I do want to acknowledge that there are many excellent planning departments in the Lower Mainland which operate fairly and I want to relay that a survey of UDI members shows that the Best Planning Department based on competence and ethical professionalism is the City of Burnaby, -- so congratulations to Burnaby council and staff. Unfortunately, at the other end of the spectrum the award for the greatest degree of coercion and unethical behaviour goes to the City of Richmond. So forecast number 1 is that most smart developers are going to choose to stay well away from the City of Richmond unless they are already imprisoned there.

Anyway, I am happy to be back with you here today and I will try not to offend anyone in government unless they really deserve it. But enough of those pleasantries, let’s talk about the recession.

Those of us who remember the early 1980’s remember that a serious recession is where interest rates are 20%, there is no available credit, junior Canadian banks go bust left and right, billions are lost, government practices restraint instead of fiscal stimulus, 100,000 people protest in the streets, unemployment soars to 15%, property values fall in half and land values fall by 90%. That was the early 1980’s – when the men were really separated from the boys -- but compared to that unhappy time, BC is not in a recession at all; in fact you might say that the current slowdown in BC is really just a recession for sissies. Now, in just a few days we’re going to hear the Federal Finance Minister, Mr. Flaherty, announce in his new budget that things in Canada are not good, and this NDP fellow, Jack Layton, is going to use the word “crisis” 700 times because he appears to have a very limited vocabulary; -- but, we need to remember that the economic situation in Western Canada is very different than what’s going on back east.

Though the Federal Government has done an exceptional job overall, the eastern Premiers have not managed their government affairs very well compared to the western Premiers and the east is in tough shape because in good part their economies rely so heavily on trade with the United States which is in a serious recession as we all know. I have recently returned from a little tour of the United States where I own over 10,000 acres of development land in various locations along with a number of apartment properties located in Atlanta, Georgia. You all know the story now; abundant developer financing without the requirement for presales creating a massive oversupply situation; 100% purchaser financing; 1% interest only “teaser” rates – Get in while you can marketing – and with millions and millions of existing homeowners getting 2nd mortgage equity takeouts. It was insane and only a matter of time until a real estate correction occurred. Our situation here in Canada is nothing remotely like the US because Canadians as a group are more prudent and because our credit and regulatory system did not encourage this kind of behaviour; however, everyone in the western world has been affected by the many follow-on consequences of this US real estate correction and the resultant loss of confidence. In my view, the US residential real estate market will drift lower for another 12 months before it settles, and the commercial real estate markets will take at least 2 years to settle, after which values and commercial rents will be flat for 5 years thereafter. The only positive thing I can say, but I believe it’s material, is that the long term confidence of people in most every walk of life remains strong, so at least there is a solid foundation to work from.

The bottom line for Canada in all of this is that our US friends are not going to be buying as much of our products, but this is going to negatively affect Eastern Canada much more than us in the West because broadly speaking our markets are more diversified, and therefore our western products are more saleable to more people than are eastern products; and, by way of example, western product sales to China particularly lumber sales are exploding. – As a separate item, the unfortunate hardships in eastern Canada allow us to enjoy Federal fiscal stimulus measures and further interest rate reductions which are going to help support our businesses and certainly our property market; and I note that the Royal Bank is now offering five-year mortgages at 4.49% interest, and their floating rate money for homeowners is at 2% which is obviously a powerful stimulus for home ownership.

So, we are all becoming very familiar with bad news outside of our Province, but where exactly do we sit relative to others. Well, the Province of BC is in a truly envious position relative to all other regions of North America. BC has a very low level of provincial debt to GDP at 14%. A balanced budget. A triple A credit rating; the lowest levels of corporate and personal income tax in North America which creates investment, jobs and more available cash in worker’s pockets; -- there is no material over supply of housing; office, retail or warehouse space; there is credit availability for qualified borrowers from banks and other financial institutions that are the best run and in the best financial condition of any in the developed world; there are incredibly low interest rates in historical terms which are likely to fall even further. BC now has a very diversified economy. There is still $170 billion dollars of major project spending on the books to take place over the next twelve years, with 60 billion underway today and there is 5 billion dollars of transportation-related spending to take place in the Lower Mainland being fast-tracked over the next 4 years that will help the Vancouver region with construction jobs and help us to be even more competitive in global terms going forward. Vancouver continues to receive top accolades from the world’s leading analysts such as:

