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.