Big White is AWESOME! Big White Challenge v. Grouse Grind...

Now before you go thinking to yourself 'oh he is totally biased...' let me just tell you that yes, you are right. However, despite my ability to embellish stuff, I will also point out some facts. (of course, they may be distorted, and may omit bits... but still facts).

I was messaging someone on Thursday about the Big White Challenge, (Facebook Page) and they mentioned that the Grouse Grind in Vancouver gets 150,000 hikers every year! Two days later I found myself, with little to do, in Vancouver. "Since I am all about the Big White Challenge, I had better increase the number of Grouse Grind visitors to 150,001. So off I went.

No, no, no... please charge me more...

From downtown Vancouver it is a 25 min drive to the bottom of Grouse Mountain. The first thing that irritated me (I am easily irritated) was parking - you had to pay, and you had to stay for a minimum three hours, with a minimum charge of $6... why...? I am only here for a hour... irritated...

The Grouse Grind is a one way hike, you can go up, but you cannot hike down. The only way down is via the gondola. The gondola charge is $10 (irritation #2). Before I have even started the trail it had cost me $16. Big White's gondola is free, even in winter! 'But Mr. Pickles, the Big White Gondola only runs in the winter...?' 'Yes, I know, but that does not help me distort the facts does it!?' Stop asking awkward questions.

The Big White Challenge - parking is free, the route is circular so there is no requirement to pay for or use the chair lift. Of course on the weekends when the chair lift is running you can ride for a nominal fee... but it is optional.

My first (and only attempt so far) for the Big White Challenge, I had a time of 58m 34s. My first visit to the Grouse Grind was 47m 13s. Why is this relevant Mr. Pickles? Er... dunno... er... I think cos Paul Doherty is interested... maybe...

The differences.

The Grind starts at 991 feet, (302m) elevation. The Challenge 5,764 feet (1757m). 
Physically, how does this affect you? I have no idea - but here are some pretty graphics.

At 302m, the standard barometric pressure is 98kPa (734 mmHg). This means that there is 97% of the oxygen available at sea level.

At 1757m, the standard barometric pressure is83 kPa (622 mmHg). This means that there is 82% of the oxygen available at sea level

But what does all this gobbledegook mean? Good question... But I still have no idea, looks good eh? The pinky/purply lines have a bigger gap... which probably means something tho...

The official website stats for the Grouse Grind - 
Length: 2.9 kilometres (1.8 miles) 

Elevation Gain: 853 metres (2,800 feet)
Base: 274 metres above sea level (900 feet)
Summit: 1,127 metres (3,700 feet)
Total Stairs: 2,830 

However, mapmyrun has me starting at 302m and finishing at 1081 - or 789m elevation gain. I used mapmyrun for both trails so to compare apples to apples, the stats I use -

Big White Challenge
Length: 6.94 kilometres (4.1 miles) 

Elevation Gain: 394 metres (1293 feet)
Base: 1757 metres above sea level (5,764 feet)
Summit: 2150 metres (7,054 feet) 

Grouse Grind

Length 2.71 km

Elevation Gain 789m

Base 302m

Summit 1081

Okay, other stuff.
Views - the views along the Big White Challenge are spectacular, Rhonda Lake, the Monashee Mountain Range, Christian Valley... The views on the Grouse Grind... it is fairly limited to the stairs/trail, you are looking down all the time and when you look up you are looking at the trail - it is so steep you don't have any option really. Yay...! lets look at 2830 stairs... However, coming down on the gondola you do enjoy great views of Van city.

Family Friendly - The Big White Challenge is hard but it can be enjoyed by families, kids as young as five could probably, fairly safely, manage the hike. The Grouse Grind, not so much, maybe young kids could make it, but it does not 'feel' that family friendly.

Access - The Big White Challenge can be accessed from any property/home on the mountain. The Grouse Grind you need transport to get to the bottom of the trail. And you have to ride the gondola down - did I mention irritating...

Hey... can we come do the Grouse Grind?
No!

Rhythm - The Big White Challenge has varying but open trails, if you have the ability, running the trail is optional. The Grouse Grind cannot be run at all, the terrain is too variable.

Dogs - permitted on the Big White Challenge, not permitted on the Grouse Grind - I did not have my dogs with me, but if I did... I would have been irritated.

