January 28, 2025 • 43 mins
WATCH
▶️ Watch this episode on YouTube
***
EPISODE DESCRIPTION
Episode 88: Matt and Taylor are joined by Jeff Hancock. Jeff is the Owner of Tradecraft Consulting, and also an Investment & Development Property Specialist (Broker) at William Wright Commercial from Kelowna, BC. Jeff has over 20 years of success in professional real estate, with a strong focus on development consulting and feasibility. He is the former Real Estate Services Manager at the City of Kelowna, where he was responsible for the acquisition and disposition of all City owned property and actively managed a team of real estate professionals overseeing a land portfolio worth $1.2 billion dollars.
Jeff is here to discuss: → Kelowna's purpose-built rental (PBR) supply summary, it's affect on the pre-sale/STRATA markets, vacancy rates, and what this means for rents. → The mindset of developers right now, the challenges they face with development cost and product choices, and the DCC fee increase in Kelowna. → What Jeff would invest in, the overall resilience and opportunity of Kelowna real estate, and the incoming influx of savvy investors.
Tradecraft Consulting Website: www.tradecraftconsulting.ca
Jeff Hancock's Email: jeff@tradecraftconsulting.ca
Jeff Hancock's LinkedIn: @JeffHancock
William Wright Commercial Website: www.williamwright.ca
William Wright Commercial Instagram: @williamwrightrealestate
William Wright Commercial LinkedIn: @WilliamWrightCommercial
William Wright Commercial YouTube: @williamwrightcommercial
***
OUR SPONSOR
The Kelowna Real Estate Podcast is brought to you by Century 21 Assurance Realty, the gold standard in real estate. To learn more, visit: www.c21kelowna.ca
***
CONNECT WITH THE SHOW
Kelowna Real Estate Podcast: @kelownarealestate
Kelowna Real Estate Podcast YouTube: @KelownaRealEstatePodcast
Kelowna Real Estate Podcast Instagram: @kelownarealestatepodcast
***
CONNECT WITH MATT
Matt Glen's Website: www.mattglen.ca
Matt Glen's Email: matt.glen@century21.ca
Matt Glen's Instagram: @mattglenrealestate
***
CONNECT WITH TAYLOR
Taylor Atkinson's Website: www.venturemortgages.com
Taylor Atkinson's Email: taylor@venturemortgages.com
Taylor Atkinson's Instagram: @VentureMortgages
***
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Okay, welcome to the Cologne RealEstate Podcast.
(00:02):
I'm your mortgage broker host,Taylor Atkinson.
I'm your real estate agent host,Matt Glenn.
Although, by looking at thisvideo, you'd think I was the
mortgage broker host.
Yeah, you're in my seat.
Yeah, good.
I feel like I got so much power.
Yeah, well, we just finished therecording with Jeff Hancock.
Yeah, he brought it.
It was awesome.
Yeah, he's a commercial agent atWilliam Wright, but also runs a
consulting company, Tradecraft.
This guy knows his spreadsheets.
(00:22):
I freaking love this.
He's a spreadsheet kind of guy.
This is stuff Matt and I have beenjust bullshitting on the podcast.
Like, yeah, these numbers, thesenumbers.
And, you know, we're not far off.
So it was really nice to actually
have some concrete numbers to lookat.
But just wild data.
Yeah, he's done a lot of work on
this.
brought it.
So, yeah, thanks, Jeff.
It was fun talking to him, you
know, like it kind of.
Really good picture of what's
(00:42):
going on, especially in thepurpose built rental space in
Kelowna, just construction ingeneral.
And it was, it was awesome.
I mean, one thing that you brought
up kind of the end is it's notlike the show had a negative feel
about it, but there was a lot oflike realistic.
numbers and, you know, deals thatwe're looking at vacancy rates and
where these projects are in thepipeline.
So it felt a little bit heavier,like, oh man, it's tough out
(01:04):
there, but there is alwaysopportunity.
It just shows like, you actuallyhave to do your research and due
diligence and speak to guys likeJeff, you know, and run some
numbers and you will findsomething.
But yeah, it was very interestingshow.
I loved it.
Absolutely.
And then, so a couple of items ofnews here.
So first one is Taylor's favoriteDCC is up. 2 .4 in Kelowna.
Your thoughts, Taylor?Yeah.
I mean, I don't think that's thatbig of an increase.
(01:25):
Yeah. 2 .4 is reasonable.
Yeah.
Is it because there's lessdevelopment?
Is there less development?Projected less development?
No. I mean, Yeah. 2 mean, I'veseen some of the data from City of
Kalina.
Yeah.
It looks like on their infillside, they're getting more
applications, but kind of a profitloss, right?
They're running a balance sheet ofwhat they need to develop in the
city.
You know, it's funny.
I was in City Hall a couple ofweeks ago doing a building permit
(01:46):
for myself, sat down.
I was just paying for it pretty
easy.
And hey, FYI, you can do your
building permit online now.
which is pretty cool.
So you just submit all thedocuments online?
That's what I did for my Facebooksuite.
a online?That's what I did for my Facebook
suite.
Yeah.
Did it work for you?Yeah, it worked well.
It did not work for me.
Well, I went in beforehand and
talked to the woman there.
I can't remember her name.
Tammy, I worked with.
It wasn't Tammy.
It wasn't Tammy.
But she was wonderful, whoever I
(02:06):
was with.
She told me what to do and I went
home and it like first try.
So yeah, So yeah, I did it all.
And then I signed, but forwhatever reason didn't work.
So I called like two weeks later.
I'm like, hey, I'm pretty sure
this should be through by now.
And she's like, oh, well, you need
a docusign.
I'm like, yeah, no, I haven't.
It's done.
The system isn't up and right.
So I think there's still a coupleof kinks.
But anyways, I went into pay andthere was a guy beside me, you
(02:28):
know, having a discussion withsomeone from the city as you do
when you're, you know, doingprojects.
And they listed his DCC fee.
It was like something like the $60
,000 range.
And he's like, what?
I am building like a shed.
Well, sir, if it was like attached
to your house, like it wouldn't bea DCC fee, but because it's not,
it's, you know, and this is kindof the city's explanation for it.
I won't get into it.
It was pretty valid on why they
(02:49):
have to kind of have a standardset fee for certain areas and
projects.
So it makes sense why they need
that, but pretty tough to swallowif you're that guy.
So 60 grand.
So you're building a shop.
Like what's the budget for theshop?
60 grads.
Exactly.
And then you go to, God, geez,that is a stinger.
Yeah.
So guaranteed.
Yeah.
He's, he's doing that without a
permit for sure.
That's right.
Also news city Kelowna coming backto provincial regulations on
(03:09):
Airbnbs.
So that means.
Amen.
Airbnb is coming to your
neighborhood, but not to awkwardevent.
Yeah.
I think it's totally reasonable
about time.
Well, yeah.
Should have never gone above andbeyond in the first place.
and beyond in the first place.
That was definitely a major
fumble.
Fumbled bank, I'd say.
(03:30):
Yeah.
Well, hey, you know what?
At least they realized it.
Yeah.
Like, if you make a mistake, raiseyour hand.
I mean, I never do, but I nevermake mistakes.
Yeah.
Honestly, Yeah.
Honestly, I agree completely.
And then, like, if the vacancy
rates start coming up like they'reexpected to.
we're talking to Jeff here in thenext few years, like the city
might, obviously they haven't saidthis, it's totally just me making
this up.
They might apply for the
(03:52):
exemption, right?Yeah, I think you're right.
think you're right.
I think everyone at this point
sees the light at the end of thetunnel.
And yeah, speaking of Jeff, likedefinitely listen to this podcast
because it does look like vacancyis going to stay up or keep
increasing for the foreseeablefuture.
And if that happens, yeah,opportunity for Airbnbs to get in
maybe.
It's like we said this in the
show, like we said this in theshow, but it's almost like if
(04:13):
something's right, you don't haveto stomp on it with every single
thing you have, like a littletweak here and there or a couple
of rules at a time.
Yeah.
You know, because like sweetJesus, man, this pendulum is just
keeping us all on our toes.
like Yeah.
And the third item is January21st.
And the third item is January21st.
No 25 % tariff so far.
And, you know, he's still
threatening.
It says it might not be as bad.
(04:34):
But so far, we got through dayone.
I mean, the threat alone, though,still kind of slows.
Yeah, but he was threatening dayone.
So we're day two as of recording.
And he said no. We're in the
clear.
Yeah, well, he said probably going
to be less than 25%.
And maybe by the end of January.
But hopefully, he's just full ofshit.
And we can just move on, right?But yeah, I agree with you.
(04:54):
The threat is having already, Ithink, the Canadian dollar is down
on this.
Yeah, this.
Yeah, we're getting crushed.
Yeah.
So the thread alone is annoying,but the actual hammer has not
dropped.
All right.
This podcast, like every podcast,sponsored by the best brokerage in
town, Century 21 Assurance Realty.
If you're an agent looking for a
new spot to call home, we're acollaborative atmosphere.
We help each other out.
We want you to succeed.
(05:15):
We love listings.
Century 21, you can get listings
for free.
photography is included so if
you're an agent looking forlistings which is what you should
be doing century 21 is a good spotfor you to go or if you're a buyer
a seller looking for an agent calla century 21 agents there is a
bunch of beauties at the brokerageso uh bunch of beauties oh yeah me
(05:36):
included that's what i have to sayabout that enjoy the show guys it
is a good one Okay, welcome to theshow, Jeff Hancock.
Thanks for joining us.
Thanks for having me, guys.
Appreciate it.
Yeah, it's been a long time trying
to get you on.
We met, was it like seven, eight
months ago?Yeah.
Excited for this one.
Great.
So we just start our show kind oflike, what's your perfect Friday
look like?What do you do in the morning,
(05:56):
productivity for work, and thenleading into the weekend for some
fun?Yeah, you bet.
That's a good question.
Perfect Friday.
I mean, living in the Okanagan,it's got to be a boat day.
But yeah, usually, you know, getup.
I'm an early riser.
Start work, sort of clear off
emails, have a coffee.
And then basically just take it as
it comes, right?Whatever pops up, try and tackle
it.
And then if I can scoot off and
get an afternoon off, then yeah,on the boat and get on the lake is
(06:18):
ultimately what I like to do.
Nice.
Yeah.
I love it.
That's awesome.
For work, you're kind of wearing
two hats.
Do you want to talk about both of
those quick?Yeah, you bet.
So I have a company calledTradecraft Consulting, and we
provide consulting services, arange of consulting services to
the development community.
to public entities,
municipalities, as well as serviceproviders?
tell us, forward us, that kind ofstuff.
We do outside land agent work.
We do feasibility consulting, just
sort of a whole host and a wholerange of different services that
(06:40):
we offer.
That's sort of my background.
I've been in the business forabout 20 years, just over 20
years.
The majority of that has been in
consulting in some form oranother.
And then I also do commercialbrokerage work through William
Wright Commercial here in Kelowna,focusing on the Okanagan, mostly
income and development stuff.
You know, up here, you have to
wear a bunch of different hatswhen you're doing this type of
(07:03):
work.
So two pieces to it, really, it's
the transactional work and theconsulting work.
Yeah.
Yeah.
You were originally in Vancouver,right?
Correct.
Yeah.
Born and raised in North Van.
And then, yeah, the majority of my
career was down in Vancouver.
I worked with a consulting company
down there called MPC Intelligenceand then worked at Deloitte for a
while in their financial advisorypractice and then transitioned up
here about 13 years ago.
(07:23):
Awesome.
What brought you up here?How come you decided to come to
Cologne?That's a good question.
At the time, we had a five -year-old.
My wife didn't really want to goback to work.
We sold everything we had down inVancouver and it was Operation
Small Mortgage.
We always had summered up here.
We really loved being up here.
We had sort of a social network
built in.
A lot of people had, you know,
kind of migrated up here over theyears.
(07:43):
And yeah, we just kind of took ashot.
And when we got here, we justnever really looked back.
Now it's home and we love it.
It's great.
Awesome.
Yeah.
Yeah.
Cool.
Okay.
Well, you sent us some amazing
information, which isn't publicknowledge.
And we'll kind of keep that closeto our chest.
Reviewing this, I guess it's anExcel sheet.
You've converted it to a PDF forus.
It is wild how much information ison here.
So thank you.
Yeah, you bet.
