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360 Degrees of Waterfront

BC Business, Frank O'Brien, July  2003

One click on Battleship Island convinced Dr. Charles Hanson that the remote spot in northwest British Columbia could be his family's sanctuary: "We were looking for a retreat but even a small lakefront lot around Minneapolis is $100,000 plus plus and that's U.S. dollars."

Instead, Hanson, a Minnesota neuro-science consultant who "was fortunate" during the high-tech boom, bought the 33-acre island in Stuart Lake that he discovered on the Internet. He paid $90,000 or, in greenbacks, $61,500, and plans to move onto the island with his wife and children. Hanson, 35, also plans to retire within two years and says he wants to make the island his permanent address and a home school for his two toddlers.

There is no power, no running water and there are no buildings on Battleship. The closest `city' is Fort St. John (pop. 50,000). But, notes Dr. Hanson, "Wireless Internet reaches the island and that settled 95 per cent of my communication needs."

"It'll be great," the doctor believes. He envisions an idyllic log home and a back-to-the-land lifestyle on Battleship sup-ported by his consulting service. "We are looking for security and seclusion and this island provides both."

Hanson may be an oddball but he fits right into British Columbia where about 25 per cent of the estimated 300 privately owned islands are on the market at any time and buyers range from `clear-cut' investors out to log the land and resell it, to tree-hugging environmentalists. It's also a tight real estate environment where fewer than half-a-dozen agents handle most of the action and quiet deals are often all cash.

"I have yet to meet a person buying an island who required any financing," says Ed Handja, a Campbell River real estate agent and pilot who has specialized in selling islands for nearly a decade. For those who do need a loan for an undeveloped island, Handja says bankers would likely insist on a minimum 50 per cent down payment before they would even consider it.

It is not always the wealthy that invest in private islands, either. "Often it is a group of buyers who divvy the land up," notes Handja. "They'll buy an island and then sell off enough lots to cover their investment"

The price range is as varied as the selection. Up in B.C.'s north or Interior, lake islands can be had for less than the cost of a city condo. Or consider listings such as the undeveloped 100-acre Ballenas Island off Parksville for $1.5 million or Dayman Island in the Gulf (27 acres and a nice house) for around $2.5 million.

Buyers include not only old money and dot-com players who exited in time, but also pragmatic loggers after old--growth trees and even people of fairly modest means who simply want a reclusive lifestyle. Depending on where you go, however, what you can do with your bit of heaven depends very much on down-to-earth forces. For example, in the province's premier island market - the southern Strait of Georgia and the Gulf Island chain- investors will find that restrictions and government control can be more intrusive than anywhere on the mainland.

Southernmost of the 400 Gulf Islands and the last of the big undeveloped ones, 2,100-acre Sidney Island is a short spin by water taxi from the town of Sidney just east of Victoria. A jewel with a California climate and sandy beaches, the island enjoys more hours of sunshine and less rain than any other location on Canada's West Coast.

The northern part of the island is home to the 380-acre Sidney Spit Marine Park, soon to be part of Parks Canada's new national park system in the southern Gulf Islands. A lagoon with a long sweep of white sand, the spit is a popular sailing and swimming destination all summer. The entire southern half of the island is the site of Peter Pearse's vision of private ownership and careful logging designed to protect its natural character and special environmental features.

"It's one thing to own the land. Quite another to do something with it," says Pearse, the former UBC resource economist and, for the past two decades, the spearhead of various controversial Royal Commissions on B.C. forest policy and Canada's Pacific fisheries. He recently served as an advisor to the federal Minister of the Environment on Canada's new endangered species legislation and last November completed a study of the problems facing B.C.'s coastal forest industry. His reports on fisheries and forest policy are considered standard references today and are used as textbooks at many North American universities. His conclusion: those who harvest resources should have a direct say in managing them, and resource extraction and environmental protection are not mutually exclusive.

Today, Pearse is putting his beliefs on the line on what may become a model of sustainable development of Sidney Island in the southern Gulf. It hasn't been an easy sell, even for a world-renowned expert on resource management.

"Call it 25 years of frustration," Pearse says, sitting on a bench above a granite bluff on Sidney Island, shaded by the vast canopy of a 100-year-old Garry oak. "We had to be checked out by more than a dozen federal and provincial agencies. I met more bureaucrats trying to do something with this land than I ever did during my commission work."

