Doug Foord of Invictus Commercial Investment Corp. discusses the financial side fo the real-estate development equation in this month's Ten on the 10th Q&A session with CBRE Victoria's Ross Marshall. Citified.ca
Ten on the 10th: Real-estate development costs Q&A with Doug Foord of Invictus Commercial Investment Corp.
Ten on the 10th
Published January 10, 2020
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.
January's Ten on the 10th features Doug Foord, President and CEO of Invictus Commercial Investment Corp., a real-estate development and investment firm with offices in Victoria, B.C., and Tomball, Texas.
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.
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Tell us a little about Doug Foord and Invictus Commercial Investment Corp. (ICIC)?
I have been in the real estate industry now for 44 years - exclusively in the development business for the last 31 years. That has enabled me to experience many different market conditions. The majority of my career has been spent in Victoria developing subdivisions, houses, townhouses, condominiums, retail, warehouse, and mix-use projects. The project we are most proud of is Tuscany Village on McKenzie Ave. in Saanich. We have also completed projects in Arizona and Texas. Although we have formed several companies, we are currently specializing in development through our company - Invictus Commercial Investment Corp., a BC registered company formed in 2012. We also formed ICIC, LLC a Texas Incorporated company to redevelop rental units in Houston. We now have an offices in both Houston Texas as well as Victoria BC. However, we are currently focused on Victoria.
We have several projects under go, in particular, we are constructing 124 units in Colwood for the BC Housing and the Aboriginal Land Trust and are rezoning a parcel in View Royal for 246 units and working on several other multifamily sites throughout Greater Victoria.
What do you perceive as the biggest stumbling block to development?
It would seem that here is a preconceived notion amongst the general public, and some Municipal staff and Councils, that the developer makes too much money and that “their job is to get as much as possible from these greedy developers.” In actual fact there is tremendous risk that we developers take with roadblocks at every turn which can often lead to loss. Without developers, there would be very little housing.
What are these roadblocks you refer to?
Although the BC Government’s position is that the Official Community Plan is an adopted bylaw and therefore must be followed, Municipalities are required to have considerable public input into creating that OCP. It is adopted only after multiple Public Hearings after being purposely worded by municipal staff with language that allows staff and Council to use the document as a guide line rather than as a policy blueprint.
Why is that a problem?
Rather than the developer being able to rely on the OCP, they must engage many consultants and provide detailed plans and information that describes and supports a proposal prior to submitting an Application. They must also engage the immediate neighbours and Neighbourhood Residents’ Associations several times and then provide all feedback to staff before staff will write a report for consideration of Council. That is just the beginning of the process.
Just the beginning?
The process takes literally years from purchase of land to shovel in the ground. The cost of carrying the land and paying for the consultants is considerable. All this money is completely at risk. History has proven that the cost of construction constantly increases and markets fluctuate. If a market downturn or worse, recession occurs during this prolonged period, the developer could lose substantially. Keep in mind that even if the market stays strong, it is the end renter or buyer that will eventually pay for all these additional costs. How does that enable affordable housing?
What is your take on affordable housing?
Every level of government seems to lament about the lack of affordable housing, and yet they are substantial contributors to the cost of housing. I believe that the best way to create affordable housing is through supply and demand. Our governments should not be adding to the cost through all the red tape, fees and taxes at every level. I also believe that the province and not the individual municipalities should be responsible for providing affordable housing where they deem necessary.
How does the federal government contribute to the cost?
At the federal level they continually update building codes that contribute substantially to overall cost. They also charge GST on everything as well as a carbon tax that contributes to manufacturing and transportation costs resulting in higher construction costs. In addition, the “stress test” has artificially prohibited our youth from buying a home and therefore adds additional demand on the rental market.
How does the provincial government contribute to the cost?
At the provincial level we have property transfer tax, speculation tax, foreign buyer tax, provincial sales tax, gas tax. All these contribute to higher real estate costs. Landlords are faced with rent controls without any corresponding control over expenses. Other provinces are more financial attractive for their risk adverse mandates. Property taxes are a large portion of landlord expense and now we have a BC Assessment Authority that has provided the values for the taxes, based on what municipal OCPs indicate as possible.
How do the Municipalities contribute to the cost?
They have created too many steps in the development process. These steps cost time and money. In addition large fees are charged for rezoning applications and development permit applications whether you are successful in getting through the various stages of development, or not. In addition, developers are required to pay Development Cost Charges, Community Amenity Fees, Building Permit Fees, off site charges, hook up charges and the latest one, Contribution for Affordable Housing, either by way of cash or inclusion of units. All these fees contribute to the cost of housing.
What do you see as a solution?
I believe that Council should adopt an OCP bylaw that can be relied on. The public will have had their input at that stage and should no longer be involved in the rezoning process. Municipalities hire well educated staff that can easily administer the directives in the OCP. Council should be involved with policy and the running of the municipality and not get caught up in the minutia of rezoning. In addition, they assist the developers where possible to expedite housing in all forms and reduce the fees required to enable more housing at lower costs.
All levels of Government should be finding ways to enable development, not hamstrung it, in order to provide more housing more quickly. Housing prices are established by supply and demand, more supply equals less demand which in turn equals less expensive housing. C
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Article resources
- Would you like to be featured as part of a future Ten on the 10th Q&A? We'd love to hear from you
- View CBRE Victoria's website here
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