-Most Liveable City in the World, Economist
-Best Airport in the World, Conde Nast Traveler
-Best Quality of Life in the World, Mercer Consulting Group
-Lowest Overall Corporate Tax Burden in all of North America - KPMG
-Best City for a Business Trip, Economist
-Greenest City in the World, Grist.org
-One of the World’s Cleanest Cities, Forbes Magazine
-Best Destination for International Meetings, International Convention Association
-One of the World’s top tourist destinations, Euromonitor International

And, all these impressive facts are going to get a lot of airplay because the world wide Olympics’ advertising campaign is just around the corner which will be far more positive for our economy than people realize. And, we need to make the best of this Olympic opportunity by being positive and proactive, because we want to be the kind of place where people want to travel to and invest, which will obviously help keep our economy healthy going forward. And, if we go way back in time, we should acknowledge that one of the key people to get the Olympics going was former Premier Glen Clark, who deserves this one and only piece of credit before I refer to him later in my remarks. So thank you Mr. Clark.

Now we all know that we are going through a few job losses in our industry and a minor residential property value correction which I think at the end of the day will be in the range of 17½% from what were momentary peak prices. But that has to be viewed in the context of prices having gone up 100% in the last five years from a socialist induced low point. There are almost no forced sales going on, and in the absence of foreclosures, prices are very sticky and inelastic and should stay reasonably firm. There will be a few closing-out sales, like our friends at Onni are doing, but these in my view represent great buying opportunities. And, when a few high-profile projects get into trouble because of over leverage, we should also note that there are many highly qualified bidders who have confidence in our future who want to buy these troubled projects and, for example, in the case of the 700-unit Infinity project in Surrey that was overly financed by Lehman Brothers, the top bid to buy it came from Terry Hui of Concord, who is one of the smartest guys in this town. I know that Terry has strong confidence in our future; he is just like Warren Buffett but with Chinese characteristics and crazy hair (but at least, he’s got hair). Terry Hui knows to “Be greedy when others are fearful”.

Now, obviously, consumer confidence in BC has been shaken because of the stock market correction and what has happened in the United States. Volume of sales is taking a breather and off more than 50% over last year, but with existing supply under construction being over 90% pre-sold, with virtually no new supply being added and yearly immigration of 35 to 40,000 people moving into the Lower Mainland per year, we are going to see a pent up demand forming over the next 12 months. And, it is important to remember that even though residential sales volume is lower today because of temporary confidence issues, the fact is that there is very little supply viewed in the context of our 2-million-person market. And, when new people from across the country and around the world see our region and look at our real estate, it’s like they are in a big beautiful store and it’s not like a Wal-Mart; it’s like a big Tiffany’s store where 98% of everything already has a “sold” sticker on it. So, once the people of BC regain their well-placed confidence in this Province, and once new people begin to focus on the beauty and security of the product in this Tiffany’s store, our market is going to experience a solid turnaround in sales volume and price stability and I think this point will occur around October 2009. So I believe our residential market is, on a relative basis, one of the strongest most stable markets in all of North America and I think it’s going to continue to stay that way. We just need to get through a slow 2009 -- and surely we can do that.

