The Vancouver Business Thread

[GeeCee]

The aquarium operates as a nonprofit organization. It's vastly different situation than all the other businesses begging for money right now.

[svlt]

Originally Posted by whatnext

Vancouver Aquarium warns it could close permanently:

VANCOUVER (NEWS 1130) — The Vancouver Aquarium could close for good in two months if it’s unable to secure at least $1 million a month in immediate financial support.

Lasse Gustavsson, CEO of Ocean Wise, which operates the aquarium, said the aquarium is hemorrhaging $3.3 million a month after shutting down due to COVID-19.

He added, Ocean Wise applied for $9.5 million in emergency funding from the federal government three weeks ago, but hasn’t heard back yet...

https://www.citynews1130.com/2020/04/15/vancouver-aquarium-warns-it-could-permanently/

That's honestly pretty sad if it comes to pass, among all the other losses we are facing. There are so few iconic Vancouver attractions as-is, and makes me wonder how the animals will be dispersed. I somehow doubt it'll actually come to pass though, it's a bit of posturing for the time being...

[Migrant_Coconut]

The feds just extended the CERB to part-time and seasonal workers; in that light, $1 million or more for a critical public asset is chump change.

Originally Posted by misher

They might very well hurt long term revenue. And that was just one example.

City hall can do online approvals plus developers and homeowners always have things in mind. Just say your next project you get +0.1 or your money back with interest similar to how we offer a heritage density bonus and sell it online. Hell people might buy it and resell it like crypto.

And again these are examples. My point being to exhaust other options before going to the governments that are desperately borrowing to keep this country afloat and tell them to borrow more or you will collapse.

One obvious example is restaurants, they switched to online models and also many now offer meal kits to cook at home. Some even offer face masks or toilet paper (earls). Good on them for trying new things to stay afloat!

Services and governments =/= businesses. As per Keynes 101, "borrow even more" is literally the go-to strategy for mitigating a downturn (see "New Deal" and "TARP").

As mentioned, the Aquarium is a nonprofit public venue. If you've thought of something, chances are that they've already thought the same and dismissed it because it was a bad idea.

And City Hall isn't going to make any money from developers and homeowners that're trying to avoid spending money right now.

[whatnext]

Interesting article in the Sun about the Covid 19 lockdown's effect on one block of West 4th:

COVID-19: In Kitsilano, at least 165 jobs lost in a single block of West 4th

[misher]

Originally Posted by Migrant_Coconut

The feds just extended the CERB to part-time and seasonal workers; in that light, $1 million or more for a critical public asset is chump change.



Services and governments =/= businesses. As per Keynes 101, "borrow even more" is literally the go-to strategy for mitigating a downturn (see "New Deal" and "TARP").

As mentioned, the Aquarium is a nonprofit public venue. If you've thought of something, chances are that they've already thought the same and dismissed it because it was a bad idea.

And City Hall isn't going to make any money from developers and homeowners that're trying to avoid spending money right now.

1-2 months of shutdown isn't going to change a 5-10 year long development project and developers+homeowners tend to have funds. Developments are still being approved in the current environment.

Not everyone spends their entire paycheque and has less than two weeks of savings.

[Migrant_Coconut]

Originally Posted by misher

1-2 months of shutdown isn't going to change a 5-10 year long development project and developers+homeowners tend to have funds. Developments are still being approved in the current environment.

Not everyone spends their entire paycheque and has less than two weeks of savings.

Not everybody's rolling in dough like Concord.

That project is now on a timetable that got pushed back several years, banks may or may not lend, you've said yourself that renters can't pay, and homeowners are out of work. The feds are spending, as they should be; everybody else is tightening their belts.

[Alex Mackinnon]

Originally Posted by misher

1-2 months of shutdown isn't going to change a 5-10 year long development project and developers+homeowners tend to have funds. Developments are still being approved in the current environment.

Not everyone spends their entire paycheque and has less than two weeks of savings.

When you're leveraged up, it doesn't take much of a shock to bring down the house of cards. If you don't think Canadian consumers were overleveraged coming into this crisis, then I think you're in for a shock.

[cornholio]

Originally Posted by misher

1-2 months of shutdown isn't going to change a 5-10 year long development project and developers+homeowners tend to have funds. Developments are still being approved in the current environment.

Not everyone spends their entire paycheque and has less than two weeks of savings.

1 to 2 months? This will be going on for quite a while still and we know Canadians hold high debt. The party is just getting started. Give it a couple years.