In March Pearse was preparing to meet once again with the Islands Trust, a regional government agency responsible for "preserving and protecting the Islands of Georgia Strait and Howe Sound," on his final plans to zone the island for more than 100 strata building lots, virtually all waterfront parcels.

"These Gulf Islands are now under intense pressure of development and many of them are losing their natural character," explains Pearse. "We've organized things here to allow low-density residential and recreational use with a gentle footprint- just enough to support a strong commitment to preserve and protect the island's natural environmental character. It's a model of private environmental stewardship."

But as they say, go tell it to the Trust. Pearse did exactly that, they listened ... and approved.

Late last year the 24-member Sallas Forest Limited Partnership, of which Pearse is a managing partner, began a strata subdivision on the 1,760 acres of the island owned by the partnership. All the strata lots are linked by a planned network of roads and trails to beaches, a central boat dock and airstrip. Now on the market, the waterfront properties back onto a managed forest, the strata plan combining low-density residential use under strict conservation covenants that cover everything from shellfish to old trees.

Pearse gives much of the credit for the project to Ozzie Sexsmith, a Vancouver development engineer turned Gulf Islander, who was the group's development consultant. Says Pearse: "Ozzie has an astonishing ability to listen to all the conflicting demands and requirements of regulatory agencies, land commissions and landowners, and come up with a plan that makes everyone happy. He matches innovation with an engineer's understanding of what can be done." In turn, Sexsmith has demonstrated his commitment to the project by buying a beachfront cabin on Sidney Island.

The covenants that Sexsmith helped draft (and which helped win over the Islands Trust members) require that all homes must be set back from the shoreline to reduce impact. There are also no paved roads, no phone or power lines and even the use of generators is restricted. Solar collectors are recommended and have been used on all six of the houses built on the island so far. There are also rules on what can be built, notes Pearse. No `shiny' roofs, all colors must be neutral and natural. If your dream is to build that barn-sized neon-pink-and-fuchsia homage to Graceland, then dream somewhere else. Or as Richard Osborne, realtor for Landcor Realty, who, with biz partner Dave Cochlan, is the exclusive agent for strata sales, puts it: "I don't think we will be seeing any vinyl siding."

Nor will you be seeing much of the neighbours. The 24 original investors, some of whom have owned property on Sidney since 1981, have collectively divided their parcels into the 111 strata lots. For example, Pearse will sell off seven housing sites, each around one acre, within his land holdings. The strata setup is much like a city condominium project, except the common area is 1,500 acres of beaches, meadows and forests.

The centre of the island is largely a selective forestry play. Profits from logging second-growth pine, fir and cedar are to be used to manage the island and help cover the cost of the infrastructure, including the grass airport landing strip. Logging is carried out to protect giant old trees and the abundant wildlife, such is the estimated 2,000 fallow deer - descendants of European stock introduced nearly 100 years ago as hunting game - flocks of wild turkeys and even wild peacocks, none of which have any natural predators.

As of early March, Phase I sales were underway with three of the initial 13 oceanfront lots already sold. Prices range from $125,000 to $360,000 says Osborne, who believes half he lots will be bought by Americans. "Today, we have a U.S. reporter on the island from the National Geographic and two airline pilots from Denver. The word is getting out."

A big reason for the Americans' interest is price. On the U.S. side of the Juan de Fuca Strait, just south of Sidney Island, similar island waterfront lots often sell for US $1 million and up.

Pearse's concept for Sidney Island reflects his life-long philosophy that resource development and environmental protection are not mutually exclusive. "This island is so unspoiled, people who appreciate the natural environment can't resist it once they see it. And that's exactly the kind of people we want to attract."

It is a philosophy not shared by all island investors. "We basically clear-cut it," says Des Shearing, a Prince Rupert logger who, in 1997, formed his own investor group to purchase the heavily treed 109-acre Hansen Island off the northern mainland. Far from the reach of the Islands Trust or any zoning body, Shearing and his partners logged off barges of 70-year-old second-growth timber and pocketed close to $950,000.

Shearing, who took over the island from his partners after logging ended, put it back on the market last year. He received a bit of a shock. "We bought the island for $450,000 and I have it listed for $400,000 but there have been no bites yet."

