deposits, which, he said, would mean some of the cash outlay is returned at the end of the lease. He can also offer his buyers financing.
"Imagine if you had a lot of money and three or four homes in the world and the money wasn't really doing anything for you. We have these homes we don't need right now, so we can kind of lend you the home for 10 or 20 or 30 years, and you can lend us the money, and instead of [us] paying a lot of interest on the money or you paying a lot of rent on the home, we could reduce both of those.
"The biggest thing is that if you buy in the market, you are speculating that the values will go up in the time you own it. If you own it 10 years, you count on it being worth more than you paid for it, which is often the case with real estate, but not always the case.
There are times in the market when people lose money. So this is a case where you can't really lose - you know exactly what you are spending, because it's all laid out.
"It's really not an investment, the way some people think of real estate, it's more utility of the usage of the unit - kind of like if you bought a boat or a yacht or a car."
The Eventide is touted by developer Deecorp as being the most luxurious apartment complex in Vancouver, offering three units, including a two-level, 3,200-square-foot penthouse.
PHOTOS BY DEECORP PROPERTIES