The Hongcouver
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‘Crowdfunders’ are targeting Vancouver real estate, tapping investors in Chinese community

Projects linked to the ambitious new firms and their offshoots include a C$185m three-hectare industrial site, as well as golf courses in Vancouver and the Okanagan

PUBLISHED : Thursday, 21 January, 2016, 6:32am
UPDATED : Tuesday, 23 February, 2016, 11:49am

Vancouver’s already red-hot real estate market has been targeted by “crowdfunding” firms, hoping to create syndicates of investors drawn from the city’s Chinese community to buy properties worth tens of millions of dollars.

At least two such companies, Suncrowdfunding Holdings and Canada Luxmore Crowdfunding, have recently emerged in Vancouver, the South China Morning Post has found.

Their ambitions are huge. Yet crowdfunding – the mass online recruitment of investors – is now regulated in British Columbia by securities rules introduced last May  that limit crowdfunders to raising C$250,000 per project and a maximum of two projects per year. Individual investors are limited to C$1,500 per project.

These rules should preclude all but the tiniest of forays into Vancouver’s property scene.

But proposed purchases linked to the two firms and their related companies over the past year range from golf courses to the pending sale of the Molson Coors factory site in Kitsilano for a rumoured C$185 million.

 

 

The ‘world’s first crowd-funded real estate brokerage’

Canada Luxmore Crowdfunding was incorporated in BC on September 23, 2014, in conjunction with Luxmore Realty, which described itself as the “world’s first crowd-funded real estate brokerage”. [UPDATE, January 24, 2016: This description has been removed from Luxmore's website since the publication of this article]

The brainchild of realtor Jason Liu, Luxmore Crowdfunding has listed a range of supposedly “ongoing” projects on its members-only website, canadazhongchou.com, or “Canada crowdfunding” . Funding was sought for such small-scale projects as the publication of a book - but they also appeared to propose investments in a range of real estate purchases. These included a Vancouver-area golf course with a mooted purchase price of C$24.5 million. Other prospective purchases included a BC retirement home, as well as another golf course and a winery, both in the Okanagan. All were listed with multimillion dollar price tags.

WATCH: Luxmore Realty’s sales pitch

However, the site went offline on Monday after the Post sent an email to Liu, pointing out that crowdfunding such projects could breach the new securities regulations. A cached text-only version of the site could still be seen this week. [UPDATE, January 24, 2016: This cached version has gone offline since the publication of this article]

Liu, who is in China on a business trip, told the Post by email: “The projects in which Luxmore is involved are compliant with British Columbia law.”

He did not respond when asked whether this meant the projects described on the canadazhongchou  site were not in fact being undertaken by crowdfunding. A disclaimer on the site said it was for “promotional purpose” without elaborating.

Liu, who is Luxmore’s CEO, has actively championed the crowdfunding of real estate purchases in Vancouver, although these activities appear to have been conducted before the securities rules were issued.

Luxmore Realty’s website said that in late 2014, the firm held an “advocacy conference”, at which about 150 Vancouver real estate agents were given “a better understanding of the relationship between real estate brokers and crowd funding”. [UPDATE, January 24, 2016: The Luxmore web page describing this event has gone offline since the publication of this article]

“The establishment of a crowd-funding real estate brokerage [of a type] different from the ones in Canada and China can provide a better platform for brokers in great [sic] Vancouver,” Luxmore said.

The firm also hosted a “crowdfunding gala”, complete with lion dancing and a magician, at the Floata Chinese restaurant in Vancouver’s Chinatown last Lunar New Year. At the event,   Liu “explained the concept of ‘crowd-funding’” to guests.

“[He] is also the first initiator to introduce the concept into the real estate industry,” Luxmore said. “As a matter of fact, the concept of crowd funding is widely known, and it helps many people realize their dreams. But in Vancouver, this concept has not been developed. It is Jason Liu who introduced the concept into the real estate industry in Vancouver, and then Luxmore Realty, a real estate brokerage different from others was established, and meanwhile he also plans to launch one Chinese App for real estates [sic] to provide more comprehensive services for Chinese buyers.”

 

Crowdfunding and the Molson site: ‘High return, zero risk’

Following on the heels of Luxmore was Suncrowdfunding Holdings, incorporated on December 1, 2014, which set its sights even higher: the prime three-hectare Molson site in Kits, with a nine-figure price tag.

Suncrowdfunding is associated with Julia Lau, who was one of Vancouver’s top real estate agents until she agreed to the “permanent surrender” of her licence last January in lieu of a disciplinary investigation into her activities by the Real Estate Council of BC.

(the RECBC initially said in its notice that Lau had received a “lifetime ban” but this wording was changed upon legal advice; a spokeswoman said Lau had signed a statutory declaration that she had surrendered her licence permanently).

