Episode 29 - Real Estate Insights from a Canadian Urban Planning Expert with Tegan Smith
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This week, Nicole and Greg engage with Tegan Smith, CEO of Channel Consulting and founder of Uplift Fund. Tegan shares her 26 years of expertise in urban planning and real estate development, focusing on real estate investing as a key strategy for family wealth-building. She discusses the challenges in the Canadian real estate market, particularly in British Columbia, and highlights investment opportunities like transit-oriented development and student housing. The episode also emphasizes the importance of involving younger generations in wealth-building and offers practical advice for navigating real estate complexities.
Transcript:
Nicole 00:00:02 Hello and welcome to your Estate Matters with your hosts, my colleague Greg Brennand and myself, Nicole Garton of Heritage Trust.
Greg 00:00:09 Your Estate Matters is a podcast dedicated to everything estates, including building and preserving your legacy.
Nicole 00:00:16 If it's estate related, we'll be talking about it. We're having the conversations today that will help Canadians protect their families, their assets and their legacies tomorrow. With us today on Your Estate Matters is Tegan Smith, CEO of Channel Consulting and founder of Uplift Fund. Tegan Smith is a distinguished leader in Canadian real estate and urban planning, a CEO of Channel Consulting. Tegan is recognized for her 26 year track record of innovative solutions to complex development challenges, and her extensive leadership to unlock impactful projects.
Greg 00:00:57 Tegan, thanks for being with us here today to talk about real estate investing as part of a family wealth building strategy. Tell us about yourself and your journey to your current role as the CEO of Channel Consulting and founder of Uplift Fund.
Tegan 00:01:11 Yeah, great. Well, thank you so much for having me.
Tegan 00:01:15 So I started my career 26 years ago as an urban planner, and my expertise is really in housing development and government relations. So I spent most of the early part of my career working in government. And so that's where I really built my relationships. And then I went over to private equity firm as a director of development, and I was looking after about 35 assets in Western Canada. At the same time, I was doing a ton of volunteer work doing advocacy. So I was a chair of an industrial land committee in Metro Vancouver that was informing that regional industrial land strategy development. I was on the building committee for the Salvation Army's Nine Stories of Hope, trustee for Christchurch Cathedral, on the partnership committee for BC Children's Hospital. And all of these things happening at the same time. Really, I realised I'm actually really good at connecting people and ideas to make projects happen. So I realised, okay, actually I'm really good at this. What kind of business could I start on my own? That leverages that gift that I have.
Tegan 00:02:24 And so I started channel consulting in 2019, at the end of 2019. So five years ago. And so in the beginning, my existing employer, I had a couple of projects with them. So I started with clients. And nobody foresaw the pandemic coming. Interest rates dropped and people were acquiring property like crazy. So 2020 was an amazing year to actually be starting a business for me, because we did so many development feasibility studies for all types of property owners. So for REITs, private developers, nonprofit groups, families, really a broad range. we did these studies for and we got incredible feedback from investment committees in some of the largest rates in Canada. And so that's really how we built our process and our templates was with this incredible feedback. So the feedback we get now five years in is that we have the best process and the best studies. You know, there's nothing like it in B.C. I'm super proud of that. So the first step in working with us is always those development feasibility studies.
Tegan 00:03:42 That's really our niche. And then depending on what those studies reveal and depending on how sophisticated the group is, we are also hired to do the approvals, which includes really navigating policy, trying to advocate for solutions that help beat the clock and costs on on project approvals. So yeah, so it's been a really rewarding five years in terms of impact. It's also very difficult business to be in in the current climate in Canada for sure.
Nicole 00:04:17 So tell us about the current climate, what's going on with real estate landscape right now in B.C. in Canada.
Tegan 00:04:23 Yeah. So Canada and B.C. is a really difficult place for real estate investment right now. As you know, we all know we're in the housing crisis. We have overkill in terms of land use policy. We have dysfunctional permitting processes. We have an infrastructure crisis. And it's really difficult to make projects pencil at this time in Canada. The other reality is land economics. It costs about $1 million to build an apartment in the Lower Mainland. So 120 apartments and a 20 storey building.
