Did the provincial government overpay? Defenders of the deals just blame a hot market
Frances Bula
Sun
The Orange Hall at 295 East Hastings in Vancouver recently sold for $1,879,000, 118 per cent over the assessed value. Photograph by : Stuart Davis, Vancouver Sun
Alexander Hotel
Marble Arch
Rainier Hotel
Empress Hotel
The provincial government paid almost double the 2007 assessed value for the residential hotels it bought in the Downtown Eastside when it went on a $37-million acquisitions spree for six weeks in February and March.
While it’s standard in Vancouver for buyers to pay more than the assessed value for property and the Downtown Eastside hotel market was among the most rapidly rising in the past year, the overall price paid by the province was significantly higher than the average prices paid in Downtown Eastside private hotel sales around the same time. Only one of the private buyers paid over double the assessed value, which the province did for six of the 10 properties it bought.
Critics say the province overpaid because it was rushing to respond to a critical low-cost housing shortage that had been ignored for too long.
But Housing Minister Rich Coleman defends the purchase prices as a reflection of the market and a good investment.
In all, the province spent $37.14 million for 10 hotels that had an assessed value of $18,834,900 million on the 2007 roll, paying anywhere from 49 to 147 per cent over the assessed value.
In the process, developer Robert Alan Wilson made $1.6 million in a couple of months when BC Housing bought two of his seven recently acquired hotels for $6.4 million after Wilson had bought them Feb. 14 and 15 for $4.65 million.
Another recent buyer, Harpal Singh Daula, made $700,000 quickly when he sold the Carol Rooms to the government for $2.05 million after having paid $1.4 million for it in December.
And the owners of the Rice Block, who bought in October 2005 for $950,000 and spent an unknown amount fixing it up, sold for $2.59 million.
Prices had risen dramatically in the 12 months before the province started buying, as a record 24 hotels changed hands. But a comparison of the prices the government paid, analysed by increase over assessed value, by cost per room, and by cost per square foot of land, indicates the province paid the highest prices for any hotel transactions of the past year, even those of the past few months.
Of the nine private sales on record between Oct. 1, 2006, and April, only one unknown buyer paid more than double. Others paid anywhere from two to 76 per cent over 2007 assessed value. The highest sales were the most recent, including the Burns Block, a vacant building that was recently auctioned for $1.45 million, and Alexander Residence, a 57-unit rooming house that sold for $4.15 million in March.
There are three recent listings for hotels and rooming houses for sale in the Downtown Eastside on public sites. They are listed at prices that work out to between $26,000 and $45,000 per room — and at between 45 and 90 per cent more than their assessed value.
SHELL COMPANY USED
The higher prices the government paid are not because anyone knew the government was buying, by all accounts. People familiar with the gossipy, closely watched real-estate world of the Downtown Eastside say no one had any indication that the province was in the market. BC Housing used a shell company and realtors who were not their usual agents.
Real estate experts say that it’s unlikely the government will lose any money in the future, since any land near the downtown is going to continue increasing in value.
Coleman says the province paid the going rate — but not more — in a hot market and that, a few years from now, the hotels will be worth much more.
“We could probably sell them all today for what we paid for them,” Coleman said. In fact, he said he started with the intention of buying only two or three hotels but, as he realized the ministry was able to acquire them at reasonable prices, he convinced other ministers to put in their year-end money to keep buying.
The province bought so quickly because leftover year-end money only becomes known and available in about February and it has to be spent by March 31.
CB Commercial agent Tony Quattrin, who did the buying for BC Housing, says the government got a great deal, paying $4 million less overall than asking prices in what he described as a “seller’s market.”
(He also said it was completely offbase to compare sale prices to assessments or to other private sales, saying that assessments are hopelessly outdated, that it’s impossible to compare one hotel price to another because each hotel is in different condition, and because there were no other sales at exactly the same time as the government’s to compare with.)
But David Eby, a lawyer with the Pivot Legal Society, said all indications are that the government paid high prices because it was trying to buy quickly in a market with prices that wildly inflated.
FAST-RISING MARKET
The past record of sales prices for Downtown Eastside hotels indicates that, if the province had decided to go on a buying spree last year at the same time, it could have bought almost double the number of hotel units as it did in February and March.