This is priceless.
(08:04):
Can you kind of summarize it?
I know summarizing this is goingto be tough, but like in a few
minutes, give us kind of highlevel or give the listener high
level what it is, what we'relooking at.
Yeah, you bet.
So it's a supply summary of all of
the purpose -built rental product.
it's a supply summary of all of
the purpose -built rental product.
that's coming to the market in the
foreseeable future.
This is one of the offerings that
(08:24):
Tradecraft provides to differentclients that are looking to
develop purpose -built rentalproduct or own purpose -built
rental products.
We help them understand the
market, understand the supplypicture, understand... pricing and
that kind of stuff.
So this is just sort of a high
level spreadsheet for you guys toget a sense of kind of what
Tradecraft can deliver.
The supply picture, I don't think
it's no real surprise, especiallyconsidering the vacancy rate that
was just announced about a monthago.
The supply picture in Kelowna haschanged quite dramatically and it
(08:46):
continues to change.
There's a lot of supply in the
pipeline and there's been a lot ofsupply delivered over the last,
call it five years.
And I think that's a good thing,
right?I think from the city standpoint.
And from a renter standpoint, youknow, that's what you want.
You want a healthy vacancy rate.
Everybody has a different opinion
on this, but call it between threeand 6 % is sort of healthy.
(09:06):
certainly getting to that point.
From a developer standpoint, and
maybe from an owner standpoint,it's obviously a little different.
You're looking at it a littledifferently.
So it's, you know, I think alittle concerning for purposeful
rental developers, you know,starting to look at this market or
have product and development inthis market.
They need to understand that, youknow, things have changed.
And, you know, because of thesupply picture, there may be some
(09:27):
rent compression, they may besitting on vacancy for a little
bit longer than they anticipated.
A lot of the these rental
developers, their pro formas werevery tight to begin with.
Building purpose -built rentalproduct, it's a difficult
endeavor.
The reason why there's been so
much is because the federalgovernment supported that type of
development through CMHCfinancing, which was really the
only financing that a lot of thesedevelopers could get.
(09:47):
So they decided to start buildingpurpose -built rental.
So a lot of developers werepivoting from market condominium
product to you know, purpose-built rental because they could
get these types of projectsfinanced.
There was an appetite on themunicipal side for these types of
projects.
And, you know, the conditions were
favorable.
There was a really low vacancy
rate.
Rents were, you know, continuing
to increase and, you know, it justmade sense.
(10:09):
But now that things are startingto change a little bit and that
picture is changing a little bit,you know, some projects, you know,
that were penciling, you know, notto say that they're not going to
still pencil, but it's just goingto be a little bit more difficult
for these developers considering,you know, vacancy in.
you know, rank compression.
Yeah.
So looking at the totals andcorrect me if I'm wrong, roughly 4
,963 units are projected to becoming on.
(10:31):
Correct.
Yeah.
Yeah.
So that's projects that are at
some point through the entitlementphase, right?
So actual projects, not just, youknow, a piece of land that
somebody bought that they thinkthey're going to, you know,
deliver.
rental product.
This is stuff that is, you know,actually been formally introduced
to the city and is working its waythrough the entitlements process.
Yeah.
You know, it's funny.
We just had on city of Kelowna andone of the architects that won the
(10:52):
fast track program talking aboutinfill and, you know, Matt and I
were talking off air and duringthe intro, like.
These things really don't pencilout yet.
In terms of like an investor, it'sgreat for infill and to maybe, you
know, take down a single familyhouse that isn't up to standard
and something better with it.
But we're talking about kind of
the levers of what you can pull tomake it cashflow as an investor.
(11:13):
And then we don't really have alot of power, but I guess one of
them would be if rents increase.
Looking at this, I cannot see
rents increasing in the nearfuture.
And I mean, I've seen itpersonally, you know, my buddy has
a basement suite just down thestreet from here, tenant left.
going to be getting a lower rentthan what he was.
(11:35):
And I thought it was a prettyaffordable rent to begin with.
I have tenants that are leaving inWest Kelowna, you know, not sure
what the rent's going to do there,but like, yeah, I guess how long
till we see rents come back up?Like, are they going to dip down?
Or at least stop going down.
Yeah.
Yeah.
I mean, I mean, that's a really
good question.
You know, I don't think there's
any real, you know, answer.
I mean, I shouldn't say that.
(11:56):
Of course there is an answer, but.
But to predict it is going to be
very difficult.
I'm not sure.
I mean, I think with purpose-built product, you know, we're
starting to see a lot ofinducements.
So developers that are advertisinga free month's rent or, you know,
additional parking or, you know,some sort of inducement that we
haven't seen in this market for,well, as long as I've tracked the
market, right?Rental developers have never had
to offer any sort of incentivebecause it's been such a tight
(12:18):
rental market for so long.
They're trying to protect their
face rate though.
So you're not going to see.
The rental rates, you know, like a$1 ,700 a month, one bedroom.
They're trying to protect thatnumber.
They're not going to, you know,start discounting it dramatically.
The net effect of rent willprobably go down because of these
inducements or the way thatthey're trying to incentivize.
But, you know, on the secondarymarket, you know, like what you
were just describing, Taylor, likeit will be interesting to see,
(12:38):
right?I think there's going to be a
flight to quality because nowrenters have choice.
So, you know, product that's welllocated, you know.
built by a good developer as newerfinishings, you know, that kind of
stuff, maybe location close to thelake or whatever that may be.
Those guys won't suffer as much onthe vacancy side because again,
renters have more choice.
They'll be able to pick up rental
opportunities in buildings thatmaybe they couldn't afford before.
I think that's one thing we hadWendy Waters on a couple of months
(13:01):
ago.
think that's one thing we had
Wendy Waters on a couple of monthsago.
And that was one of the things shehighlighted too in Vancouver was
basically looking for thatmovement of tenants.
And yeah, there will be a dip in,you know, rental income.
But it's mostly from those peoplethat have been in those affordable
rentals for a long time.
And they don't want to give up
that because BC Tenancy, we can'tincrease the rent that much.
(13:21):
So she's saying like, yeah, maybea bit of a lateral move.
But then those lower rents shouldcome up a little bit.
So it kind of evens things out.
But like time horizon on that, it
would take a long time.
Yeah, 100%.
And that's the million dollarquestion is how long, right?
I think there's not going to be ahuge dip in rents.
I think just because.
You know, especially for a new
(13:42):
product, developers can't affordto offer it at less than, you
know.
Yeah, their financing income.
Exactly.
Right.
So they're in a position wherethey'll eat the vacancy and
they'll sit on it and they'llwait, you know, and then just hope
that.
I think you're going to see.
The supply lever get pulled back.
So you're going to see a lot of
guys, projects that, you know,even that are on that spreadsheet
that I sent that look like they'removing forward.
If they're not under construction,you know, there's a high
likelihood that they may not moveforward and just wait for better
(14:04):
conditions.
You know, every developer is a
little different in terms ofwhat's driving them, but I could
definitely see that.
happening without the rents where
they are currently, it's going tobe really hard.
A lot of guys are going to beunderwater and they're performing
and they're just not going to beable to make it work.
Right.
So it's kind of a different story.
kind of a different story.
Like a narrative we've heard,
right.
Is like, we need more housing
(14:26):
supply, which I agree with.
Like, even if you're looking at
this of three and a half, 4 %vacancy, it's not a lot, but when
you're talking, it's just notaffordable.
So how do we fix both issues,right?
Like how do we provide developersopportunity to build and be
profitable and how do we makeaffordable houses?
Yeah.
It's definitely, it's a tough
question.
And, you know, I think when you
have...
From the city's perspective and,
you know, from the public'sperspective, the more supply, the
(14:48):
better, right?The higher the rental rate, the
better provides opportunity.
It creates affordability, all of
those things.
But again, for the guys that are
actually delivering this productand taking the risk and putting
their own capital at work to work,excuse me, all of these numbers
drastically impact, you know, thefeasibility of their project and
slight changes in rents or, youknow, slight increases in vacancy.
All of that just ends up beingdollars in the pro forma.
Some of it can kill theirperformance and kill the supply.
(15:09):
And then again, like you say, it'skind of all the supply slows down,
right?And then vacancy comes back up.
It's kind of a bit of a cycle,right?
Do you think this will be kind ofa catalyst to start stratifying
some of these properties?you think this will be kind of a
catalyst to start stratifying someof these properties?
I was going to ask, going to ask,how does this affect the pre -sale
market?Because obviously, we're talking
about purpose -built rentals, butwe bought condos and stuff.
So the rental market reallystarted to blow up when the pre
-sale market just collapsed, howstarted to blow up when the pre
(15:32):
-sale market just collapsed,right?
developers that were typically pre-sale guys or would do the
majority of their work buildingmarket condominium product, all of
a sudden needed to keep the lightson and needed to keep their guys
busy.
And so then they pivoted to
purpose -built rental.
Like I mentioned earlier, they
could finance through CMHC andthey could continue to build as
builders do.
So yeah, I think you're going to
(15:53):
see if the pre -sale market comesback and with interest rates
dropping, I think that you'regoing to start seeing that.
You're already hearing whispers ofthings coming around again, which
is great.
So then some of those guys will
pivot back to that product.
and sort of maybe steer away from
the purposeful rental side ofthings.
But like, if you're talking aboutthe condo product that is
currently under construction andbought by investors and will end
(16:13):
up on the rental market, is thatkind of what you're referring to
matter?Yeah.
Yeah.
So, you know, typically.
In Kelowna, for high -rise or newwood frame condominium product, it
was usually about 30 % investorbought, depending on the project.
So some more, some less.
So like Aqua and Caban, those were
higher percentage of investorbuyers because they were really
marketed as short -term rentalopportunities, which obviously
that's a whole different story inpodcasts.
But the expectation is that a lotof those units are going to come
back as secondary rental units,right?
(16:33):
So owner.
rented.
We don't really track that market.
It's a little bit more difficult
to track.
We only really track the purpose
-built rental market, but we'vedone some work on that in the past
and looked at, you know, all thecondo product that's completing in
the next, you know, whatever,three years or two years, probably
two years now, just becausethere's not a lot of new stuff
being built, but how much ofthat's going to come back to the
rental market.
(16:54):
And it's another like 2000 units
based off of that 30 % investorbought sort of benchmark.
So yeah, I mean, it's a wholeother.
you know, rental inventory, Iguess, that needs to be considered
for sure.
for sure.
I mean, this is pure speculationnow, but I guess we've seen the
condo market pretty flat.
It seems very saturated, a lot of
listings.
There is getting to be some more
activity in that right now.
So I know firsthand that it's
picking up.
Yeah.
But even for just owner occupied,I guess, like we've looked at that
(17:16):
market and I think it still hasanother six to 12 months of, you
know, on the lower end wheresingle family homes, it seems like
it's kind of bottomed out andcoming back up.
Yeah.
If we're seeing all these purpose
-built rentals come online, doesthat not continue the saturation
of the stratified properties, evenif an owner -occupied wants to buy
(17:37):
that?So I guess, how long do we think
the condo market's going to staydown?
Yeah.
I mean, that's a good question.
A lot of renters want to own,right?
So, you know, they'll pivot backin and start picking up condo
product, new condo product.
When we start seeing that being
built again and offered to market,you know, the amount of supply
that we're dealing with both onthe purpose -built rental and on
the secondary market with, youknow, market condominiums that our
(17:59):
investor bought, it's a lot ofproduct and it's going to be
interesting to see.
I don't really have an answer for
you in terms of like how long.
Yeah.
It's funny when you think aboutcauses of this, right?
Because like everyone points toland prices being kind of the
driving factor.
But then like Taylor and I were
talking about this, like if youtalk about a fourplex, you buy the
property for a million, millionone or something.
(18:20):
And then you build a place, costyou two and a half million bucks
or whatever it is, two millionbucks to build it.
But you drop that price for theland 20%, like which is not going
to happen, but like a big, that'slike $200 ,000 off, which really
doesn't help.
It helps a little, obviously.
Everything helps, but it's not thegolden ticket.
Then you think about how does thiscash flow?
Rents could go up or buildingcosts come down, but prices of
(18:41):
stuff is not going to come down.
Wages are not going to come down.
What has to change?It feels like the only two things
that could realistically changeare land prices or rents.
Right.