Tegan 00:05:03 $120 million. And so the only groups that really have the pockets deep enough to build those projects are the pension funds, and they are accountable to their defined benefit pensioners, the nurses, the teachers. And they can't make the economics work on projects. And so those investments aren't happening in this market. The reality is those pension funds are starting to take more of a global view. And we're seeing those investments leave Canada, go into USA and other markets. So the current landscape if you own land. So if you're a long term landholder, a family with generational holdings, it's actually a great time to go ahead and get your sights entitled. Because when things change, there will be an appetite for sites that have been through the approvals process. But right now it's really difficult to make the economics work. That's for sure.
Nicole 00:06:06 So where are the investing opportunities?
Tegan 00:06:09 Yeah. So great question. As I mentioned really what I'm hearing from clients, prospective clients. Number one is just really thinking globally. So people have their heads up and they are looking south of the border.
Tegan 00:06:26 People tend to, you know, feel more comfortable investing in North America. And also there are sophisticated groups that are taking a global perspective. There are, you know, plenty of jurisdictions around the world that are more business friendly than British Columbia or Canada currently. So that's a challenge. But it's a trend as well that we're seeing that that capital take that path. The second trend, which whether it's in B.C. or Canada or anywhere globally, is transit oriented development and what I personally love about. Transit oriented development is that trains and transit love corridors, but pipes and fiber and energy love corridors too. So transit oriented development is super efficient for infrastructure, so for building housing at scale, but also for servicing things like data centers that require, you know, a lot of water and a lot of fiber and a lot of energy. So number one, you know, think globally. Number two, transit oriented sites are just awesome. And then the third one really is looking at ways to use land more intensively.
Tegan 00:07:43 So again I use the data center example. Very efficient way to use industrial land. And then student housing where you have things like shared kitchens. And so with this trend of going away to college, which used to be sort of an American or a North American thing. It's become a global thing. This is a global trend as well. Is adding student housing around the world, and kids do international exchanges and all of these things. They are all putting pressure on this type of use, but also creating a lot of opportunities for that type of use as well.
Nicole 00:08:16 So what do you mean by transit oriented housing? Do you mean it's close to a bus line or what does that mean in practice?
Tegan 00:08:23 Yeah. So well, transit oriented development is typically a rail based transit. So the Skytrain can align that type of service. But it can be bus rapid transit. But generally it's a dedicated transit service. That's that's a fixed service that you can predict is going to be there, you know, long into the future and then building walkable communities around that.
Tegan 00:08:49 So, for example, you know, transit oriented housing is fantastic because particularly young people, new Canadians, early talent who's wanting to relocate. They tend to not have a vehicle, and they tend to be dual income households where they're going to be working in different locations. So you don't necessarily have a home by the office, home by somebody's office, but maybe not the other one. So transit oriented development is very desirable. You know, just from a market perspective tends to have better absorption. But also from a building perspective, you can get a lot more certainty on your infrastructure costs when you're upgrading a corridor overall to serve transit.
Greg 00:09:32 I think in real estate investing, we use to build long term generational wealth for families.
Tegan 00:09:37 Yeah, this is a great question. And I think this word generational is kind of the heart of this question, which is this long term idea. And so it's interesting because just last night my daughter had her boyfriend over for dinner. And so I asked them what they thought about this question.
Tegan 00:09:57 The thing that they said is, well, is a family home. Generational wealth. And I said, that's absolutely brilliant because yeah, the first step in building wealth is buying a home. And so that family home tends to be the first step, obviously in building generational wealth. The second step then being you know when we see this typically a vacation properties. And then the third step creating that income producing or development portfolio and where the family home and the vacation properties really come in is leverage providing that leverage the family home and the increase in values over time to start to acquire some of those income producing properties and assets. And with the vacation properties, there can be really exciting opportunities for subdivision and so forth that allows unlocking value over time through land banking. So I think that the key really is starting somewhere, building those assets and then looking for those cash flow positive, income producing properties. Again, it starts somewhere. It could be, you know, starting off with an apartment portfolio. It could be shopping centers and rental apartment buildings.
Tegan 00:11:13 But basically the key is just to get in. And then knowing with the income producing properties what the exit is. What is the long term strategy for this asset. Is it a redevelopment asset? If it's a shopping center, there can be really exciting opportunities to joint venture through redevelopment and continue to hold those commercial retail assets for future generations.
Nicole 00:11:36 So how do you start to diversify this? So you're I'm hearing a family home, maybe a vacation property, maybe apartments. And then I guess as wealth accrues, you can start doing more substantial things. Like what is an effective diversification strategy to mitigate risk?
