Another "Billion Dollar" Lesson?

This past weak debt laden Intrawest sold off another one of it's ski resorts in an effort to avoid an auction of assets by its lenders on February 19th. Panorama Mountain Village located in southeastern BC was sold to a group of local investors that plan to continue building the facility into one of Canada's top family oriented ski resorts. Although the price was not disclosed, it is reported to be far less than the estimated $100 million U.S. Intrawest received for the sale of its Copper Mountain Resort in Colorado.
As Intrawest continues to negotiate with its lenders, no one for sure knows what will transpire come February 19th during the Olympics when the auction of assets is scheduled to take place and no one can speculate what the future outcome will be for Blue Mountain or the Village at Blue.
One thing is certain however, this is yet another example of an acquisition funded with massive debt gone bad. I am currently reading an excellent book entitled "Billion Dollar Lessons" written by Paul Carol and Chunka Mui. For those of you interested in business this is an excellent book chronicling some of the more significant business blunders of all time including acquisitions made by companies that turned into colossal mistakes.
Purchased by Fortress Investment Group LLC in 2006 for $2.8 billion U.S., Intrawest like a lot of other highly leveraged companies has struggled under a significant debt load. As long as a steady stream of cash flow continues in order to make the loan repayments, leveraged buyouts can be a success. More often than not however, many companies in this position find themselves facing changing economic times or a downturn in sales revenue that ultimately means disaster.
Many experts believe that an auction of assets in this economy at distressed prices will not benefit anyone, especially the creditors. Will Intrawest's woes be another footnote in the book Billion Dollar Lessons? I guess with February 19th fast approaching we'll soon know.

How Important Is A Home Inspection?

In today's residential real estate market, home inspections have become an integral part of virtually every resale property transaction. Most REALTORS® will insert a home inspection "condition" into an Agreement of Purchase and Sale, making the buyer's offer conditional on obtaining a satisfactory home inspection. Does this mean the house has to be perfect? No. Is this a tactic to potentially get out of a deal should the buyer(s) change their minds? No. The purpose of a home inspection is to simply obtain a report on the condition of the property at that point in time. If done thoroughly, a home inspection will help forewarn a buyer(s) about potential problems with a home suggesting that further examination is required ie: bring in a structural engineer or conduct a mold test etc.

Television personality Mike Holmes has repeatedly criticized home inspectors and rightly so. Some inspectors lack the knowledge, training and or experience to thoroughly inspect a property and render an accurate assessment of its condition. However, let's not lose sight of one thing. A home inspection which typically takes 2-1/2 to 3 or more hours is only a "visual" inspection and most inspectors will duly explain that to the buyer(s). A well qualified inspector will enter a crawl space, go up into the attic, pull the cover off the electric panel, run the appliances and so on. They don't however punch holes in drywall to examine an inner wall structure nor can they visually assess the interior of a home's foundation walls if the basement is fully finished. A well trained home inspector will however note certain conditions that could be the tell tale signs that are masking something much more serious.

CBC's program Marketplace recently did a segment on home inspectors the main focus of which was in relation to grow houses. Click on the link below.

http://www.cbc.ca/marketplace/2010/grow_op_cover_up/main.html

In this show, four out of four home inspectors missed and or ignored warning signs that the subject property had one time been a grow house. That's a pretty shoddy reflection on the home inspection profession. To date, the home inspection industry has a long way to go before it is regulated to the same extent that we as REALTORS® are. The Canadian Association of Home and Property Inspectors is working diligently to improve the training and effectiveness of its members. The irony is however, if a REALTOR® were to sell a home with known deficiencies and failed to protect their client, the REALTOR® would stand to be in a lot more trouble than a home inspector that had failed to properly assess and report on the home's issues. A consumer's only recourse with a home inspector is with a civil suit. A REALTOR® on the other hand faces severe consequences both civilly as well as with the Real Estate Council of Ontario (RECO), the body enforces the Real Estate and Business Brokers Act, provincial law with which we must adhere. If found negligent, RECO can bring forth a variety of measures against a REALTOR® including fines, mandatory training, suspension or worse, revoking of a REALTOR'S® license thus ending their career.
It is by far in a REALTOR'S® best interest to recommend a well qualified home inspector, one that will leave no stone unturned in fully inspecting and reporting on the condition of a property. There is nothing to be gained and a lot more to lose by having a buyer(s) purchase a home that turns out to have issues that should have been detected in a home inspection. It's not only a matter of "let the buyer beware," but the REALTOR® as well.