And there's kind of like the land
prices come down a bit and therents go up.
Like what has to happen for thatto happen?
We're kind of seeing the oppositeof that though.
I mean, like rents are coming downand land prices are going up.
(19:02):
I think land prices are kind ofplateaued, but yeah, coming down.
So like what has to happen?It's almost like our spike, like
the COVID spike just threweverything out of whack.
Right.
Like just so badly.
And then like everyone was livingthe gravy train and then just kind
of the opposite and kind of like apendulum.
Yeah.
I mean, that inflation spike was
brutal for a lot of developers,like the cost side.
The cost side was always, for alot of guys, it was pretty
manageable, pretty predictable.
(19:24):
And then they would bank on
increased revenue, whether it'smarket condominium prices
continuing to go up or rentscontinuing to go up.
That's how they would make itwork.
But then, yeah, inflation andinterest rates, obviously, that
just really threw, I think, a lotof developers into.
a position where, yeah, they justcouldn't make their numbers work
anymore.
But to your point, Matt, I think
even on the revenue side, there'snot enough upside to make it work,
right?So we are seeing land prices
starting to correct specificallyfor purpose -built rental product,
(19:45):
which is great.
We're still seeing guys able to
rationalize a land buy based offof today's rental rates and
vacancy rates, still saying, okay,look, I can still make this work
as long as this land is 70 bucks abuildable square foot or whatever.
whatever the number is for them.
Those are really the only two
things that can kind of give, youknow, the cost piece is kind of,
it is what it is.
(20:05):
It's really about getting either a
really good land buy or, you know,catching the market at a place
where, you know, rents continue togo up.
And I've seen lots of developerspro formas on the rent side, like
looking at the 6 % to 8 % a yearfor the three years while they're
building this thing out.
And then at that point, so at
stabilization, then they're like,oh, these numbers work.
Even then, it's still prettytight.
Low double -digit IRR, maybe evenbelow that.
And that's a big bet, saying thatthis thing's going to go up 6 % to
(20:29):
8 % or rents are going to go up 6% to 8 % over the course of the
three years while we're buildingthis thing.
then at So, you know, now, youknow, guys that were in that
position and round in 21 or 22 andare now completing.
And, you know.
Yeah.
Not only did they get killed withinflation, the rents are there.
are there.
So like, just like talking this
(20:49):
out loud, do you talk like it doesfeel like there's going to be an
opportunity to buy some of thesebecause like you have these
developers that pre -sale is justnot penciling.
So they're just not doing it.
So they're just basically.
for no other reason than to keeptheir, well, other reasons, but
like main reason is just to keeptheir crews going.
They're building these rentalprojects that are just breaking
(21:09):
even at best.
And then once the market does kind
of shift, like you're going tohave all these people holding
these things.
Are they just going to be like, do
I really want to have thisbuilding?
Yeah, it's a great observation,observation, Matt, because when
you're a purpose -built rentalbuilder, there's two businesses,
right?There's the development of the
(21:30):
property and the construction ofthat.
And then there's the management ofit.
right and so there's lots ofdevelopers and builders that are
you know very good at building butThey don't have the infrastructure
to actually operate and manage thebuilding because that takes
people, resources.
You need to have Edna in the
rental office.
Yeah, exactly.
It is an operating business.
A lot of guys aren't necessarily
prepared for that, especiallybecause they just pivoted into
this product because it was theonly thing to get going.
(21:55):
Basically, the market pushed theminto it.
Yeah, exactly.
Everybody was saying, we got to
build more rental, more rental.
The city was on board.
Again, the federal government'sfinancing it.
Okay, we can do this.
idea was, okay, we're going to
stabilize this and then we'regoing to turn around and sell it
to a REIT or to a pension fund orwhatever that may be, private
(22:16):
investor group, whatever.
But what we're seeing now is... a
lot of the REITs and a lot of theguys that were active in the
Okanagan are looking at the supplypicture.
And there, I mean, these are verysophisticated groups and they're
going, no, we're not interested inbuying up there.
So there's going to be a lot ofguys that are going to have to
figure it out and hold it probablylonger than they thought.
And, you know, there might be someinvestors that are going to, you
(22:36):
know, maybe not getting the typeof return that they thought they
were going to get.
Right.
So it's going to be interestingfor sure.
be interesting for sure.
Like the government did kind of
want this by, you know, reallypushing CMHC, like the MLI Select,
like it was the only option fordevelopers.
100%.
Now that they've achieved what
they want, now what?Yeah.
Like the vacancy rate goes up.
It just feels like they come up
with, It just feels like they comeup with, like something happens,
they come up with all these thingsand it goes too far.
(22:58):
Pendulum times.
Yeah, they go too far.
Like, it's crazy.
Instead of little tiny.
Yeah, it's a little tweak here andthere.
It's just kind of right the ship.
It's like, no way.
Everybody to the left.
Totally.
just feels like they Pendulumtimes.
Yeah, they Everybody to the right.
Totally.
And we get there and it's justlike, like, sweet Jesus, man.
I mean, this is going to be areally hard one to analyze.
(23:19):
I don't know if you've spent a lotof time on it, but Airbnb, like.
Has it affected these numbers thatmuch, or is the data just not
there yet?Yeah, there hasn't really been any
consolidated data that we canpoint to.
I mean, there's lots of chatterand people saying, oh, there's
another 3 ,000 units that havecome back to the market.
I haven't done any of thatresearch myself, so I'm not 100 %
sure where that ends up, butthere's been an effect.
(23:44):
There's no question.
Again, on the secondary market,
like you were just talking about,it's more anecdotal, but your
buddy who just said - said - Howlong do we hold it and lose money
while rent goes down?You're right.
It's definitely had an effect.
I'm just guessing, as we were
talking about the pendulumswinging, it's like, well, you
guys already pushed it so far thisway, and then you added on 400
players to keep it that way.
Yeah.
players to keep it that way.
(24:04):
Yeah.
I think the city of Kelowna isrecognizing that as of a couple of
days ago, they just said they weregoing to go to council.
That's just for personalresidents.
That's basement suites.
basement suites.
Yeah.
Essentially, they're just trying
to align with the provincial regsbecause they had pushed it even
further than what the province hadsuggested.
Yeah.
They should have done that from
day one.
We love you, City of Columbia.
Come on.
Yeah.
That was a fumble for sure.
Yeah.
I think they recognize that.
They heard a lot from the tourism
industry over the last summer.
(24:25):
I think that's going to correct.
I also feel that if we're over 3 %for two years, we're going to get
probably exempted or at least -partially exempted.
I think the city will probablycreate a new zoning bylaw and do
it more specific.
for short -term rentals.
Maybe some of the projects likeAqua and stuff that were designed
and originally approved for thatuse, I could maybe see them going
back and saying, okay, look, we'llallow this under these conditions.
It was on the shadow market, butit was a lot of inventory that all
of a sudden was available and hasaffected the rental market for
(24:46):
sure.
Another thing the city is reading
this morning is upping the DCCs,Taylor's favorite.
Are they?Yes.
You have to.
It's pretty.
Yeah.
Yeah.
They have to.
It's kind of with inflation, I
guess.
But it's pretty nominal, to be
honest.
They could have gone probably a
lot higher.
Certainly, if you look at Metro
Vancouver and what's happeningdown there, it's nothing like
that.
I think it was two and a half
percent is what they were talkingabout.
So every little bit is difficult,especially from a developer
(25:07):
standpoint.
But, you know, we want
infrastructure.
We want a nice place.
place.
So when we had Ryan Smith on, it
was like he did phrase it prettywell.
He's like, you know, you're kindof shooting yourself in the foot
because like you build thisbeautiful city.
But like.
That's what it comes with the cost
of, you know?So like, yeah, you can complain
(25:28):
about it, but it has to be there.
Yeah, exactly.
Yeah, exactly.
And you know what?
The city of Kelowna, I think theydo a really good job in terms of
trying to keep it as fair as theycan and to manage it and manage
expectations around it and to passit along, you know, gradually.
And I think the developmentcommunity would echo what I just
said.
Like, you know, there's always
going to be guys grumblingwhenever it costs them money.
But at the end of the day, Ithink, you know, we could be in a
(25:50):
lot worse situations.
And again, pointing to Metro Van,
like what's happening down thereis crazy.
Some of the costs that those guysare passing.
like 30 % increases.
Like, I mean, that's pretty tough
to swallow that, right?Wasn't it down in the Soyuz?
It was like 60 % on their propertytaxes or something that went up.
That's from just like years andyears of no tax increase at all,
of no tax increase at all, right?Which is the silliest way to run a
(26:12):
city.
Like Vernon kind of did the same
thing back in the day.
And that's why they have all these
legacy infrastructure issues thatthey're dealing with.
And then they're eventually goingto have to pass that along.
And then instead of doing two anda half percent a year, 3 % or
whatever, you know, it's a game ofpolitics, but you know, yeah.
(26:33):
I mean, this is kind of one of ourwrap up questions, but I want to
focus on this for a while anyways,but like with an investor cap on,
where's the opportunity?know, the opportunity?
What would you be buying?Yeah, that's a good question.
I think covered land place, a lotof the sophisticated guys that I
deal with, that's what they'relooking for is income with either
(26:54):
some development spin or theability to subdivide and sell off
or bring their cost base down orreposition through aggressive
leasing or whatever.
Those types of assets are still
selling.
There's a lot of guys out there
looking for that kind of stuff.
And that could be anything from...
a strip mall to, you know, anunderutilized industrial piece to,
you know, a purposeful rentalbuilding, right.
That needs to be repositioned orwhatever.
So that's where I would be lookingto put my money in is something
that, you know, you could get alittle bit of income and then
(27:15):
still have upside like long -termdo some planning.
Yeah.
Yeah.
Whether it's excess land orwhether it's, yeah, development or
redevelopment or whatever.
Right.
But there's some way to add value,you know, down the road.
Right.
Yeah.
I know there's been, and maybethere's already been publications
on it, but like starting to taxvacant land.
Do you know anything about that?Like, where's that kind of going?
Because obviously they're tryingto force people to develop land
that they're just holding onto.
But personally, I feel it's kind
of the wrong way because it justdoesn't make sense to develop some
(27:36):
land yet.
Yeah.
So it might not get the bestdevelopment out of it.
Yeah.
So it might not get the best
development of it.
Absolutely.
Yeah.
Yeah.
And then province is pushing that,which again, doesn't make any
sense to me.
Another example of all levels of
government using development andland as sort of the piggy bank and
not understanding what the knock-on effect is and how that can end
up contravening what they'retrying to accomplish, right?
Which is building supply anddeveloping a tax base and all of
(27:58):
those things.
I don't really know a lot about
that, but it sounds asinine to me.
yeah i guess what's the feedback
you're getting when you're beingcontracted by developers right now
and like you come up withperformers and they're kind of
like yeah that just doesn't pencillike here's our thoughts here's
what guess what's the feedbackyou're getting when you're being
contracted by developers right nowand like you come up with
performers and they're kind oflike yeah that just doesn't pencil
like here's our thoughts here'swhat needs to happen?
Yeah, it's difficult for sure.
(28:19):
You know, right now it's a lot of
wait and see.
So the work that we do, it's, you
know, present as much informationas we can, you know, show them the
lay of the land, show them thenumbers, and then you can make a
go or no go decision.
Right now, a lot of the decision
is no go.
You know, there's some guys that,
you know, have owned land for along time.
(28:40):
So their cost -based is a littledifferent or they have some
advantage.
like the high streets of the
world, guys like that, that arevery, very good at what they do.
They're super efficient.
They know their product.
You know, they've stripped all thefat out of the process.
Like those guys are always kind offine.
They can always figure out how tomake it work and continue to
(29:03):
build.
But, you know, for one of
developers or guys that are, youknow, moving into a new product
type or whatever, it's a toughtime to make things work right
now.
Yeah.
So High Street just developed anupper mission, right?
Beautiful.
Yeah.
Just financed one up there andit's...
Yeah.
I mean, it's fantastic.
Yeah.
I mean, it's fantastic.
And the prices that they'reoffering up there and it's condo
(29:24):
product.
Yeah.
It's unbelievable, right?But like good space.
Oh, yeah.
Like efficiently built, you know.
So I guess why can't more peopledo that?
Well, it's a lot of hard work.
work.
That's for sure.
