How Chinese Crowdfunders Flipped Rundown Vancouver Apartments for $54M in 7,200 Seconds

An unlicensed realtor wheeling and dealing through Facebook. A stampede of investors frantically buying up dubious assets. And a city’s property markets pushed to the breaking point by a flood of Chinese buyers. All of these elements sound like a pot-boiler novel, but are already part of real life in the real estate markets of Canada’s west coast.

The story starts with the group-buy of a pair of run-down Vancouver apartment buildings valued at just C$17M (USD $13.5M) by a pack of mainland-backed investors for C$60 (USD $47.5), and then it starts getting interesting, according to an account in the South China Morning Post’s Hongcouver blog. 

The high stakes acquisition and resale winds its way through shell companies and shady individuals, testifying to how Vancouver’s loosely regulated housing market has become a casino for an influx of Chinese money fleeing currency and stock market gyrations half a world away.

Group-Buying a Site for a 60-Storey Condo Tower

The property at the centre of the tale is composed of an unassuming pair of apartment buildings on Nelson Street near downtown Vancouver. Three years ago, local developers from the Wall Financial Corporation snapped up the buildings for C$16.5M. They thought they were aiming high by planning to convert the site into a trendy residential skyscraper, complete with an innovative facade designed by architect Chris Doray.

But in fall 2015 came the jaw-dropping offer from Chinese real estate investment firm Sun Commercial Real Estate (Suncom): C$60M for the land. The developers, architect and city all remained supportive of the original project, but the chance for a near-quadrupling of an investment with no further costs was just too much to turn down.

“The price on this block of land has now thrown everybody in the industry out of whack,” Chris Doray, the architect behind the original project, told the SCMP. “The property is worth, what, C$20 million, and somebody pays C$60million? One wonders what’s going on. Is this New York? Is this Hong Kong?”

Chinese Investors Said to Pay Questionable Prices for Vancouver Property

Those are questions being asked more and more often in Vancouver, a city that some analysts say has seen its housing prices break loose from economic fundamentals. Even while the Canadian economy and employment suffer from a downturn in oil prices, Vancouver housing has soared to the point where the average price of a detached home is now $1.82M, according to the Greater Vancouver Real Estate Board.

Last year’s turmoil in the Shanghai stock market and sudden Renminbi devaluation made wealthy Chinese more eager than ever to funnel money out of the country to familiar destinations like Vancouver. Many of those able to circumvent China’s $50,000 per year capital controls have poured money into overseas real estate, precipitating buying frenzies like the “stampede” that SCMP documented in Vancouver.

SCMP’s examination of both corporate records and the building itself call into question the value of the deal. On a visit to the property that had just skyrocketed to luxury-level pricing, the reporter found:

“… a broken ground-floor window at weary-looking 1075 [Nelson Street], a Canadian flag draped as a makeshift curtain. Next door, at 1059, a waft of marijuana smoke drifted out of an open window.”

Former Broker Played Key Role in Deal

A glance at the parties involved looks likely to further inflame local concerns over hot money from foreign shores distorting the Vancouver market.

Suncom connects wealthy Chinese immigrant investors to local commercial real estate — and came under investigation by the BC Securities Commission for potentially illegal crowdfunding activities following an SCMP investigation.

The main public sales channel for the Nelson Street site appears to be Julia Lau Chi Yuen, a woman who formerly worked as a high-end broker with Sotheby’s realty in the city — before she permanently surrendered her real estate license earlier last year to avoid disciplinary proceedings. Under the title of Vice President of Suncom (a title Suncom says it temporarily allowed her to use during the summer), last fall Lau turned her Facebook page into a billboard for the site.

A Facebook post of Lau’s from a Thursday in October that was dug up by the SCMP reveals the crowdfunding pitch used to drive the acquisition:

“Whoever want [sic] to invest has to prepare the deposit with bank draft tomorrow. The shares will be sold out on Monday.”

That prediction proved all too prescient. According to further posts by Lau, the entire sale of C$60M of shares lasted just two hours — 7,200 seconds. The SCMP is careful to note that it has no evidence that Lau herself profited from direct sale of real estate or from shares in the companies involved, an act that would have been illegal given her lack of a license.

Adding to intrigue is the fact that Suncom no longer even owned the property at the time of this stampede for shares. Just one month after purchasing the property for C$60M, Suncom flipped it to a Chinese immigrant named Gao Shan for C$60M. Shan, when asked the rationale behind spending more than four times the 2013 price for the property, told the SCMP only that it will give him “a good return.”