Tegan 00:11:53 Yeah. This is like a really great question. Right. Because there's how to be well diversified in real estate in Canada, where we have such high barriers to entry in terms of land costs. And then there's sort of the question around, you know, there's the rich and then there's the ultra rich. So what does diversification look like? Really varies on, you know, how much money you have.
Tegan 00:12:16 but certainly, the long term kind of goal being to have a mix of income producing and development properties, residential, commercial, industrial exposure diversified in that regard. And then, of course, with really good tax advice, looking at opportunities, you know, across the border and globally, where the barriers to entry from a capital perspective are just significantly lower.
Greg 00:12:44 Lock in real estate investing complement other wealth building strategies like stock market investing or business ownership.
Tegan 00:12:51 Yeah, that's a really great question. So it's interesting because BMO actually did a study last year, which was really fascinating. And they looked at the stock market versus Canadian real estate over the last 34 years. And what they found is that the S&P TSX composite had an average annual return of 7.9% over the 34 years, whereas Toronto real estate in the same period was 7.8% and Regina was 4.2%. So whereas real estate is more stable over time and the stock market is more volatile, and of course, there's different tax implications in terms of capital gains and primary residence and so forth, to take into account.
Tegan 00:13:47 The two performed relatively comparatively, but with different types of risk profile in terms of this third complementary wealth building strategy that you that you mentioned. Of business ownership. You know, there's there's. Kind of different aspects of business ownership. My husband and I are both entrepreneurs. So when I think of business ownership, I think of personal business ownership with a controlling interest. And that's where, you know, I think that you can have the most control over your returns. But that's my view obviously, as an entrepreneur. But I think that all three in the portfolio is is really worthwhile and important for different reasons.
Nicole 00:14:29 So how do you start getting kids involved in investing?
Tegan 00:14:33 Yeah, a really great question, because my experience with my clients is that they have a very difficult time having these conversations with their children. I have a lot of coffee, meetings, lunches, breakfast, phone calls with Gen one folks, mostly gentlemen who in their 70s and 80s still are doing most of the heavy lifting related to their properties and don't have a succession plan in place.
Tegan 00:15:04 And what I really noticed is that the attachment that they have to their properties is very personal and very emotional. They're very proud of these properties that they have. Generation two, you know, this is just being completely stereotypical, but there tends to be some knowledge from growing up around the parent who's been building this portfolio and maybe tagging along and doing repairs with that and that type of thing. So they they have an appreciation of what's gone into this with generation three. Not as much really awareness at all. So what I have found when I've been working with families is the first step is really to help take the emotion out of the conversation and to really focus on doing a really solid technical study of what they can do with the property based on the current land use policy and policy environment. And we always look at three scenarios. If we look at a really aggressive scenario, a moderate scenario, and then kind of a status quo scenario. And so recently we had one of our clients who included her 20 something son in one of these processes, and it was fantastic.
Tegan 00:16:18 And he made it when he could. And he asked really good questions. And it's a slow drip, right? It's the beginning of a longer term conversation about what happens with this asset. But I really believe that in terms of legacy planning involving family members, involving them in a really technical, matter of fact way with the third party advisors extremely important.
Nicole 00:16:40 So how do you start educating kids at a young age about these topics?
Tegan 00:16:45 Yeah, well, it's really interesting because it's kind of like this having dinner with my daughter and her boyfriend last night and telling them about the podcast and asking them about what they thought people would be interested in hearing about is sort of whetting their appetite to develop more knowledge around around a topic. So I'm totally a believer in the slow drip method, and also just really challenging myself to let go and to be as transparent as possible. I think it's really important just to really challenge ourselves around trusting and sharing information, and also having the right advisors on board. So there are obviously age appropriate conversations that you can have around assets and value and risks and opportunities.
Tegan 00:17:34 There's opportunities to involve kids in projects where you can, whatever that project might look like. All three of my children have worked in my business and my daughter, who's studying engineering, she does land title searches. She's understanding land. So really fostering, you know, where you can those opportunities to get them involved and then foster financial literacy and strategic thinking. So there's this great book by Scott Galloway that I read last year, and now all my kids are reading it called The Algebra of Wealth. And so, you know, just those types of things, you can't make your child read a book. You can suggest it. So again, it's the slow drip method, capacity building, meeting them where they are. If there's an opening, you know, exploring that. But yeah, I think that education and mentoring, it's extremely worthwhile. And it just takes some intention and thought.
