A Kelowna developer is looking for some additional investment to get one of its more controversial developments off the ground.
Mission Group Enterprises listed the Aqua development for sale this month through Colliers International at a cost of $60 million.
“The listing process has been set up a certain way with the intention for (the Mission Group) to move ahead with the project and solicit interest in partnerships,” said Luke Turri, vice-president, development for the Mission Group
“We had been working on this project for quite some time with a silent partner whose partnership with us has allowed the project to move through the approvals process, and we recognize now we will need another partner to move the project forward to sales and construction.”
“This is a big project with a lot of complexity to it so we always knew we would need to bring a new partner on board.”
Jonathan Friesen, chief executive officer of Mission Group, said the transaction will involve the sale of Aqua to pay out the initial investor, and a subsequent agreement put in place to determine the renewed stake for Mission Group.
“It does sound confusing but it is our intent in any sale agreement to remain involved in the project. That’s why (Mission Group president Randy Shier) and I went to meet with the mayor and explain what we were doing just to make sure there were no misunderstandings about our intent,” Friesen said.
“We had an initial investor who agreed to come on board until the project reached the entitlement stage, and that has been done. So they want to move on now and we are looking for a new partner. This is the cleanest way to do this rather than trying to sell a portion of the project to draw investor interest.”
Turri said whether the partnership opportunity would be for a minority or majority stake in the project will depend on the response to the Colliers listing, which calls it “arguably the best development opportunity to be offered to the market.”
“We are approaching this with a fairly broad scope but a lot of the conversations at this point would tend to be with British Columbia-based potential investors,” Turri said.
The Aqua project has been in the development permit approval process for a decade, situated on a 6.17 acre site with 470,000 square-feet of building area that will encompass three towers of 12, 14 and 16 storeys in height with 319 residential units, a separate four-storey indoor boat storage facility, and some ground-level retail commercial space.
Aqua would be built on land along Okanagan Lake just south of the Hotel Eldorado, bordering on Lakeshore Road and Truswell Road.
Turri said because this was a planned investment move, reading into it as being a negative assessment of the local condo real estate market would be an over-reach.
“It will be quite some time yet before we are ready to launch a pre-sales campaign for Aqua, so we’ll have to wait and see where the market is at that point,” Turri said.
“I would say this has less to do with current market trends and more about our own timing in the partnership process and securing a new investment partner moving forward.”
While Mission Group has multiple development projects in the works for Kelowna, Turri said Aqua is the largest scale development the company has ever taken on.
“It’s not easy to pull these projects together and Aqua in particular given its location represents a lot of work to get the best value for the site and for potential homeowners. Overall, there is a large commitment of time and effort on our part to help bring that to a reality,” he said.
Ryan Smith, City of Kelowna community planning manager, said from a city planning perspective, Aqua seeking a partner investor doesn’t raise any concerns.
“We are not in control of that side of the business and don’t try to judge it,” Smith said.
He said the influence of a new investor could possibly bringing forward a request for “cosmetic tweaking” changes to the existing Aqua development plan, and there is a process for dealing with further changes.
Kelowna Coun. Luke Stack said he was not aware of the Aqua property investment sale, but said he has become used to dealing with the economic the ups and downs of large-scale residential projects, during his time on council.
“When large proposals come to us, we put time into it, staff puts time into it, and the developer pays fees to work with the city, and you sometimes go through controversial public hearings and make decisions on variances or other unusual features,” Stack noted.
“So yes it is a little discouraging when you go through all that and the approvals are in place, then the developer pulls the pin. But I’ve come to learn over my years on council that is a regular occurrence as the time frame for the process to be carried out will sometimes see new economic realities come into play that were not anticipated.”
Stack cited the ongoing revisions to the Westcorp downtown hotel project, the cancelled Monaco residential towers proposal and initial delays in the high density residential towers along Sunset Drive as reflections of the complexity of bringing these developments to fruition.
Smith said from his city planning perspective, development interest in Kelowna remains high.
“Last year was the biggest for building permits we’ve ever had and this year is shaping up as being in the top three ever,” Smith said.
“Despite reports the market is cooling off, I would say there is still a lot of investor confidence out there based on what we are seeing.”
Smith said while the Alberta economy is struggling and the Lower Mainland housing market has hit a slowdown, the attraction of living in the Okanagan drawn by job opportunities in such sectors as the high-tech industry combined with retirees bode well for the longer term.
“To put it in perspective, I don’t think we are looking at any type of crash like we had in 2009. We are not seeing that loss of confidence. Developers may be a bit more cautious and phasing in plans for new developments in smaller bits and bites.”
Stack added after a long boom cycle, he would not be disappointed to see an overheated real estate market experience an adjustment.
“I think it would be healthy to slow down a bit. The last few years have seen a tremendous shortage of trades people to meet the building demands which drives up building times and costs. If it calms down a bit we can achieve a better balance between labour and growth demands.”