So a family of four doing the Grouse Grind would spend $46, the same family doing the Big White Challenge - $0. The Big White Challenge has better views, better terrain, is longer, has less elevation gain but starts and peaks, much much higher, and is more family (and dog) friendly. And because it is brand new... has far less visitors - great for misanthropic people (like me).

Oh... we prefer Big White anyway.

Sólido Properties owns, rents, lives, hikes, runs, and lives the million dollar lifestyle (without the $1m cost) at Big White - the two season resort in BC. 

Big White is AWESOME! The Big White Challenge!

The what...?

Glad you asked. Imagine it is 2024, July 19th to be exact. It is the 10 year anniversary of Big White becoming a summer resort. What will have happened in those 10 years?

Lets speculate a little...

Major Brunt, back in the old days.

Big White became its' own entity in 2018. Major Jude Brunt has just been elected for her third term in office. She is still working 18 hours a day... She is threatening to have a day off but Minister Ballingall has requested this be postponed... indefinitely. The population has grown exponentially, there are now 2000 permanent residents at Big White, the school from an inauspicious start with 12 kids, enjoys 300, the old school still exists, next to the 10 classroom one.

With the municipal status property values recovered, we are now back to and above the peak of 2008... 'I should have bought in 2014 when prices were at rock bottom... shoulda, coulda, woulda... but didn't(a). Yeah... me neither.

The resort is now all season, the community, business and social is vibrant, we are the darling of the province... as Minister Ballingall likes to espouse in his daily tweets to the press. Growth seems unstoppable, the new man made lake

Minister B, Hydrating pre the
Big White Challenge run.

situated on the old Happy Valley parking lot attracts thousands escaping the summer heat of the valley. Ballingall is often seen at Big White's own annual International Food and Culture festival, usually at the Australia booth, drinking an expensive red (are there other types...?) 

The numerous festivals attracts the very best... the floating stage on Rhonda lake was a brilliant idea, the cliff and its natural amphitheatre shape is the perfect venue for small and large performers.

The catalyst and the beginning of all this - the original hiking trail - renamed 'The Hike of a Thousand Inukshuks.' With its own annual 'rebuild the inukshuk festival' attracting over 4000 inukshuk volunteers every Canada day weekend.

We can do it too!

The hike is also the home of the Big White Challenge. Back in 2014 Christof Lummy Pie ran the new trail, two days before the official trail opening. The idea hit his oxygen starved brain whilst on what turned out to be the inaugural run. 'What if this trail became a running challenge, not a mass race but a challenge for everyone?' The idea fermented... and now after thinking about it for at least seven minutes we have a Facebook Page...

Exciting? Yes? Then lets have some fireworks!

Actually, it was not all me... all of the speculation...? Yes, the catalyst for the start... not really, credit has to go to Big White's President Mr. Plimmer, his team and the Chamber of Commerce Members volunteering their valuable time, knowledge and energy. Kudos to you all!

Of course... It is just speculation, but what if, what if...? We are now on a path forward... an AWESOME... a Big White AWESOME... path. 

Big White is AWESOME! And... Big White are AWESOME!

I know it is not a summer picture...
but it is pretty cool tho.

Summer is here! 
Officially, come Saturday 19th July, 2014 Big White Ski Resort, will become something more - a two season resort. This is huge! I have been waiting for this since I arrived 14 years ago.

But we criticize Big White...? Longer season please? More spend please? Summer activities please... blah blah blah...

Closing with lots of snow?
Yes they do, but for good reason, come April the only skiers are the seasons pass holders - they are not buying lift tickets, ski lessons, or even coming to the mountain much - it is golf/boating/biking/winery season in Kelowna, and the rest of BC. 

You want to ski/snowboard? Get some skins on your skis, or strap on some snow shoes and hike up - enjoy a pristine mountain with fresh powder everywhere. Don't give me any excuses, we have discussed excuses before haven't we...?

Yes they close with snow but lets think about things. Your seasons pass is one of the least expensive for a major resort. The abundant staff running your lifts, teaching you to ski, patrolling the mountain, keeping the resort clean... not to mention the state of the art equipment making your perfectly groomed corduroy runs... power turning the lift, insurance... lift maintenance... surprisingly this is expensive, who would have known... 