Greg 00:18:31 Any final tips for our listeners?
Tegan 00:18:33 Yeah. So final tips for listeners. This morning, I was actually just listening to Jordan Peterson's interview with Pierre Poilievre.
Tegan 00:18:43 It left me feeling hopeful about our country. So I'm feeling hopeful. I think that when I'm talking to all different types of clients, they have big ideas for their land, and it's really important to ground truth, those ideas. As I mentioned, those opportunities to find out exactly what you can do with your property and to be prepared and equipped when those major investment groups come back looking for those sites that are entitled, looking for those opportunities for joint ventures. I think it's really important to get those development feasibility studies done. I really believe in the work that we're doing.
Nicole 00:19:25 That's funny that you mentioned that interview. So Tegan and I have known each other personally through business, and I actually thought I listened to that as well. And I actually thought of you as I was listening to that podcast, because one of the things that Mr. Poilievre discusses is the incredibly high baked in cost, the bureaucratic and municipal cost and development, and then also the impact of our monetary policy on inflation. And given that we have such structural barriers to affordability and housing.
Nicole 00:19:58 Like how how do we turn this ship around? It's kind of like turning a huge freighter around.
Tegan 00:20:04 It's going to be extremely difficult. So on the cost side, that's a whole ball of wax. What I can focus on really is the development approvals process. So we actually have one of our service offerings is to municipalities and government for the development approval process review. We have a whole framework that we do for reviewing municipal processes. There is so much fat in municipal process in the city of Vancouver. The average zoning application has 30 to 50 hands. Touch it. The opportunities are immense for process improvement, templating things, tools moving to a professional reliance model. Approved suppliers lists. Leveraging AI enormous opportunities to leverage AI. And I think we'll get there I think it's going to take. You know, I think it's going to be 5 to 10 years before we really see meaningful shifts in our ability to do that work, because there's so much technical work that has to happen in the meantime. But, I mean, I think the first step is to have a government that actually understands the complexity of land economics and that we can't just keep adding taxes and expecting growth to pay for growth.
Tegan 00:21:17 We've had a history in our country where development was able to pay for growth. That's no longer the case in Canada. So I left feeling inspired from the podcast. Yeah.
Nicole 00:21:28 Do you feel like we're going to have potentially a leadership change that's going to do. Because I think there will be difficult changes. And what is it? Homeostasis and a large bureaucratic environment is motivated to maintain itself. Isn't that true? Absolutely.
Tegan 00:21:45 It's going to be really difficult. It's going to be a really difficult thing to rightsize government at all levels, 100%.
Nicole 00:21:55 So any final tips for our listeners?
Tegan 00:21:58 Channel consulting has a lot of resources available to folks who are starting to think about generational wealth and real estate investing. So on our website channel consulting under the resources page, there are, you know, many, many webinars, masterclasses, roundtables that we've done to help support the industry in being more knowledgeable around the complexity around land use approvals. So definitely encourage that. We have a blog that we post every week with 1700 followers.
Tegan 00:22:37 There's nuggets in there. We often reference some of our other industry colleagues good work around advocacy. So I would just say, you know, as a tip, just really, if folks want to get free information that they can tap into those resources.
Nicole 00:22:53 Great. And so listeners can find you.
Tegan 00:22:56 At Channel Consulting or on LinkedIn.
Greg 00:22:59 Thank you very much for coming on the podcast today.
Tegan 00:23:02 Yeah. Thank you so much for having me.
Nicole 00:23:05 This podcast is for informational purposes only and should not be considered individual, legal, financial, or tax advice. Make sure to consult the advisor of your choice to advise you on your own circumstances. Thank you for joining us for this episode of Your Estate Matters. If you like this podcast, make sure to follow it on your podcast platform of choice.
Greg 00:23:27 Whether you are planning your own estate or you're acting as executive for somebody else's heritage, trust can help partner with Heritage Trust to protect your family, your assets, and your legacy.
Nicole 00:23:38 If you would like more information about Heritage Trust, please visit our website at Heritage Trust Company.
Greg 00:23:51 This podcast is produced by Pod Father Creative.