The province paid an average of $62,420 per room. Even if the Orange Hall is removed — an anomaly because it has two-bedroom units and sold for considerably more — the province still paid $58,159 a room for the remainder.
But last year at the same time, hotels were selling at a cost of about $25,000-30,000 per room. The cost per room didn’t go past $40,000 until October.
B.C. Assessment Authority assessor Jason Grant said the Downtown Eastside residential hotel market has risen much faster than any other Vancouver sector in the past 18 months.
Commercial assessments went up by 24.5 per cent between 2006 and 2007; general hotels went up by between 20 and 30 per cent. But downtown residential hotels “went up closer to 50 per cent in most cases,” he said.
In the weeks before the province’s announcement about its hotel buys, there was considerable publicity about the housing needs B.C. would have to meet in order to keep the commitments it made as part of its Olympic bid.
In February, The Vancouver Sun published a front-page story about unreleased recommendations of the housing table set up by Vanoc, saying B.C. needed to buy 800 hotel rooms in the Downtown Eastside and build 3,200 rooms to meet its Olympic promise. That caused a stir within the government, which was disconcerted by the recommendations and had been holding off on releasing the report publicly.
As well, Downtown Eastside groups had been applying public pressure for at least a year about the housing situation in the area, as hotels were being bought by developers.
“I wish that there had been more planning,” said Eby.
GOVERNMENT AND PRIVATE HOTEL PURCHASES IN THE DOWNTOWN EASTSIDE SINCE OCTOBER
GOVERNMENT HOTEL PURCHASES
ST. HELEN’S HOTEL
1161/1163 Granville
Price paid: $7.5 million
Assessed value 2007: $3,397,000
Difference in sale price over assessed value: 121 per cent higher
Cost per room: $76,531
Cost per square foot (land): $1,250
Previous owner: A company whose director is Geoffrey Hughes, who bought it in 2004 for $3,890,998 and has done extensive improvements
WALTON HOTEL
261/265 East Hastings
Price paid: $2.3 million
Assessed value 2007: $1,541,000
Difference in sale price over assessed value: 49 per cent higher
Cost per room: $45,098
Cost per square foot (land): $377
Previous owner: A company whose director is Robert Alan Wilson, who bought it on Feb. 14, 2007, for $1.65 million
MARBLE ARCH
518 Richards
Price paid: $8 million
Assessed value 2007: $4,558,700
Difference in sale price over assessed value: 76 per cent higher
Cost per room: $55,172
Cost per square foot (land): $890
Previous owner: A company whose director is Geoffrey Hughes, who bought it in 2002 for $4.5 million
ORANGE HALL
329/341 Gore
Price paid: $4.1 million
Assessed value 2007: $1,879,000
Difference in sale price over assessed value: 118 per cent higher
Cost per room: $151,852. The building includes one- and two-bedroom apartments, as well as bachelor suites
Cost per square foot (land): $573
Previous owner: A company whose director is Robert Alan Wilson, who bought it on Feb. 15, 2007, for $3 million
ROOSEVELT HOTEL
166 East Hastings
Price paid: $2.35 million
Assessed value 2007: $1,169,800
Difference in sale price over assessed value: 101 per cent higher
Cost per room: $52,222
Cost per square foot (land): $770
Previous owner: Savoy Hotel (1997) Ltd., whose director is lawyer John Bruce Preston, purchased it in 1998 for $990,000
ORWELL HOTEL
456 East Hastings
Price paid: $2.95 million
Assessed value 2007: $1,1295,900
Difference in sale price over assessed value: 128 per cent higher
Cost per room: $53,727
Cost per square foot (land): $969
Previous owner: Savoy Hotel (1997) bought in 2002 for $820,000
SAVOY HOTEL
258/260 East Hastings
Price paid: $1.79 million
Assessed value: $782,600
Difference in sale price over assessed value: 129 per cent higher
Cost per room: $63,929