[WarrenC12]

Originally Posted by misher

1-2 months of shutdown isn't going to change a 5-10 year long development project and developers+homeowners tend to have funds. Developments are still being approved in the current environment.

Not everyone spends their entire paycheque and has less than two weeks of savings.

LOL you have so many bad takes it's not worth saving to point out how wrong you were in the future.

This is going to be really bad. Just look back to 2008-09, and assume this will be worse, because all signs point to that.

[rofina]

Originally Posted by WarrenC12

LOL you have so many bad takes it's not worth saving to point out how wrong you were in the future.

This is going to be really bad. Just look back to 2008-09, and assume this will be worse, because all signs point to that.

In Mishers defense...

He was about to smoke all of us at the prediction thread. 1 year is coming up, and he is by far the closest, and likely would have been on the money had the world not come to a complete halt. He got a fair bit of ridicule too for his bullish take at the time.

[Alex Mackinnon]

Originally Posted by rofina

In Mishers defense...

He was about to smoke all of us at the prediction thread. 1 year is coming up, and he is by far the closest, and likely would have been on the money had the world not come to a complete halt. He got a fair bit of ridicule too for his bullish take at the time.

To be fair, endless blind optimism and 20x leverage are always great strategies to maximizing investment return until something unexpected hits you in the face. It's just that huge leverage in becomes a hilariously bad idea at the slightest whiff of bad news.

It's not an invalid strategy, it's just something that tends to implode when a recession hits. Very seldom do people manage to unwind their risk before the magnitude of a recession is apparent, especially with an illiquid investment like real estate.

[misher]

Originally Posted by Alex Mackinnon

To be fair, endless blind optimism and 20x leverage are always great strategies to maximizing investment return until something unexpected hits you in the face. It's just that huge leverage in becomes a hilariously bad idea at the slightest whiff of bad news.

It's not an invalid strategy, it's just something that tends to implode when a recession hits. Very seldom do people manage to unwind their risk before the magnitude of a recession is apparent, especially with an illiquid investment like real estate.

I'm optimistic because we're an advanced nation with a lot of precedent and financial weaponry to work with. The government doesn't want the economy to crash. The government (most of whom are homeowners or own multiple properties) doesn't want real estate to crash (which also pays a large chunk of taxes).

That being said, its always possible that after exhausting every resource, things still crash. But if they do, the last thing we will be thinking about is home prices. I do acknowledge that our debt is high, Canadian wages are stagnant, and our economy is under performing. Rather than fix inherent flaws in our nation and its operating model, we've relied on other nations to subsidize/support us.

Back in BC, it was 200k or less for a house. Yet many people complaining today didn't buy back then. They invested in stocks or spent their money on other endeavors. Price has little to do with it.

I see our sources of tax revenue and the government as a symbiotic relationship. The government gets paid a ton of money from real estate, and in turn it does its best to ensure it keeps getting paid a ton of money from real estate.

The BC NDP did act to hurt values and its own tax revenues. But it didn't go crazy, there's a ton of exemptions/ways to get around its taxes. It knew that if prices actually decreased by half, no one would build anything and there would be protests against them.

Originally Posted by rofina

In Mishers defense...

He was about to smoke all of us at the prediction thread. 1 year is coming up, and he is by far the closest, and likely would have been on the money had the world not come to a complete halt. He got a fair bit of ridicule too for his bullish take at the time.

Thanks. The way I see it an expanding economy, a city with population increasing but a small fixed supply of land, and low interest rates will ensure that long-term real estate values have to go up. Unless we become like Japan with a falling population or implement drastic and expensive policies nothing will change that.

I think a lot of people don't understand how the real estate and development industry really work. People who work in development companies will understand that if prices halve, development will halt. The average person seems to see housing as a fixed supply that is being stolen rather than a need that is met with development.

And its not about "greedy" developers. Development like anything else is a business with a business plan and financing. I don't work in development but I'm sure someone who does can comment on this.

Btw price growth has actually been a bit slower the past few years.

Housing prices appear to have tripled between 1977 and 1990 then tripled again between 1990 and 2008. Between 2008 and 2020 they've only doubled.

[Changing City]

Well here's a surprising finding from the C D Howe Institute on tax burdens for business in Canada. The authors compare business tax burdens in 10 Canadian municipalities, the largest in each province. They estimate the 2019 marginal effective tax rate (METR) for the largest municipality in each province by aggregating corporate income taxes, retail sales taxes, land transfer taxes and business property taxes. Their findings measure the tax burden on a hypothetical investment that has the same net-of-tax return regardless of where in Canada it is located.