Royal LePage Hospice Ski Day

This year marks the 25th year of Royal LePage's support of Hospice Georgian Triangle with our annual fundraising "Ski Day." For those of you not familiar with the organization, Hospice is a charitable, volunteer-based group, providing non-medical support to individuals, and families living with any life-threatening illness. 90% of the cases here in the Georgian Triangle deal with cancer.

This year's Ski Day is Thursday February 4th at Craigleith Ski Club. In addition to a great day of skiing, there is a buffet lunch and silent auction. Tickets for the day including skiing are only $100 and this represents one of the best values amongst the many charitable ski events throughout the winter. For those of you that do not ski, lunch tickets are $35, bring your snowshoes and hike up the switchback trail at Craigleith then enjoy apres ski/snowshoe activities in the lodge while perusing the many items available on the auction tables.

Tickets are available by contacting Heather during normal office hours (9:00am to 5:00pm) at our Collingwood office 445-5520. We hope to see many of you on the slopes at Craigleith February 4th!

Special Concert for Haitian Relief

Disaster relief for the victims of the earthquake in Haiti has spread globally including right here in Collingwood.
A benefit concert is being held this Sunday, January 24th from 3:00 to 10:00pm at Fairways "The Party Place" located at 2-20 Balsam Street (across from Montanas) Admission $10.00 with 100% of the proceeds going to ad the people of Haiti.
Fellow REALTOR® and musician Fran Webster of "The Webster Family" has helped to organize this event which will include numerous local bands and singers including: Aaron Garner, Fig Leaf Jazz Band, Ladies Night out, Jeff Cunningham and others.
This sounds like 7 hours of great music featuring a variety of local talent all in the name of a very worthy cause. John Nichols the Peak FM's morning man has agreed to host the event with Fairways donating the space. Sunday's weather is calling for a temperature of +7 with rain. Sounds to me like a perfect day to stay indoors listening to some good music in support of a great cause.

World Cup Ski Cross Comes to Blue

Over the past past two days, Blue Mountain Resort has hosted The Rockstar Ski Cross Grand Prix which is part of the FIS Freestyle World Cup. 125 of the world’s best ski cross racers from 25 countries, including Canadian World Cup and World Championship medalists participated in the event creating quite a spectacle for the crowd on hand and heightening the excitement for Canada's entries in the upcoming 2010 Winter Olympic Games.
Canadian ski racer Ashleigh McIvor, the 2009 FIS World Champion in ski cross and Stanley Hayer, the 2009 Winter X-Games winner and multiple World Cup medalist, raced for the first time ever at Blue Mountain. McIvor finished second.
Commencing at the top of the Silver Bullet chairlift, the course arched across the top of the Tranquility and Smart Alec runs before descending into what was previously known as the Yahoo terrain park with the balance of the course snaking its way down Smart Alec terminating at Blue's central base lodge.
For those unfamiliar with ski and snowboard cross style racing, four competitors run the course simultaneously in a roller derby style race to the bottom. The top two finishers of each heat moved on until the field gets whittled down to the final few. All in all it's a pretty exciting format with racers jockeying for position often resulting in multiple spills. I took in a few heats at the top of the course then skied down to the bottom where a sizable crowd was on hand to cheer on the Canadians. Errol Kerr a ski cross racer from Jamaica was on hand and was a popular competitor with the kids, signing their helmets etc. at the bottom of the course. Who can forget the Jamaican bobsled team from the 1988 Olympics in Calgary that inspired the movie "Cool Runnings" with Canadian actor John Candy.
Ski and snowboard cross which started out at the X-Games are newly added events to the Olympics and they will no doubt add a great deal of excitement. The next stop on the ski cross tour is Lake Placid before the racers head to BC for the 2010 Games.

What a Difference a Year Makes!

One year ago Canadians were being pummelled by overly-negative media reports regarding the global economy including real estate. While cleaning up some files I came across two copies of Maclean's magazine featuring articles that had prompted me to write letters to the editor as did others in the housing business.
As far back as their October 6, 2008 edition, Maclean's cover was emblazoned with the headline "Canada's Looming Real Estate Crisis" followed by the sub-title "Why House Prices May Soon Fall Through The Floor." Further, the Maclean's March 2, 2009 cover story boasted "The value of your home is about to drop another 20%."
Late in 2009, Canada began to show signs of what will be a slow recovery from the current global recession lead by a strong real estate sector. Was there ever a crisis? No. Did home prices drop significantly last year? No they didn't much less did they "...drop another 20%." Sure, some over-heated markets such as Calgary and Vancouver that saw huge run-ups in prices over a short period saw price adjustments but the prediction of a widespread "crisis" by Maclean's and other purveyors of doom and gloom just didn't happen.
Little more than midway through the month of January, real estate sales locally are running more than double what they were in January of last year, currently at $12.4 million versus $11.9 million for the entire month of January last year. I suspect positive information such as this is not going to make the cover of Maclean's or other print media, it simply doesn't sell newspapers or magazines.