But what about investing 'they never spend any money...' rubbish, capital expenditure In the last 14 years at Big White has included-

And Ice tower... don't forget the ice tower!

• Built the Snow Ghost six pack chair lift.
• Built the Gondola
• Built Telus Park and the Telus chair lift.
• Built the Cliff Chair.
• Built the two acre outdoor skating rink - one of the largest in North America.
• Built the Tube Park - again biggest in North America
• Built Happy Valley Day Lodge
• Built the Beginner area, with its' two magic carpets.
• Built a second reservoir at the bottom of Powder Chair.
• Added new runs and has continued to summer groom the runs every year.
• Built Happy Valley car park.
• And Big White enjoys a great school in Happy Valley.
• In addition, there is more retail space and more restaurants.
• Provided a seasonal, free bus service. Incidentally this was supposed to be 50% funded by some Regional District program. Big White was left with the whole $150k bill!

Hiking Trails!

And from Saturday, Hiking Trails at Big White - the start of Summer

Summer is here!!!

Seasons at Big White.

And the spend? This is Big White's capital... What do I mean by this? Sun Peaks, Whistler, Jumbo resorts are Municipal Resorts - they can apply for provincial capital improvement grants - Sun Peaks is (according to their Mayor, Al Raine) generating $600k - $700k per annum in additional funding, through various programs, specific to Municipal Resorts. Big White company cannot apply for these programs, Big White community cannot apply for these grants. Big White is (currently) part of the Regional District Kootney Boundary (RDKB), RDKB could apply for these grants... but they have their own thing going on... 

Wait, what... how much...? Zero...?!!

As a side note RDKB's budget for capital and cultural improvements is roughly $7m per year, and remains fairly constant for the next five years. RDKB's total budget is $35m+/- so 20%+/- of RDKB's budget is for capital and cultural development.

RDKB's planned for Big White? Let's see, Big White represents 23% of the RDKB's tax revenue, therefore could we reasonably expect around 23% of the $7m, or $1.61m per annum... all things being equal? Yes, I think so. 

RDKB will spend zero at Big White - in the next five years - $35m in the region, nothing allocated to Big White.

Big White have been upgrading the resort themselves.

And the rest? Awards for best groomed runs, awards for best family resort, awards for friendliest staff, awards for best ski school etc etc? Including a top 100 spot for the best ski runs in the world! The world people! Want to see more?

Finite Spend.

We all have finite resources, Big White is the same, they have a choice - brilliant award winning service and product for the regular season, or lower quality, none award winning, longer season? Err... I will have the quality please Mr. Pickles...

And before you ask, 

no, I don't work for Big White, I have never worked for Big White (despite begging every week... well... until the restraining order was issued... but that expires soon!) and no, they don't pay me to blog - the blog pays its own way - it earned $12 last year!

Sólido Properties lives, works, exercises, drinks beer, skins and snowshoes up the mountain pre and post ski season... and writes a crappy blog. Oh, and we manage and own seasonal rental properties - if you need expert management... we probably are not the ones for you, if you are happy with moderately competent (well we aspire to be soon... in the next couple years anyway...) we are your guys!

Big white is AWESOME! More stuff on health & fitness...

So close... no matter how far... 'I would do anything to lose weight, anything! Except of course diet and exercise.'

Diet and Exercise...!??
Can I have some chips instead?

In 2010 CNBC reported the diet industry was a $55b a year industry. In 2008 68% of Americans were considered obese - definition is a greater than a 25% BMI, or percentage of total fat. The current estimates of exercise and weight loss industry is a $20b a year in the US alone. These astonishing statistics (that I just made up, well I pulled them off the internet... so same thing) are... well... astonishing!

Now, as you guessed, I am all for health and fitness, if I don't look after my body... where will I live? But, there are no shortcuts, no quick fixes, no nothing, gluten, wheat, sugar, etc, etc... No shortcuts, period. (Do you like that, I did period followed by a period...)

Weight control/management consists of a very simple formula - calories consumed has to equal calories expended... calories do not multiply when you eat them, thinking 'but I don't eat much... and I still put on weight - it has to be dairy, or it has to be gluten or this or that... or whatever...' No. I'm sorry, if you consume 2500 calories and burn 2000 a day... on average you will increase your body weight by one pound per week.

