City of Vancouver
Inter-Office Correspondence
REAL ESTATE SERVICES July 29, 1996
MEMO TO: Mayor and Council
COPY TO: Ken Dobell, City Manager
Maria Kinsella, City Clerk
Ken Stoke, General Manager of Corporate Services
Rick Scobie, Director of Land Use & Development
Jacquie Forbes-Roberts, Director of Community Planning
FROM: Bruce Maitland, Manager of Real Estate Services
SUBJECT: Oakherst Rezoning
In response to Council's request for economic evaluation around the park
and heritage house issues we have analyzed the following options:
BASE CASE
In order to determine the increased land value resulting from the
proposed rezoning we determine the market value of the property under
the present RS-1 zoning taking into consideration road and lane
dedications, survey and subdivision costs. The indicated market value
for the Oakherst site as RS-1 was $9M.
We then calculated what is called a land residual to determine the value
of the density and unit mix proposed but without retention of the
heritage buildings (i.e., as if the site was vacant land). In this
calculation we start with the estimated selling price of the units and
working backwards subtracting cost of sales, construction costs hard and
soft, financing on land and construction, and developer profit. The
result of this subtraction is the land residual or the amount the
developer can afford to pay for the land to earn in this case a 15%
profit. The indicated land value after rezoning was $10.1M.
The difference between the RS-1 value of $9M and the land residual value
after rezoning of $10.1M is $1.1M. This is our estimation of the
maximum CAC/DCL contribution the developer can make and still have an
economically viable project.
OPTION 1
The rezoning as presented by the developer and recommended by staff
varied from the base case in that a heritage house containing six units
was retained and six new townhouse units that could otherwise be built
on the heritage house site were deleted. We then, as we do in any
heritage bonus calculation for the heritage site, determined the value
of the land as if vacant. We calculated the value of the land under
RS-1 zoning, not the proposed CD-1, to ensure the increase in land value
due to the rezoning does not increase the heritage retention cost. The
market value of the heritage house site was estimated to be $600,000.
We then did a land residual on the heritage house restoration and sale.
We again started with the estimated selling price of the units less cost
of sales, hard and soft construction costs, financing and developer
profit. The difference between selling price and costs was a negative
$160,000. We then added this to the RS-1 land value to get the cost to
the developer of the heritage retention of $760,000. We then deducted
the $760,000 from the $1.1M to determine the amount the developer could
pay in cash as DCL/CACs - $340,000.
OPTION 2
In this option we calculated the amount the developer could afford to
pay if the heritage house was demolished, six additional townhouses were
added generally in its location and a large public park was dedicated.
In this option recognizing the public park will detract from the selling
price of at least those units abutting the public park by approximately
10%, the estimated CAC/DCL the developer can afford to pay is $750,000.
The selling prices in the base pro forma reflected the private open
space, thus the need to reduce selling prices of directly affected
properties backing on a public park.
OPTION 3
In this option we looked at retaining the heritage house and converting
the communal open space in the applicant's proposal to public park.
Under this option the heritage house retention at a cost of $760,000 and
the public park negative affect on selling prices would leave only
$150,000 for developer contribution of CAC/DCLs.
OPTION 4
The Park Board request for a 100' x 200' dedicated park and the loss of
one townhouse unit, with the retention of the heritage house will use up
the entire CAC/DCL developer contribution.
I must reiterate to Council the affect of the park allowing public
access on and through the site was recognized in the rezoning condition
(b) (xviii):
"design development to reduce opportunities for cutting through the
site by non-residents and to reduce opportunities for mischief and
break and enter to ground level residential units."
Council should be aware the imposition of a public park on the subject
property may be perceived by the developer to negatively affect selling
prices of more units than those simply abutting the park to the extent
that he may opt to abandon the rezoning and proceed with an RS-1
subdivision. Attached is a summary of the options discussed (on file in
the City Clerk's Office).
B. Maitland
BEM:lr
HP5-7123.COV
att.