"They find municipal business tax burdens are highest in Montreal, Halifax and St. John’s, while near the group average in Calgary, Charlottetown and Moncton. Vancouver showcases the most competitive municipal business tax environment, followed by Saskatoon, Toronto and Winnipeg."

[misher]

Originally Posted by Changing City

Well here's a surprising finding from the C D Howe Institute on tax burdens for business in Canada. The authors compare business tax burdens in 10 Canadian municipalities, the largest in each province. They estimate the 2019 marginal effective tax rate (METR) for the largest municipality in each province by aggregating corporate income taxes, retail sales taxes, land transfer taxes and business property taxes. Their findings measure the tax burden on a hypothetical investment that has the same net-of-tax return regardless of where in Canada it is located.

"They find municipal business tax burdens are highest in Montreal, Halifax and St. John’s, while near the group average in Calgary, Charlottetown and Moncton. Vancouver showcases the most competitive municipal business tax environment, followed by Saskatoon, Toronto and Winnipeg."

An interesting article.

One flaw is that it compares muncipal tax rates by value of property. A $200,000 retail store in Calgary will likely not pay 5x more property tax for the same services provided to a $1,000,000 retail store in Vancouver thats the same size.

Tax rates should be per a sqft of commercial space, not based on assessed value of the property.

The METR measures the percentage of the gross-of-tax return needed to pay business taxes on the marginal
investment. For example, if the minimum acceptable rate of return on investment net-of-tax is 6 percent, and if
investors need a gross-of-tax return of 10 percent to pay taxes and leave shareholders with a 6 percent return, net-oftax, the METR would be (10 – 6) / 10 = 40 percent. Readers interested in model parameters and data in addition to
information outlined in the online appendix are invited to contact the authors through the C.D. Howe Institute.

[officedweller]

Yeah, that's more of an academic exercise than reflecting the costs actually faced by business.
It's like examining percentages, instead of absolute values.

[Alex Mackinnon]

Originally Posted by misher

I'm optimistic because we're an advanced nation with a lot of precedent and financial weaponry to work with. The government doesn't want the economy to crash. The government (most of whom are homeowners or own multiple properties) doesn't want real estate to crash (which also pays a large chunk of taxes).

That being said, its always possible that after exhausting every resource, things still crash. But if they do, the last thing we will be thinking about is home prices. I do acknowledge that our debt is high, Canadian wages are stagnant, and our economy is under performing. Rather than fix inherent flaws in our nation and its operating model, we've relied on other nations to subsidize/support us.

Back in BC, it was 200k or less for a house. Yet many people complaining today didn't buy back then. They invested in stocks or spent their money on other endeavors. Price has little to do with it.

I see our sources of tax revenue and the government as a symbiotic relationship. The government gets paid a ton of money from real estate, and in turn it does its best to ensure it keeps getting paid a ton of money from real estate.

I'm pretty sure that the government and most business leaders already see high housing costs as a threat to the economy rather than as a benefit of a strong economy. It's capital that is tied up bidding up a limited resource, rather than being deployed to do useful things. Their problem is that they can't let the air out slowly without the risk of taking down all the people who bought in at the peak and are hugely leveraged.

I know quite a few companies in my industry sees it as a strategic problem, since it makes it near impossible for staff to get recruited the Vancouver area. Most people living in the rest of Canada (or other countries for that matter) don't want to move here for work, because they'll take a massive hit on the cost of housing and the pay around here generally doesn't make up for it. So how do you get specialized staff who aren't available locally?

Now what was that point about a house being 200k or less? It seems like you missed a thought there.

[misher]

Originally Posted by Alex Mackinnon

I'm pretty sure that the government and most business leaders already see high housing costs as a threat to the economy rather than as a benefit of a strong economy. It's capital that is tied up bidding up a limited resource, rather than being deployed to do useful things. Their problem is that they can't let the air out slowly without the risk of taking down all the people who bought in at the peak and are hugely leveraged.

I know quite a few companies in my industry sees it as a strategic problem, since it makes it near impossible for staff to get recruited the Vancouver area. Most people living in the rest of Canada (or other countries for that matter) don't want to move here for work, because they'll take a massive hit on the cost of housing and the pay around here generally doesn't make up for it. So how do you get specialized staff who aren't available locally?

Now what was that point about a house being 200k or less? It seems like you missed a thought there.

You missed my point that governments rely on housing revenues. Vancouver is already talking about bankruptcy, what happens if they lose their 300+ mil a year in development fee income and if their property tax base stops increasing? How will the province deal with losses of 2 bil+ in real estate related tax income from probate to transfer taxes to speculation taxes to the land value school tax for 3 mil+? How will the feds deal with losing their 5% gst on all new housing sold?