Listing agent Neil Wark of Re/Max Wark Realty, a Delta-based realtor who deals almost exclusively in islands, says Shearing shouldn't worry - he has the law of supply and demand on his side. There is a limited number of coastal islands, party due to government demand, he notes. "Governments, both provincial and federal, are buying up all they can for parklands, so some properties simply never come on the private market."

Since 1995, operating under the Pacific Marine Heritage Legacy program, the federal government has been buying up Gulf Island properties to flesh out the proposed Gulf Islands National Park Reserve of Canada. The park, recently finalized with the province, totals 23 square miles to date and includes all or part of 15 islands and outcroppings in the southern gulf including the north end of Sidney Island. "Land will continue to be acquired for the national park reserve," according to Meredith Reeves of Parks Canada's coastal British Columbia end unit.

This type of deep-pocket competition has convinced Wark that coastal islands are one of the best possible real estate investments: "The price is certainly going to continue going up." Get 'em while you can.

Wark, who relies heavily on the Internet, believes it's a matter of steady exposure to reach the rare person who wants to buy an island; "I've never posted a `for sale'; for sale signs are an open invitation for anyone to come. I only want to talk to serious buyers," And the buyers today, he says, are primarily investors.

Rudy Nielsen, president of Niho Land and Cattle Company of New Westminster, which lists coastal and lake islands across B.C., sees other factors entering the mix. "We've seen a real increase since the terrorist attacks of 9/11. We recently sold three islands to U.S. buyers and two of them bought sight unseen. People are worried about anthrax in he States, and some have bought B.C. islands just in case things get really bad."
Nielsen, who has been selling real estate since 1964, saw a similar upswing in the 1970s when the threat of nuclear war was uppermost in many people's minds. "Studies showed B.C. as being one of the safest places because it's sandwiched between two mountain ranges. We're again getting lots of calls from people looking for a secure, safe place."
A fan of fresh-water islands (and just in case you're interested), Nielsen helpfully points out the costs are much lower than ocean properties. "In the Interior, it's relatively easy to find lake islands for anywhere from $30,000 to $100,000."

Campbell River's Ed Handja says he spends a lot of his time questioning any potential island buyers. "I have burst a few bubbles. Some people need a reality check." Buyers have to understand that living on an island is different, he explains. Saltchuck lands, in particular, have transportation issues, potable water and power concerns and a variety of potential uses. "Like a lot of logs in life, buying an island often starts as a dream, but it you don't step back and formulate a game plan, the shine can come of it in a real hurry."

Lately, however, Handja has seen more conservative, local investors who have a very clear idea of what they are doing. Although these more savvy buyers seldom purchase island properties for commercial development, Handja often sees a blending of uses, perhaps incorporating a family getaway with corporate entertaining. But he adds that while most island lovers plan to buy and hold, there are opportunities for a well targeted, niche business.

"A wellness retreat or a nature resort might do very well if you had a solid marketing plan and could setup the transportation infrastructure and logistics. Or perhaps a corporate think tank, where executives could brainstorm, air out their heads and still be able to take in some kayaking or fishing.

"For someone who dares to be different, is willing to put in the work creating some-thing that's a one-of-a-kind, island properties can represent some fascinating potential."

Handja's favorite pick from his island listings ( Protection Island on the west side of Desolation Sound at the entrance to Squirrel Cove on Cortes Island. "It has never been logged. There are trees two men couldn't reach around." It also has a couple of great beaches and its handy location makes the 27-acre site "an ideal $1-million investment."

And that's in Canadian dollars, by the way. Or, in good old American bucks, about $727,484 the last time we checked. Cheap

For Dr. Hanson, who believes he may represent a wave of American retirees, says heading to B.C. and buying an island had less to do with investment than lifestyle. "We are into kayaking and hiking and I recently started fishing. The U.S. lakes are stocked but there is over-fishing because of the population density. But the fishing in B.C. is awesome."

And he won't be alone. Hanson says a number of his American colleagues are also considering a move to Canada. In fact, one has scouted American Island, also in Stuart Lake, and Hanson was surprised to find some Americans already own property around the lake: "People thought I was insane at first, but now a lot are really interested."