Yesterday’s question:
A Real Estate Developer in British Columbia must be licensed by the Urban Land Institute?
False. Anyone with a wheel barrow and a brother-in-law can be a real estate developer.
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Today’s question:
Pension-fund investment in real estate in Canada is very low and is less than 5% of total pension fund assets of all funds.
True or false?
Answer tomorrow morning.
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Get the answers from the experts: Herb Auerbach and Michael Mortensen will be teaching Real Estate Development from the Inside Out on Mondays from Feb 16 to Mar 19. More here from the SFU City Program.
My inclination is to say pension fund investment in real estate much higher than 5%, but not necessarily in conventional residential real estate. Commercial, industrial, toll roads, ports, pipelines, etc. Ontario Teachers Pension owns Cadillac Fairview so that’s a huge chunk. BC Pensions own all sorts of property.
I am going to say ‘true’.
Many significant development/commercial real estate companies are owned by pension funds.
“Anyone with a wheel barrow and a brother-in-law can be a real estate developer.”
That’s a cheap, uninformed slur against a critically important industry in our cities. The reality is that the barrier to entry of many other businesses – for example groceries or food service – is much lower than urban development. In 2005, the BC Gov’t brought legislation requiring anyone creating more than 5 units (or lots), to provide full disclosure on many aspects of the development such as financing, including the people involved, the track record of the developer (including any bankruptcies or disciplinary action such as fraud), and if there are any conflicts of interest. If there are changes to an original disclosure that a developer does not reveal during development, a pre-sale purchaser can get their deposit back and walk away. And, the courts have strictly enforced the legislation in a few cases.
That type of disclosure and consumer protection is absent in most industries, as well as in many public sector services.
It’s got to be much higher than 5%. Interest rates are so low in bonds that real estate has become quite attractive to pension funds that have an obligation to get a higher rate of return. Even the CPP invests heavily in real estate.