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episode # 131

Forecasting the Future & Holding onto the Past with Developer Kush Panatch

Developer of 50 Electronic Avenue, Kush Panatch, joins Adam and Matt to discuss his trailblazing new project in Port Moody’s most up-and-coming area. Learn Kush’s best investment advice, market predictions, and tips and strategies for growing your net worth through careful forecasting and long-term holds.

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Episode Summary


 

About Kush and the Panatch Group:

Kush is President of Panatch Group, a small, family-owned operation out of Richmond that’s been around for 30 years. Up until the last few years, the company was primarily involved in holding commercial and industrial properties for the long-term. Now, it is evolving more into building in Richmond. Panatch’s last two projects have been mixed-use. Some of the properties they own go back 15-20 years and have become development properties as the areas have evolved. The company has become more of a developer than an investor.

On Panatch’s process and focus, and what they look for in neighbourhoods:

It’s not magical or complicated. Looking at the long-term and being patient is key. Many people hope they can make it overnight, but it’s a longer-term business if you want to stay in it and become successful. Over the past 20-25 years since Kush really got involved with investments, he always looked for areas with a potential for transition – that is, large, underutilized land holdings with perhaps a two or three-acre property nearby. The idea is that if a change takes place in close proximity, he would benefit from it.

Port Moody was very much in this vein. Kush went there 20 years ago and found a big, old IPSCO steel plant next door to a property. It had been shut down and he knew they would not restart it. He then found out it was going to be re-zoned and redeveloped. There was another adjacent 25-acre piece of land, ideal for development. This is what piqued Kush’s interest in the 3.5-acre property with an old, rundown warehouse—his purchase was a direct result of seeing the two larger properties. Panatch took the longer-term view of acquiring it, fixing up the warehouse, getting a tenant, and hanging on for what will be 20 years.

On how Kush got started:

Kush got started the old-fashioned way: selling residential real estate. He started this in Richmond in 1988 and was fortunate enough to get in as the market was going up and recovering from the slump in the early-1980s. He succeeded, and even became one of the top Remax agents in Richmond for a couple of years. He noticed what some developers were doing there, and after three or four years he took his savings, bought up some small lots, and looked into how he could redevelop them. Eventually, Kush started buying and consolidating single-family lots for townhouse development – initially selling them to larger developers for building. About 12 years ago, he collaborated with some Richmond developers that took care of construction and marketing. Over time, they took on the whole process themselves.

On where underutilized land is currently located in Greater Vancouver:

It’s becoming more and more challenging because the area is being so built out. Another difficulty for younger or more inexperienced developers is the fact there is much more money and capital chasing everything. Kush used to buy properties in areas generally within the typical small developer’s or investor’s range (about $2-5 million) which weren’t on the radar of larger players. Now, even small developers are buying in the $5-10 million (up to sometimes $20-50 million) range, which is making properties so hard to come by and pushing the big developers out. As a result, they’re buying up in the smaller ranges! Business dynamics have changed significantly over the past few years.

On the current softening market and attempts to clamp down on demand, and whether Kush sees this shifting back:

We’re in a bit of a lull. A couple of times in the past 10-12 years the market has pulled back in terms of demand, due to tax changes or an unaffordable spike, and we saw a lull. However, there is still an unrelenting demand, but whenever we get a holdback for three or six months, prices don’t seem to come back much and the next wave of demand comes up.

Through his travels, Kush has learned that Canada is a very desirable place to people throughout the world, with BC and especially Vancouver being even more desirable – maybe too much so!

On advice for millennials looking to get into the market:

It’s more and more challenging for first-time buyers but they need to look for any angle to get in, somehow. Maybe you buy something further away or co-share a place with someone. Perhaps parents can help or other avenues can be taken. When Kush went to the City of Port Moody, he was asked what Panatch would do for the community to help with affordability issues. So, affordable rental homes were worked into plans for the project. They saw that over 500 affordable rental units were coming on board in Port Moody in the next few years. Port Moody has been very successful in tracking development to provide rental housing.

The challenge for millennials is stepping up from renting to owning. To try to help with this prospect, Panatch Group has set aside 30 units in Its 50 Electronic Avenue project in Port Moody as rent-to-own (which is uncommon). Port Moody residents or workers can put their name down, identify a unit as though they were buying it, and rent it for two years (at $1,000/month for one-bedroom and $1,250/month for two-bedroom units). At the end of the two-year period, they take all the rent paid and use it for part of the down payment to buy the unit. The program has been well-received by the City and its Councillors and was unanimously approved. The sales centre is currently under construction and Kush is hoping to be in the marketplace later this year. He is meeting with the City and local residents soon to discuss how the units will get assigned—they want it to be very fair and transparent.

On areas Kush is most excited about, and if Panatch Group is considering other markets outside Vancouver:

You unfortunately need to go further out to get into the market; if Kush was a young, aspiring homeowner he would look at Langley (both the city and township). He thinks of Langley as a “sandwich” community: it’s near Surrey and the major services it offers, but hasn’t been recognized as much as it could be for the level of amenities it offers. If transit keeps going the way it is, it will eventually go in Langley’s direction. As well, Port Moody and Coquitlam are experiencing a boom due to the Evergreen line. Kush predicts areas like Pitt Meadows and Maple Ridge will see the overflow from this demand in the Tri-Cities area.

Being a small operation, Panatch Group is focused only on the Richmond market (aside from its Port Moody property and past holdings in Surrey). Kush believes in focusing on an area to get to know it really well—sometimes the best opportunities are at your doorstep. He has lived in Richmond since 1980, and most of his projects and investments have been the “unpolished jewels” within a five-mile radius of his home and office. Staying local is really the only differentiating factor now, due to the vast amount of people out there with a lot of money. If you simply chase after what everyone else is chasing, you’ll get beat out every time (this can even happen with local knowledge).

In addition, Kush gets involved in his community and gives his time to non-profits. Catalysts for potential deals may come as a result of a conversation in the community, not necessarily from a realtor. This serves you well on the other end too: if you’re known in the community, you do a good job, and you have a great reputation, you don’t have to spend a lot of time and money on marketing. For its last two projects in Richmond, Panatch did not have to put an ad in the paper or get any market presence until they were about 50-75% sold. These sales were due to signage, reputation, and word-of-mouth.

Another key factor is the ongoing feedback from the community during the building process, which enables you to make decisions based on their needs. For example, on a previous project, Kush knew that past buyers (particularly retirees) had issues with the heat and wanted full air-conditioning in their suites. So, he included this in a subsequent project – which cost about $15,000-25,000 more per unit. Other developers couldn’t believe it, yet he made most of his sales based on this feature.

On what the rest of 2018 looks like:

There won’t be much change from what we’ve seen in the past six to nine months. The underlying demand is still there. This gives people the opportunity to not chase what they see and therefore be more selective. They can take time to compare projects and think things through, which also provides a good opportunity for developers.

Five-wire:

  1. Favorite neighbourhood in Vancouver: Richmond. The Canada Line has made access great.
  2. Favourite bar or restaurant: The small mom-and-pop shops you don’t hear about in Steveston.
  3. Downtown penthouse or west-side mansion: Single-family mansion, if you can afford it, with as big a piece of land as possible.
  4. First place Kush brings out-of-town visitors: Whistler.
  5. Best recent purchase under $500 that’s impacted Kush’s life: The iPad has been a game changer. Kush takes it anywhere he goes in the world.

To learn more about the Panatch Group, visit www.panatchgroup.com.

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