One of Canada’s most outrageous mortgage scandals to be focus of new documentary

Clayton Jarvis
Mortgage Broker News

 In Capitalisms, an in-the-works docuseries planned for online release, filmmaker Bryan Bakker aims to explore how extreme wealth, or the similarly profound lack of it, distorts the way justice is served in Canada. Its intended first target is the perpetrator of one of the country’s most notorious mortgage frauds, Fortress Real Developments.

The Fortress story – a slimy narrative that brings together unlicensed mortgage brokers, more than $900 million in lost life savings, and a brazen syndicated mortgage scam – is one that will be familiar to many Canadians, not just the approximately 14,000 investors taken in by the scheme.

Despite the heavy publicity the scandal has already received, Corrine Sutej, one of Fortress’ victims, says it’s important that Canadians aren’t allowed to forget the company’s transgressions, or who suffered at its hands.

“The victims were hard working, everyday Canadians who invested in what they thought was a safe investment,” Sutej told Mortgage Broker News. “If white collar crime happened to these people, it can happen to anyone. I hope other investors come forward after seeing the documentary, so they know they’re not alone.”

Sutej said the documentary will serve two other important functions: further exposing the principals of Fortress, Jawad Rathore and Vince Petrozza, and their inner circle; and highlighting the actions of the Financial Services Commission of Ontario, who she said “failed miserably” in its duties to protect the province’s consumers from what many believe was the largest mortgage fraud in Canadian history.

A Press release for the film stated that Capitalisms will illustrate “the human damage” caused not only by FSCO’s oversight but also that of the Ontario Securities Commission and the Law Society of Ontario.

“Victims claim they were defrauded through obfuscation and deception and point the finger at FSCO and a cabal of allegedly crooked mortgage brokers, lawyers, and businesspeople,” said the release.

Sutej invested over $20,000 in LIRA funds into a Brad Lamb project slated for construction in Calgary, but ground was never broken. The land, she explained, was sold and the Trustee involved, FAAN Mortgage Administrators, confirmed that Sutej received a rather paltry payout, 10% of the principal, as compensation.

“Those funds were meant to be for our children, so this has been very upsetting for us,” she said. “However, this experience has made me want to fight for justice for my family and for the other victims of syndicated mortgage investments,” who refer to themselves collectively as VOSMI.

The film’s Press release said that public record evidence recovered from six separate police raids in 2017 shows “layers of complexity and fraud,” adding that no-one involved in the scandal has yet been charged and “none of the people who have lost everything have been compensated.”

“This series,” Bakker said, “more than anything, is about exploring the disparity between the rules for the 1% and the rules for the rest of us.”

The project is currently seeking support through GoFundMe.

 

Copyright © 2020 Key Media

A Whole Lot to Know About the Land Owner Transparency Act #533

Lisa Niro
BCREA

On November 30, 2020, the Land Owner Transparency Act¹ (LOTA) came into effect, and with it, the Land Owner Transparency Registry (LOTR). Now, with every change in title to a property in British Columbia, a transparency declaration must be filed with the Land Title and Survey Authority of British Columbia (LTSA). Individuals acquiring an interest in land are responsible for completing the declaration. REALTORS^® should be aware of these new requirements so they can advise clients to speak to a legal professional as needed. Legal professionals will assist clients with the required filings on all future property purchases. 

On the transparency declaration, the transferee (i.e., the person or entity about to become the new registered owner) must declare if they are a reporting body. A reporting body is any one of the following:

• a relevant corporation;
• a trustee of a relevant trust; or
• a partner of a relevant partnership.

If the transferee is a reporting body, then a transparency report must also be filed. The type of information that must be included in the transparency report can include the following (depending on the type of reporting body): full names, citizenship of individuals, country of residence and address of principal residence, date of birth, social insurance number, tax number, last known address, the type of partnership, the address for the partnership, jurisdiction (laws) that governs the partnership, head office, and information about the settlor of a trust.²

Practically speaking, this means all properties owned by a company, or properties that are held in trust for another party under a trust (including a bare trust) or a partnership, are reporting bodies and therefore must file a transparency report to confirm who the interest holders of the corporation, the trust, or the partnership (as applicable) are. The Province introduced LOTR as part of its plan to address housing affordability in BC and “end hidden ownership.”

