Treegroup Sets the Record Straight on Provocative Globe & Mail Article Entitled “The Great B.C Real Estate Bust”

Vancouver, B.C.  Treegroup Developments Corp, an established Vancouver developer, is troubled over a recent Globe and Mail article by Jim Sutherland printed October 29, 2009 entitled: The Great B.C Real Estate Bust. According to Norm Porter, CEO of Treegroup, “the article provided a bleak picture of B.C. real estate, is unbalanced and co-mingles B.C. issues with negative national and international events.”

“Specifically, the article painted a broad brush of gloom and doom for B.C. and fails to adequately realize the profound impact of the collapse of the credit markets worldwide, the consequences of the fall of oil prices on Western Canadian homebuyers and the debilitating result of the stock market collapse,” said Porter.

The article focuses particularly on the Okanagan region, an area that has been hard-hit. Porter noted that Treegroup has just announced the development of the 400 acre Ponderosa project in Peachland, B.C. and felt compelled to put into context and perspective another side of the Okanagan story not being told by the Globe reporter.

Mr. Porter notes that: “Mr. Sutherland makes some good points, but he skirts the real issue.  The conclusion that Mr. Sutherland should have come to is that all these projects failed because of one common element.  They are located outside existing communities where there is no social infrastructure and community to provide the market for a broader base of housing type that would have ensured success of these projects in all market cycles.”

“The point of differentiation with our project” stated Porter, “and the reason why we will succeed, is that we are located in the existing community of Peachland, which has over 100 years of local history, and social and town infrastructure that gives us lower offsite costs than more remote locations.  By social infrastructure, I mean the elementary schools, the seniors centre, boys and girls clubs, churches, and other community activities.”

Porter stated “when planning the Ponderosa project, we specifically addressed the challenges such as those identified by the projects named in the Globe article. Apart from the stunning location of the Ponderosa property, and the diverse mix of product types that will appeal to all buyer demographics, the project has a sound business model that is a core value of Treegroup.”

The model is based around a minimum of debt, strong capital backing, and an experienced development team with broad real estate and business backgrounds. Porter noted that “our experience has shown us that to succeed in real estate development through all market cycles, location is the critical difference, followed closely by experience, and finally the business model.”

“The article correctly suggests that the fundamental attractions to B.C. and positive demographic trends will continue and lead to recovery, and reinforce the fact that the Okanagan is the fastest growing region in Western Canada.  We purchased the Ponderosa lands at the right price and will be building infrastructure when building costs are more reasonable,” said Porter. “We know we are in a position to benefit from the improvement in the real estate market, and, as Mr. Sutherland states:  “building a town (now)…begins to seem like a prudent idea”, which is exactly our point!”

Treegroup Developments Corp., a British Columbia company with over 25 years of experience in land development and construction are the developers of Ponderosa and several other lower mainland communities.

Included in this release is a copy of the letter to the editor Porter sent the Editor of the Globe and Mail ROB.

Ms. Elena Cherney
The Editor
Report on Business
The Globe and Mail

Dear Ms. Cherney:

It is with considerable interest that I read the provocative article of October 29, 2009 relating to the “The Great B.C. Real Estate Bust” by Jim Sutherland.

Mr. Sutherland makes some insightful comments about the factors giving rise to the explosive real estate development in B.C. over the last thirty years being:

• Anti development sentiment arising from environmental consciousness
• Impact arising from creation of the 1973 Agricultural Land Reserve
• Accessibility of Capital
• Inexperience of many developers
• Impact of “West Jet Effect” on BC developments
• Demographics

However, Mr. Sutherland paints a pretty bleak picture of B.C. and in particular the Okanagan which in my view is unbalanced, lacks context and comingles B.C. issues with national and international events.

Specifically, he fails in his article to adequately realize the profound impact of the collapse of the credit markets worldwide, the consequences of the fall of oil prices on Western Canadian homebuyers and the debilitating result of the stock market collapse.

The article points out that the main challenges faced by the various projects were:

• High ratio debt financing
• Under capitalization
• Lack of development and even business experience
• Poor market timing
• Isolated resort developments

Treegroup Developments Corp., our company, has just announced the development of the 425 acre Ponderosa project in Peachland, in collaboration with Greg Norman and in partnership with the Westbank First Nation.  We feel compelled to put context and perspective into Mr. Sutherland’s assertions with respect to our project.

The point of differentiation with our project, and the reason why our business model is very sound, is that we recognized and directly addressed the challenges faced by the projects named in the article.  Apart from the stunning location of the Ponderosa property, and the diverse mix of product type that will appeal to all buyer demographics, our business model also has the following components:

1. Minimal Debt Model
2. Extremely well capitalized
3. Experienced development team and partners with a broad base of real estate and related business experience
4. Timing is perfect.  We purchased the land at the right price and will be building the infrastructure at the right price
5. Our location in Peachland has many attributes not present in the projects referenced:

a)     existing infrastructure with little offsite costs;

b)     a social infrastructure that has 100 years of history;

c)     a planned expansion of an existing community, not a resort development;

d)     a golf course amenity has existed on the property since 1979

The article correctly suggests that the fundamental attractions to British Columbia and demographic trends will continue and will eventually lead to recovery.

Our commitment at Treegroup is to adhere to the principles which are the foundation of our business model and which experience demonstrates and the article correctly states are well founded.

Challenges yes but let us put context and perspective to B.C. real estate development – it isn’t just bust or bubble – it is a cycle, just as it is elsewhere, and we can and will succeed if we seek solutions to the challenges we face.

Sincerely,

Norman Porter
Chairmain and CEO
Treegroup Developments Corp.

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