Citified's Ten on the 10th is a monthly question-and-answer segment connecting our readers with the insight and knowledge of Victoria's top real-estate and business professionals.

 

December's Ten on the 10th features Johnathon Sipos, President of Victoria-based real-estate development firm Cielo Properties.

 

Asking the questions is Ross Marshall, Senior Vice President of the Victoria offices of commercial real-estate brokerage CBRE. As a leader in facilitating large-scale commercial real-estate transactions throughout the Capital Region – which include apartment complexes, industrial retail and office properties, and land/development opportunities – Ross and his team are at the forefront of market-leading real-estate transactions on Vancouver Island.

 

Would you like to be featured as part of a future Ten on the 10th Q&A? We'd love to hear from you.

 

 

Tell us a little bit about Cielo Properties and your current projects underway? 
Cielo Properties is the real-estate division of our current operation, our background is primarily in real-estate development with over 2,000,000 square feet constructed over the last 40 years. Our current activity is concentrated in the Victoria market, but we are exploring opportunities in other markets as they present themselves. With the current pandemic, it has been important to stay agile as economic conditions shift. We are currently nearing completion on our largest project to date, Customs House in Victoria’s inner harbor. Our next project is a 242-unit mixed-use rental project currently in the rezoning process with the District of Saanich.  

How is the Customs House project going, and what are some of the most significant challenges you have faced on it to-date?  
Customs House has without a doubt been the most complex and challenging project the entire project team has ever worked on. It’s truly a piece of art, with almost no typical repetitive details. Out of the 57-units, 43 are completely unique floor plans. We are currently putting down flooring and tile on the second floor, and anticipate cabinets to be installed mid-January. We are currently forecasting occupancy in April 2021. 

The biggest challenge has certainly been working around and rehabilitating the significant heritage walls.  For example, as-built floor plans simply don’t work when incorporating in existing heritage walls, this has the construction process resembling a "design build," which is a tremendous exercise in coordination on this scale. An example would be that wall thicknesses and window openings would change floor to floor by a few inches, requiring redesign of columns, and slab tie ins as we went.  Due to each floor presenting a new layout and challenge it has been an exercise in creativity and problem solving for which our General Contractor, Banyan Construction Group, and all our subtrades and consultants, have done exceptionally well.  

Our commitment to quality has never wavered as we feel it is our civic duty to deliver a landmark in the city given the location. This is a true legacy project for us, and something that we do not take lightly. I hope that the final outcome will meet and exceed everyone's expectations, as we know it will once again be a cornerstone of Victoria’s historic Inner Harbour.   

Your units shattered previous records in the community for price-per-square-foot in the luxury condo market. Have sales slowed down, and what are your thoughts on the future of the luxury segment? 
Our vision for the project was very well received, and we are still receiving strong interest. We only have 10 homes remaining out of the 57 in total and have averaged $1,500 price-per-square-foot (PPFS) to-date, with the penthouse going for nearly $11 million ($2,450 PPSF).  Customs House is being built to a level of luxury Victoria hasn’t seen before, the quality both inside and out is in line with the premier projects one would find in global cities like Vancouver, New York, or London. Our price points achieved validated our vision, and we are confident the we will meet and exceed all expectations of our purchasers and the greater community when the building is finished.

The pandemic has slowed down the condo market to a certain degree, though in comparison to Vancouver, and other city centres, Victoria is still doing exceptionally well. As Victoria continues to increase its global recognition, all housing classes will see growth, including the luxury market.  

Do you have any tenants lined up for Custom House's commercial space?  
We have held off leasing any of the ground floor commercial spaces to-date. We have had strong interest from some very high calibre tenants. However, we wanted the building to fully take shape before bringing it to market.  We are currently working on a couple of very exciting plans for the ground floor space, something that will hopefully become just as iconic as the building itself, and create a destination for locals and visitors alike. We have always envisioned the ground floor space working in collaboration with the rest of building, and fitting into the overall project's vision. If everything goes as planned, we should be able to unveil the vision behind the ground floor space in the new year.  

Any other projects in the pipeline? 
Currently we are in the permitting process for a 242-unit rental project adjacent to Tillicum Shopping Centre, on the site of a former bingo hall. The site was rather oddly shaped, and required careful design consideration which has resulted in two six-story 'L'-shaped buildings mirroring one another, each with thoughtful architectural features to break up height and massing. We have also been adamant that the quality of design and materials reflect a higher calibre then many purpose-built rentals we see today. While slightly more costly to build, we feel that in the long run the residents and community will appreciate the look and feel of the building. After receiving strong positive feedback from the community association and neighbours, we submitted our Development Permit and Rezoning application to Saanich in late 2019. We have received successful approval from the advisory design panel, and are currently awaiting our public hearing dates. We are hopeful we can start construction spring of 2021.  