Here is an example of how LOTR works:

Pretend Holdings Ltd. purchases a property closing on December 18, 2020. The only shareholders of Pretend Holdings Ltd. are John Smith and Jane Smith. John and Jane each own 50% of the shares in Pretend Holdings Ltd.

On the closing date, before the transfer documents can be filed with the LTSA, a transparency declaration must be filed. Since a company is going on title to the property, the transparency declaration will confirm that the transferee, Pretend Holdings Ltd., is a reporting body since it is a relevant corporation. This means that a transparency report also needs to be filed. The transparency report will confirm who the interest holders of Pretend Holdings Ltd. are. A corporate interest holder is someone who owns 10% or more of the shares or voting shares in a relevant corporation. Therefore, in this example, the transparency report will disclose that John Smith and Jane Smith are the corporate interest holders.

All existing reporting bodies (where the transfer was filed prior to November 30, 2020) must file a transparency report by November 30, 2021, disclosing who the interest holders of the property are. Clients may wish to reach out to legal professionals for assistance with filing these reports.

Moving forward, if there is a change of interest holder, the reporting body must file a new transparency report, regardless of whether registered ownership changes or not. For example, using the fact pattern set out above, if Jane Smith were to sell her shares in Pretend Holdings Ltd. to John Doe, then Pretend Holdings Ltd. would need to file a new transparency report disclosing that Jane Smith ceased being an interest holder and that John Doe is now an interest holder in the property.

Public Registry

The registry will become publicly accessible beginning April 30, 2021. Similar to land title searches, a fee will be charged for all LOTR searches. According to the LOTR website, the search fees will be $5.00 per search.³   However, not all information filed with the registry will be available to the public, only primary information about interest holders. Secondary information including birth dates and social insurance numbers will only be accessible by those defined as a regulator, a taxing authority, or law enforcement.⁴

Summary

British Columbia has a new registry that records and discloses who the beneficial owners, or interest holders, of properties are. The registry will soon become publicly accessible. It is unclear at this time how the information noted in the registry will be used by the public, financial institutions, and the government.

Realtors need to be able to understand the basic principles of the LOTR and inform their clients as to what kinds of information will become publicly available through the registry. Realtors may also wish to help educate past clients who are reporting bodies, that they need to file a transparency report prior to November 30, 2021, for all existing properties that were acquired prior to November 30, 2020. If you believe your client is a reporting body, have them reach out to the legal representative to discuss LOTR filing and disclosure requirements. Note there are fines of up to $100,000 or 15% of the assessed value of the property, for offences, failure to file, or providing false or misleading information under LOTA.

For more information, visit the LOTR website, or click here to learn more about the implications for Realtors and real estate practice.

 

1	Land Ownership Transparency Act, SBC 2019, Chapter 23.
2	See https://landtransparency.ca/wp-content/uploads/2020/11/LOTR_Policy_Presentation-Nov-19.pdf and https://landtransparency.ca/wp-content/uploads/2020/11/LTSA-LOTR-FactSheet_Nov12.pdf
3	See https://landtransparency.ca/search/
4	See https://landtransparency.ca/wp-content/uploads/2020/11/LOTR_Policy_Presentation-Nov-19.pdf

To subscribe to receive BCREA publications such as this one, or to update your email address or current subscriptions, click here.

 

Copyright@BCREA2020

Housing Competition Strongly Favours Sellers in 25 Major Housing Markets Across Canada: REPORT

Janine Rane
other

Oxford takes Canada’s industrial development to the next level

WI Staff
Western Investor

 Oxford Properties Group has broken ground on Canada’s first large scale multi-level industrial complex, despite the fact that no tenants have been signed for the 437,000-square-foot, two storey project in Burnaby’s Riverbend Business Park.

Oxford has transformed the 64-acre brownfield site – once a paper mill and landfill – into a 1.3-million-square-foot master planned business park. Oxford first announced in November 2019 its intention to build the two-storey project on a speculative basis. With all municipal approvals received, the building has now broken ground with anticipated completion within two years.