To paraphrase Dickens-
Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.

Calorie intake 2200, calorie expenditure 2250 - result... you can work out the rest. Those 50 calories, or a tenth of a bagel (without any cream cheese, butter...). A tenth of a bagel...? Or, less than one bite... hmmm yummy - fill me up Scotty.

Of course other stuff matters - type of calorie makes a difference, exercise makes a difference, when you eat makes a difference...

Type of Calorie.
There is good, there is neutral and then there is Sugar (once described as the heroin of the world) when I say sugar I mean all simple carbs - it could be white bread, plain sugar, carbs in apple juice, wheat products - cereals (cornflakes) corn syrup. Anything similar. Your body loves sugar, do you know why? Sugar converts to usable energy instantly. Brilliant...! Or it would be if we expended the energy - imagine running a marathon, and you eat a chocolate bar - the sugar converts to energy and gets burned up with this high energy activity.

But, what if you are sat watching TV? The sugar instantly enters your bloodstream and has nothing to do. Your body being this amazing product of evolution has a solution - it can and will store the energy for times of famine - in the form of fat. Well not that simple it (the pancreas) has to produce some extra insulin to do the conversion.

So Rule No. 1 - stay away from too much sugar. Actually the World Health Organization is planning a recommendation of a reduction in sugar consumption from 10% of your daily calories to just 5%. Current averages in North America are 25%... 

Fats.
A gram of fat contains 9 calories. A pound of butter is 3500 and is similar for all types of fat - Olive oil, vegetable oil, lard, bacon fat... etc.

I am not going into saturated v none saturated but lets just use a broad brush stroke - fats from meat are believed to be less healthy than most others.

But it is not all bad, fat takes time to be converted to usable energy - you will stay feeling satiated longer.

Rule No. 2 - include fats. But not too many, and stick with the healthy stuff if possible - olive oil etc.

Proteins.
Hmmm... my favourite. A gram of pure protein contains 4 calories. And proteins are a complex product - animal proteins are the muscle. And, your body's muscles cannot increase their mass without protein. 

Okay, a little tangent here. When you exercise hard your body breaks down muscle fibres. The soreness you feel the day after exercise are these damaged muscle fibres (or lactic acid, whatever). And your body is repairing them... cool. Of course your body needs protein to repair and it has two options - consumed protein, or employ existing protein - your other muscles. Your body does not and cannot fabricate muscle from fats or carbs! Read it again - fat does not turn to muscle and vice versa. 

Rule No. 3 - eat protein. We live in a world of abundance - protein is an easy option.

Burning the energy.
Or exercise. Do not tell me you don't have time to exercise. You have time to watch tv, surf the internet, check personal emails, take selfies, go to the bar, chat with friends... etc. read my crappy blogs... rubbish, get outside and go for a walk.

Weight, speed, elevation, inclination are all factors to the energy consumed but just assume 200-300 calories per hour. Squash (my favourite) 1200 calories per hour (based on my personal stats). Just for fun the number of calories in a White Spot double double meal, with a coke - 1360 (my favourite) number of hours I have to walk to burn those calories... six hours. Six! It is almost a full days recommendation of calorie consumption!

What burns energy?
Muscle - yes, fat no. More muscle, more calories burned. 

Fad diets.
Rubbish, crash diets - yes you will lose weight, you will lose fat, fluid and muscle. When you come off your diet you will have a slower metabolic rate, (less muscle you see) it will be easier to put on fat. And your body will be in this famine state (OMG, we are going to starve, limited food... okay guys lets slow the energy burn down, and speed up the fat storage... not ideal for the dieter).

But a quick fix
sounds better... 

Quick Fix?
There is none, none, none. Remember at the beginning - $55b industry? A quick fix would wipe out this industry overnight. If there was a quick fix do you really think they would share the info? No! 

The solution is diet and exercise.
Burn more calories, eat more of the right foods, less of the wrong foods.


But I feel hungry!

So, so hungry... brains... yes, high in protein!
Ask any Zombie.

