Rebuilding Xanadu
By Eugen Klein, B.Comm(UREC), CRES, ARM®, RI, FRI
Real Estate Broker
One of the most ambitious real estate projects ever undertaken is in progress in South Korea. New Songdo City is a massive public and private sector project focused on free trade and international business: one of the world’s largest urban centres, it is being designed and constructed from the ground up. The mixed-use city will be built on South Korea’s northwest tip on the Yellow Sea. This project is the first ever US-South Korean real estate joint venture, and ranks as the largest international real estate investment in South Korea’s history.
At a cost in excess of $20 billion, New Songdo City is scheduled to be built in multiple phases on 1,376 acres of reclaimed land over a 10-15 year period. When complete, New Songdo City is designed to accommodate 30 million SF of residential space, 40 million SF of office space, 10 million SF of retail space, 5 million SF of hotels, 30 million SF of garage space, and 10 million SF of public space.
Shortly after the IMF bailout of South Korea in 1997, the city of Incheon and the Korean Central Government agreed to implement a long-term economic growth and development strategy for Korea, which was based on turning Korea into a service and technology based global economy. This strategy would require three things: a new international airport, a central place to house the new economy, and substantial economic incentives to induce foreign investment to Korea.
In the late 1990s, the city of Incheon began reclaiming approximately 3,000 acres of land along the southwest edge of the Incheon City coastline in order to create a platform for the new, world-class, master-planned community. This land will ultimately be developed by many international as well as domestic companies into a city of approximately 500,000 people and with services and amenities unlike any other city in the world. The goal of the city and central governments is to turn this land into “New Songdo City, the Hub of Northeast Asia”
In March 2001, the $3 billion Incheon International Airport opened. It is the 2nd largest airport in the world and is capable of handling up to 50 million passengers annually. After the first year, the air traffic count stood at 27 million passengers with 240,000 flights. It is designed to handle up to 50% of the world’s air traffic flow by 2010. The airport is connected to the mainland 5 miles away by an 8-lane bridge and commuter rail system to Seoul (underneath the bridge) which will be completed in 2005.
With these connections, the reclaimed land has all the necessary long term fundamentals in place for real estate value – location, access to airport, access to public transportation, views, land that is easy to work with, utilities in place, streamlined approval process.
More Songdo City investment advantages:
• Land can be bought at 25% to 50% of FMV
• Phenomenal pent-up demand for housing and retail.
• Great potential for international demand
• US-style legal system
• Central government willing to create special “Free Economic Zone” designation for area.
Recognizing the importance of closing the land in order to start some construction activity soon, the City and NSC identified 94 acres of land out of the 1,376 acre parcel as an immediate development priority. As such, the 5.5 million sq. ft. Convention Centre Complex, with an estimated total cost of approximately $1.3 billion, was approved by the City and is now in the design-development phase.
Material for this article was provided by The Gale Company, a partner in the development of Songdo City.
Editorial
For the last four issues of the year, I am going to do things a little differently. As you know, we have had a very busy summer, and business continues to arrive at our door at a hectic pace. We have a number of new properties either coming to market or already listed – so many that they can not all be featured in one issue! That is why I have decided to focus each of these four issues of Prosperitas on a particular class of properties. This issue I call the “Money” issue as it features some of our largest properties to date.
This issue’s article features one of the most extraordinary developments going on in the world today. When I was at RealComm 2004 this spring, I attended a presentation by Stan Gale of the Gale Company. I was astounded by the project he was describing: the construction, from the ground up, of the most technologically advanced city for business. Among the design innovations: a full fibre-optic communications and high-speed wireless grid. From his speech and the information on his website comes the information for the main article.
As always, you are welcome to contact me any time with your questions and concerns regarding the disposition of your commercial investments or businesses.
Eugen L. Klein
B.Comm (UREC), CRES, ARM®, RI, FRI
[email protected]
Tel. 604.818.5888
Tel. 1.800.818.8599
A note on triple-net properties
Rarely will you find a true-triple net, multi-tenant property. A true triple-net leased property means the tenant is responsible for all expenses of operating the property, including property taxes; property casualty, and liability insurance; all maintenance including: structural components, mechanical systems, plumbing and drainage systems, glass, and the roof.
Ownership of the property is vested fee simple, inclusive of the entire “bundle of rights” inherent to real estate. In short, the only responsibility of the owner is to designate where the rent check goes. In the case of a multi-tenant property, about the only way to make that happen is to have a master lease for the whole building, and the master lessee then sublets to the individual tenants.