The ground floor comprises 437,000 square feet with 32-foot clear heights. The second storey, which is accessible to full-size transport trailers via a heated ramp, consists of 270,000 square feet, with 28-foot clear heights and a 130-foot truck court with dock loading doors.

Jeff Miller, Oxford’s head of industrial development, confirmed that no leases have yet been signed for the project, which, like all of the business park, it is being built on speculation.

“We’re a long-term investor and owner, so the asset will be leased versus sold as strata,” an Oxford spokesman confirmed.

Average net industrial lease rates in Burnaby are $14.12 per square foot,  based on recent industry surveys, but new space can see higher rates.

Miller noted that two-level industrial facilities are more complicated to build than standard single-storey structures and typically cost two-and-a-half to three times as much to construct.

The first three buildings completed on spec at Riverbend Business Park, ranging from 199,498 square feet to 209,993 square feet, are now fully leased.  A 92,863-square-foot building was completed earlier this year and has had strong leasing activity, according to Miller. The smallest building, at 78,436 square feet, is under construction and 70 per cent leased.

Anticipated for completion in November 2022, the buildings at Riverbend Business Park can provide a single customer 707,000 square feet of contiguous space, the largest available industrial property in Metro Vancouver. Located near the intersection of Marine Way and Highway 91A in Burnaby, it will serve a population of 1.4 million within a 30- minute drive, according to an Oxford release.

Demand for distribution space, particularly consumer good shipping, is expected to drive leasing demand at the project.

“The pandemic has accelerated the penetration of e-commerce into our daily lives and will put additional demand for infrastructure such as logistics space to service the growing digital economy,” Miller said.

Metro Vancouver recorded 1.1 million square feet of positive net absorption in the third-quarter of 2020, extending the region’s record-setting run of interrupted positive industrial absorption to a full seven years.  The region has a 1.7 per cent industrial vacancy rate, tied with Toronto as the tightest among the largest Canadian cities, according to Colliers International.  

Oxford’s total Canadian industrial footprint now comprises 14.3 million square feet with $2.3 billion of assets under management, and a development pipeline of up to six million square feet across Vancouver, the Greater Toronto Area, Edmonton and Calgary.

The buildings at Riverbend Business Park earned Oxford the 2019 City of Burnaby Environmental Award. With all buildings built to LEED (Leadership in Energy and Environmental Design) standards, the business park amenities include a pier overlooking the Fraser river and walking trails that connect to the public trail system.

 

© Copyright 2020 Western Investor 

Vancouver home sales stay hot in December, bidding wars continue

Sean MacKay
Livabl

While home buying activity in the Vancouver region is slowing down ahead of the holidays, it’s still on track to exceed home sales totals recorded in December 2019 and 2018.

There have been 1,492 home sales in the first two weeks of the month, down slightly from the 1,505 sales posted during the same time in November. That two-week total is already more sales than the market achieved during the entire month of December 2018. At the current rate of sales, it’s also expected to beat December 2019’s total of 2,046 transactions.

 

Dexter Realty Managing Broker Kevin Skipworth published the mid-month home sales data for the Vancouver region this week through an email market update.

With record low mortgage rates being offered by lenders along with elevated rates of household savings, Skipworth said the heat being felt in the Vancouver housing market shouldn’t come as a surprise.

His chief concern is the low supply levels available to buyers in the market.

“As we move through December it’s becoming clear that there again are just not enough properties available for sale. Multiple offers are still occurring and properties that had been on the market for longer periods of time are seeing offers and sales come their way for Christmas,” Skipworth said.

There have been more sales than new listings in many of the region’s markets, including North Vancouver, New Westminster and Coquitlam, according to Skipworth.

“There will be less than 10,000 properties available for sale come the start of 2021, the question is how far below that mark will it be?” he asked.

Skipworth’s declining inventory concerns were shared by Royal LePage Sterling Realty Managing Broker Randy Ryalls in the brokerage’s Vancouver region forecast for 2021 released earlier this week.

“We are seeing multiple offers on almost every reasonably-priced detached listing. There simply isn’t enough inventory to meet the demand,” said Ryalls.

“A balanced Vancouver market has about 15,000 active listings available. Right now, we’re sitting at roughly 10,000. If we reach the end of January without an injection of inventory, we will continue to see upward pressure on prices in the spring. I expect a strong seller’s market in 2021,” he continued.