Then you are eating the wrong stuff. Eat a 500 calorie bagel with cream cheese and a coffee for breakfast - what 800 calories? Your body converts this to sugar instantly - it leaves your stomach, goes to the blood stream, is unemployed and gets stored for later (on your hips, or ass, or stomach - actually everywhere). The insulin is working hard to convert all that crazy sugar - two hours later, it is gone, converted to fat. Your blood sugar level has now crashed, your stomach is empty and you are craving a donut. Thank god Frank from accounting brought a dozen in from Tim's 'I'll just have one... okay two...'

Three eggs, with cheese.
350 calories (depending on the amount of cheese of course...). The proteins and fats will take a while to be converted to usable energy. Your blood sugar will not spike, and it will not crash, four hours later you are not desperate for food. Your blood sugar is balanced and you will find it easier to make a healthier choice. 

And... the White Spot meal - 1360 calories? Equivalent to 20 eggs... I can eat the burger meal, it is yum, but could I eat 20 eggs? Probably not...

But what has this to do with Big White? Not much, but if you are lucky enough to live here, you will enjoy a slight (altitude related) metabolic rate advantage. Maybe it is the extra work your body does to extract the oxygen from a lower level of oxygenated air. I don't know... but that sounds good eh?

Just for me!

You want to get healthy?
1. Exercise 15 minutes every day. Every!
2. Start your day with a high protein breakfast.
3. Don't try and starve yourself but make healthier choices - fish over steak.
4. Cut down on carbs, increase protein.

Sólido Properties
lives, works, owns, rents and manages property and exercises at Big White. And yes, sometimes I make poor food choices too... beer...

Big White is AWESOME! Cos the people number er 472 I think...

 Brad, Brad and New Brad...! 

Safety gear is important
when you are a sparky!

The mountain (I mean f***** beer) is this way!

Brad... and Brad... we miss them both - one was Australian and an electrician, the other well he was Australian and an electrician... (Australia breeds them apparently, comes from the convict stock... actually most convicts were electricians... and they were all named Brad... even the female ones - true(ish) fact that I just made up).

Anyway we liked the Brads, they were characters.


Brad-

• Swore lots, in fact if he did not swear his sentences would not have a structure... or words...
• Only swore when he was talking, or texting, or emailing, or writing... or thinking...
• Brad did not swear in his CV! But that was typed by his sister.
• Brad was regularly late for work... except strangely enough when he was drunk and had not gone to bed... but then you had to use the broad definition of 'work'.
• Brad had big Jazz hands... well one anyway.
• Brad would get drunk lots.
• And lots...
• And lots... and then gets you drunk! Bad Brad.
• And then 'work'.
• The most important thing about Brad was that he got my humour... well most of it anyway (good god man what do you expect he is Australian!)

Happy Jo

Other Brad.

Brad the Mixologist - Shaken not Shtirred.

• Was always happy and always smiling - no, I don't know why, maybe he was sick.
• Brad was the happiest server at the Globe (well apart from Jo).
• Brad was the cutest server at the Globe (well apart from Jo).
• Brad would give me hugs... I preferred Jo's... "I'm a hugger!" he would say... "I'm a puncher..."
• Brad was the best mixologist (okay, second best) in the whole wide world... Well Big White anyway. (Jo didn't enter the competition).
• Brad was a stalker "I just want to give you a hug." "...it is 2am Brad, and I am in bed... F*** Off!"
• And yes, Brad got my humour too!

Good ol' Brads... but now they have gone back to Australia... Booo...! Who will laugh at my crap jokes now...? 

Yes! New Brad!

New Brad Button.

• New Brad is a chef at Globe for the summer. And he is the bestest cook ever (except for Jo... oh and Taryn... ok, bestest cook ever named New Brad, who works at Globe, in the summer! Yay!) 
• New Brad used to be called Daniel... yes exactly my thoughts too! Now he is called New Brad! Cool eh!
• New Brad thinks he is funny. He is not.
• New Brad has a weird neck beard thingy... Weird!
• New Brad has got huge buttons that you can press all the time. 
• New Brad gets cranky when you press his buttons...! Which is funny.
• New Brad does not think this is funny.
• New Brad likes to cook good food... 
• New Brad likes to be told about problems with his food.
• New Brad does not know what 'Spicy' means (Jo does tho).
• New Brad goes pink in the sun... except for the weird neck beardy spot. Jo does not, and she has no weird neck beardy thing.
• New Brad complains lots, and is cranky like most chefs.