Obviously, an owner focused on maximizing returns and enhancing value is not going to be very keen on the idea of leaving the fate of a property representing a sizeable investment in the hands of a tenant for sub-lease, except in the most unique of situations. Hence, a multi-tenant deal represented as a triple-net investment bears a hard, hard look.
Chances are the property is the subject of a poor definition rather than a triple net lease.
by Ray Alcorn
Good News
Fourth Consecutive Quarterly Gain for Index
The Business Council’s BC Economic Index rose by 1.3% in the third quarter, the first time in a decade the Index has registered four consecutive quarterly increases over 1%. Employment, housing construction, increased retail spending, manufacturing shipments, and number of overseas visitors to the province have all contributed to B.C.’s growth.
(Business Council of British Columbia, BC Economic Index, October 13, 2004)
Royal Bank of Canada Upgrades B.C.’s Forecast
The Royal Bank of Canada (RBC) has upgraded its 2004/05 economic forecast for B.C. RBC expects B.C.’s real economic growth to reach 3.6% in 2004 and increase to 4% in 2005, up from the previously forecast growth of 3.0% for 2004 and 3.5% in 2005. RBC’s upgrade is based on expectations that B.C. will continue to be Canada’s job creation leader in 2005, with a corresponding increase in disposable income, robust retail sales, and as the only province where housing starts are expected to increase in 2005.
(Royal Bank of Canada, “Provincial Outlook” Oct. 06, 2004)
Properties:
1. NATIONAL FLAG HOTEL ALBERTA
Centrally located, premier full-service hotel in town; 7 stories, indoor pool, blues pub, business centre. Generates $2,500,000+ net per year
2. COMMERCIAL OFFICE RETAIL
Class A Building, Downtown Vancouver/False Creek; 8 stories, 140,000 sq. ft. Net income $2,000,000+
3. 45 ACRES MANUFACTURING
Best manufacturing land available in Blaine , WA. Junction I-5 & Pacific Hwy; truck stop, manufacturing, duty free potential. Border proximity, 10 parcels all serviced.
4. RESIDENTIAL TOWER DEVELOPMENT
Strip mall for redevelopment into com/res tower, 15+ stories. 360 views (Vancouver & Puget Sound), prime location with highest elevation.
5. FRASER VALLEY RESIDENTIAL LAND
View property overlooking Fraser River; 30+ acres, serviced, zoned for 100+ units.
6. FOUR STAR RESORT
18.73 acres; restaurant, pub, 33 rooms, indoor swimming pool, cabins, strong revenue growth third straight year.
7. FRASER VALLEY GAS STATION
Gas bar, convenience store, offices, and ~2 acres bare land. 12,000,000 litres annual sales; net to owner just under $400K.
8. 1926 BROADWAY
Mixed retail/office/residential building; 5 stories; 10,000 sq. ft. +1,000 avail. in penthouse suite. Nets $220,000 per year, %6.5 cap rate
9. GREATER VANCOUVER HOTEL & PUB
Famous hotel with blues pub in old part of Greater Vancouver. 25 rooms, great view of Fraser River. Res / high rise development potential.
10. HEAVY INDUSTRIAL LAND
14.3 Acres at Lickman Road Interchange (access to Hwy 1). Services at lot line. Enviro Phases 1 & 2 completed and clean.
11. PUB & SPORTS BAR
Greater Vancouver Pub & Liquor Store, only liquor store in area. Near sky train & hi-density development.
12. 2485 MONTROSE AVENUE
1.07 acre building site near downtown Abbotsford core. New C7 zoning entails multiple uses incl. 4 story mixed use residential.
13. INTERIOR BC TRUCKING BUSINESS
Serving all major southern BC highways. 17 years uninterrupted growth. 13 trucks in fleet.
14. 30488 GREAT NORTHERN WAY
Class A building for various uses. 4,000 sq.ft. office, 10,000 sq.ft. warehouse w/22ft ceilings, on 1 acre land in business park.
15. 2026 QUEEN STREET
Industrial lot; 1.73 acres, just north of Abbotsford Airport, zoned A1. Opposite side of Queen zoned I2-I6
16. CHILLIWACK AREA PUB
Pub & liquor store; sales over $1,000,000. 4,400 sq ft lease at $12 psf. Building & land available for $400,000.
17. DETACHED BUILDINGS CHILLIWACK
Live/work includes 3 separate buildings: rancher, 2000 sq. ft. offices and 4600 sq. ft. warehouse.
18. WHISTLER LEASE SPACES
30,000 sq. ft. light industrial/service retail space: 17 units, varying size, $15 – $18 psf. Located just off Hwy 99 in Function Junction, Whistler.