I want to quickly touch on the Olympic Village project that has had some negative press, some of which has been irresponsibly inaccurate. I have personally investigated the affairs of the Olympic Village. My overall view is this: there is a construction plan that is slightly behind schedule but with some overtime and enough qualified trades people, the project can be delivered on time; there is a new financing plan that will put the project on stable footing thanks to the quick action of the Premier; there is a sensible marketing plan being carried out by one of the world’s top marketing people, our very own Mr. Bob Rennie; there is a committed award winning developer who had the courage (or whatever you might call it) to take on one of the most complicated developments in the history of Canada; and there is a City team led by Mayor Robertson, Councillor Meggs and City Manager Ballem who are now on top of things. We need to appreciate that this highly complex billion dollar project is a world-wide model of environmental excellence and the 25-month construction period is a development miracle. Developers, architects and planners from all over the world will be coming to see this model community, in this stunning location; and, when the 2800 athletes from around the world arrive next January they are going to be located in the happiest place on earth next to Disneyland -- This is a great development; and I believe that the overall economic picture for the project will not result in any net risk to the City of Vancouver. I’ve analyzed the numbers and that’s what I firmly believe.

Now the real meat of my discussion with you today is not just that BC is in relatively great shape – the fact is, there is one very black cloud on the horizon that we need to be very afraid of and we will need to wait until after May 12th to see if it drifts past us. And I’m sorry we need to talk about this -- but this is a forecasting discussion after all and my forecast for the future of BC could change and take a very different path. The path I have been talking about to this point is the proven path that leads to high levels of broad-based employment; low income taxes, high disposable income; prosperity for 95% of the population, with social support for the balance -- and confidence in our future. The other path will most surely lead to the opposite of all of these things, based on past history. You know that the single greatest lesson of history -- is that people do not learn from the lessons of history -- so we need to remind ourselves from time to time about history in order to help plan our future and avoid making the mistakes of the past.

Now, I am going to tell you a quick personal story that for me has resulted in a small epiphany. For many years my socialist acquaintances in politics have been telling me how great Cuba is. They use words like “Socialist Utopia” and “worker’s paradise”. These leftist acquaintances of mine organize junkets to Cuba to keep in touch with their model society. Now I think that I’m an open-minded guy and I have been very curious to see how socialism could apparently succeed in Cuba when it has failed so completely everywhere else. So off to Cuba I went on December 26th just past, to check out the supposed success and the anniversary of 50 years of Socialism. What I found was that the very private resort peninsula of Veradaro Beach developed by Europeans is quite nice. However, I found the rest of Cuba to be a third-world disaster which reminded me of China 25 years ago. Havana looks like Barcelona except it appears as if it has been fire bombed and it makes the downtown eastside of Vancouver look like a Four Seasons Resort. I quickly determined that the 50th anniversary of the Revolution meant a 50-year suspension of private property rights and no repair or maintenance for 50 years thereafter.

Amidst the endless crumbling buildings and even out in the countryside, there were a lot of police around and when I suggested to my private guide that it must be quite safe with so many police—he replied to me, and I quote – “Senor, the police are not here to make us safe”. Later on in the day I said to my guide – some people from my country say Cuba is a worker’s paradise – to which he replied, and I quote, -- “your friends senor are insane” – he was actually very angry at this suggestion – and it struck me as the kind of anger many of us felt when Glen Clark was in power – Anger at how a region with everything going for it can be destroyed by ideologically driven bad governance. And, my little epiphany was simply this—there are certain people who are trying to take over the government in BC, some of whom have been acquaintances of mine, that are totally brainwashed and ideologically blind. Many of them honestly believe that a place like Cuba where there is no freedom of speech, no freedom of the Press, no economic freedom, and where workers get paid $20/month maximum, is some kind of Utopian worker’s paradise, when in fact it is a crumbling economic and social disaster. So the question I offer is this -- – what matters more to us -- in forecasting our industry’s future in BC? – is it the shallow short-lived recession facing us, or is the greater danger the possible four-year election of a provincial political party controlled in part by people -- who have drunk the Kool-Aid laced with the cyanide of socialism. On this question, the forecast for BC depends.