U.S. Real Estate Woes Continue

While the overall Canadian real estate market including activity locally showed renewed strength in the final quarter of 2009, the same cannot be said for our neighbours in the U.S.
The U.S. economy continues to struggle its way towards a recovery and has yet to generate any traction in the all important area of job creation. Many Americans even those with conventional low risk mortgages are under the threat of losing their homes in the next year or two the result of being unemployed. This has now spilled over into the two other segments of the U.S. real estate market as well.
The commercial real estate market is under great threat of collapse. As tenants go bankrupt, out of business or just start to close unprofitable retail locations etc. many investors with significant holdings in commercial real estate are going to incur massive losses. PriceWaterhouseCoopers believe that 2010 will be the worst time in 30 years for commercial property investors in the U.S. to sell their holdings. The question on every one's mind is what impact this will have on the housing market?
In short, this creates the potential for bad news in the luxury residential market. Investors, brokers, builder/developers, tenants and others that are engaged in some aspect of the commercial real estate market are often the buyers and sellers of luxury homes as well. If he commercial real estate market suffers any significant fallout stemming from the ongoing recession being experienced in the U.S. the luxury home market will be sure to take a hit as well.

4th Quarter 2009 Real Estate Sales Increase 101%

Real estate sales across southern Georgian Bay rebounded strongly in the second half of 2009 particularly during the 4th quarter which saw sales more than double over the 4th quarter of 2008.

Following a lackluster start to 2009 which saw 1st quarter sales decline 47% from the first quarter of 2008, low interest rates, strong consumer confidence and an abundance of properties listed for sale all contributed to fuel increased sales activity during the balance of 2009. As a result, total sales revenue for the year exceeded 2008 by 10% totaling $484.7 million while unit sales rose 8% to 1,857 individual properties sold.

Single family MLS® home sales across the area increased a respectable 4.6% during 2009 with 1,195 homes changing hands. Surprising strength was shown in the condominium market which saw unit sales increase by 22% from 266 units in 2008 to 324 sales in 2009. Neither of the aforementioned results include the sales of new homes and condos made by developers that were not listed on the MLS® system of the Georgian Triangle Real Estate Board.

Of particular note during the latter half of 2009 was the renewed strength shown in the upper-end of the market. Sales above $500,000 for the year increased by 12% to 125 properties compared to 107 in 2008. More significantly, sales from $800,000 to $1 million totaled 15, an increase of 36% while sales over $1 million totaled 15 as well, also reflecting a 36% increase.

Unit sales for 2009 of 1,857 properties reflected an 8% gain over the 1,720 properties sold in 2008. The number of new listings that came on the market in 2009 totaled 5,875 down slightly (2%) from the 6,000 new listing that were recorded in 2008. Conversely, the number of expired listings increased by 6% to 3,112. This was the 5th consecutive year where the number of expired listings exceeded the number sold. Many sellers and/or their respective agents are not listing properties commensurate with current market values. The reduction in new listings relative to sales reflected more balanced market condtions which in turn helped to stabilize prices. Prices throughout the area have remained relatively constant with the average residential price actually increasing in 2009 by 2.4% to $285,785.

For a complete summary of market activity 2009 vs 2008, see my 4th Quarter Georgian Triangle Real Estate News.

2010 Real Estate Outlook

In a press release out today, Royal LePage Canada has issued their forecast for Canada's real estate market activity in the first half of 2010.
Given the market strength that was shown if the last quarter of 2009, all indications are for the momentum to continue during the first six months of 2010. What is unknown at this point here in Ontario, is the impact that the forthcoming harmonization of PST/GST will have as it will create added costs to both home sellers and buyers. Estimates are the average real estate transaction in Ontario will incur $1,400 to $1,500 in added taxes resulting in new taxes being applied to legal, appraisal and home inspection fees, real estate commissions etc.
As part of their 2010 market forecast, Royal LePage also issued their quarterly house price survey for the last quarter of 2009. Nationally, statistics show that house prices for bungalows and 2 storey homes rose at an annual rate of 6.04% and 5.2% respectively while standard condominium prices increased by an annual rate of 6.35%. Clicking on the above hyperlinks above will give you access to the two Royal LePage publications.
In my next posting I will recap the year-end results pertaining to local market activity here in the Georgian Triangle.