I mean, I think Scott Butler and
his team, Christina Wilson andeverybody else over there, I mean,
they do an amazing job.
They work really hard at, again,
just construction efficiency and,you know, making sure that their
design is best it possibly can be.
(29:45):
You know, getting a good price on
their land, you know, making agood buy.
Right.
That's critical to those guys.
Like they have a very regimentedapproach.
And, you know, if it doesn't work,they don't try to make it work.
Right.
Like they just move next, you
know, and they move on.
Yeah.
That's for They don't getemotional about it.
That's a takeaway from my point ofview is like, you know, we can
(30:05):
blame the government, city,whatever we want to blame.
But like at the end of the day,some developers.
you know, quote unquote developersjust made really bad decisions
buying land that was overpricedand like, and it kind of forces
the market in a direction itshouldn't go.
And that can take a few years, butyeah, effectively that happened
over the last few years, like baddecisions on.
buying land assemblies or a coupleof single family houses that they
thought was going to pencil out.
And it just didn't.
Yeah.
Yeah.
I mean, which even at the time,like I remember seeing
transactions in 2020, Matt, youprobably do too.
(30:26):
And you run the numbers and you'relike, Howard, that makes no sense.
And, you know, that's 20 % higherthan what anybody could pay.
And yet this guy bought it.
And now you're seeing, I mean,
I've never seen so manyreceiverships in my 22 years in
the business.
And that's going through 2008 too.
Right.
And I mean, the amount of
receivership in, you know, thelower mainland, the Okanagan and
the island right now is mindboggling.
And that's a direct reflection ofthat, right?
(30:47):
Is that, you know, guys that justwere making bad decisions and, you
know, the guys like High Streetor, and there's a million I could
probably name here, but like thosetypes of developers don't make
those bad decisions, right?And they're the ones that you see
for the next 30 years, years,right?
Yeah.
So I guess it's just kind of like
a, you know, unfortunate part ofthe natural cycle.
There's going to be some toughtimes out.
for everyone, but it's going tohappen, going to happen, I guess.
(31:07):
And a lot of those pedigreedevelopers, they're licking their
chops, right?This is a great time to buy,
right?They're watching all these guys
floundering and going intoreceivership.
And now this is when they can openup the war chest and go and buy a
bunch of land cents on the dollar,right?
Yeah.
Okay.
Lastly, just to kind of wrap itup.
So you did indicate there's apretty big student rental going
out at UBCO, like 40 acres.
Yes.
That's a lot of units coming onfor student housing.
(31:28):
And like right now we're in aspace where internationally, I
don't think there's probably goingto be a huge intake for
international students.
Yeah.
I think we're pretty wellsupported, you know, domestically
at UBCO, but yeah, I guess whatdoes student housing rentals do as
well?Because that's going to take just
rentals in general off the market.
Yeah.
I mean, I think You know, to yourpoint with this new federal
immigration rules and the waythings are changing, I think all
(31:48):
universities across the countryare expecting enrollment to be
down significantly.
And a lot of those students that
were coming from overseas needed,obviously, rental housing.
It's going to be a big impact.
There's no question.
You know, UBCO, again, is wellpositioned and they have a pretty
significant growth plan, which maybe tempered a bit now, again,
based off of these new regs.
But basically, the rental housing,
even if it's geared for students.
I mean, some of it is really
(32:09):
geared to students, like just likefrom a design standpoint, from a
pricing standpoint, the way thattheir leases are structured and
everything else.
So I think that will just remain
specific to students, specificallyat the university.
But students also would rent.
stuff in the city, downtown, it's
part of the overall demandpicture.
There's not going to be as much ofit, right?
So that, again, is going toinfluence the overall absorption
(32:31):
of all this rental product that'scoming.
Where are these 40 acres on JohnHandel?
Yeah, just kind of off ofAppaloosa or in that way, kind of.
Okay.
Yeah.
Dang, that's a lot.
Yeah, it's a big project.
All of this stuff is going to bephased out over years, right?
Yeah, yeah, yeah.
It shows big numbers at build
-out, but is that a 15 -year build-out?
Is it, you know, like who knows,right?
So again, rule of thumb, we wouldexpect like 150 units a year to
(32:53):
come out of a project like that.
And maybe on a good year, maybe
it's two buildings, right?Maybe it's 300.
But like right now, it's probablygoing to be like one building.
like one building.
Because just even anecdotally, the
condos on Academy, they've sloweddown quite a bit.
And Mission Group has a bunch ofrental up there as well, right?
Yeah.
So it's wild to look at this.
wild to look at this.
So yeah, just under 5 ,000.
Units, bedrooms, right,essentially coming on?
(33:13):
Yeah, units.
Well, that's like 3 % of our
population in Kelowna.
We're at like 150 ,000.
So like 3 % added.
Is that going to be a direct
correlation to vacancy then?Is that just going to bump it by
2%, 3 %?%?
Yeah, it's hard to say.
It was funny because there was a
big bulge of rental product thatcame through kind of 2019.
It was like 2015 to 2019.
There was a big surge of new
(33:35):
rental product.
At the time, talking to appraisers
and other industry experts, theexpectation was that a vacancy is
going to go up probably a point ora point and a half, or we might
get up to close to 3%.
And then the statistics came out
and it had gone down, right?The market had absorbed all of
that product, no problem.
But I think we've gotten to a
saturation point.
And then also, that coincided with
(33:56):
the most aggressive immigrationpolicy in the history of the
country.
Basically, an open door policy as
many people.
come in as possible.
So, you know, now that that'schanged and we have all this
supply and again, you know, justyour point around, you know, the
student housing demand and there'sgoing to be, you know, I think a
big effect and whether we end upat, you know, is it over five?
(34:17):
I don't know.
You know, I guess collectively
too, like what do you guys think?Because in the past five years,
yeah, we saw a ton of, you know,immigration to Kelowna, whether
that's, you know, it's probablymostly domestically, but it's
because, yeah, it's a beautifulplace to live.
But it was also a little bit moreaffordable than comparably some of
the bigger cities.
But now we're getting up there
where it's not so affordable.
(34:37):
Are we still going to see people
being able to move here?Is that going to drive vacancy up?
population growth is notincreasing as much?
as much?Well, we certainly dropped.
We were the fastest growing CMA inCanada for a couple of years
running.
And now I think we're 21st.
Our population growth has slowed.
We kind of always ebb and flow a
(34:58):
little bit.
And next year, we could be higher
on that list.
But lack of affordability in
Kelowna is nothing new.
That's certainly precluded people
from coming here.
But I do think that the lifestyle
and the way the city's shaping upand some of the other things that
are happening, I think UBCO beinga big one, right?
as a driver for growth and forindustry and everything else.
I think that we're safe to say thepopulation isn't going to decline.
(35:18):
We may slow a little bit and thenpick up speed again.
Kelowna is just too nice of aplace and people want to be here.
So all of this rental supplyhitting the market and the rent
compression that's expected, maybethat's going to allow other people
that maybe said, hey, I can'treally afford to be up there.
Now look again and say, well, youknow what?
I can make that work, right?It's dropped 300 bucks a month or
whatever.
I can make that work and I'll make
(35:39):
the move, right?Yeah.
Also, that's a lot of constructionand a lot of construction jobs.
construction and a lot ofconstruction jobs.
For sure.
For sure.
Yeah, that's a big one, Matt.
You know, hopefully we can find
work for those guys because, youknow, once a lot of the product
that you see being built currentlyfinishes, I don't know where those
guys are going to go, right?Other than back to Alberta.
Well, they can come work in mybasement because it's taken me
(36:01):
like three years to build this.
three years to build this.
There you go.
Yeah.
You might be able to get a gooddeal.
Yeah.
Yeah, it'd be interesting to see
on that side if things do comedown a bit.
Well, this has been awesome, man.
We're going to jump into a wrap
-up question.
I know I already asked you one of
them.
All right.
(36:21):
If you could give your 20 -year-old self any advice, what would
you do?Buy real estate.
Nice.
As much of it as you can.
What if you were 20 right now,would you?
I would still buy real estate.
Me too.
I love that answer because I woulddo.
Yeah, 100%.
Yeah.
I think in the long term, As thelong term, there's always ups and
downs.
Of course.
I love that answer, man.
(36:43):
Yeah.
I mean, we live in such abeautiful place.
we live in such a beautiful place.
You got to be able to weather it
and you got to have a bit of alonger term vision.
But I mean, if you have those twothings.
all day long.
I am very bullish on Kelowna real
estate, all asset classes, alltypes over the long term.
long.
I would agree.
This whole time that we've beentalking, sorry, normally we just
(37:03):
let you talk.
Matt, what would you do?
Thank God you asked me too.
No, I just love that because we're
talking about, oh, this is down.
How are these numbers going to
pencil?To me, I'm just thinking, man,
this is an opportunity.
This is an opportunity.
Obviously, I'm not the only onethinking this because people are
still doing stuff, but it mightsuck.
It might be hard for a couple ofyears, but man, just put it in
(37:25):
your numbers when you run them andthen get there.
I'm with you, Matt.
If you can make it work, work, I
think now's a great time to buy.
And I'm not saying that just...
Because that's what most brokerswould say.
I truly believe it.
And I think, again, long term,
there's no downside to real estatein Kelowna.
I mean, look, you got to buy theright stuff.
There's just room for error.
error.
(37:46):
You can make a mistake buying realestate and it's going to resolve
itself.
Any other asset class, you could
lose everything.
Yeah.
But with real estate, most errorscan just be... corrected with just
waiting it out.
It might be a few years, but just
wait it out.
You can't buy anything for three
or four years, but then you can.
I have a lot of stocks that have
gone to zero.
have a lot stocks that have gone
(38:06):
to zero.
They're not coming back.
That's a great point.
Also, another point on here, you
and I, all three of us really, seebehind the scenes and movers are
moving.
There's a lot of money in the city
and a lot of money.
Going around, like people are
setting up, they're kind ofsetting up for the next future and
like buying things that you don'tsee.
So like a lot of people that I'vetalked to are like, oh, should I
buy this condo right now?Step back and look at the big
picture.
It's like, yes, like if it works
(38:27):
for you now, it's good for younow, right?
The tap hasn't dried up.
People are still moving around,
right?Can't see as much in the city, but
like there's still... A lot ofstuff going on.
A hundred percent.
So I've been in this market for 13
years and I've never seen so manylike sophisticated, well
-capitalized development groupsfrom the lower mainland, branded
groups from the lower mainland,from Calgary, from Edmonton that
want to be in this market.
Before you talked to them about it
(38:48):
five years ago, eight years ago,and they'd say, no, I'm not
interested in the Okanagan.
Now they want to be in the
Okanagan.
Show me some side check.
Let's run some numbers, that kindof thing.
So that says a lot to me becausethose guys usually are the
canaries in the coal mine, right?They're ahead of the curve.
a lot of stuff happening.
Even, you know, talking to the
city and you guys, you know, I hadRyan Smith on the growth that the
city has earmarked and some of theexciting things, all of that, it
just builds on itself, right?And it creates more momentum.
(39:11):
And yeah, it's a bit of a blipright now.
And, you know, maybe the market'ssoft, no surprise.
That's just what the market does,right?
It cycles, you know, it's a greattime to position for the next big
run, right?Because it will happen.
There's no question.
Off the air, And the air, I was
talking to Taylor, how do I?buy one of these?
How do I buy a fiveplex or asixplex?
Come on, tell me what I need todo.
Let's do it because I believe it.
(39:31):
I'm all in.
It's happening and it might notcash flow over the next two,
three, four, five years, but like20 years, I'm definitely going to
be patting myself on it.
Yeah, I told you to write me that
blank check.
I still haven't got it.
buy I still haven't got it.
Yeah, you can take that blank
check to any bank you want andthey'll tell you the same thing.
Speaking of charities, Jeff,what's your favorite charity?
(39:52):
Favorite charity?Well, I'd say the Okanagan Food
Bank.
My wife does a lot of volunteer
work there.
We've supported them a lot.
She had a really great time at thegolf tournament last year or last
summer.
So yeah, that would be my charity
of choice.
Awesome.
I love that one.
How can Taylor or I or our
listener help you?What can we do for you?
For me?That's a good question, actually.
I don't know, Matt.
You guys are helping me, you know.
by having me on the podcast.
(40:12):
So I appreciate that.