It is important to just review for a moment how one side of the political system works here in BC. You’ve got the big public sector unions that have been taken over by a mixed bag of Marxist, Leninist, Trotskyites, Maoists and Castro lovers. These people take millions of dollars of their union member’s money without approval and then run a political campaign based on “fudget” budgets and phony jobs and timber accords and other lies, and with all of that they try to take over the government. And, if the leftist party wins then four things happen. Firstly, the far left ideologues do whatever it takes to get control of the government beating out what I call the social pragmatists in their own party. Now, sometimes the social pragmatists split off from the leftist ideologues like our Vision Party friends in Vancouver split off from COPE, but this will not happen at the Provincial level because of who donates the political campaign money. The Second thing that happens is that economic freedom is attacked and wounded through tax increases of every sort and bureaucracy gone mad; thirdly, the puppet masters leading the public sector unions are allowed to raid the government treasury taking literally billions of dollars of regular taxpayer’s money for their own crew; and, finally, these acts have the ultimate effect of destroying the economic welfare of our Province as a whole, and destroying the lives of decent hard working union and non-union people in the private sectors of this Province. That my friends is the factual history of the 90’s, and that my friends could be our future once again, and that my friends is the single biggest determinate of any forecast for this Province.

Now it may surprise you, but I am a private sector union person by background prior to receiving my business degree from UBC. I was formerly a member of the International Union of Operating Engineers and the Hotel Bartender and Culinary Workers Union Local 40. I have union friends and union employees – and I consider myself a social pragmatist. One of my heroes was a union man by the name of George Meany who was the President of the 9-million member American Federation of Labor and who also became the US delegate to the United Nations. Mr. Meany spoke often with a recurring theme and I quote from a speech he gave in 1953: “We, in the American Federation of Labor want no part of socialism or communism. Experience has taught us that free labor can exist and make progress only in a free land. There is no stronger enemy of socialism in the world than the nine million men and women who make up the American Federation of Labor.” end quote. You see, as a true labour leader, George Meany, understood well the maxims of Abraham Lincoln that you cannot strengthen the weak by weakening the strong and you cannot build up the wage earner by tearing down the wage payer.

Well nice Mike Harcourt did not understand these truths when he ushered in the confiscatory thievery of the corporate capital tax that damaged the real estate industry more than any other -- and Glen Clark did not understand these principals when as Premier, he and his fellow travelers set about to make BC into their very own socialist utopia just like Cuba. And Glen Clark did us no favours when he let the leftist ideologues that have seized control of the public sector unions, raid the Provincial treasury, driving the Province into a deficit position and into the status of a have-not Province. These people destroyed our industry and all the economic prosperity and jobs this industry and you people create, and they would destroy us again in a heartbeat. That was the dark, lost decade – and the history lesson of the 1990’s. And this history is worth remembering because now we have the lovely Carol James leading the NDP who is the new smiling shiny puppet of the left wing ideologues who for now -- is not supposed to scare anyone -- just like the nice Mike Harcourt didn’t seem too scary at first. But, you might remember that the leftists got rid of Mike, when he wasn’t left wing enough. In his own words, he took a bullet for them.

And so my friends we are fast approaching a fork in the road on May 12th where either a continued bright future, or a return to the dark times is a possibility, in what at this point -- despite the ups and downs of the polls -- will no doubt be a very close election coming down to just a few seats.

So let me conclude by summarizing my message and my forecast. I believe that with these very low interest rates, available credit, continued in migration, fiscal stimulus, the lowest taxes in North America, the incredibly positive Olympics, and the absolute fact that BC is one of the finest places to live in the world, we should have every confidence in the long term health of our real estate market and our industry. I believe the property market will begin to return to strength in volume, and stability in price, by late this year. The only condition to this positive long-term forecast is that we continue to enjoy good governance and not return to a government controlled by the leftist ideologues in our midst.

Our brightest future is in having an honest, capable government that lays the foundation for the people and the economy to flourish together and, if we can retain good government -- then we will all prosper -- in this truly magic place.

ROB MACDONALD

President, Macdonald Development Corporation

Robert J. Macdonald is the President of Macdonald Development Corporation whose property portfolio consists of over 1000 apartment units and a number of shopping centre and office complexes. The company primarily develops single family lots and multi family condominiums and, since 1990, the company has successfully delivered over 2500 residential condominiums and 800 single family lots. Current development activity underway in British Columbia exceeds $300 million. The company has participated in several joint initiatives with various government bodies which have created significant public benefits as well as corporate profitability.

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