Cost per square foot (land): $588
Previous owner: Savoy Hotel (1997), which has owned it since 1997, when it was bought for $634,000
PARK HOTEL APARTMENTS
429/433 West Pender
Price paid: $3.5 million
Assessed value 2007: $1,883,000
Difference in sale price over assessed value: 86 per cent higher
Cost per room: $62,500
Cost per square foot (land): $1,122
Previous owner: Glenna and Peter Sze, who have owned it since 1993, when they bought it for $1,096,300
CARL ROOMS
573/577 East Hastings
Price paid: $2.05 million
Assessed value: $1,278,000
Difference in sale price over assessed value: 60 per cent higher
Cost per room: $43,617
Cost per square foot (land): $336
Previous owner: Harpal Singh Daula, who had bought the building for $1.4 million on Dec. 1, 2006
RICE BLOCK
800/802 East Hastings and 404 Hawks
Price paid: $2.59 million
Assessed value: $1,049,900
Difference in sale price over assessed value: 147 per cent
Cost per room: $60,233
Cost per square foot (land): $849
Previous owners: Maria and Stephen Smele, who bought the building for $950,000 in October 2005, and did extensive renovations
PRIVATE SALES
ALEXANDER RESIDENCE
90 Alexander
Price paid: $4.15 million
Assessed value 2007: $2,358,000
Difference in sale price over assessed value: 76 per cent higher
Cost per room: $78,302. This residence includes six townhouse units as well as 47 single-room units
Cost per square foot (land): $533
Sale date: March 26, 2007
Buyer: A company whose directors are Steven Lippman and Danny Wong
ARCO HOTEL
81/83 West Pender
Price paid: $2.8 million
Assessed value 2007: $1,661,000
Difference in sale price over assessed value: 68 per cent higher
Cost per room: $40,000
Cost per square foot of land: $933
Sale date: March 1, 2007
Buyer: A company whose director is Robert Alan Wilson
BURNS BLOCK
16/18 West Hastings
Price paid: $1.45 million
Assessed value 2007: $660,000
Difference in sale price over assessed value: 120 per cent higher
Cost per room: $51,785
Cost per square foot (land): $567
Sale date: April 30, 2007
Buyer: Numbered company with no directors listed
LION’S ROOMS
316/318 Powell
Price paid: $1,039,870
Assessed value 2007: $976,200
Difference in sale price over assessed value: Seven per cent higher
Cost per room: $64,992
Cost per square foot (land): $343
Sale date: Feb. 16, 2007
Buyer: A company whose director is Abolghasem Abdollahi
SHALDON HOTEL
52/60 East Hastings
Price paid: $2,167,500
Assessed value 2007: $1,612,000
Difference in sale price over assessed value: 35 per cent higher
Cost per room: $38,026
Cost per square foot (land): $347
Sale date: Feb. 1, 2007
Buyer: A company whose director is Robert Alan Wilson
CENTENNIAL ROOMS
342/350 Powell
Price paid: $1.1 million
Assessed value 2007: $889,000
Difference in sale price over assessed value: 24 per cent higher
Cost per room: $84,615
Cost per square foot (land): $120
Sale date: Nov. 30, 2006
Buyer: A company whose director is Rengasamy Ponraja
LOW YOUNG COURT
406/410 Union
Price paid: $1,150,000
Assessed value 2007: $1,050,000
Difference in sale price over assessed value: 10 per cent higher
Cost per room: $52,273
Cost per square foot (land): $754
Sale date: Nov. 1, 2006
Buyer: Miaka Jean Nufer
RAINIER HOTEL
307/315 Carrall
Price paid: $3.2 million
Assessed value 2007: $2.04 million
Difference in sale price over assessed value: 57 per cent higher
Cost per room: $69,565
Cost per square foot (land): $368
Sale date: Oct. 13, 2006
Buyer: A company whose director is Robert Alan Wilson
EMPRESS HOTEL
235 East Hastings
Price paid: $2.35 million
Assessed value: $2,303,800
Difference in sale price over assessed value: two per cent higher
Cost per room: $32,192
Cost per square foot (land): $770
Sale date: Oct. 2, 2006
Buyer: A company whose director is Hassan Ashori
Real-estate records research by Vancouver Sun librarian Kate Bird
© The Vancouver Sun 2007