2009 Vancouver Real Estate Forum

By Commercial Real Estate Group at Clark Wilson LLP

Introduction

The 2009 Vancouver Real Estate Forum was held on Thursday, April 23, 2009 at the spectacular new Vancouver Trade and Convention Centre. As in past years, the Clark Wilson Commercial Real Estate Group was in attendance and has prepared a recap of the proceedings.

While the mood at the Forum was much more muted than in the past two or three years, overall there was more optimism than we expected. Consistent themes included: the shortage of capital continues and is the most significant factor affecting the overall market; the residential housing market seems to have reached a bottom in terms of pricing, with significant activity at the lower end of the market and with first time buyers; after experiencing very low vacancies rates and a large increase in rental rates in late 2007 and early 2008, the Vancouver office market is seeking a balance; there is some downward pressure on industrial rental rates; and overall the Canadian retail market is in a better position than in previous downturns, with no oversupply, low vacancy rates, and low mortgage interest costs.

Keynote address: Economic overview – trying to understand what lies ahead

Speaker:

Jeff Rubin, Formerly Chief Economist and Chief Strategist, CIBC World Markets

Jeff Rubin, formerly the Chief Economist and Chief Strategist of CIBC World Markets, provided the Forum with his thoughts on the current economic situation and what lies ahead.

In Mr. Rubin's view, the current global recession was the result of the significant increase in the price of oil up to mid 2008, rather than the imploding US real estate market. This is consistent with four of the last five economic recessions, which were preceded by sharp increases in oil prices. The fact that the increase from $50 to $147 per barrel prior to mid 2008 was twice as big a price shock as in any previous recession means that the current recession will be deeper than in previous circumstances.

However, economic recovery is closer than many expect and will be led by the nearly $2 trillion in economic stimulus being undertaken in the United States. Unfortunately, this will result in the biggest federal budget deficits since World War II, with the U.S. deficit reaching an exceptionally high 13% to 14% of GDP. These deficits could be reduced in future years by reducing expenditures and raising taxes, but the more likely scenario is a "reflation" of the economy through increasing the money supply and selling government securities.

Reflation is the "rising tide that will lift all boats". It will result in increases in the price of all hard assets, including commodities and real estate. Unfortunately, economic recovery will inevitably be accompanied by a "sudden and triumphant return of inflation". Oil will very quickly soar over $100, which will be difficult for many world economies but of significant benefit to Canada, especially Western Canada. The Canadian Dollar, which has found its cyclical low in the range of US$0.80, will recover strongly and set new highs, although this will be negative to Canada's export and manufacturing sectors.

In Mr. Rubin's view, we are on the cusp of the most reflationary period since World War II, and no more so than in the price of oil. This recovery will benefit commodity-based economies, such as Canada, but will provide new challenges throughout the economies of the developed world. Although it was not stated, the presumption is that this rapid and significant reflation will benefit the real estate sector overall.

Narrowing in on the BC market – are we more insulated than the rest of the country? And if so, why?

Speaker:

Jock Finlayson, Executive Vice President – Policy, Business Council of British Columbia

Mr. Finlayson provided the Forum with an update on the state of the B.C. economy.

Starting by noting that the "good news is that there are only 12 months in 2009", Mr. Finlayson presented the International Monetary Fund's recently revised projections for global economic growth. These figures, which have been revised downward four times in the past six months, project that the global GDP will decrease by 1.2% in 2009 (Canada -2.5%, U.S. -2.8%), as opposed to growth of 5.2% in 2007 and 3.2% in 2008. Ironically, although the current economic crisis may have started in the U.S., its effect will be felt much more dramatically outside the U.S., in regions such as Germany, Japan and the rest of Europe. Like Mr. Rubin, Mr. Finlayson noted that as a result of its unprecedented economic stimulus, the U.S. will emerge from the recession more quickly than other parts of the world. This will be of particular benefit to British Columbia, due to the significant impact the U.S. housing market has on B.C.'s forestry industry, which remains B.C.'s largest industry.