 

© Copyright 2020 BuzzbuzzHome Corp.

Why doomsday housing forecasts have proven wrong ? for now

Murtaza Haider and Stephen Moranis
other

 The housing market across Canada collapsed in March after governments imposed a pandemic-mandated lockdown. Sales tumbled, prices fell and new listings almost disappeared. It was all doom and gloom, all the time.

The uncertainty about COVID-19’s impact on people’s health and economy made the future of housing markets look uncertain, if not bleak. Then came the pessimistic forecasts of a weakening housing market. Leading the charge in May was Canada Mortgage and Housing Corp. (CMHC), which projected average housing prices would fall between nine and 18 per cent.

However, the November housing stats released by Canadian Real Estate Association (CREA) paint a different picture altogether. Housing markets have been resilient, indeed, buoyant. Actual sales in November were up 32.1 per cent from the year before. The quality-adjusted home price index (HPI) was up 11.6 per cent from November 2019.

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Did the forecasters get the markets wrong? Or might it be too early to celebrate?

In addition to CMHC, others, including the National Bank of Canada and Fitch Ratings Inc. have forecasted that housing markets will decline in 2021.

Forecasting is more of an art than science. George Box, a famed statistician who devised innovative forecasting tools, has warned that all (statistical) models are wrong, yet some are useful. But distinguishing wrong forecasts from the useful ones is even more challenging than forecasting.

 

 

 

 

 

 

 

 

 

 

Essentially, statistical forecasts project the future by relying on past trends. Sometimes, the predictions depend solely on the past realizations of observed  indicators, such as housing prices. At other times, forecasters use additional relevant data to inform their statistical models. For example, someone might also include information about mortgage and unemployment rates when determining future housing prices or sales.

Forecasts based solely on previous observations assume that the past holds the key to the future and that nothing else is required. If other variables inform the model, the forecaster must make additional assumptions about what the future might hold for those variables. The latter type of model would forecast the future based on the past (housing prices or sales) and the assumptions made about supporting indicators such as the mortgage rates.

If this isn’t complex enough, consider that forecasts also differ based on the statistical method used. Projections are often based on partial equilibrium models, where a small set of variables is assumed to capture economic or social behaviour in a market. Others are estimated by general equilibrium models, which try to analyze the entire economy.

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The problem, perhaps, is not with the forecasts, but with the forecasters. They seldom reveal the assumptions they have made, the motivations behind those assumptions, the statistical tools deployed or the variables they included or excluded. Also, forecasters often release point forecasts, a number, rather than a range of numbers or the uncertainty surrounding the estimates, known as the confidence interval.

With so much subjectivity involved in estimating a statistical model, it’s little wonder that forecasters seldom agree, or that their forecasts pan out. Remember, all models are wrong. So, what to do?

Going by first principles might be a prudent way to think about future outcomes. With interest rate cuts planned as a response to the expected slowdown in the economy, Doug Porter, BMO Financial Group’s chief economist, in March warned that rate cuts were likely to “put (Canadian) housing market on steroids.” His forecast contradicted the gloomy outlooks others had projected.

With interest rates at record-low levels, home ownership under COVID-19 has become even more accessible to those whose employment prospects are secure. Hence, Porter’s forecast has been on the mark.

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How housing markets will evolve in 2021 depends upon the economy, markets and consumer preferences. COVID-19 has hit some economic sectors hard, but it has left others unscathed. Some have even thrived.

For example, sales of electronic equipment are up even though small retailers have been forced to shut their doors. Condominium sales are struggling, but suburban housing and cottage country homes are experiencing unprecedented demand.

Dismal housing forecasts perhaps assume that the economy will weaken when stimulus packages expire. One can also see that certain economic sectors and their associated labour markets might not experience such a downturn. Hence, those with secured economic prospects may continue the homebuying mania made possible by ultra-low mortgage rates.

Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.

 

© 2020 Financial Post

New CMHC market assessment sees “moderate degree of vulnerability” in Canadian housing

Clayton Jarvis
Mortgage Broker News

Wednesday morning, Canada Mortgage and Housing Corporation released its most recent Housing Market Assessment for the third quarter of 2020.