I drank 10 beers!
(It is a Roman Joke),

• New Brad is a DJ, but not with discs and he does not ride horses. 

• New Brad gets our jokes! We like New Brad!

Sólido Properties ownes, manages, rents, invests, drinks (when with Brad) lives and abuses (in a kind and loving way) people at Big White. We also write a blog about stuff... Anyhoo... if you are still reading... stop it!

Big White is AWESOME! Property Values (again) and other (financial) stuff...

One of the challenges to purchasing property at Big White is the borrowing conditions. Whether the place is a condo. hotel condo, strata subdivision or bare land strata, banks are very reluctant to lend.

But why?
It is a long answer but I will try.

How does a bank make money?
Well there are really only two ways a bank can make money - fees and lending.

Fees.
Checking, wire, transfers, business account fees, statement fees, taking the dog for a walk fee, depositing funds fee, fees for checking how much the fees are... ad infinitum.

One fee that I particularly enjoy with one of my HSBC business accounts is my account fee. I have a National Home Warranty bond - funds held in trust in a GIC account. This account earns minimal interest, 0.9% per annum maybe, okay not great but something. The cost to hold this account was 2% per annum. Or it was until I threw my teddy in the corner, then it was reduced to 1.25%. So I am lending the bank money and for that privilege, I get to pay them - very exciting! Not.

Lending.
When I was young and good looking, thinner, had hair etc a finance professor said if you can borrow at 1% and lend at 2%... borrow and lend everything you can get hold of. This is why bank are always asking you to change your bank 'come to us, we have bells and whistles, and pretty colours, we will even give you money. Come on, you can do it, yes you can, yes you can...' 

They borrow hundreds of billions at 0.25% and lend the same at 2% - 36% (Credit cards).

What...? You thought the banks just put the money in a vault...? No, no, no, Mr Pickles, it gets lent to the man/woman/business on the street.

Capital Ratio.
But it cannot employ all the depositors funds, no, it needs to retain some. This is called the Capital Ratio. But how does it work? Glad you asked. Lets say there is a bank of Christoph Lummy Pie (CLP). Lets say CLP has customers with total deposits of $11m. With a Capital Ratio of 10% (Basel II regulations roughly for total capital) CLP can lend $10m. Brilliant, easy... yes I thought so too.

Risk.
What is risk? There are lots of definitions but I like 'Risk is exposure to an event and the likelihood of that event occurring... good or bad.'  

A roulette table is a good analogy here; betting red or black will return you either double or nothing. But a casino will not profit if the odds are 50:50. Odds are not even, there is a green zero, (and on some tables a double zero). The zero will give the casino a 2.6% advantage, (double zero 5.6%). So a million $1 bets on the single zero roulette table will profit the casino $26,000... guaranteed. Casinos do not lose money.

So the risk (exposure) betting red or black is not 50:50 it is 50:47.4 with 2.6% going to the house.

For a bank the risk is the borrower will not pay back the debt. Different borrowing entities have different risk profiles - home owners - lower, credit card users - higher; the rates charged reflect the risk.

Bank Lending Risk at Big White?
It is a bit higher, the second property is lower on a homeowners priority than the first. The risk is a bit higher. 

Okay, lets go back to that Capital Ratio thingy again.
What affects it? So Bank of Christoph Lummy Pie has deposits of $11m and has lent $10m, he is complying with Basel II regulations. What happens if the ratio changes (Basel III) and increases to 10.5%? Either the deposits have to increase or lending decrease. Or if there is a big withdrawal? Lending has to decrease.

Lending decreases by withdrawing from markets, mortgages not being renewed, your credit card limit decreasing, the Central bank seizing 10% of your deposits (Cyprus 2012). Or locally, no lending at Big White.

And it is not just the Capital Ratio thingy... there is also lending ratios. When a bank lends money to buy a property, the bank takes security on the property title - a mortgage. Lets say the bank will only advance 90% of property value. If that property value falls by 50% (Big White 2000 - 2014...?) the bank has an exposure, or an increased risk. If the owner walks, the bank has to foreclose, books a loss and reduces its' Capital and therefore affecting the funds to lend.