Mr. Finlayson noted that B.C.'s economy represents significantly less than 1% of the North American economy. As such, what happens in B.C. has little to do with our own decisions, as our economy is driven by trade. Current weakness in exports, particularly exports of forestry products, have resulted in faltering domestic demand, decreasing retail sales, soft labour markets and a reduction in housing starts. However, with over $160 billion in major infrastructure and construction projects either underway or planned in B.C., the province's economy should lead Canada in 2009.

Overall, Mr. Finlayson projects that economic weakness in B.C. will continue through the second and third quarters of 2009, with improvement starting in the fourth quarter. Overall, there will be a 1.5% retraction in GDP provincially in 2009, with a modest recovery in 2010. How strong the recovery is will depend on factors outside the province's control, primarily the recovery of the U.S. economy and, in particular, the U.S. housing market. As well, preparations for and holding the Vancouver 2010 Olympic Games in February, 2010 will be of significant benefit to the British Columbia and comes at an excellent time in the economic cycle.

Investment panel: Slowing not halted

Panel:

John O'Bryan, Vice Chairman, CB Richard Ellis Ltd. (Moderator)
Avtar Bains, Executive Vice President, Colliers International
Mark Rose, Chairman & CEO, Avison Young (Canada) Inc.
Paul Zema, Chief Investment Officer, Bentall LP

The panel of real estate investment leaders discussed current and emerging investment trends, from both local and global perspectives. It was agreed that there are radical differences between the US and Canadian markets – most notably the difference in liquidity (or lack thereof in the US markets which has resulted in a gridlock in the market). Differences also include the expectation that there will not be a significant number of forced sales or foreclosures in the Canadian markets.

There was consensus among the panel that there has been and will continue to be significant reduction in Canadian investment transactions in 2009. Predictions ranged from a 40-50% reduction in investment transaction value from the panelists from outside B.C. to a more optimistic prediction of only a 10% reduction in investment transaction value from the B.C. member of the panel.

According to the panel, private investors have been the most active buyers in the investment market in Canada in 2008 and 2009, with the most prevalent transactions being smaller transactions, valued at less than $50 million.

According to Avtar Bains, the level of investment activity in 2009 will depend on whether the vendors are willing to accept prices dictated by the current market. According to Bains, demand persists and the lack of liquidity is not affecting the B.C. market. Rather, in order for there to be activity vendors will have to re-evaluate their expectations and accept the prices and cap rates dictated by the market.

Vancouver's office market: expectations and reality – what has really happened and where are we right now?

Panel:

Sandy McNair, President, Altus InSite (Moderator)
Lou Ficocelli, Director of Office Leasing, Cadillac Fairview
Brent Lee, Director, Office Leasing, Western Region, Ivanhoe Cambridge
Jeff Rank, Managing Director, Cushman & Wakefield LePage
Chuck We, Director of Leasing, Oxford Properties Group

The first, and biggest topic covered by the panel was Vancouver's sub-lease market. Mr. McNair noted that with 963,410 sq. ft. of sub-lease space currently available, the market is at almost double the historical average of 520,000 sq. ft. Jeff Rank noted that even though there's a large amount of sub-lease space available, it is spread out among smaller pockets than in past downturns, through more buildings and among a wider number of landlords. Chuck We noted that the issue isn't the amount of sub-lease space on the market, but the rapid pace at which it came on.

Considering future changes to available inventory, the panellists agreed that no new supply should be expected until at least 2013/2014, although Brent Lee boldly predicted that Metro Tower III, with over 400,000 sq. ft. of Class 'AAA' rentable space, would be "Vancouver's next downtown office building".