You know, I love talking to Taylorabout the business and now you,
Matt, like hopefully we canconnect and continue to chat.
I'm always up for, you know,coffees and networking and, you
know, sitting down and havingconversations with people in the
industry and all aspects of theindustry, you know, whether it's
on the lending side, whether it'son the transactional side, you
know, the more people you talk to,the more opportunities to pop up.
And like, for instance, thisopportunity.
So yeah, no, I appreciate you guyshaving me on and let's just
(40:38):
continue to grow the relationship,right?
Keep trying to do some business.
I love it.
Well, thank you so much for thisspreadsheet as well.
Yeah, no problem at all, guys.
My pleasure.
If you have questions or stuffcomes up, just let me know because
we're always neck deep in thatpart of the market and we're
always updating the numbers andlooking at new stuff.
Awesome.
Sounds good.
Well, thanks for coming on, man.
Pleasure, guys.
Thank you very much.
Thank you.
Yeah, that's great.
Thank you.
Okay, welcome to the Cologne RealEstate Podcast.
(00:02):
I'm your mortgage broker host,Taylor Atkinson.
I'm your real estate agent host,Matt Glenn.
Although, by looking at thisvideo, you'd think I was the
mortgage broker host.
Yeah, you're in my seat.
Yeah, good.
I feel like I got so much power.
Yeah, well, we just finished therecording with Jeff Hancock.
Yeah, he brought it.
It was awesome.
Yeah, he's a commercial agent atWilliam Wright, but also runs a
consulting company, Tradecraft.
This guy knows his spreadsheets.
(00:22):
I freaking love this.
He's a spreadsheet kind of guy.
This is stuff Matt and I have beenjust bullshitting on the podcast.
Like, yeah, these numbers, thesenumbers.
And, you know, we're not far off.
So it was really nice to actually
have some concrete numbers to lookat.
But just wild data.
Yeah, he's done a lot of work on
this.
brought it.
So, yeah, thanks, Jeff.
It was fun talking to him, you
know, like it kind of.
Really good picture of what's
(00:42):
going on, especially in thepurpose built rental space in
Kelowna, just construction ingeneral.
And it was, it was awesome.
I mean, one thing that you brought
up kind of the end is it's notlike the show had a negative feel
about it, but there was a lot oflike realistic.
numbers and, you know, deals thatwe're looking at vacancy rates and
where these projects are in thepipeline.
So it felt a little bit heavier,like, oh man, it's tough out
(01:04):
there, but there is alwaysopportunity.
It just shows like, you actuallyhave to do your research and due
diligence and speak to guys likeJeff, you know, and run some
numbers and you will findsomething.
But yeah, it was very interestingshow.
I loved it.
Absolutely.
And then, so a couple of items ofnews here.
So first one is Taylor's favoriteDCC is up. 2 .4 in Kelowna.
Your thoughts, Taylor?Yeah.
I mean, I don't think that's thatbig of an increase.
(01:25):
Yeah. 2 .4 is reasonable.
Yeah.
Is it because there's lessdevelopment?
Is there less development?Projected less development?
No. I mean, Yeah. 2 mean, I'veseen some of the data from City of
Kalina.
Yeah.
It looks like on their infillside, they're getting more
applications, but kind of a profitloss, right?
They're running a balance sheet ofwhat they need to develop in the
city.
You know, it's funny.
I was in City Hall a couple ofweeks ago doing a building permit
(01:46):
for myself, sat down.
I was just paying for it pretty
easy.
And hey, FYI, you can do your
building permit online now.
which is pretty cool.
So you just submit all thedocuments online?
That's what I did for my Facebooksuite.
a online?That's what I did for my Facebook
suite.
Yeah.
Did it work for you?Yeah, it worked well.
It did not work for me.
Well, I went in beforehand and
talked to the woman there.
I can't remember her name.
Tammy, I worked with.
It wasn't Tammy.
It wasn't Tammy.
But she was wonderful, whoever I
(02:06):
was with.
She told me what to do and I went
home and it like first try.
So yeah, So yeah, I did it all.
And then I signed, but forwhatever reason didn't work.
So I called like two weeks later.
I'm like, hey, I'm pretty sure
this should be through by now.
And she's like, oh, well, you need
a docusign.
I'm like, yeah, no, I haven't.
It's done.
The system isn't up and right.
So I think there's still a coupleof kinks.
But anyways, I went into pay andthere was a guy beside me, you
(02:28):
know, having a discussion withsomeone from the city as you do
when you're, you know, doingprojects.
And they listed his DCC fee.
It was like something like the $60
,000 range.
And he's like, what?
I am building like a shed.
Well, sir, if it was like attached
to your house, like it wouldn't bea DCC fee, but because it's not,
it's, you know, and this is kindof the city's explanation for it.
I won't get into it.
It was pretty valid on why they
(02:49):
have to kind of have a standardset fee for certain areas and
projects.
So it makes sense why they need
that, but pretty tough to swallowif you're that guy.
So 60 grand.
So you're building a shop.
Like what's the budget for theshop?
60 grads.
Exactly.
And then you go to, God, geez,that is a stinger.
Yeah.
So guaranteed.
Yeah.
He's, he's doing that without a
permit for sure.
That's right.
Also news city Kelowna coming backto provincial regulations on
(03:09):
Airbnbs.
So that means.
Amen.
Airbnb is coming to your
neighborhood, but not to awkwardevent.
Yeah.
I think it's totally reasonable
about time.
Well, yeah.
Should have never gone above andbeyond in the first place.
and beyond in the first place.
That was definitely a major
fumble.
Fumbled bank, I'd say.
(03:30):
Yeah.
Well, hey, you know what?
At least they realized it.
Yeah.
Like, if you make a mistake, raiseyour hand.
I mean, I never do, but I nevermake mistakes.
Yeah.
Honestly, Yeah.
Honestly, I agree completely.
And then, like, if the vacancy
rates start coming up like they'reexpected to.
we're talking to Jeff here in thenext few years, like the city
might, obviously they haven't saidthis, it's totally just me making
this up.
They might apply for the
(03:52):
exemption, right?Yeah, I think you're right.
think you're right.
I think everyone at this point
sees the light at the end of thetunnel.
And yeah, speaking of Jeff, likedefinitely listen to this podcast
because it does look like vacancyis going to stay up or keep
increasing for the foreseeablefuture.
And if that happens, yeah,opportunity for Airbnbs to get in
maybe.
It's like we said this in the
show, like we said this in theshow, but it's almost like if
(04:13):
something's right, you don't haveto stomp on it with every single
thing you have, like a littletweak here and there or a couple
of rules at a time.
Yeah.
You know, because like sweetJesus, man, this pendulum is just
keeping us all on our toes.
like Yeah.
And the third item is January21st.
And the third item is January21st.
No 25 % tariff so far.
And, you know, he's still
threatening.
It says it might not be as bad.
(04:34):
But so far, we got through dayone.
I mean, the threat alone, though,still kind of slows.
Yeah, but he was threatening dayone.
So we're day two as of recording.
And he said no. We're in the
clear.
Yeah, well, he said probably going
to be less than 25%.
And maybe by the end of January.
But hopefully, he's just full ofshit.
And we can just move on, right?But yeah, I agree with you.
(04:54):
The threat is having already, Ithink, the Canadian dollar is down
on this.
Yeah, this.
Yeah, we're getting crushed.
Yeah.
So the thread alone is annoying,but the actual hammer has not
dropped.
All right.
This podcast, like every podcast,sponsored by the best brokerage in
town, Century 21 Assurance Realty.
If you're an agent looking for a
new spot to call home, we're acollaborative atmosphere.
We help each other out.
We want you to succeed.
(05:15):
We love listings.
Century 21, you can get listings
for free.
photography is included so if
you're an agent looking forlistings which is what you should
be doing century 21 is a good spotfor you to go or if you're a buyer
a seller looking for an agent calla century 21 agents there is a
bunch of beauties at the brokerageso uh bunch of beauties oh yeah me
(05:36):
included that's what i have to sayabout that enjoy the show guys it
is a good one Okay, welcome to theshow, Jeff Hancock.
Thanks for joining us.
Thanks for having me, guys.
Appreciate it.
Yeah, it's been a long time trying
to get you on.
We met, was it like seven, eight
months ago?Yeah.
Excited for this one.
Great.
So we just start our show kind oflike, what's your perfect Friday
look like?What do you do in the morning,
(05:56):
productivity for work, and thenleading into the weekend for some
fun?Yeah, you bet.
That's a good question.
Perfect Friday.
I mean, living in the Okanagan,it's got to be a boat day.
But yeah, usually, you know, getup.
I'm an early riser.
Start work, sort of clear off
emails, have a coffee.
And then basically just take it as
it comes, right?Whatever pops up, try and tackle
it.
And then if I can scoot off and
get an afternoon off, then yeah,on the boat and get on the lake is
(06:18):
ultimately what I like to do.
Nice.
Yeah.
I love it.
That's awesome.
For work, you're kind of wearing
two hats.
Do you want to talk about both of
those quick?Yeah, you bet.
So I have a company calledTradecraft Consulting, and we
provide consulting services, arange of consulting services to
the development community.
to public entities,
municipalities, as well as serviceproviders?
tell us, forward us, that kind ofstuff.
We do outside land agent work.
We do feasibility consulting, just
sort of a whole host and a wholerange of different services that
(06:40):
we offer.
That's sort of my background.
I've been in the business forabout 20 years, just over 20
years.
The majority of that has been in
consulting in some form oranother.
And then I also do commercialbrokerage work through William
Wright Commercial here in Kelowna,focusing on the Okanagan, mostly
income and development stuff.
You know, up here, you have to
wear a bunch of different hatswhen you're doing this type of
(07:03):
work.
So two pieces to it, really, it's
the transactional work and theconsulting work.
Yeah.
Yeah.
You were originally in Vancouver,right?
Correct.
Yeah.
Born and raised in North Van.
And then, yeah, the majority of my
career was down in Vancouver.
I worked with a consulting company
down there called MPC Intelligenceand then worked at Deloitte for a
while in their financial advisorypractice and then transitioned up
here about 13 years ago.
(07:23):
Awesome.
What brought you up here?How come you decided to come to
Cologne?That's a good question.
At the time, we had a five -year-old.
My wife didn't really want to goback to work.
We sold everything we had down inVancouver and it was Operation
Small Mortgage.
We always had summered up here.
We really loved being up here.
We had sort of a social network
built in.
A lot of people had, you know,
kind of migrated up here over theyears.
(07:43):
And yeah, we just kind of took ashot.
And when we got here, we justnever really looked back.
Now it's home and we love it.
It's great.
Awesome.
Yeah.
Yeah.
Cool.
Okay.
Well, you sent us some amazing
information, which isn't publicknowledge.
And we'll kind of keep that closeto our chest.
Reviewing this, I guess it's anExcel sheet.
You've converted it to a PDF forus.
It is wild how much information ison here.
So thank you.
Yeah, you bet.
This is priceless.
(08:04):
Can you kind of summarize it?
I know summarizing this is goingto be tough, but like in a few
minutes, give us kind of highlevel or give the listener high
level what it is, what we'relooking at.
Yeah, you bet.
So it's a supply summary of all of
the purpose -built rental product.
it's a supply summary of all of
the purpose -built rental product.
that's coming to the market in the
foreseeable future.
This is one of the offerings that
(08:24):
Tradecraft provides to differentclients that are looking to
develop purpose -built rentalproduct or own purpose -built
rental products.
We help them understand the
market, understand the supplypicture, understand... pricing and
that kind of stuff.
So this is just sort of a high
level spreadsheet for you guys toget a sense of kind of what
Tradecraft can deliver.
The supply picture, I don't think
it's no real surprise, especiallyconsidering the vacancy rate that
was just announced about a monthago.
The supply picture in Kelowna haschanged quite dramatically and it
(08:46):
continues to change.
There's a lot of supply in the
pipeline and there's been a lot ofsupply delivered over the last,
call it five years.
And I think that's a good thing,
right?I think from the city standpoint.
And from a renter standpoint, youknow, that's what you want.
You want a healthy vacancy rate.
Everybody has a different opinion
on this, but call it between threeand 6 % is sort of healthy.
(09:06):
certainly getting to that point.
From a developer standpoint, and
maybe from an owner standpoint,it's obviously a little different.
You're looking at it a littledifferently.
