The quick rise and public fall of Vancouver’s Coromandel Properties

But now, Coromandel finds itself under scrutiny and the talk of the town. Its recent petition to B.C. Supreme Court seeking creditor protection reveals a pattern of high levels of leverage and repeated borrowing to hold onto properties while failing to develop them quickly enough.

The company has declared it is in financial trouble with $700 million in outstanding debts on 16 prime Vancouver properties, most of which are potential development sites. It is seeking relief under the Companies’ Creditors Arrangement Act, seeking time for the company to be restructured.

Coromandel’s creditor protection application was delayed in a B.C. Supreme Court hearing on Thursday, around the same time hundreds of real estate industry professionals were gathered three blocks away in a hotel ballroom to hear Vancouver Mayor Ken Sim speak at an event hosted by the Urban Development Institute (UDI).

It’s a fall from grace for a company that grew relatively quickly to amass a portfolio of 16 prime Vancouver properties. Coromandel’s petition pegs the combined appraised value of those sites, based on their existing use or Coromandel’s plans for them, at more than $1 billion.

Coromandel Properties began as CM Bay Properties. In 2014, the company paid $15.8 million for a former gas station site near Oakridge Centre that was notable for a proposal to build a mixed-use condo and retail complex in what media reports at the time described as a record-setting per buildable-square-foot price.

In 2015, it moved into offices on the 18th floor of a building on West Georgia Street in downtown Vancouver and announced it would be known as Coromandel Properties, putting forth Jerry Zhong, also known as Zhen Yu Zhong, as its principal.

The company now leases 12,000 square feet of space in the Georgia Street office tower for $19,892 a month, according to a list of assets and liabilities included in the court petition.

In the following years, Coromandel continued to add to its portfolio. The petition outlines the company’s vision for several of these sites, including tall towers combining hotels, offices, condos and apartments. But figures in the development industry say the company has, to date, completed a limited number of relatively modest projects.

Earlier this month, Coromandel’s website listed nine “future development” projects, four in various stages of development, and only two completed projects.

“I would call them a small developer with unusually large land holdings. They’re a small developer, both in terms of their past track record and overall amount of property under development,” said Jon Stovell, who has been in the Metro Vancouver real estate development industry for more than 25 years and is chair of the UDI and president of Reliance Properties.

“It’s fair to say it’s a significant event. Everybody is keeping an eye on to see how it sorts itself out. It’s primarily a function of a very, very, very rapid increase in interest rates … and not surprising that some developer, maybe, is caught on the wrong side of that, just the way that their capital is structured,” said Stovell.

Ronn Rapp, CEO of the Homebuilders Association Vancouver, put it this way: “Everyone has to start somewhere, but the order of magnitude in this case is unusual.”

Typically, developers want to sequence their projects “to drive a more evenly balanced cash flow position,” Rapp said, with some projects in early stages while others are under construction and others are completed and driving revenue.

In July 2015, Zhong explained in a news release that his company’s new name, Coromandel,  was “derived from the valuable screens that were created in China and shipped all over the world via the Coromandel Coast of southern India. We chose (the name) to honour the heritage of our company’s principals who travelled from China to make Canada their home.”

But there were also much smaller companies, backed by a mix of money from B.C., other Canadian provinces and overseas that were jumping into the market to assemble residential land and buy commercial sites in various part of Metro Vancouver.

Coromandel was one of several of these. Some local developers were critical of the way these newer companies seemed to be buying prime lots at top dollar with no pressing plans to develop them. Academics and observers said it wasn’t the first time inflated real estate prices were being blamed on investors and immigrants from Asia, pointing back to the 1980s and 1990s-era exodus of people and money from Hong Kong to Vancouver.

Instead, the company threw its support behind popular events like the Vancouver Cherry Blossom Festival and charitable causes such as the Vancouver Sun’s Adopt-A-School program. At the Vancouver Art Gallery, it joined some of the city’s high profile entrepreneurs, such as Artizia founder Brian Hill, as well as big corporate names, such as BMO and TD, in being a lead sponsor and backer of major exhibits, including Claude Monet’s Secret Garden and Takashi Murakami’s The Octopus Eats Its Own Leg.

In one of the few public photos of Zhong, he is pictured at the opening of the Murakami exhibit standing with a big cheerful smile next to the Japanese pop artist.

Like many other more established developers, Coromandel and Zhong also threw money into political contributions. Elections B.C. records show that in 2017 alone, Coromandel donated $20,000 to the B.C. NDP and $35,000 to Vision Vancouver. Ahead of the 2018 election, Zhong also donated to Vision and independent candidate Kennedy Stewart.

Zhong attended events and parties, but kept a low-profile in the media.

Stovell said he does not personally know Zhong, but knows Louie from his time on city council, saying “he was a great councillor and did a lot for the city.”

Louie grew up in East Vancouver and his career took him from bundling Vancouver Sun and Province newspapers in the viewless basement of the old Pacific Press building, where he was a union rep, to a key player in Vancouver’s city council chamber, to Coromandel’s board rooms.

Louie was first elected to Vancouver council in 2002 representing COPE, as the left-leaning, union-backed party swept to power. He was part of the split from COPE which produced the more centrist Vision Vancouver, the party with which he was re-elected to council in 2005, 2008, 2011 and 2014.

Coromandel didn’t make Louie and Zhong available for an interview, and declined to answer questions by email.

John Nicola, CEO of Nicola Wealth, said his company bought Coromandel out of a joint venture earlier this year to build two apartment towers on a site near Oakridge.

“They, at the time, needed a liquidity event,” Nicola said. “They had obviously, in hindsight, pressure from these other projects, and we were committed to going ahead, so therefore we said: ‘OK fine, we are going to continue on our own.’”

— With research from Carolyn Soltau