The panel considered the diversity of the tenant mix in the market. Lou Ficocelli said that the tenant mix is quite diversified, which bodes well, and noted that the inherent advantage of downtown Vancouver is that a large component of the tenant make-up is junior venture exchange groups, which don't individually occupy large premises but collectively weather the market cycles better than other more rigidly structured businesses. Mr. Rank observed that another aspect of Vancouver's market "pause" results from its position as a branch-office town, which results in Vancouver being more vulnerable to downsizing in a slow economy.

On the issue of pricing, Mr. Rank commented that landlords are probably hoping to see high-rise view spaces remain in the high $40 per sq. ft. range but that there will be significant downward pressure on the lower levels of buildings in the downtown core. He predicted that the suburban market will lead the downward trend and pressure in pricing and that this will have an impact on the demand for space in the downtown core. Chuck We advised that it is difficult to assess how far prices had fallen from their peak because of the lack of deals in the current market. He also noted that Vancouver is known as a "spot market" in terms of rental rates.

Generally speaking, the panel had a positive outlook for the Vancouver office market. All agreed that there is no new supply coming on in the downtown core in the foreseeable future and that the availability of space in the suburban market will have an impact on the demand downtown. The panel agreed that this lack of new supply downtown means that landlords will tread water until the market improves.

Industrial market update – challenges and opportunities ahead

Panel:

Ron Bagan, Managing Director, Colliers International (Moderator)
Tom Corsie, Vice President, Infrastructure Development, Port Metro Vancouver
Murray DeGirolamo, Vice President Industrial Western Canada, Hopewell Development Corporation
Stuart Morrison, Vice President, Industrial, Cushman & Wakefield LePage
Todd Yuen, Vice President, Beedie Group

With 180 million square feet of developed industrial space in our region and a current vacancy rate of 3.6%, moderator Ron Bagan asked the panel to forecast what lies ahead for industrial real estate as various sectors tighten their belts. Stuart Morrison and Todd Yuen commented that from 2004 to 2008, demand had come from all markets, while today the most pronounced market was the import/export sector requiring distribution centres close to major highways and ports. They observed that groups occupying niche markets are continuing to do well (ie. pharmaceuticals), as are groups that are considered to be "recession proof" (ie. pet food or fast food suppliers). Mr. Morrison noted that while lease rates in peripheral markets and lease rates for older supply will have to soften, he did not see much slippage for sites located close to ports or for new buildings of better quality, simply because of the lack of supply of such product.

The general sentiment from the panel was that with very little trading currently taking place, it is difficult to get an idea of industrial values. There is now downward pressure on sales price and purchasers have a choice of industrial sites. Larger industrial sites will see even greater discounts as a result of fewer prospective purchasers, larger carrying costs and the difficulty of obtaining financing. While borrowers should continue to expect scrutiny from lenders, the panel confirmed that lenders are open for business and debt is being awarded at historically low interest rates.

In terms of opportunities that lie ahead, the message from Tom Corsie of Port Metro Vancouver was that the Port is very bullish on its long term container forecasting, and is buying lands and developing projects to increase capacity for container growth and the movement of goods. He noted that the Port prefers to develop through partnerships and Mr. DeGirolamo reflected on the positive aspects of a recent development transaction undertaken on Port lands.

The greening of Canadian real estate: what green initiatives work and what are the benefits?

Panel:

Derek Page, Director, Real Estate Management, Oxford Properties Group (Moderator)
Albert Bicol, Partner, Cobalt Engineering
Kevin Hanvey, Principal and Director of Sustainability, Omicron
Max Richter, Intern Architect, Stantec
Elia Sterling, President, Theodor Sterling Associates Ltd.
Matt Walker, Principal, Vancouver Office, Avison Young Commercial Real Estate

The panel began the session discussing whether the market is shifting towards a more sustainable paradigm. Generally, the panel felt that although there is a move towards sustainability among institutional clients, the overall shift towards sustainability is not significant. Panelists also expressed that the movement towards energy efficiency may be due more to the economy than for "green" reasons. Mr. Walker pointed out that less than 15% of the inventory on the market is certified, and he does not see this changing.