So it's, you know, I think alittle concerning for purposeful
rental developers, you know,starting to look at this market or
have product and development inthis market.
They need to understand that, youknow, things have changed.
And, you know, because of thesupply picture, there may be some
(09:27):
rent compression, they may besitting on vacancy for a little
bit longer than they anticipated.
A lot of the these rental
developers, their pro formas werevery tight to begin with.
Building purpose -built rentalproduct, it's a difficult
endeavor.
The reason why there's been so
much is because the federalgovernment supported that type of
development through CMHCfinancing, which was really the
only financing that a lot of thesedevelopers could get.
(09:47):
So they decided to start buildingpurpose -built rental.
So a lot of developers werepivoting from market condominium
product to you know, purpose-built rental because they could
get these types of projectsfinanced.
There was an appetite on themunicipal side for these types of
projects.
And, you know, the conditions were
favorable.
There was a really low vacancy
rate.
Rents were, you know, continuing
to increase and, you know, it justmade sense.
(10:09):
But now that things are startingto change a little bit and that
picture is changing a little bit,you know, some projects, you know,
that were penciling, you know, notto say that they're not going to
still pencil, but it's just goingto be a little bit more difficult
for these developers considering,you know, vacancy in.
you know, rank compression.
Yeah.
So looking at the totals andcorrect me if I'm wrong, roughly 4
,963 units are projected to becoming on.
(10:31):
Correct.
Yeah.
Yeah.
So that's projects that are at
some point through the entitlementphase, right?
So actual projects, not just, youknow, a piece of land that
somebody bought that they thinkthey're going to, you know,
deliver.
rental product.
This is stuff that is, you know,actually been formally introduced
to the city and is working its waythrough the entitlements process.
Yeah.
You know, it's funny.
We just had on city of Kelowna andone of the architects that won the
(10:52):
fast track program talking aboutinfill and, you know, Matt and I
were talking off air and duringthe intro, like.
These things really don't pencilout yet.
In terms of like an investor, it'sgreat for infill and to maybe, you
know, take down a single familyhouse that isn't up to standard
and something better with it.
But we're talking about kind of
the levers of what you can pull tomake it cashflow as an investor.
(11:13):
And then we don't really have alot of power, but I guess one of
them would be if rents increase.
Looking at this, I cannot see
rents increasing in the nearfuture.
And I mean, I've seen itpersonally, you know, my buddy has
a basement suite just down thestreet from here, tenant left.
going to be getting a lower rentthan what he was.
(11:35):
And I thought it was a prettyaffordable rent to begin with.
I have tenants that are leaving inWest Kelowna, you know, not sure
what the rent's going to do there,but like, yeah, I guess how long
till we see rents come back up?Like, are they going to dip down?
Or at least stop going down.
Yeah.
Yeah.
I mean, I mean, that's a really
good question.
You know, I don't think there's
any real, you know, answer.
I mean, I shouldn't say that.
(11:56):
Of course there is an answer, but.
But to predict it is going to be
very difficult.
I'm not sure.
I mean, I think with purpose-built product, you know, we're
starting to see a lot ofinducements.
So developers that are advertisinga free month's rent or, you know,
additional parking or, you know,some sort of inducement that we
haven't seen in this market for,well, as long as I've tracked the
market, right?Rental developers have never had
to offer any sort of incentivebecause it's been such a tight
(12:18):
rental market for so long.
They're trying to protect their
face rate though.
So you're not going to see.
The rental rates, you know, like a$1 ,700 a month, one bedroom.
They're trying to protect thatnumber.
They're not going to, you know,start discounting it dramatically.
The net effect of rent willprobably go down because of these
inducements or the way thatthey're trying to incentivize.
But, you know, on the secondarymarket, you know, like what you
were just describing, Taylor, likeit will be interesting to see,
(12:38):
right?I think there's going to be a
flight to quality because nowrenters have choice.
So, you know, product that's welllocated, you know.
built by a good developer as newerfinishings, you know, that kind of
stuff, maybe location close to thelake or whatever that may be.
Those guys won't suffer as much onthe vacancy side because again,
renters have more choice.
They'll be able to pick up rental
opportunities in buildings thatmaybe they couldn't afford before.
I think that's one thing we hadWendy Waters on a couple of months
(13:01):
ago.
think that's one thing we had
Wendy Waters on a couple of monthsago.
And that was one of the things shehighlighted too in Vancouver was
basically looking for thatmovement of tenants.
And yeah, there will be a dip in,you know, rental income.
But it's mostly from those peoplethat have been in those affordable
rentals for a long time.
And they don't want to give up
that because BC Tenancy, we can'tincrease the rent that much.
(13:21):
So she's saying like, yeah, maybea bit of a lateral move.
But then those lower rents shouldcome up a little bit.
So it kind of evens things out.
But like time horizon on that, it
would take a long time.
Yeah, 100%.
And that's the million dollarquestion is how long, right?
I think there's not going to be ahuge dip in rents.
I think just because.
You know, especially for a new
(13:42):
product, developers can't affordto offer it at less than, you
know.
Yeah, their financing income.
Exactly.
Right.
So they're in a position wherethey'll eat the vacancy and
they'll sit on it and they'llwait, you know, and then just hope
that.
I think you're going to see.
The supply lever get pulled back.
So you're going to see a lot of
guys, projects that, you know,even that are on that spreadsheet
that I sent that look like they'removing forward.
If they're not under construction,you know, there's a high
likelihood that they may not moveforward and just wait for better
(14:04):
conditions.
You know, every developer is a
little different in terms ofwhat's driving them, but I could
definitely see that.
happening without the rents where
they are currently, it's going tobe really hard.
A lot of guys are going to beunderwater and they're performing
and they're just not going to beable to make it work.
Right.
So it's kind of a different story.
kind of a different story.
Like a narrative we've heard,
right.
Is like, we need more housing
(14:26):
supply, which I agree with.
Like, even if you're looking at
this of three and a half, 4 %vacancy, it's not a lot, but when
you're talking, it's just notaffordable.
So how do we fix both issues,right?
Like how do we provide developersopportunity to build and be
profitable and how do we makeaffordable houses?
Yeah.
It's definitely, it's a tough
question.
And, you know, I think when you
have...
From the city's perspective and,
you know, from the public'sperspective, the more supply, the
(14:48):
better, right?The higher the rental rate, the
better provides opportunity.
It creates affordability, all of
those things.
But again, for the guys that are
actually delivering this productand taking the risk and putting
their own capital at work to work,excuse me, all of these numbers
drastically impact, you know, thefeasibility of their project and
slight changes in rents or, youknow, slight increases in vacancy.
All of that just ends up beingdollars in the pro forma.
Some of it can kill theirperformance and kill the supply.
(15:09):
And then again, like you say, it'skind of all the supply slows down,
right?And then vacancy comes back up.
It's kind of a bit of a cycle,right?
Do you think this will be kind ofa catalyst to start stratifying
some of these properties?you think this will be kind of a
catalyst to start stratifying someof these properties?
I was going to ask, going to ask,how does this affect the pre -sale
market?Because obviously, we're talking
about purpose -built rentals, butwe bought condos and stuff.
So the rental market reallystarted to blow up when the pre
-sale market just collapsed, howstarted to blow up when the pre
(15:32):
-sale market just collapsed,right?
developers that were typically pre-sale guys or would do the
majority of their work buildingmarket condominium product, all of
a sudden needed to keep the lightson and needed to keep their guys
busy.
And so then they pivoted to
purpose -built rental.
Like I mentioned earlier, they
could finance through CMHC andthey could continue to build as
builders do.
So yeah, I think you're going to
(15:53):
see if the pre -sale market comesback and with interest rates
dropping, I think that you'regoing to start seeing that.
You're already hearing whispers ofthings coming around again, which
is great.
So then some of those guys will
pivot back to that product.
and sort of maybe steer away from
the purposeful rental side ofthings.
But like, if you're talking aboutthe condo product that is
currently under construction andbought by investors and will end
(16:13):
up on the rental market, is thatkind of what you're referring to
matter?Yeah.
Yeah.
So, you know, typically.
In Kelowna, for high -rise or newwood frame condominium product, it
was usually about 30 % investorbought, depending on the project.
So some more, some less.
So like Aqua and Caban, those were
higher percentage of investorbuyers because they were really
marketed as short -term rentalopportunities, which obviously
that's a whole different story inpodcasts.
But the expectation is that a lotof those units are going to come
back as secondary rental units,right?
(16:33):
So owner.
rented.
We don't really track that market.
It's a little bit more difficult
to track.
We only really track the purpose
-built rental market, but we'vedone some work on that in the past
and looked at, you know, all thecondo product that's completing in
the next, you know, whatever,three years or two years, probably
two years now, just becausethere's not a lot of new stuff
being built, but how much ofthat's going to come back to the
rental market.
(16:54):
And it's another like 2000 units
based off of that 30 % investorbought sort of benchmark.
So yeah, I mean, it's a wholeother.
you know, rental inventory, Iguess, that needs to be considered
for sure.
for sure.
I mean, this is pure speculationnow, but I guess we've seen the
condo market pretty flat.
It seems very saturated, a lot of
listings.
There is getting to be some more
activity in that right now.
So I know firsthand that it's
picking up.
Yeah.
But even for just owner occupied,I guess, like we've looked at that
(17:16):
market and I think it still hasanother six to 12 months of, you
know, on the lower end wheresingle family homes, it seems like
it's kind of bottomed out andcoming back up.
Yeah.
If we're seeing all these purpose
-built rentals come online, doesthat not continue the saturation
of the stratified properties, evenif an owner -occupied wants to buy
(17:37):
that?So I guess, how long do we think
the condo market's going to staydown?
Yeah.
I mean, that's a good question.
A lot of renters want to own,right?
So, you know, they'll pivot backin and start picking up condo
product, new condo product.
When we start seeing that being
built again and offered to market,you know, the amount of supply
that we're dealing with both onthe purpose -built rental and on
the secondary market with, youknow, market condominiums that our
(17:59):
investor bought, it's a lot ofproduct and it's going to be
interesting to see.
I don't really have an answer for
you in terms of like how long.
Yeah.
It's funny when you think aboutcauses of this, right?
Because like everyone points toland prices being kind of the
driving factor.
But then like Taylor and I were
talking about this, like if youtalk about a fourplex, you buy the
property for a million, millionone or something.
(18:20):
And then you build a place, costyou two and a half million bucks
or whatever it is, two millionbucks to build it.
But you drop that price for theland 20%, like which is not going
to happen, but like a big, that'slike $200 ,000 off, which really
doesn't help.
It helps a little, obviously.
Everything helps, but it's not thegolden ticket.
Then you think about how does thiscash flow?
Rents could go up or buildingcosts come down, but prices of
(18:41):
stuff is not going to come down.
Wages are not going to come down.
What has to change?It feels like the only two things
that could realistically changeare land prices or rents.
Right.
And there's kind of like the land
prices come down a bit and therents go up.
Like what has to happen for thatto happen?
We're kind of seeing the oppositeof that though.
I mean, like rents are coming downand land prices are going up.
(19:02):
I think land prices are kind ofplateaued, but yeah, coming down.
So like what has to happen?It's almost like our spike, like
the COVID spike just threweverything out of whack.
Right.
Like just so badly.
And then like everyone was livingthe gravy train and then just kind
of the opposite and kind of like apendulum.
Yeah.
I mean, that inflation spike was
brutal for a lot of developers,like the cost side.
The cost side was always, for alot of guys, it was pretty
manageable, pretty predictable.
(19:24):
And then they would bank on
increased revenue, whether it'smarket condominium prices
continuing to go up or rentscontinuing to go up.
That's how they would make itwork.
But then, yeah, inflation andinterest rates, obviously, that
just really threw, I think, a lotof developers into.
a position where, yeah, they justcouldn't make their numbers work
anymore.
But to your point, Matt, I think
even on the revenue side, there'snot enough upside to make it work,
right?So we are seeing land prices
starting to correct specificallyfor purpose -built rental product,
(19:45):
which is great.
We're still seeing guys able to
rationalize a land buy based offof today's rental rates and
vacancy rates, still saying, okay,look, I can still make this work
as long as this land is 70 bucks abuildable square foot or whatever.
whatever the number is for them.
Those are really the only two
things that can kind of give, youknow, the cost piece is kind of,
it is what it is.