It is more than this actually the security and the difference between the property value and the mortgage is considered part of the 'undisclosed' capital (along with booked but unannounced profits). Accounting for the property's loss in value can affect the banks capital level.

Big White.
In the bull market 2000-2007 we saw banks with excess capital. Banks were searching for markets to employ the funds, unemployed funds do not make money. To employ the funds Banks expanded into marginal markets, higher risk markets - larger resources were going to development projects, funding home-owner purchases on recreational property.

When the crash came most lenders were in the same boat, losses were booked, and the ability to lend decreased. Compounding the problem new banking regulations (targeted at reducing the risks banks take - Basel III arrives soon) started to come into effect. So not only must the bank lend at a lower ratio, it also has a lower capital base.

Why is my stock price down?!
It is the CEO dear, he is risk averse...

You may be asking yourself why would they do this... it sounds crazy. Shareholders. Like any enterprise the primary objective is to increase shareholder wealth. If bank A is not doing it, shareholders will sell the stock and buy a bank that is... Selling stock decreases stock value, cost of capital increases, profits drop (bank is not taking profitable risk). And then there is the CEO's drivers - bonus is related to share price, bonus is related to profit margins... his/her job is dependant on performance - under performing the market in general is a guaranteed way to lose your position.

E.g. take the bank of Christoph Lummy Pie, imagine the $11m of capital has diminished to $8.8m and the lending capital ratio has increased to 13%. CLP can only lend $7.67m. A reduction of 23%. Imagine if all banks had to reduce their lending by 23%...? 

The Sub-prime lending fiasco was probably worse than this, international bank balance sheets lost hundreds billions from their balance sheets - an assets thought to be worth $50b worth zero...? The bank's lending capacity drops by half a trillion dollars. This is the reason for the bail-out.

So lower risk markets are maintained the higher risk markets are cut - Development... Resort real estate lending - Big White.

Affect on Values.
Without bank lending potential purchasers cannot make buy - big problem one. Big problem two - purchasers are concerned about the exit strategy - if banks are not lending who will by my property when I want to sell? And the big problem three - falling property values create deflation. If the expectation is that property values will be lower, buyers will postpone their purchasing decision. 

Fascinating... but I'm not asleep...

Big White is a prime example - buyers willing to spend $500k on a property in 2007, are not willing to buy that same property in 2014 for $300k. In-fact recent sales at Big White show buyers paying $450k in 2007, and selling in 2014 for $230k (rough numbers).

Interesting the banks create their own problems here - foreclosing on properties creates downward pressure on property values. And the banks only marketing 'tool' is price reduction. It can be argued, dropping prices causes buyers to defer their buying decision.

Resort Municipal Status.
If Big White became its' own municipality the risk profile (in the eyes of the banks policy) would change. The perception is a lower risk, therefore the lending rules are less stringent - more buyers can buy... And again the banks perception will be self realized, more buyers will be attracted to the market.

Revenue Streams.
Capital markets are driven by revenue - actual and expected. 

At Big White the average occupancy for properties in the resort is 22% per year. Lets say my $300k property generates $15k of net revenue - 5% return. If occupancy increased to 33% with a commensurate increase in revenue to $22.5k the return would be 7.5%. A buyer needing a 5% return would pay $450k for the property. Now if the revenue was $15k but was expected to increase to $22.5k how much would the buyer pay? More than $300k but less than $450k...? Probably.

What if the revenue was expected to grow at say 2% per annum?  The formula the investment community use to value growing revenue streams is the current revenue ($15k) divided by current revenue rate less the growth rate.  Or 15000/(0.05 - 0.02) = $500k... at $22.5k the value is $750k.

You may want to ignore that gobbley gook above - it just means a growing revenue stream attracts a higher valuation.

Should you sell? 
Actually it should be should you sell based on purely financial decisions. But I will give you financial questions to ask yourself.

Really...?

1. Can you sustain the cash-flow for the foreseeable future?
2. What is the amount of capital paid down off your mortgage each year?
3. Will the revenue stream grow - or is expected to grow?
4. Your mortgage payments will likely remain the same, however, by how much will the purchasing power of those payments decrease? $10 today will buy you a Guinness at Blarney - what will it cost in ten years - $20. This indicates a inflation rate of 7% per annum. Or... a mortgage payment value deflation rate of 7%... make sense?
5. What is the tax deduction value of the interest payments?
6. Will the property appreciate in value?