In respect of the carbon tax, the panel discussed the tax being too low to be effective – it does not significantly affect an individual or small consumer, but it could be significant for a larger consumer. In respect of "Green" certification, Mr. Walker noted that there is an advantage to certification when government tenants are looking to become carbon neutral, but probably makes less of a difference to other tenants, and wondered where a private sector tenant would tenants place LEED certification among the other factors considered (location, view, transportation) in choosing premises.

The panel engaged in considerable discussion on value and building design in the economic downturn. According to Mr. Walker, tenants will not pay more for a "green" building when other options are available. Mr. Bicol suggested that it is an urban legend that sustainable buildings cost more, while Ms. Sterling countered that that energy efficiency increases a building's value and improved environment keeps tenants happy.

Residential market: where are the values and where are the opportunities? How much more will the market fluctuate?

Panel:

Ward McAllister, President & CEO, Ledingham McAllister Properties Ltd. (Moderator)
Ralph Archibald, Senior Vice President, Polygon Homes Ltd.
Sandra Cawley, Principal, Burgess Cawley Sullivan & Associates
Ross Hanson, Vice President, Investment Analysis, Park Lane Homes
Cameron Muir, Chief Economist, BC Real Estate Association

Cameron Muir, Chief Economist of the BC Real Estate Association, provided an overview on how the financial crisis in the US and on a larger scale, the global economic downturn, will likely affect BC's real estate market. Mr. Muir noted that the subprime mortgage meltdown in the US has had a domino impact in North America and substantial pull-backs in industrial countries, including China, have created a remarkably unique situation. Retail trade with the US has fallen off the charts and the downturn is continuing. Housing starts in the US are down 18% from this time last year and the impact has been significant in Canada. Mr. Muir expects it will be at least 18 months before we see a rebound of any kind.

Mr. Muir commented on how the increase in unemployment rates and concern for job security will affect our real estate market. He expects that the unemployment rate will rise to between 8 % and 9% and that both unemployed consumers and employees concerned with their job security will not be buying real estate.

As demand in real estate fell over the past year, there was a corresponding and rapid decline in prices. Mr. Muir noted that demand hit bottom in December / January and that although prices continue to decline, the rate of decline has slowed to about 1% per quarter (or 4% per year). He projected a fairly weak economy into 2010 and weak demand for real estate. There was a dramatic pull-back in housing starts in BC from November to January; however, it will assist in correcting the imbalance between supply and demand. Mr. Muir expects that prices will stabilize and should be at bottom by the coming summer, provided the reduction in demand does not continue.

Mr. Archibald described three categories of buyers in the market:

  1. the first-time home buyers, who without question are driving the market;
  2. the move-up buyers, being those who the ability to move from their urban condos to suburban homes; and
  3. the "life goes on" buyers.

Mr. Hanson advised that Park Lane's target market is the Move-up Buyer. While sales today are challenging, everyone wants a good deal and if the price is right, they'll buy.

The panel agreed that by this time next year, prices will stabilize and buyers' confidence will be higher, although the depth of demand may be of concern. Mr. Hanson predicted that with inventories still less than half of the average over the past 10 years, there will be a lack of supply due to a continuing downturn in construction starts. With an average mortgage rate at 26% lower today than a year ago, Mr. Muir predicted that there will be a pick up in demand and that demand will not go lower than it was in December / January.

Retail: what does the future hold for this asset class?

Panel:

Chris Wood, Principal, Northwest Atlantic Canada Corporation Inc. (Moderator)
Michael Beattie, Senior Vice President, Portfolio Management, Grosvenor
Darryl Schmidt, Senior Director of Leasing, Western Portfolio, Cadillac Fairview
Geoff Stollery, Director, Real Estate, Best Buy Canada Ltd.
Bob Tattle, Vice President, Business Development, Anthem Properties Ltd.

