CANADA

Canadian securities regulators review Vancouver real estate ‘crowdfunders’ after SCMP report

PUBLISHED : Saturday, 23 January, 2016, 3:35am
UPDATED : Saturday, 23 January, 2016, 12:08pm

Securities regulators in Canada are reviewing the activities of two Vancouver real estate “crowdfunding” firms, after the South China Morning Post reported on apparent efforts to create investor syndicates drawn from the city’s Chinese community to buy properties worth tens of millions of dollars.

British Columbia Securities Commission spokesman Richard Gilhooley on Friday confirmed that the commission was conducting the review of Suncrowdfunding and Canada Luxmore Crowdfunding  and their associated entities.

However, he said he could not comment on whether a formal investigation into the firms was already underway.

The review comes after the Post’s Hongcouver blog on Wednesday published an investigation of Suncrowdfunding, which is associated with Sun Commercial Real Estate (Suncom); and Luxmore Crowdfunding, which is linked to Luxmore Realty, which describes itself as the “world’s first crowd-funded real estate brokerage”.

READ MORE: ‘Crowdfunders’ are targeting Vancouver real estate, tapping investors in Chinese community

Both have been linked to multimillion-dollar projects amid Vancouver’s soaring real estate market. However BC crowdfunding – the mass online recruitment of investors – is regulated by BCSC rules introduced last May  that limit firms 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.

The Hongcouver blog reported how an anonymous advertiser on the Vansky Chinese-language internet forum last year tried to recruit investors for a “Sun Commercial Real Estate brewery project”. Potential investors were asked to contribute either C$150,000 or C$1,000,000 for the development of a “prime sea-view apartment project on a 330,000-square-feet site”, with the scheme described as “high return and zero risk”.

The advertisements were anonymous, but did carry a phone number. The same number was used by a person named “Tang Jun” in a separate posting on the Vancouver Club forum, seeking investors who were “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”. Tang used an email with a “suncrf” affix.  

In a statement released Friday by lawyer James Carpick of Owen Bird Law, Sun Commercial said Tang had posted advertisements on Vansky “purporting to solicit investors, but she did this without Suncom’s knowledge or approval, and certainly not at Suncom’s direction”.

“Suncom will take steps to address this misconduct by that individual,” it said, attaching a lawyer’s letter warning Tang of possible legal action.

Suncom said it volunteered to meet with the BCSC but had not been advised that the commission “takes any issue” with any of its activities.

When the Post called the number on the Vansky ad this week, it was returned by a woman who said the ad was “a mistake”.  “I am not employed by anyone. I’m just an at-home housewife, ok?” she said.

The site in question is a three-hectare waterfront lot that is currently the site of a Molson Coors factory in the trendy Vancouver neighbourhood of Kitsilano. It is currently zoned for industrial use, which would preclude the construction of apartments.

An anonymous posting on Vansky announced last year that Sun Commercial had bought the Molson site on October 10 for C$185million. Then, in November, it was publicly revealed that Molson has struck a deal to sell the site for an undisclosed sum to unidentified buyers.

A Molson spokeswoman said this week that she could not give any information on the buyer; the sale had yet to finalise but “there is still an agreement in place,” she said.

The vice-president of Sun Commercial is Julia Lau, a former star real estate agent who agreed to the permanent surrender of her broker’s licence last January, in lieu of a disciplinary investigation into her activities by the Real Estate Council of BC. She has listed her address as that of Suncrowdfunding, and has also used an email address with a “suncrf” affix.

Lau has not responded to voicemail or email requests for comment.

Canada Luxmore Crowdfunding is the brainchild of Vancouver-area realtor Jason Liu. The members-only “canadazhongchou” (Canada crowdfunding) website run by Luxmore touted for investors in projects including golf courses in Vancouver and elsewhere in BC, as well as a vineyard and a retirement home. All had multimillion-dollar fundraising goals.

The website went offline a day after the Hongcouver blog contacted Liu and asked whether he was aware of the BCSC limits on crowdfunding.

“The projects in which Luxmore is involved are compliant with British Columbia law,” Liu said by email, from a business trip in China.

The BCSC’s Gilhooley said that “speaking generally, if you are selling securities without a prospectus, you have to have an exemption, and you have to file an exempt distribution report [with the BCSC].”

He said: “We don’t have a record of either a prospectus or an exempt distribution report being filed with us,” from either Sun or Luxmore or their associated entities.

[Note: This story has been updated to incorporate information from a statement that was released by Sun Commercial Real Estate on Friday after this story was initially published]