What are the biggest challenges facing the development industry currently?  
2020 has certainly been the COVID-19 year. The disruptions to supply chains, price increases for materials, and the necessary procedures to make sure construction sites are COVID-19 safe have all had material impacts on the industry. That being said, we still believe that lengthy project approval timelines, and municipal and provincial policies have the most dramatic effect.  Going forward we are hopeful supply chains can return to more predictable levels, and it would be nice to see price increases to raw materials and building products more in line with inflation. Without a doubt, we are also hopeful more cities and municipalities see the significant net benefits to lowering housing prices through ensuring development applications are processed in a more efficient manner.  

Outside of this, it is important to ensure that permits are issued so that we can inject some life into our local economy. The construction industry offers many good paying jobs for a large percentage of our local residents. Project approvals are essential to ensuring the economy continues to perform.  

It appears that there are quite a number of rental projects in the pipeline within the city, do you fear an oversaturation or supply issue moving forward? 
Under the existing system, supply is not derived from how many projects are in the pipeline, but the rate of approval within the districts and municipalities. The current trend of purpose-built rental has created a number of applications, but in our experience, we have not seen a development approval rate that would indicate a supply issue upcoming. If anything, the supply issue is only being exacerbated, as more and more people continue to move to Victoria at a rate that is vastly outpacing the ability for the city to approve projects. My belief on why Victoria has continually seen price increases leading to overall unaffordability stems from supply and demand, unless we meet and exceed demand, housing prices will only continue to rise. If municipalities and cities are serious about tackling affordability, they should be looking for ways to see tens of thousands of net new units constructed over the coming years, ensuring a healthy dose of supply in the market. Without that, pricing will only continue to rise as housing quantities fail to meet local demand.  

You are a family operation, how have you found working alongside your father? 
I feel very fortunate and grateful to have such a great relationship with my dad, Stan. We get along exceptionally well for working together every day, and are almost always on the same page with the strategy of the organization. I think we bring complementary skill sets and perspectives to the business which leads to creative and well thought out decisions. The development industry is unique in that there are so many family run companies, it’s become the norm versus the exception. Anyone who knows Stan understands he can be very passionate and intense, whether it’s a business or sporting endeavour. The early days of cross country or golf instruction certainly had their interesting moments to say the least. However, our great relationship has allowed me to temper that intensity and from my earliest memories Stan always supported me with a positive belief that anything is possible if you put in the effort and believe unequivocally in whatever you pursue.  

My understanding is that you are in the wine industry as well? 
I am, wine is something I became seriously passionate about 5 or 6 years ago. The more involved I became, the more I wanted to learn and create my own product. I saw many similarities between it and real-estate development, and in 2018, I decided to start making wine in Napa Valley. Which in my opinion, at its highest levels, creates the very best wine in the world. My vision starting out was to craft wines capable of competing with the iconic cult wineries, Screaming Eagle, Harlan Estates, 100 Acre, and Opus One among others. I went down and started sourcing out small quantities of exceptional grapes from leading vineyards. I then partnered with one of Napa's best custom crush facilities. They understood my vision and were able to bring it to life. My first vintage was 2018, and it is getting bottled this coming January, with a release later in the spring.  

My passion has only grown since I started, I find it to be the perfect conflux between business, art, and science. Overall, I am very bullish on the alcohol sector, I see the ability for significant growth and expansion in the coming years, and I am planning on expanding into other alcoholic beverage categories in the coming year. The industry is seeing a shift away from the large conglomerates towards independent brands with a sense of vision and purpose. It's an area I hope to capitalize on moving forward, as the growth and metrics of the industry closely resemble that of the tech sector with the added benefit of seeing revenues from day one.  

What do you think sets Cielo apart from other real-estate developers in the city?  
We are lifelong residents of Victoria and are passionate about our community and the lifestyle that is provided to its many residents. We take care to ensure that all projects we enter into uphold the values, culture, and fabric of our community. It is our belief that local, and personal involvement in all facets of a project pay dividends in the long run. This includes designing buildings to integrate into the fabric of the surrounding community. We are passionate about what we create, as it’s a direct representation of who we are and what we do. C