The panel compared US to Canadian retail tenants, noting that US tenants are bigger, better organised and can be more confrontational. Retailers in Canada are younger and more collegial in a quieter market where a personal relationship can develop. Although Canada is not feeling the effects of the economic downturn as much as the US, there are changes taking place.

Canadian retailers do not appear to be requesting rent relief to the same extent as in the US, although there are some examples of these requests being made. In respect of to what extent US retailers are controlling the Canadian landscape, the panel had a range of comments, from Western Canada being viewed as a safer haven in the North American market place, to the perspective that smaller centers will not likely attract US retailers. Mr. Tattle pointed out that in addition to the landlord-tenant relationship, landlords need to extend their focus to municipalities and cities – obtaining a development permit can take a long time and delays cost money. With capital harder to come by, a good relationship with a banker is also necessary.

The panel ended the session with some thoughts on whether we have reached the bottom of the current economic downturn. The general consensus was that we are not at the bottom yet. Retail sales are predicted to drop this year as inventory levels are lowered with hope for a rebound in 2010. Mr. Tattle also discussed the need for optimism as things are still relatively good here.

What can we expect from the 2010 Olympics?

Speaker: David Podmore, President & CEO, Concert Properties Ltd.

David Podmore believes that the impact from the 2010 Olympics will be extremely positive, with the largest impact to date being reflected in the positive outlook of the community, which would have been very different had the city not had the Olympics to look forward to.

The 2010 Olympics have the ability to show the world that Vancouver and B.C. have a very competent team of people who have done a very competent job of putting Olympic facilities together. As well, the economic spin-off from the Olympics is already being experienced and includes the creation of employment, with people having the opportunity to work on projects at a scale they otherwise wouldn't have worked on. These individuals will have a fantastic skill set going forward, and will be able to further contribute to the community, and in particular the real estate industry, as a result.

The Olympics will showcase Vancouver and B.C. to the world. For over two weeks, three billion people will be watching our community from around the world. In addition, there is a significant likelihood that those attending the Games will return to the city and the rest of Canada in the future (Vancouver has the third-highest rate of revisitation in the world).

Facilities constructed for the Games are those that the community can actually use on a long-term basis, including the Convention Centre, which is already nearly fully booked for 2011 and 2012, and has bookings as far ahead as 2022. Collectively, these facilities have demonstrated an excellent capability to complete projects on time and on budget.

Mr. Podmore believes that the largest impact that the 2010 Olympics will have will be on the global perception of Vancouver and B.C. Although global interest resulting from the Olympics will not necessarily be immediate, by 2012 and beyond there will be a large influx of interest in Vancouver and B.C. from around the world, which will lead to economic opportunities.

Construction costs – how much lower will costs go before it makes sense to build again?

Panel:

Liam Murray, Senior Director, Cost Consulting, Altus Group (Moderator)
Ward McAllister, President & CEO, Ledingham McAllister Properties Ltd.
Doug McFarlane, Executive Vice President Business Development, ITC Construction Group
Peter Norman, Director, Altus Clayton
Keith Sashaw, President, Vancouver Regional Construction Association

Given the different backgrounds of the four panelists, it was perhaps not surprising that there were a number of different points of view as to when it will make sense to build again.

Peter Norman approached the issue from an economist's perspective. He pointed out that the pricing of primary construction products are not really showing a year over year decline, nor have statistics indicated a slow down in construction wages yet and ultimately believes that it may be quite some time before costs are low enough to get value out of building again.

In contrast, Keith Sashaw believes the time for building is right now. There was tremendous growth in construction industry employment from 2005 to September 2008. Since then, there have been dramatic decreases to bring the market back to levels similar to 2006. There has recently been some reduction of labour costs, but what has been more noticeable is the fact that contractors are now looking to see if they have the most productive people on staff. The industry has capacity and construction costs are now beginning to make sense, so Mr. Sashaw believes that this is a great time for building.