I guarantee you that if forced to vote between cutting welfare to the bone to pay for losing housing market revenues and current housing Canadians would vote for the second. And even if we did cut housing and thus stopped all development where will everyone coming here live?

It’s not a perfect world yet so many refuse to see that. Losing our real estate economy has a massive cost.


And my point was that at almost any price most of the people bitching will not buy. Prices have been rising at a fast rate for 30-40 years and price increases have actually been slower over the past 12 years. Everyone saw this coming but these whiners didn’t buy at that lower price.

[whatnext]

B.C.'s tourism industry prepares for a bleak summer
According to the industry's recovery task force, the sector generates over $20B and over 161K jobs
CBC News · Posted: Apr 26, 2020

This month was supposed to be the start of the busiest cruise season in Metro Vancouver history, but the cruise industry — and the province's tourism industry as a whole — is looking at a much more subdued season altogether due to COVID-19.

"It's going to be devastating — there's no question," says Nancy Small.

Small is the CEO of Tourism Richmond and co-chair of the Metro Vancouver Tourism and Hospitality Industry Response and Recovery Task Force, an umbrella group representing organizations across the travel and tourism industry.

According to the task force, in 2018, B.C.'s tourism industry brought in $20.5 billion in revenue, and contributed 161,500 jobs to the economy.

She says there have already been huge losses to the sector: over 40 hotels in Metro Vancouver, or 35 per cent of hotel rooms in Vancouver, have shut down. Restaurants, which have been limited to take-out and delivery, are reporting 80 per cent revenue reductions. Large scale conventions and conferences have been cancelled or postponed....

https://www.cbc.ca/news/canada/british-c...summer-1.5544867?__vfz=medium%3Dsharebar

[Alex Mackinnon]

Originally Posted by misher

You missed my point that governments rely on housing revenues. Vancouver is already talking about bankruptcy, what happens if they lose their 300+ mil a year in development fee income and if their property tax base stops increasing? How will the province deal with losses of 2 bil+ in real estate related tax income from probate to transfer taxes to speculation taxes to the land value school tax for 3 mil+? How will the feds deal with losing their 5% gst on all new housing sold?

I guarantee you that if forced to vote between cutting welfare to the bone to pay for losing housing market revenues and current housing Canadians would vote for the second. And even if we did cut housing and thus stopped all development where will everyone coming here live?

It’s not a perfect world yet so many refuse to see that. Losing our real estate economy has a massive cost.

And my point was that at almost any price most of the people bitching will not buy. Prices have been rising at a fast rate for 30-40 years and price increases have actually been slower over the past 12 years. Everyone saw this coming but these whiners didn’t buy at that lower price.

When it comes down to it, those revenue streams are pretty paltry compared to the cost of kicking the can down the road. They certainly don't make up that large of a percentage of government revenues either, probably well under 10%.

Prices have been rising for 30-40 years, you are correct. It's been rising at a pace which hasn't corresponded to a big jump in incomes, and generally all that buffer "disposable income" has been used up by debt servicing costs for the average person. They've way overshot what can be considered a reasonable portion of income. That cycle is going start unwinding, because it can't go on forever without eating other portions of the economy. I'd say where we're at is long past sustainable, just looking at BC's net negative savings rate. Perhaps people have been complaining the whole time, but it doesn't always mean that they're wrong.

I don't know if you just ignore or don't understand that development can and will go on at lower prices. The price inflation we see around here is largely land value inflation. If housing prices drop, so will the prices of develop-able land. People sitting on unproductive or under utilized land are the ones that get burned in that scenario. Developers that aren't depending on land value appreciation can however still continue to function and build. They should more or less be taking a flat fee for a given building on top of their costs. It's not a binary system. Development will continue, albeit at a likely slower pace.

As per usual, you take a couple of reasonable points and extrapolate way too far. Facepalm.

[misher]

Originally Posted by Alex Mackinnon

The price inflation we see around here is largely land value inflation. If housing prices drop, so will the prices of develop-able land.

I disagree. Price inflation is possibly 30% land inflation and 70% increase in costs/taxes/fees/requirements.

If prices go down we won't build at nearly the same rate. Anyone that says so is clueless. Even the city can't build a studio condo for less than 200k with free land. If land costs were the largest reason then units in high skinny towers would be much cheaper than we're seeing and it wouldn't cost nearly a mil to get a detached house built in Vancouver.