“Although the unprecedented income supports from governments provided temporary relief, the COVID-19 crisis negatively affected the level of permanent disposable income available to households,” said Bob Dugan, CMHC’s chief economist. “Along with the weakening of other drivers of the housing market, overvaluation imbalances increased further or started to emerge in several markets in the third quarter of 2020.”

Be that as it may, the HMA, which examines the level of vulnerability in the country’s major real estate markets, determined that the raging sales activity seen in Q3, despite occurring without the support of robust employment, steady immigration, or economic certainty of any kind, has had a minimal impact on the stability of Canada’s housing markets. Compared to CMHC’s second quarter assessment, only four Census Metropolitan Areas are currently considered more vulnerable overall than they were in September: Regina, Hamilton, Montreal, and Moncton.

In assembling the HMA, CMHC considers four factors: overbuilding, overvaluation, price acceleration, and overheating.

 

Moderate risk from overheating: Hamilton, Ottawa, Montreal, Quebec City, Moncton

Moderate risk from price acceleration: Hamilton, Ottawa, Montreal, Moncton

Moderate risk from overvaluation: Canada, Victoria, Regina, Hamilton, Halifax

High risk from overvaluation: Moncton

Moderate risk from overbuilding: Edmonton, Calgary, Regina

Six markets received overall low vulnerability scores – Edmonton, Calgary, Saskatoon, Winnipeg, Quebec City and St. John’s – while only two, Moncton and Hamilton, were deemed highly vulnerable. CMHC said the remaining seven CMAs studied, and Canada as a whole, are facing moderate levels of vulnerability.

Despite receiving low vulnerability scores across all four metrics, both Toronto and Vancouver were deemed moderately vulnerable overall. In Toronto’s case, CMHC’s Dana Senagama told Mortgage Broker News that the city’s evaluation reflects the persistence of the city’s housing challenges even though certain technical thresholds were not crossed in Q3.

“Although you are seeing, for this particular quarter, all those indicators showing as green, they were, at one particular time over the course of the last two years or more, in the more vulnerable category,” Senagama said, adding that CMHC is paying particularly close attention to overvaluation in the GTA.

Eric Bond, CMHC’s senior specialist in Vancouver, said the city’s moderate vulnerability assessment was also impacted by its market’s recent performance. One item that has CMHC concerned is the region’s high level of indebtedness, which ranks among the highest in the country.

“While low interest rates are currently supporting housing demand and encouraging that, the uneven impacts of the pandemic mean that debt will affect different households differently,” Bond said. “That’s a vulnerability we wanted to take into account for Vancouver.”

With the HMA built around subjective concepts like “high vulnerability” and colour coding, consumers looking at an individual market’s assessment may wonder what exactly to do with the information in front of them. Dugan said the intent of the report is to promote stability in the market by making Canadians aware of potential issues in the communities in which they may be considering purchasing a home.

“Ultimately, we’re trying to signal imbalances to people to improve the decisions that they make,” Dugan said. “If, for example, there were overbuilding in the market that could lead to price declines, it’s a signal to people that there is some risk around prices in the market. It’s also a signal to builders that maybe instead of adding to inventories sell from the existing inventories you have on hand.”

 

Copyright © 2020 Key Media

Industrial real estate demand engulfs Abbotsford

Frank O?Brien
The Vancouver Sun

 The Metro Vancouver Regional Industrial Lands Strategy Report, released June 2020, found the region, as of 2015, had approximately 28,000 acres of industrial land, but that 80 per cent of that had already been developed.

“Demand is outpacing the market’s ability to provide space,” the report warned. “Businesses are faced with either renewing leases at notably higher rates, or relocating further away from the region’s core markets.”

That relocation has already started and Abbotsford has become a prime destination.

The eastern Fraser Valley community, once seen as a lower-cost safety valve for surging Metro industrial demand, is now posting prices rivalling major Metro markets.

Only 1.1 per cent of Abbotsford’s 8.8 million square feet of industrial space is vacant, according to a third-quarter survey from Colliers International.

There is 460,000 square feet of new industrial buildings are currently under construction in Abbotsford, representing  nearly 14% of all industrial development in the Lower Mainland. 

