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episode # 240

Understanding Vancouver’s Housing Market in 2020 with Anthem’s Eric Carlson

You asked for him and we got him! The one and only Eric Carlson, Founder & CEO of Anthem Properties Group, joins Adam and Matt to talk all things real estate and the Vancouver housing market. With a growing portfolio that includes 15,000 homes in various stages of development, 8 million square feet of commercial space, and 6,100 acres of land across Alberta, British Columbia and California, Eric knows a thing or two about the market and has a lot of wisdom to impart. How’s the Vancouver real estate market? What makes a good investment or development site? And where should you buy right now? Check this episode out and share it with your family and friends. They will thank you for it!

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Episode Summary


 

Who is Eric Carlson?

Eric Carlson is the founder and CEO of Anthem. I grew up in North Van, so I’m a local guy and have been in the city my whole life. I have three siblings and we all get along well. I had an excellent childhood – I went to public school, played sports. I went to the University of British Columbia and had a phenomenal experience there. I met my now-wife there. I was a business graduate and graduated in a recession. It was very hard to get a job in real estate, so I worked as a chartered accountant. Which was an inadvertent positive, as it taught me a lot about thinking critically and finances. I then worked with a development company and eventually left during the next recession to start my own business, Anthem. I also had two kids along the way.

Anthem Properties is an integrated real estate development company. We own income properties and build thousands of homes each year – all kinds: single family, wood frame, condo buildings, high rises, mix-use, etc. We currently work in Sacramento, Vancouver, Calgary and Edmonton. We do most of our work in house – construction, marketing, etc. Overtime we want to export our skillset to other markets. In ten years from now, we’d love to be working in six cities. In addition to real estate, we exist as a community that benefits the people in the company and the people outside of it. We want to better the world around us. The minds and hearts of the people who work at Anthem are really important to us.

Development has a PR issue, especially in Vancouver. Developers are blamed for high housing costs. So, one of the challenges any developer faces is to show the world we’re creating what the community needs. We want to be a vibrant place where people work and a company that continues into the future. We want to keep adding value, adding space and getting better. We’re a real estate company but we’re more than that too.

Why real estate?

Through my life circumstances, I developed a desire to be independent. I wanted to be self-employed. Even though I took an unorthodox route to get here, I’ve always liked space. As a kid I played in treehouses, built LEGO, etc. Spaces always resonated with me. So, when you combine those two things, it leads to real estate. My dad was also an architect and he’d bring his drawings home. So, it’s always felt natural to me.

If you’re going to be working long hours, you want to like the work you’re doing. Other businesses didn’t feel as fun for me as real estate. I love space so it’s easier for me to work in it and I enjoy it so much more. I could talk about real estate 24/7; it’s a hobby and a business.

When you started Anthem Properties, did you have this size of a business in mind? How did you scale so quickly?

I wanted a company. In real estate, it’s easy to be a guy who hires people to help him. But that’s not a company. You’re not building a company that’s going to last after you. 25 years ago, I thought about what I wanted this business to be. I wanted to be more than a guy who builds stuff – I wanted to be a company. It’s not about short-term gains when you’re building a business like that. In the great man model, you’re limited by your own ideas. But when you create an organization, you can benefit from teams and others’ ideas. When people see more opportunity beyond just helping you, they may contribute more to the team. That’s why we became more than just a real estate business.

And that’s how we scaled. You do spend a lot of time and money on systems, defining culture, etc. It’s not just going out and doing it like you could when it’s just you. You also have to ensure you don’t turn into a blob where you get stuck in bureaucracy and processes.

By building the foundation the way we did, we could grow bigger, better and faster. The company began in 1991. In the first few years, growth was slow, but it began to pick up. When you have this organization to fall back on, you can scale. To grow beyond where we are now, we’ll need to do more organizational work.

How does Anthem choose markets and development sites? Where do you see the opportunities?

The two things I always look for in any market are population growth and job growth. If the population is growing, they need a place to be – whether it’s a place to live, work or shop. And job growth gives that validity; it drives the economy. So, I like to see both.

When I started Anthem, Metro Vancouver was not what it is today. It wasn’t international or seeing the growth we have now. The first city I picked in the 90’s was Denver, Colorado. It had the job and population growth I was looking for, as well as good deals in real estate. Anthem has moved around in the years – we’ve been in Denver, Phoenix, Houston and Toronto in the past. We were mostly investing in income properties, but found we made more money if we focused on development. So, we came back to Metro Vancouver and refocused here.

If you go back ten years, Alberta was on steroids. There was huge growth. So, we expanded there. That was good for a while but has been a pain ever since. But it will get better again. We did want to get back to the US because they have good markets and opportunity. We bought a business in Calgary that had an office in Sacramento, which gave us a toehold in the US. Sacramento fit our criteria. But it kills me that we don’t have a big operation in Colorado anymore; we should have stayed there. Phoenix and Texas, too, were great. We could get more done down there (pre-COVID). Toronto is also beckoning us.