(20:05):
It's really about getting either a
really good land buy or, you know,catching the market at a place
where, you know, rents continue togo up.
And I've seen lots of developerspro formas on the rent side, like
looking at the 6 % to 8 % a yearfor the three years while they're
building this thing out.
And then at that point, so at
stabilization, then they're like,oh, these numbers work.
Even then, it's still prettytight.
Low double -digit IRR, maybe evenbelow that.
And that's a big bet, saying thatthis thing's going to go up 6 % to
(20:29):
8 % or rents are going to go up 6% to 8 % over the course of the
three years while we're buildingthis thing.
then at So, you know, now, youknow, guys that were in that
position and round in 21 or 22 andare now completing.
And, you know.
Yeah.
Not only did they get killed withinflation, the rents are there.
are there.
So like, just like talking this
(20:49):
out loud, do you talk like it doesfeel like there's going to be an
opportunity to buy some of thesebecause like you have these
developers that pre -sale is justnot penciling.
So they're just not doing it.
So they're just basically.
for no other reason than to keeptheir, well, other reasons, but
like main reason is just to keeptheir crews going.
They're building these rentalprojects that are just breaking
(21:09):
even at best.
And then once the market does kind
of shift, like you're going tohave all these people holding
these things.
Are they just going to be like, do
I really want to have thisbuilding?
Yeah, it's a great observation,observation, Matt, because when
you're a purpose -built rentalbuilder, there's two businesses,
right?There's the development of the
(21:30):
property and the construction ofthat.
And then there's the management ofit.
right and so there's lots ofdevelopers and builders that are
you know very good at building butThey don't have the infrastructure
to actually operate and manage thebuilding because that takes
people, resources.
You need to have Edna in the
rental office.
Yeah, exactly.
It is an operating business.
A lot of guys aren't necessarily
prepared for that, especiallybecause they just pivoted into
this product because it was theonly thing to get going.
(21:55):
Basically, the market pushed theminto it.
Yeah, exactly.
Everybody was saying, we got to
build more rental, more rental.
The city was on board.
Again, the federal government'sfinancing it.
Okay, we can do this.
idea was, okay, we're going to
stabilize this and then we'regoing to turn around and sell it
to a REIT or to a pension fund orwhatever that may be, private
(22:16):
investor group, whatever.
But what we're seeing now is... a
lot of the REITs and a lot of theguys that were active in the
Okanagan are looking at the supplypicture.
And there, I mean, these are verysophisticated groups and they're
going, no, we're not interested inbuying up there.
So there's going to be a lot ofguys that are going to have to
figure it out and hold it probablylonger than they thought.
And, you know, there might be someinvestors that are going to, you
(22:36):
know, maybe not getting the typeof return that they thought they
were going to get.
Right.
So it's going to be interestingfor sure.
be interesting for sure.
Like the government did kind of
want this by, you know, reallypushing CMHC, like the MLI Select,
like it was the only option fordevelopers.
100%.
Now that they've achieved what
they want, now what?Yeah.
Like the vacancy rate goes up.
It just feels like they come up
with, It just feels like they comeup with, like something happens,
they come up with all these thingsand it goes too far.
(22:58):
Pendulum times.
Yeah, they go too far.
Like, it's crazy.
Instead of little tiny.
Yeah, it's a little tweak here andthere.
It's just kind of right the ship.
It's like, no way.
Everybody to the left.
Totally.
just feels like they Pendulumtimes.
Yeah, they Everybody to the right.
Totally.
And we get there and it's justlike, like, sweet Jesus, man.
I mean, this is going to be areally hard one to analyze.
(23:19):
I don't know if you've spent a lotof time on it, but Airbnb, like.
Has it affected these numbers thatmuch, or is the data just not
there yet?Yeah, there hasn't really been any
consolidated data that we canpoint to.
I mean, there's lots of chatterand people saying, oh, there's
another 3 ,000 units that havecome back to the market.
I haven't done any of thatresearch myself, so I'm not 100 %
sure where that ends up, butthere's been an effect.
(23:44):
There's no question.
Again, on the secondary market,
like you were just talking about,it's more anecdotal, but your
buddy who just said - said - Howlong do we hold it and lose money
while rent goes down?You're right.
It's definitely had an effect.
I'm just guessing, as we were
talking about the pendulumswinging, it's like, well, you
guys already pushed it so far thisway, and then you added on 400
players to keep it that way.
Yeah.
players to keep it that way.
(24:04):
Yeah.
I think the city of Kelowna isrecognizing that as of a couple of
days ago, they just said they weregoing to go to council.
That's just for personalresidents.
That's basement suites.
basement suites.
Yeah.
Essentially, they're just trying
to align with the provincial regsbecause they had pushed it even
further than what the province hadsuggested.
Yeah.
They should have done that from
day one.
We love you, City of Columbia.
Come on.
Yeah.
That was a fumble for sure.
Yeah.
I think they recognize that.
They heard a lot from the tourism
industry over the last summer.
(24:25):
I think that's going to correct.
I also feel that if we're over 3 %for two years, we're going to get
probably exempted or at least -partially exempted.
I think the city will probablycreate a new zoning bylaw and do
it more specific.
for short -term rentals.
Maybe some of the projects likeAqua and stuff that were designed
and originally approved for thatuse, I could maybe see them going
back and saying, okay, look, we'llallow this under these conditions.
It was on the shadow market, butit was a lot of inventory that all
of a sudden was available and hasaffected the rental market for
(24:46):
sure.
Another thing the city is reading
this morning is upping the DCCs,Taylor's favorite.
Are they?Yes.
You have to.
It's pretty.
Yeah.
Yeah.
They have to.
It's kind of with inflation, I
guess.
But it's pretty nominal, to be
honest.
They could have gone probably a
lot higher.
Certainly, if you look at Metro
Vancouver and what's happeningdown there, it's nothing like
that.
I think it was two and a half
percent is what they were talkingabout.
So every little bit is difficult,especially from a developer
(25:07):
standpoint.
But, you know, we want
infrastructure.
We want a nice place.
place.
So when we had Ryan Smith on, it
was like he did phrase it prettywell.
He's like, you know, you're kindof shooting yourself in the foot
because like you build thisbeautiful city.
But like.
That's what it comes with the cost
of, you know?So like, yeah, you can complain
(25:28):
about it, but it has to be there.
Yeah, exactly.
Yeah, exactly.
And you know what?
The city of Kelowna, I think theydo a really good job in terms of
trying to keep it as fair as theycan and to manage it and manage
expectations around it and to passit along, you know, gradually.
And I think the developmentcommunity would echo what I just
said.
Like, you know, there's always
going to be guys grumblingwhenever it costs them money.
But at the end of the day, Ithink, you know, we could be in a
(25:50):
lot worse situations.
And again, pointing to Metro Van,
like what's happening down thereis crazy.
Some of the costs that those guysare passing.
like 30 % increases.
Like, I mean, that's pretty tough
to swallow that, right?Wasn't it down in the Soyuz?
It was like 60 % on their propertytaxes or something that went up.
That's from just like years andyears of no tax increase at all,
of no tax increase at all, right?Which is the silliest way to run a
(26:12):
city.
Like Vernon kind of did the same
thing back in the day.
And that's why they have all these
legacy infrastructure issues thatthey're dealing with.
And then they're eventually goingto have to pass that along.
And then instead of doing two anda half percent a year, 3 % or
whatever, you know, it's a game ofpolitics, but you know, yeah.
(26:33):
I mean, this is kind of one of ourwrap up questions, but I want to
focus on this for a while anyways,but like with an investor cap on,
where's the opportunity?know, the opportunity?
What would you be buying?Yeah, that's a good question.
I think covered land place, a lotof the sophisticated guys that I
deal with, that's what they'relooking for is income with either
(26:54):
some development spin or theability to subdivide and sell off
or bring their cost base down orreposition through aggressive
leasing or whatever.
Those types of assets are still
selling.
There's a lot of guys out there
looking for that kind of stuff.
And that could be anything from...
a strip mall to, you know, anunderutilized industrial piece to,
you know, a purposeful rentalbuilding, right.
That needs to be repositioned orwhatever.
So that's where I would be lookingto put my money in is something
that, you know, you could get alittle bit of income and then
(27:15):
still have upside like long -termdo some planning.
Yeah.
Yeah.
Whether it's excess land orwhether it's, yeah, development or
redevelopment or whatever.
Right.
But there's some way to add value,you know, down the road.
Right.
Yeah.
I know there's been, and maybethere's already been publications
on it, but like starting to taxvacant land.
Do you know anything about that?Like, where's that kind of going?
Because obviously they're tryingto force people to develop land
that they're just holding onto.
But personally, I feel it's kind
of the wrong way because it justdoesn't make sense to develop some
(27:36):
land yet.
Yeah.
So it might not get the bestdevelopment out of it.
Yeah.
So it might not get the best
development of it.
Absolutely.
Yeah.
Yeah.
And then province is pushing that,which again, doesn't make any
sense to me.
Another example of all levels of
government using development andland as sort of the piggy bank and
not understanding what the knock-on effect is and how that can end
up contravening what they'retrying to accomplish, right?
Which is building supply anddeveloping a tax base and all of
(27:58):
those things.
I don't really know a lot about
that, but it sounds asinine to me.
yeah i guess what's the feedback
you're getting when you're beingcontracted by developers right now
and like you come up withperformers and they're kind of
like yeah that just doesn't pencillike here's our thoughts here's
what guess what's the feedbackyou're getting when you're being
contracted by developers right nowand like you come up with
performers and they're kind oflike yeah that just doesn't pencil
like here's our thoughts here'swhat needs to happen?
Yeah, it's difficult for sure.
(28:19):
You know, right now it's a lot of
wait and see.
So the work that we do, it's, you
know, present as much informationas we can, you know, show them the
lay of the land, show them thenumbers, and then you can make a
go or no go decision.
Right now, a lot of the decision
is no go.
You know, there's some guys that,
you know, have owned land for along time.
(28:40):
So their cost -based is a littledifferent or they have some
advantage.
like the high streets of the
world, guys like that, that arevery, very good at what they do.
They're super efficient.
They know their product.
You know, they've stripped all thefat out of the process.
Like those guys are always kind offine.
They can always figure out how tomake it work and continue to
(29:03):
build.
But, you know, for one of
developers or guys that are, youknow, moving into a new product
type or whatever, it's a toughtime to make things work right
now.
Yeah.
So High Street just developed anupper mission, right?
Beautiful.
Yeah.
Just financed one up there andit's...
Yeah.
I mean, it's fantastic.
Yeah.
I mean, it's fantastic.
And the prices that they'reoffering up there and it's condo
(29:24):
product.
Yeah.
It's unbelievable, right?But like good space.
Oh, yeah.
Like efficiently built, you know.
So I guess why can't more peopledo that?
Well, it's a lot of hard work.
work.
That's for sure.
I mean, I think Scott Butler and
his team, Christina Wilson andeverybody else over there, I mean,
they do an amazing job.
They work really hard at, again,
just construction efficiency and,you know, making sure that their
design is best it possibly can be.
(29:45):
You know, getting a good price on
their land, you know, making agood buy.
Right.
That's critical to those guys.
Like they have a very regimentedapproach.
And, you know, if it doesn't work,they don't try to make it work.
Right.
Like they just move next, you
know, and they move on.
Yeah.
That's for They don't getemotional about it.
That's a takeaway from my point ofview is like, you know, we can
(30:05):
blame the government, city,whatever we want to blame.
But like at the end of the day,some developers.
you know, quote unquote developersjust made really bad decisions
buying land that was overpricedand like, and it kind of forces
the market in a direction itshouldn't go.
And that can take a few years, butyeah, effectively that happened
over the last few years, like baddecisions on.
buying land assemblies or a coupleof single family houses that they
thought was going to pencil out.
And it just didn't.
Yeah.
Yeah.
I mean, which even at the time,like I remember seeing
transactions in 2020, Matt, youprobably do too.
(30:26):
And you run the numbers and you'relike, Howard, that makes no sense.
And, you know, that's 20 % higherthan what anybody could pay.
And yet this guy bought it.
And now you're seeing, I mean,
I've never seen so manyreceiverships in my 22 years in
the business.
And that's going through 2008 too.
Right.
And I mean, the amount of
receivership in, you know, thelower mainland, the Okanagan and
the island right now is mindboggling.