Lau, who made her name selling hundreds of millions of dollars worth of real estate to mainland Chinese immigrant buyers in Vancouver, has since described herself as vice-president of investment firm Suncom Commercial Real Estate (also known as Sun Commercial Real Estate), which is associated with Suncrowdfunding.

Lau’s personal website (offline since last week) listed her contact address as that of Suncrowdfunding’s office at 999 West Hastings St. It also included an email address based on her name with a “suncrf” affix.

Lau did not respond to voicemail or email messages seeking comment about Suncrowdfunding or Suncom’s possible purchase of the Molson site, that was first reported by The Province newspaper last week.

However, an online advertisement reveals efforts last year to recruit investors.

“Sun Commercial Real Estate’s brewery project is recruiting shareholders for the development of a prime sea-view apartment project on a 330,000-square-feet site,” said the Chinese-language ad on the Vansky internet portal.

The Molson site’s industrial zoning would currently prohibit the development of a “sea-view apartment project”. Nevertheless, the ad went on encourage readers to “invest in prime commercial properties in Vancouver with Sun Commercial Real Estate and enjoy high return and zero risk. Investment size: C$150,000 or C$1 million.”

The posting – now offline, but still partially visible in cached form this week -  included a phone number but no contact name. [UPDATE, January 24, 2016: This cached posting has gone offline since the publication of this article]

However,  the same number was listed by a person named “Tang Jun” in a March 19 forum posting on the Vancouver Club website, which sought “partners to invest in Vancouver real estate”. “Required to make a minimum investment of C$150,000, have basic knowledge in property investment, and be familiar with investment partnerships. Invest in major commercial properties (mainly land sites) in Vancouver with us,” the Chinese-language posting read. [UPDATE, January 24, 2016: This posting has gone offline since the publication of this article]

We aim to purchase two billion renminbi worth of projects this year
Suncom Commercial Real Estate

The posting included Tang’s email address, which was based on the same “suncrf” affix used by Julia Lau.

The Post called the number without leaving a message. Unusually, the call was returned from two different people – initially by a man, whose caller ID revealed that he was in Royal Pacific Realty’s Oakridge office. He hung up after being told he was speaking to a reporter.

The second call-back’s ID showed that it was being made from a number listed to “Tang Jun”. The caller refused to identify herself, but said of the Vansky advertisement: “It was a mistake, by mistake. It is not the company’s number.”

She said that “anyone can place an advertisement” on Vansky, but refused to respond when asked if it was she who placed the “brewery project” ad.  “I am not employed by anyone. I’m just an at-home housewife, ok?”

Whether or not Suncrowdfunding or Suncom did in fact buy the Molson site remains unclear, although an unsigned posting on Vansky (also now offline, but partially visible in cached form) said that on October 10, Sun Commercial Real Estate had obtained the site for C$185 million. A month later, news broke that the site had indeed sold to an unidentified buyer.

Molson spokeswoman Jennifer Kerr said this week that while she had “no information on the new owner”, the deal was going ahead, with completion of the sale expected soon. “To my knowledge, there is still an agreement in place,” she said.

The buyer remains unknown.

The Post does not suggest that Suncom, Suncrowdfunding or Luxmore breached BC’s crowdfunding rules, since these were only put in place in May. Nor does the Post suggest that Lau’s involvement with Suncom or Suncrowdfunding requires a real estate licence.

Real estate crowdfunders in BC appear to have little room for manoeuvre after the imposition of the rules regarding prospectus exemptions, according to lawyer Jennifer Hayes.

 “As the funding requirements of most commercial real estate companies will be significantly greater than $500,000 per year, it is unlikely that this exemption will be used to invest in/develop commercial real estate in BC,” Hayes, then of McCarthy Tetrault, said in a July blog posting  for the firm. “We will need to wait for a broader exemption, like that anticipated in Ontario [a C$1.5 million fundraising limit], for commercial real estate crowdfunding to take off in BC.”

Suncom continues to tout its expertise as “the leaders in land assembly” in Vancouver. “Over the years we have helped our clients achieve impressive returns on their investments, ranging from 16 per cent to 150 per cent,” says one 2015 online flyer, in Chinese. “Our company has a large amount of investment capital, and we always invest in every project we put together. We guide our clients to come together and secure large investments with a relatively small amount of capital.”

Tellingly, the same flyer lists the value of its Vancouver real estate purchases in Chinese renminbi, not Canadian dollars.

“In 2014 we completed nine projects, with the sale amount of one billion renminbi [now C$221 million]. We aim to purchase two billion renminbi worth of projects this year. We are both confident and capable that we can deliver the right investment opportunities and generate the most profit possible for our clients in 2015.”

 

The Hongcouver blog is devoted to the hybrid culture of its namesake cities: Hong Kong and Vancouver. All story ideas and comments are welcome. Connect with me by email ian.young@scmp.com or on Twitter, @ianjamesyoung70.