All things being equal, your mortgage payment in 10 years will have depreciated in value, the revenue stream will have inflated, the outstanding debt will be 10 years lower.

Finally - market efficiency.
Markets are dynamic, they always move to an equilibrium balance based on current information. However market participants are human and emotional, leading to markets being over-bought (2000 - 2008) and oversold (2009 - 2014...). Over-buying drives up values, over-selling the opposite. The question to ask - is the market over-sold? For me it is. We are below construction costs, we are at a 14 year low (probably the only one in the world... maybe Iceland is lower) comparable markets have not dropped (Sun Peaks, Whistler, Silver Star) and the closest city (Kelowna) is probably still double its' 2003 levels. Are we oversold...?

Despite being a small market, we are a global market, many of our owners are foreigners - this has a dramatic impact on values. Global sentiment and exchange rates have very high impact-

• A strong US and UK currency attracts buyers, a strong Canadian currency creates sellers because a capital loss is mitigated by a currency gain.

Conclusion.

A Resort Municipal Status will have a positive impact on bank lending, leading to upward pressure on property values. A weakening of the Canadian currency will have an upward pressure on values. An expectation of increased revenue streams will create upward pressure on values. A recovering global economy will create upward pressure on property values. Is it a good time to sell then? Not for me... but then again I have made many poor decisions... 

Like Me!

Sólido Properties owns, manages, rents properties at Big White; at the same time we try to balance our revenue streams and encourage value growth (for our own selfish reasons). If you would like to discuss improving your property's revenue stream (and thus my bottom line...) we can help.

Contact us at solidorentals@gmail.com or 'like' us on Facebook.

PS - I am not a financial advisor, this is not to be considered a professional opinion i.e. you can't Sue me. You are responsible for your own decisions... yes you are!

Big White is AWESOME! Fortis...

Sooo... do you know what pisses me off? No? Well I will tell you. Fortis - I set up an account, they said I have to pay a deposit of $550 I say no, they say it is their policy to charge this I say it is my policy not to pay these onerous charges that are nothing more than a way for Fortis to get cheap capital... they say... I say... ad nauseum... Anyway I did not pay it.

But the conversations are always the same. And you know what else? Have you looked at your bills compared to last year? There are two rates one is up by 10.02% the second 8.25% (roughly) in addition, the 'service' charge has gone from $18+ to $33+.

But but but... they are a monopoly, a regulated utility, rates are increased to pay for upgrades etc. But the company also answers to shareholders and ultimately the only true goal of any company is to increase shareholder wealth... everything else is subordinate to this goal. Everything!

Okay a couple of stats for you-

• On March 2nd 2009 the share price for Fortis was $18.32, five years ago almost to the day. Today the share price is $32.45 after peaking at $34.95 a year ago - an increase of 77%.
• In addition the dividends have increased from $.26c per share to $.32c a $.06 increase or a 23.1% increase. Annualized this increase is only 4.4% compounded per annum (1.0424^5 = 23.7% or ((1.237/1)^(1/5)) simple really).

But what do all these gobbledegook numbers mean?

Shareholder Wealth.
If the share price has increased 77% and the market cap value today is $7b five years ago the value would have been $4b. This means Fortis have increase their shareholders wealth by three billion dollars - not bad for a regulated utility. 

Interestingly the book value is only $22.39 - assets less liabilities. The excess really is market confidence. Or the expectation future cash flows will justify todays value... Or... the market expects revenues to increase, profit margins to increase... Or to you and I it means billing rates to increase.

Hmmm... of course it is all above board cos it has been approved by the BCUC... does not mean it is right.

• Fortis report that 75% of homeowners will pay the same or less. This means 25% will pay more, it could also mean that 1% will pay less, 74% will pay the same and 25% will pay more. 
• And Fortis's other argument for increasing rates? They want the homeowner to use less electricity - if our shareholder wealth increases because of this it is not their fault... poor lambs.

So... Fortis piss me off.

Other than that... Big White is AWESOME!