And that's a direct reflection ofthat, right?
(30:47):
Is that, you know, guys that justwere making bad decisions and, you
know, the guys like High Streetor, and there's a million I could
probably name here, but like thosetypes of developers don't make
those bad decisions, right?And they're the ones that you see
for the next 30 years, years,right?
Yeah.
So I guess it's just kind of like
a, you know, unfortunate part ofthe natural cycle.
There's going to be some toughtimes out.
for everyone, but it's going tohappen, going to happen, I guess.
(31:07):
And a lot of those pedigreedevelopers, they're licking their
chops, right?This is a great time to buy,
right?They're watching all these guys
floundering and going intoreceivership.
And now this is when they can openup the war chest and go and buy a
bunch of land cents on the dollar,right?
Yeah.
Okay.
Lastly, just to kind of wrap itup.
So you did indicate there's apretty big student rental going
out at UBCO, like 40 acres.
Yes.
That's a lot of units coming onfor student housing.
(31:28):
And like right now we're in aspace where internationally, I
don't think there's probably goingto be a huge intake for
international students.
Yeah.
I think we're pretty wellsupported, you know, domestically
at UBCO, but yeah, I guess whatdoes student housing rentals do as
well?Because that's going to take just
rentals in general off the market.
Yeah.
I mean, I think You know, to yourpoint with this new federal
immigration rules and the waythings are changing, I think all
(31:48):
universities across the countryare expecting enrollment to be
down significantly.
And a lot of those students that
were coming from overseas needed,obviously, rental housing.
It's going to be a big impact.
There's no question.
You know, UBCO, again, is wellpositioned and they have a pretty
significant growth plan, which maybe tempered a bit now, again,
based off of these new regs.
But basically, the rental housing,
even if it's geared for students.
I mean, some of it is really
(32:09):
geared to students, like just likefrom a design standpoint, from a
pricing standpoint, the way thattheir leases are structured and
everything else.
So I think that will just remain
specific to students, specificallyat the university.
But students also would rent.
stuff in the city, downtown, it's
part of the overall demandpicture.
There's not going to be as much ofit, right?
So that, again, is going toinfluence the overall absorption
(32:31):
of all this rental product that'scoming.
Where are these 40 acres on JohnHandel?
Yeah, just kind of off ofAppaloosa or in that way, kind of.
Okay.
Yeah.
Dang, that's a lot.
Yeah, it's a big project.
All of this stuff is going to bephased out over years, right?
Yeah, yeah, yeah.
It shows big numbers at build
-out, but is that a 15 -year build-out?
Is it, you know, like who knows,right?
So again, rule of thumb, we wouldexpect like 150 units a year to
(32:53):
come out of a project like that.
And maybe on a good year, maybe
it's two buildings, right?Maybe it's 300.
But like right now, it's probablygoing to be like one building.
like one building.
Because just even anecdotally, the
condos on Academy, they've sloweddown quite a bit.
And Mission Group has a bunch ofrental up there as well, right?
Yeah.
So it's wild to look at this.
wild to look at this.
So yeah, just under 5 ,000.
Units, bedrooms, right,essentially coming on?
(33:13):
Yeah, units.
Well, that's like 3 % of our
population in Kelowna.
We're at like 150 ,000.
So like 3 % added.
Is that going to be a direct
correlation to vacancy then?Is that just going to bump it by
2%, 3 %?%?
Yeah, it's hard to say.
It was funny because there was a
big bulge of rental product thatcame through kind of 2019.
It was like 2015 to 2019.
There was a big surge of new
(33:35):
rental product.
At the time, talking to appraisers
and other industry experts, theexpectation was that a vacancy is
going to go up probably a point ora point and a half, or we might
get up to close to 3%.
And then the statistics came out
and it had gone down, right?The market had absorbed all of
that product, no problem.
But I think we've gotten to a
saturation point.
And then also, that coincided with
(33:56):
the most aggressive immigrationpolicy in the history of the
country.
Basically, an open door policy as
many people.
come in as possible.
So, you know, now that that'schanged and we have all this
supply and again, you know, justyour point around, you know, the
student housing demand and there'sgoing to be, you know, I think a
big effect and whether we end upat, you know, is it over five?
(34:17):
I don't know.
You know, I guess collectively
too, like what do you guys think?Because in the past five years,
yeah, we saw a ton of, you know,immigration to Kelowna, whether
that's, you know, it's probablymostly domestically, but it's
because, yeah, it's a beautifulplace to live.
But it was also a little bit moreaffordable than comparably some of
the bigger cities.
But now we're getting up there
where it's not so affordable.
(34:37):
Are we still going to see people
being able to move here?Is that going to drive vacancy up?
population growth is notincreasing as much?
as much?Well, we certainly dropped.
We were the fastest growing CMA inCanada for a couple of years
running.
And now I think we're 21st.
Our population growth has slowed.
We kind of always ebb and flow a
(34:58):
little bit.
And next year, we could be higher
on that list.
But lack of affordability in
Kelowna is nothing new.
That's certainly precluded people
from coming here.
But I do think that the lifestyle
and the way the city's shaping upand some of the other things that
are happening, I think UBCO beinga big one, right?
as a driver for growth and forindustry and everything else.
I think that we're safe to say thepopulation isn't going to decline.
(35:18):
We may slow a little bit and thenpick up speed again.
Kelowna is just too nice of aplace and people want to be here.
So all of this rental supplyhitting the market and the rent
compression that's expected, maybethat's going to allow other people
that maybe said, hey, I can'treally afford to be up there.
Now look again and say, well, youknow what?
I can make that work, right?It's dropped 300 bucks a month or
whatever.
I can make that work and I'll make
(35:39):
the move, right?Yeah.
Also, that's a lot of constructionand a lot of construction jobs.
construction and a lot ofconstruction jobs.
For sure.
For sure.
Yeah, that's a big one, Matt.
You know, hopefully we can find
work for those guys because, youknow, once a lot of the product
that you see being built currentlyfinishes, I don't know where those
guys are going to go, right?Other than back to Alberta.
Well, they can come work in mybasement because it's taken me
(36:01):
like three years to build this.
three years to build this.
There you go.
Yeah.
You might be able to get a gooddeal.
Yeah.
Yeah, it'd be interesting to see
on that side if things do comedown a bit.
Well, this has been awesome, man.
We're going to jump into a wrap
-up question.
I know I already asked you one of
them.
All right.
(36:21):
If you could give your 20 -year-old self any advice, what would
you do?Buy real estate.
Nice.
As much of it as you can.
What if you were 20 right now,would you?
I would still buy real estate.
Me too.
I love that answer because I woulddo.
Yeah, 100%.
Yeah.
I think in the long term, As thelong term, there's always ups and
downs.
Of course.
I love that answer, man.
(36:43):
Yeah.
I mean, we live in such abeautiful place.
we live in such a beautiful place.
You got to be able to weather it
and you got to have a bit of alonger term vision.
But I mean, if you have those twothings.
all day long.
I am very bullish on Kelowna real
estate, all asset classes, alltypes over the long term.
long.
I would agree.
This whole time that we've beentalking, sorry, normally we just
(37:03):
let you talk.
Matt, what would you do?
Thank God you asked me too.
No, I just love that because we're
talking about, oh, this is down.
How are these numbers going to
pencil?To me, I'm just thinking, man,
this is an opportunity.
This is an opportunity.
Obviously, I'm not the only onethinking this because people are
still doing stuff, but it mightsuck.
It might be hard for a couple ofyears, but man, just put it in
(37:25):
your numbers when you run them andthen get there.
I'm with you, Matt.
If you can make it work, work, I
think now's a great time to buy.
And I'm not saying that just...
Because that's what most brokerswould say.
I truly believe it.
And I think, again, long term,
there's no downside to real estatein Kelowna.
I mean, look, you got to buy theright stuff.
There's just room for error.
error.
(37:46):
You can make a mistake buying realestate and it's going to resolve
itself.
Any other asset class, you could
lose everything.
Yeah.
But with real estate, most errorscan just be... corrected with just
waiting it out.
It might be a few years, but just
wait it out.
You can't buy anything for three
or four years, but then you can.
I have a lot of stocks that have
gone to zero.
have a lot stocks that have gone
(38:06):
to zero.
They're not coming back.
That's a great point.
Also, another point on here, you
and I, all three of us really, seebehind the scenes and movers are
moving.
There's a lot of money in the city
and a lot of money.
Going around, like people are
setting up, they're kind ofsetting up for the next future and
like buying things that you don'tsee.
So like a lot of people that I'vetalked to are like, oh, should I
buy this condo right now?Step back and look at the big
picture.
It's like, yes, like if it works
(38:27):
for you now, it's good for younow, right?
The tap hasn't dried up.
People are still moving around,
right?Can't see as much in the city, but
like there's still... A lot ofstuff going on.
A hundred percent.
So I've been in this market for 13
years and I've never seen so manylike sophisticated, well
-capitalized development groupsfrom the lower mainland, branded
groups from the lower mainland,from Calgary, from Edmonton that
want to be in this market.
Before you talked to them about it
(38:48):
five years ago, eight years ago,and they'd say, no, I'm not
interested in the Okanagan.
Now they want to be in the
Okanagan.
Show me some side check.
Let's run some numbers, that kindof thing.
So that says a lot to me becausethose guys usually are the
canaries in the coal mine, right?They're ahead of the curve.
a lot of stuff happening.
Even, you know, talking to the
city and you guys, you know, I hadRyan Smith on the growth that the
city has earmarked and some of theexciting things, all of that, it
just builds on itself, right?And it creates more momentum.
(39:11):
And yeah, it's a bit of a blipright now.
And, you know, maybe the market'ssoft, no surprise.
That's just what the market does,right?
It cycles, you know, it's a greattime to position for the next big
run, right?Because it will happen.
There's no question.
Off the air, And the air, I was
talking to Taylor, how do I?buy one of these?
How do I buy a fiveplex or asixplex?
Come on, tell me what I need todo.
Let's do it because I believe it.
(39:31):
I'm all in.
It's happening and it might notcash flow over the next two,
three, four, five years, but like20 years, I'm definitely going to
be patting myself on it.
Yeah, I told you to write me that
blank check.
I still haven't got it.
buy I still haven't got it.
Yeah, you can take that blank
check to any bank you want andthey'll tell you the same thing.
Speaking of charities, Jeff,what's your favorite charity?
(39:52):
Favorite charity?Well, I'd say the Okanagan Food
Bank.
My wife does a lot of volunteer
work there.
We've supported them a lot.
She had a really great time at thegolf tournament last year or last
summer.
So yeah, that would be my charity
of choice.
Awesome.
I love that one.
How can Taylor or I or our
listener help you?What can we do for you?
For me?That's a good question, actually.
I don't know, Matt.
You guys are helping me, you know.
by having me on the podcast.
(40:12):
So I appreciate that.
You know, I love talking to Taylorabout the business and now you,
Matt, like hopefully we canconnect and continue to chat.
I'm always up for, you know,coffees and networking and, you
know, sitting down and havingconversations with people in the
industry and all aspects of theindustry, you know, whether it's
on the lending side, whether it'son the transactional side, you
know, the more people you talk to,the more opportunities to pop up.
And like, for instance, thisopportunity.
So yeah, no, I appreciate you guyshaving me on and let's just
(40:38):
continue to grow the relationship,right?
Keep trying to do some business.
I love it.
Well, thank you so much for thisspreadsheet as well.
Yeah, no problem at all, guys.
My pleasure.
If you have questions or stuffcomes up, just let me know because
we're always neck deep in thatpart of the market and we're
always updating the numbers andlooking at new stuff.
Awesome.
Sounds good.
Well, thanks for coming on, man.
Pleasure, guys.
Thank you very much.
Thank you.
Yeah, that's great.
Thank you.
Popular Podcasts
Bookmarked by Reese's Book Club
Welcome to Bookmarked by Reese’s Book Club — the podcast where great stories, bold women, and irresistible conversations collide! Hosted by award-winning journalist Danielle Robay, each week new episodes balance thoughtful literary insight with the fervor of buzzy book trends, pop culture and more. Bookmarked brings together celebrities, tastemakers, influencers and authors from Reese's Book Club and beyond to share stories that transcend the page. Pull up a chair. You’re not just listening — you’re part of the conversation.
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com