“The Abbotsford industrial market has exploded,” confirmed a November 2020 report from Valley-based Frontline Real Estate Services Ltd., characterized by industrial property sales more than tripling over the past five years.

In 2019, a record 34 transactions totalling $82 million were seen in West Abbotsford’s industrial district, up from 22 sales worth $50 million a year earlier.

“2020 continued to see insatiable demand and new price records across all property types, despite the outbreak of a global pandemic and looming economic uncertainty,” said Frontline agent Braydon Hobbs, who prepared the industrial report with co-agent Todd Bohn.

Even decades old freestanding buildings are achieving record prices, available development land is difficult to find and strata sellers are nearly nonexistent, meaning buyers must wait for new developments to come to market to secure industrial space, Bohn said.

In the first nine months of 2020, 10 industrial properties and one land sale represented a total sales volume of $34.7 million. Transactions were down from 2019, but the sales value increased, an indication of the rising prices. A new trend now is strata industrial, with at least two such light-industrial projects now underway.

Abbotsford industrial land prices now start at $2.3 million per acre, Frontline reports, while strata warehouse space is selling for from $280 to $320 per square foot. Industrial lease rates are pushing $12 per square foot for prime space, only slightly lower than the average in Surrey and Richmond.

With a tight 1.6 per cent vacancy rate for light-industrial space, Abbotsford is facing a shortage of land that can accommodate such use.

The City of Abbotsford has even launched a “space sharing” program for industrial users. The unique service allows businesses to collaborate by sharing space and saving money by splitting the cost of property taxes.

 

© Copyright 2020 Western Investor

Industrial real estate demand engulfs Abbotsford

Frank O?Brien
The Vancouver Sun

Dual industrial strata projects planned for Vancouver

WI Staff
Western Investor

The two latest industrial builds planned for Vancouver will tilt speculative strata industrial development to near dominance in the city.

Thanks to soaring industrial land costs in Metro Vancouver, a bias towards strata development has skewed new development being delivered to include only limited amounts of traditional lease space, according to a third-quarter report 2020 from Avison Young.

Nowhere is the trend more pronounced than in Vancouver, where, of the 328,000 square feet of new industrial under construction, 172,000 square feet is strata, where the space is sold rather than leased.

The two new projects planned for South Vancouver by PC Urban will push the new strata development up by more than 154,300 square feet.

PC Urban has submitted a development permit application to the City of Vancouver for the two new strata industrial projects. They are to be built on a former metal recycling 2.2-acre site on Ontario Street and a two-acre site on East Kent Avenue, which was used as a storage yard. Construction is projected to complete in 2022.

“Demand for strata has been very resilient through COVID-19 and we’re seeing a ton of activity, in particular with PC Urban’s IntraUrban Brentwood in Burnaby which is 100 per cent sold and is now seeing re-trades and resales at prices well over $525 per square foot,” said Ryan Kerr, principal at Avison Young. “With low financing costs for buyers, we’ve seen a lot of groups previously leasing who are now looking to purchase, especially in a market where industrial rents are rising by 15 per cent a year.”

Additionally, said Kerr, there is very limited to no supply of new industrial strata anywhere in the Vancouver market.

“With vacancy rates down from 1.7 per cent earlier this year to 1.2 per cent today, and ongoing rising rental rates, new industrial strata allow owner-occupiers to control costs and build equity.”

Vancouver’s average industrial lease rates are now around $17 per square foot. It is not uncommon for new Vancouver strata industrial space to sell for north of $1,000 per square foot.

PC Urban’s first industrial strata development, IntraUrban Laurel in the South Vancouver area, sold out before construction was complete, a record for the industry. Its new Ontario Street development will consist of three buildings totaling over 82,000 square feet close to the SkyTrain Marine Gateway station, and will target flex-commercial uses, including flex office and retail components. The two-building East Kent Avenue project, with a total of 72,296 square feet, is aimed at light industrial users, including contractors and trades, the company stated.

“South Vancouver has a history as an industrial hub and is a sensible home-base for small businesses or tradesmen,” says PC Urban CEO, Brent Sawchyn. “Those companies need and want to stay in Vancouver but have very limited options.”

 

© Copyright 2020 Western Investor