Did I always pick the right markets? Sure. But we left markets we shouldn’t have. But you can only handle so much, especially early on. You have to be able to chew what you bite off.

Picking sites is Real Estate 101. It’s all about location. A high-rise need to be transit-oriented, near where people work, in a walkable area, etc. You want to be where people want to live or where people want to work. And then you have to look at what’s available at what price.

Because we’re diverse, we don’t always have to be downtown. In Vancouver, we like to be anywhere near a skytrain. In the suburbs, we like to create community around town homes. We look at what’s in alignment with our strategy.

Opportunity is everywhere always. Sometimes it’s easy to see and sometimes it’s hard. When there’s a boom, if you go where the action is, you’ll probably be okay. In good times, the opportunity seems to be doing anything. In bad times, it seems like there aren’t opportunities but there are. You might get a deal you never could during a boom.

Today, the obvious opportunity is wherever you see job and population growth. Go there and hunker down. But costs are high, and regulations are insane. Regulations increase costs, no matter what. So, if you find something you can get through quickly, that’s the opportunity. But you have to really look for it.

For example, Toronto is a hard place to make money but it’s always growing. So, if you go set up your shop and get good at your business, you’ll make money. But there are challenges everywhere.

If you don’t have growth, you don’t have opportunity.

Why do you stay in Vancouver? Does this market make sense?

I’ve asked myself this many times. One of the core strategies of Anthem is diversification. It doesn’t work in every market. In the 90’s, Vancouver was dead. You couldn’t make any money in real estate. That reinforced to me that you need to be able to work more than one asset class and in more than one market.

Vancouver has been successful for the last 20 years but it’s getting hard to make money. Regulations have gotten complicated, land is expensive, debt is a problem, etc. Whereas in Sacramento, we can get rezoning and building permits in a year and everyone loves you – here it takes four years, and everyone hates you. That’s why I’m not just in Vancouver.

In Vancouver, we have an inexperienced mayor, a disjointed city council and a provincial government that likes to intervene in markets.

Alberta was great for a few years until the oil economy began to falter. The stress test also made it hard for people to buy homes and there’s a broad anti-Alberta sentiment. But I’m not giving up on Alberta. For example, Calgary has three universities, lots of young people and cheap housing. If you want a house with a backyard or want to start a new business, you can do that in Calgary. There’s opportunity there but it’s a tough slog right now.

Have you been surprised with how the market in Vancouver has reacted in the last six months? Are you excited about the future of the market in Vancouver?

It’s about demand and supply. Because Vancouver is what it is, it’s an attractive place for people to live and visit. I think that will continue. Canada is a high functioning democracy. Our environmental standards are high. It’s a great place for people to be, anywhere in the country. Our national birth rate is low, so we have a pro-immigration policy because we need it. So, the demand will always be here.

Every year you need new housing to keep up with the demand. But we can confuse that demand when we mess with immigration policies, new taxes and regulations, etc. People are waiting for the market to correct and to adjust to the new policies. Governments can disrupt the market, but they can’t control it in the long run. What we saw in January of this year was people saying, “Enough already!” Prices weren’t moving and the policies didn’t work in the long run. People were ready to buy. But then COVID happened.

But the demand is still there. And now with the low interest rate and people getting used to life with COVID, the market is starting to come back to life. The demand will always be there. It’s just a matter of how we mess it up.

The other side is supply. And that’s what is frustrating about the region. Housing prices will go up with no new supply. From that point of view, the market sucks. Municipalities are bogged down. The population doesn’t understand that the affordability issue in Vancouver is due to supply constraints, which is the political will. Until that changes, we’re going to be a tough market to be in.

We’re going to get 60,000 immigrants to BC each year and more than half will come to Metro Vancouver. They’re coming and we need to plan for it. Will the government act accordingly? I’ve seen progress in some municipalities and hope we reach equilibrium.

For aspiring investors, where and what would you buy?

That’s a tough one! Ideally, if you’re passive about real estate and can invest directly, you’d buy a condo and rent it out or rent out your basement suite. In Vancouver, that’s a good thing in the long run. If you have a bit of money and want to invest, you could go into the stock market in REITs (real estate investment trust). You could get steady cash flow from rent. You could also contribute to syndicated mortgages, which is a good rate of return on a relatively stable investment.

Bigger investors could also co-invest with real estate developers. You could invest with Anthem or companies like us.

The good thing about REITs is that they are regulated. Those are good opportunities for investors with smaller amounts of money. So, invest directly if you can pull it off or indirectly with REITs and syndicated mortgages.

Five wire:

Favourite neighbourhood in Vancouver: Chinatown, Strathcona, West Pender transitioning to East Pender

Favourite bar or restaurant: Nightingale Restaurant

Book you would recommend everyone read: 7 Habits of Highly Effective People by Stephen Covey

One piece of advice you would give your 18-year-old self: Always listen. You don’t always know how things work, so keep listening. This will make your life way better.

Something you have purchased for under $1,000 that has changed your life: Garmin Fenix 5 sports watch

Find about more about Anthem.

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