Doug McFarlane advised that the price per square foot of constructing a Yaletown condo has so far dropped by about 20% from its peak last year, and believes the bottom of that pricing will be somewhere around 25-30% less than where it was at its peak. Mr. McFarlane believes the 30% reduction will be the hard bottom on costs, that this figure will be reached in the middle of this year and will remain steady for a while. However, this hard bottom could ultimately be skewed by how much government work actually becomes available to the industry. Mr. McFarlane also believes that significant gains have been made in productivity in the industry recently.

Ward McAllister had a similar perspective to Mr. McFarlane's. He is seeing a huge decrease in construction costs right now, in some cases amounting to a $40 – $50 per square foot reduction, but believes that the bottom line in construction cost reduction from its peak last Fall is beyond 30%, and has not yet been reached. Mr. McAllister noted the current difficulties involved in financing a high rise residential building, and the fact that many developers are prepared to wait for financing to become available, costs to decrease, and values to increase. Mr. McAllister believes that wood frame buildings will lead the recovery of the industry, not concrete buildings, and that the lack of credit and lack of developers willing to go forward right now will result in construction costs continuing to decline for some time to come.

Show me the money! What is the outlook for the debt market in 2009? When will capital be available again, what are the costs?

Panel:

Kevin Meikle, Senior Vice President, Capital Markets Group, Cushman & Wakefield LePage (Moderator)
Dean Atkins, Vice President, Mortgage Investments, BC Investment Management Corporation
Peter Aghar, Chief Investment Officer, KingSett Capital
Jason Cottle, Managing Director, RBC Capital Markets Real Estate Group

The panel noted generally that lenders continue to be more risk averse in respect of real estate. There was consensus among the panel that there is difficulty in getting deals done in the current market. However, at least two of the three panelists commented that there is activity in the lending markets and deals are getting done despite the economic conditions. While there is activity in the lending markets, it is selective activity typically involving life insurance companies, small credit unions and banks as lenders.

The trends in loans, noted by the panel, in Canada's current market include shorter term loans (5 year terms as opposed to 10 years), recourse loans, loans in principal amounts less than $50 million, spreads of 350 basis points or more (up from 200 basis points or less), loan to value ratios of 50-60% (as opposed to 65-75%) and an increase in requests for mortgage assumptions.

According to Peter Aghar, the panelist wearing the hat of both the private equity investor and mezzanine lender, interest rate spreads are greater but reasonable and reflect the current market. Mr. Aghar believes that there needs to be a readjustment of unrealistic expectations on the part of borrowers, which were at the peak in 2007.

There was consensus among the lenders on the panel that existing relationships are crucial in the current lending market particularly with banks. According to the panel, another crucial element for lenders is income sustainability. The panel agreed that what is going on at the operating level, who the tenant is and how they are positioned to weather the economic downturn are more important factors than cap rates.

Finally the panel discussed the future and anticipated stabilization of the markets. There was consensus among the panel that there will not be a significant number of distressed sales or foreclosures in the Canadian real estate markets. While Mr. Aghar believes that the current debt market is reasonable, neither Mr. Atkins nor Mr. Cottle foresee significant improvement in the debt market before the second quarter of 2010.

Apartment sector update: where is the cycle heading?

Panel:

Rob Greer, Principal, Avison Young Commercial Real Estate (Moderator)
David Goodman, Goodman Report, Macdonald Commercial Real Estate Services
Dan Sander, Director, Hollyburn Properties Ltd.
Scott Ullrich, President & CEO, Gateway Property Management Corporation
Bill Zigomanis, Vice President, Commercial Mortgage Group, TD Bank Financial Group

David Goodman spoke about sales trends for apartment complexes and noted that there's been a sharp decline in sales activity in the first four months of 2009, with sales representing a 48% decline from the same period in 2008.

