The Realty Deal: B.C. Real Estate Market
Real estate is booming, so why are so few developers on the Top 100 list of B.C.’s biggest companies? Mainly because revenue, our basis for ranking companies, is one bit of information few developers are willing to disclose.
But it also has to do with how the revenues of development companies are calculated. Residential developers – the most obvious candidates to rank among the major corporate players in the province – typically don’t receive the majority of sales revenue from pre-sales until a project completes, explains Lizette Parsons Bell, spokesperson for Concert Properties Ltd.
While revenues on pre-sales are locked in with the purchaser’s deposit at the start of a project, purchasers only begin making payments upon completion – and only then do revenues start to appear on the developer’s balance sheet.
Home completions throughout the province dipped slightly in 2007 after rising steadily from 2001 to 2006. For Concert that translated to a drop in revenues from $255 million in 2006 to $188 million in 2007.
That’s not quite enough for the union-owned developer to make it onto this year’s Top 100. The drop came in spite of an aggressive development program for Concert: it’s currently developing more than 400 units in B.C. and is planning a further 420 starts for 2008 in both Vancouver and Toronto, with additional projects in the initial planning stages. It is also steadily increasing its portfolio of investment properties.
Meanwhile privately held Polygon Homes Ltd. saw its revenues surge last year to an estimated $450 million, from approximately $375 million two years earlier (the company, which participated in the Top 100 two years ago, declined to participate last year but submitted figures again this year). By contrast, Wall Financial Corp. (WFC-T) placed on the list as revenues rose more than 80 per cent last year to $301.2 million – thanks to the completion of units in its Yaletown Park development as well as the Hudson on Granville Street, among others.
The yearly variations in revenues mean rankings for real estate companies can vary wildly (this year’s absence of Concert from the list being a case in point). It also means some companies choose to abstain altogether, because revenues are not necessarily an accurate reflection of economic importance when stacked up against companies in sectors that generate more stable cash flows. “[Revenues] all come in bursts,” says Hani Lammam, vice-president of Cressey Development Corp. “It’s definitely very staggered: it’s not steady, not as in a typical manufacturing or sales-oriented business.”
But Lammam says the majority of developers in B.C. – one thinks not just of Cressey, but also Aquilini Investment Group, the Bosa and De Cotiis companies, Jameson Development Corp. and others – are family businesses not keen on attracting attention to finances. “It becomes a very private matter,” says Lammam.
On the other hand, those within the industry generally know where competitors stand because the economics of the industry don’t vary much between developers, and there’s a general understanding as to how many units each developer is juggling. “I think we know what everybody does and how much volume they do,” says Lammam, noting that Cressey completed 1,400 units last year. “From that it’s easy enough to ballpark the [revenue] figures.” Cressey’s volumes put it among the top five privately held developers in the province, Lammam says, though the top five fluctuate from year to year. And he adds that, with revenues from commercial developments and investment properties, there’s an added unknown in accurately pinpointing the revenues for many developers.
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