19. ABBOTSFORD AUTO MALL LEASING
Retail & service bays available in auto mall. Easy access and great visibility; perfect for any auto sales/service/accessories related business.
20 HOPE RESIDENTIAL LAND
Waterfront development property on Fraser River near Hope. Land fully serviced, excellent views. Perfect for hotel/motel or mobile home park.
Testimonials
“Eugen is a rare and genuine individual; we have enthusiastically recommended him to all our friends and associates. We are extremely fortunate to have such a dedicated, experienced, and intelligent individual working on our behalf.”
Dr. A. Ignaszewski, M.D., FRCPC, FACC
Cardiologist Heart Transplant Program
Medical Director Healthy Heart Program and Heart Function Program
“You’ve defined your niche pretty well… You’ve got a 12-year head start from your closest competitor, so that’s a definite advantage. More power to you and your team, Eugen. I’m certainly glad to have gotten to know you. You are a larger than life person who’s also refreshingly humble. And you seem to be headed toward even greater things.”
George Verdolaga
Flowform Design Group, Ltd.
“I wanted to write you this note to thank you personally for your support over the past 12 months as a valued member in our coaching program. It has truly been our pleasure to be of service to you… you are someone that should not settle for anything less than greatness, and have much value to offer the world.”
Richard Robbins
President, Richard Robbins International
“In my family’s 10 year association with Eugen Klein, he has displayed attributes which have secured our continued admiration. They are: Respect, dedication, dependability, passion and commitment to his causes, particularly in the areas of self-improvement and the service of his friendships, his family, his clients, his business associates.”
Chris Stringer
President, ActionView
Community:
My ‘Community’ section is dedicated to the extraordinary people who have contributed to my life with exceptional service. I would like to share my good fortune of knowing them with you. Please feel free to convey my recommendation.
BARFLY
Mr. Jesse Bannister
New Westminster (604) 519-0333
BANK OF MONTREAL
Mr. Joe Corrado & Mr. Mark Tower
Vancouver (604) 665-2682
CAPITAL WEST MORTGAGE
Mr. Daymon Eng
Vancouver (604) 899-3799
CHARTERED ACCOUNTANT
Mr. Grant Gilmour
Langley (604) 888-4200
CIBC RESIDENTIAL FINANCE
Mr. Adam Beaudin-Ball
West Vancouver (604) 981-2549
CIBC RESIDENTIAL FINANCE
Mr. Derek Christiansen
Vancouver (604) 220-6161
COMFORT INN
Mrs. Valerie Orr
Vancouver (604) 605-4339
COMMERCIAL MORTGAGES
Mr. Gary Khangura
Vancouver (604) 879-0235
CYPRESS INSPECTIONS LTD.
Mr. Noel Murphy
West Vancouver (604) 312-8606
DIGITAL PRINTING
Mr. Jason Romo
Vancouver (604) 420-3400
FLOWFORM DESIGN GROUP
Mr. George Verdolaga
Vancouver (604) 321-8008
GRAPHIC DESIGN & ART WORK
Mr. Denis Meyer Jr.
Burnaby (604) 777-0550
MAHOVLICH MARBLE & GRANITE
Mr. Frank Mahovlich
Vancouver (604) 293-0093
MCKITRICK CLARK MCLEOD
Mr. Bruce J. Preston
Vancouver (604) 736-6717
NATIONAL HOME REVIEWS
Mr. Dean Kazoleas
Vancouver (604) 681-2108
PINK LIME SALON & SPA
Mr. Youssef Jawhari
Vancouver (604) 683-7444
PLAN-IT WITH US TRAVEL
Mrs. Pam Gosal
Richmond (604) 916-8044
RENOVATIONS & APPRAISALS
Mr. Chris Lewin
North Vancouver (604) 562-5799
SCOTIA MCLEOD
Mrs. Vanessa Stenner-Campbell
White Rock (604) 535-4749
VANCITY CREDIT UNION
Mr. Joe Chan
Vancouver (604) 877-8296
VANCITY VENTURE CAPITAL
Mr. Axel Christiansen
Vancouver (604) 877-6582
The Team
Eugen L. Klein
B.Comm (UREC), CRES, ARM®, RI, FRI
Broker
email: [email protected]
Cell: 604.818.5888
Toll Free: 1.800.818.8599
Direct: 604.691.6622
Fax: 604.691.6688
Michael Mustard
B.Sc(Hons)
Associate Broker
Licensed
email: [email protected]
Direct: 604.691.6660
Fax: 604.691.6688
Please do not hesitate to call me at 604.818.5888; it is my pleasure to serve your real estate needs. Please visit us on the world wide web at www.eugen-klein.com
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