If you live in Metro Vancouver, you’re probably used to crazy real estate stories by now.
But this one might take the cake.
A pair of land parcels in Downtown Vancouver, valued at $16 million, that sold for $60 million – in an investor stampede that lasted a mere 7,200 seconds.
Investigative reporter Ian Young with the South China Morning Post broke the story this week, and joined Lynda to break it down.
LISTEN: Ian Young explains what might be Vancouver’s craziest real estate deal
An offer you can’t refuse
Young says the story starts back in 2013, when well known Vancouver developers Bruno and Peter Wall bought the land on Nelson Street, with plans to build a tower.
He says they paid $16-million – a hefty sum, but good value since the parcels are zoned for a development up to 167 meters high.
But everything changed last fall, when a consortium of investors brought together by SunCom made them an offer they couldn’t refuse: $60-million.
“What SunCom is is a firm that basically pools rich Chinese immigrant investors money to buy real estate in Vancouver.”
But why pay so much, when the land was assessed by BC Assessment at $16 million?
Young says the answer came a month later when that same land was flipped to another Chinese investor, Mr. Gao Shan, for $68 million.
He says it’s not clear if what happened ran afoul of B.C.’s laws around crowdfunding real estate.
But he says the B.C. Securities commission is looking into the company, along with ex-realtor Julia Lau who set the deal up.
Young says both SunCom and Lau deny they did any crowdfunding.
“But on the other hand you’ve got social media postings from Julia Lau calling on investors, recruiting them.”
He says Lau, who had her realtor’s license revoked last year, later boasted on FaceBook and flyers that the deal had gone through in 7,200 seconds.
Young says there’s another troubling aspect to the story: The land itself was never sold.
“What was technically for sale, was not the real property, not the actual site, but the company that owned the site. And in so doing both sets of buyers, both SunCom’s consortium and Mr. Gao Shan completely legally avoid having to pay property transfer taxes of $1.8-million and $2-million respectively.”
That’s because tax is assessed when legal ownership of the site changes. Young says the actual ownership of the land remains unchanged – it belongs to a bare trust set up by the Walls in 2013.
He says this is a common practice for transferring commercial real estate, and one he calls “a massive loophole.”
So who is this mysterious new owner, and why would he pay $68-million for a piece of land valued at less than a quarter of that sum?
Young says with some legwork he was able to track down the mysterious Gao Shan, who coincidentally shares the same name as a famous Chinese embezzler.
He arranged a meeting, and was able to confirm Gao is not that person – but was allowed to ask just one question: why pay?
“He thought it was a good investment, he sees that there’s a good return on this, he thinks that he’ll be able to make a profit from the site.”
Young says he spoke to Chris Doray, the designer of the original tower that was meant to occupy the site, who doesn’t see it that way.
“He’s frankly flabbergasted by this price, he can’t see how it makes much sense.”
Young says according to Doray, it would be nearly impossible to build and sell units that would float in Vancouver’s market.
“Whatever the price would be to justify that land price, that puts it out of reach of mere mortals here in Vancouver.”
Young says the entire transaction has left him with plenty of questions.
But he says there’s one aspect hanging over the whole deal that leaves him troubled.
“One of the things that really surprised me about this story is that there is absolutely no public filing that demonstrate that these two massive sales have even taken place. There is no evidence in the public record, there is no property transfer tax, there is no change on the land titles. And even when we look at the fact that the directorship of the company has changed, that owns this site, that in itself doesn’t prove that ownership of the company has changed, it’s only because sources have told me what’s been going on that we’ve been able to work it out.”