Scott Ullrich advised that there are few vendors in the current market, but there's still considerable interest among buyers, including pension funds and private buyers. Private family buyers are now entering the market due to available financing options. On the subject of financing options, Dan Sander noted that there are more vendors providing take-back financing in order to facilitate the completion of transactions and that this trend is likely to continue. Mr. Goodman noted the great divide between pricing expectations of buyers and sellers, with buyers being more in tune with today's market. Mr. Sander commented that as there's been a significant increase in inventories, buyers can be more selective and are more cautious about what to buy.

Bill Zigomanis spoke about challenges for buyers in terms of financing. Since the fall of 2007, the landscape has changed; pension funds are no longer lending, although there's still competition among some lenders for product. Mr. Zigomanis advised that borrowers should lock in to today's low mortgage interest rates.

On the biggest challenges faced by apartment owners, Mr. Sander noted that although owners recognize there's a need for rental housing, it's not possible to redevelop and make a profit with land valued at its highest and best use. He also noted that part of the NDP platform is to erode landlords' rights. Along the same lines, Mr. Goodman stated that in order to provide developers with an incentive to build rental housing, there needs to be a relaxation of some of the demands of local municipalities, including a reduction of parking requirements and a stop to increases to development cost charges and development cost levies.

Mr. Goodman noted that another contributing factor to the downturn in the rental sector in the Vancouver market was the City of Vancouver's introduction of a moratorium on demolitions of buildings. Although the moratorium is supposed to be lifted, Mr. Goodman suspects it could last at least another year.

Final comments on the risks, trends, challenges, and opportunities for the next 12-24 months

Panel:

Tom Knoepfel, Vice President & Divisional Portfolio Manager, Pacific Region, Cadillac Fairview (Moderator)
Eric Carlson, President & CEO, Anthem Properties Ltd.
Neil Chrystal, President & CEO, Polygon Homes Ltd.
Jon Love, Senior Vice President & Portfolio Manager, Investment Management, Bentall LP

Four leaders in the British Columbia real estate community discussed trends, challenges and opportunities.

In terms of what is the most significant issue facing their companies at this time, all members of the panel focused on the global recession and its impact on the B.C. economy. The lack of capital for new development or refinancing, the impact of de-leveraging and the resulting need to apply equity to the repayment of debt, thereby reducing the amount available for new investment, were also of concern to the panel members.

With respect to the investment market, Mr. Purcell noted that pension fund and other investors continue to be interested in the real estate sector and, despite the challenges of sector allocation limits retraining investment capacity, investors are still actively reviewing opportunities and going forward on a selective basis. The panelists agreed that there is significant capital in Canada looking for investment opportunities, but that vendors need to recognize the changing marketplace, and until they do so there will continue to be a "bid / ask dichotomy".

In reference to this week's bankruptcy of General Growth Properties in the United States, Mr. Carlson noted that the Canadian investment market is significantly different than in the U.S., as for the most part large Canadian investment funds are not as highly leveraged and did not underwrite property acquisitions as aggressively. Mr. Love noted that the oligopoly of Canadian lenders has actually benefitted the real estate sector, and is in contrast to the U.S. where there are many marginal lenders willing to lend on real estate. Distressed property opportunities will be predominantly in the U.S., and will be few and far between in Canada.

With respect to the Vancouver residential housing marketplace, Mr. Chrystal noted that Vancouver developers were better prepared for the decline which started in mid 2008, as Vancouver was among the last markets to experience a downturn and developers had witnessed what happened in other North America markets. Prices have been reduced very quickly, with reductions in the range of 20% to 25% from 2008 highs resulting in buying opportunities and activity in the market. However, the market is not yet stabilized and is not expected to be until later in 2009. As in other markets, the lack of capital will constrain new supply, with the possibility of an undersupplied market within 12 to 24 months.

The panel agreed generally that the Vancouver 2010 Olympic Games will be very positive for Vancouver in the short run, and are occurring at an opportune time in the economic cycle. Finally, when asked to provide one simple piece of advice to younger members of the audience who had not experienced a recession previously, the panel's answers were "work hard", "work harder", and "don't forget that all recessions are followed by recovery".