Executive Summary

Purpose of the Study

The purpose of the development study is to identify economically viable options for the City owned lands at the Southeast Shore of False Creek, taking into consideration all pertinent City objectives and policies.

Present Situation

The City currently own approximately 43 Acres of M-2 zoned industrial lands at Southeast False Creek. The lands are short-term leased to a number of tenants for a variety of storage and transportation uses. An exception is a long term lease of a water-lot to Egmont Towing and Sorting Ltd. This lease expires in November 2006. The total gross rental income is approximately $520,000 per annum at the present time. The City Works Yard does not pay rent and there is a portion of the Canron site not rented for environmental reasons; the former tenancy of the galvanizing facilities was terminated to stop further potential contamination.

In order to provide a complete assembled site for a comprehensive development, purchase or land exchange in respect of the 1.9 Acre Egmont Towing property and the 17,000 sq.ft. Sauder owned property will be required. Based on an independent opinion of value, the market value based on a willing seller situation is a total of $2.8 Million. However, the price dealing with unwilling sellers may be higher.

The lands have historically been used for a variety of heavy industries, including ship-building, incinerator, sawmill and steel fabrication. As a result, significant and widespread soil contamination is present, and approximately $10 Million will be required in the short term to address this issue even without developing the lands. The cost will be significantly higher, estimated at $27 Million, if a comprehensive residential development is to occur, employing soil removal and risk assessment.

Based on an independent opinion of value, the City lands have a current market value of $51 Million if it were uncontaminated. A preliminary cost estimate of soil remediation to develop the lands as an industrial park is $15 Million, hence the market value of the City lands with the contamination in place is approximately $36 Million.

The soil cost estimates are preliminary, order of magnitude and based on known data at the present time. As further investigations are carried out, revision to the estimates is expected.

City Objectives Pertaining to Development of the Lands

The City’s objectives for the lands are as follows:

• Land use should be residential.
• A continuous public waterfront walkway should be provided.
• Any appropriate new policies as developed by the City’s Blueways Team should be incorporated into the land development.
• The standard public amenities required of major developments should be provided; these amenities are 20% social housing, park standard of 2.75 Acres per 1,000 population, daycare, school site, public art and library levy.
• Regarding public art, there is an additional objective of providing a City owned Arts Resource Centre on the lands.
• The "B" listed heritage building at 85 West 1st Avenue should be retained as a heritage resource.
• Views of significant City landmarks should be respected.
• A corridor for a new streetcar system should be reserved.
• Planning policies set out in the False Creek Policy Broadsheet should be addressed.
• A development should incorporate energy efficient design and explore the potential for sustainable development.
• Last but not least, a development should bring a reasonable return on the City’s investment in the lands.

Potential Development Concepts

A number of potential concepts were created, studied, and consulted with experienced and knowledgeable persons in the property and development industry, including a private workshop with a number of respected persons in the industry. Out of all these, a concept named Creekside Landing was formed.

Other concepts including an industrial park development, a mixed industrial and residential development and a number of residential developments were also explored. They fall short of the City objectives and were not pursued.

Creekside Landing:

The Creekside Landing concept envisions a new residential neighbourhood of about 6,500 people living in 3,750 housing units on about 44 building sites, varying from 2 storey townhomes to high-rise condominiums. A village square will be located on the waters edge, providing up to 100,000 sq.ft. of commercial space, and the square will be the focal point, meeting place and the soul of the new community.

The development would provide 3.2 Million sq.ft. of floor area, at a density of 1.60 FSR based on gross site area, or 3.13 FSR based on net site, exclusive of parks and roads.

Incremental building blocks enable a varied mix of small and large scale developments. As these proceed they will have the flexibility to respond to changing social and market conditions in the course of the project build out.

Sustainability is a key principle behind the development concept. While the criteria will be refined in the next planning phase, there is a consensus from the literature and planning practice on the subject that Creekside Landing’s vision embodies the goals for sustainable urban development. This vision is for a mixed use "walking" neighbourhood which has a critical mass and a strong identity in itself, and which is also integrated with the City’s utility and transit infrastructure. Following the principles City Council has established regarding housing mix, and provision of community facilities will further reinforce the social sustainability of this new community.

Good accessibility, for daily convenience and for special needs, is a fundamental principle. A street car right of way will run through the neighbourhood, with a stop at the village square, from where a ferry could be taken to the downtown peninsula. These modes of public transportation completes the array of accessibility options in Creekside Landing which also redefines the allocation of territory for pedestrians and automobiles - to the advantage of all users.

The emphasis is on mews instead of standard City streets to provide the service circulation through the neighbourhood. The vision is of a pedestrian friendly environment, where walking is the primary mode of surface circulation, and where vehicular traffic is directed to an incremental traffic and parking system. Unnecessary surface vehicular movements are thereby eliminated while, the mews enable necessary service and emergency vehicles to obtain direct access to their destinations. Therefore, while automobiles are well accommodated, their negative impacts on the community are greatly eliminated.

A large Park, a number of smaller parks, open spaces and a continuous waterfront walkway will all be linked, to form a comprehensive public realm. A constructed creek-like water system will create a public atmosphere and provide interesting vistas throughout the public realm. The opportunity of this water to be cleaned and released into False Creek will be explored.

The heritage listed Domtar Salt building would be moved from its First Avenue location to the village square and join the commercial clusters in the square.

The City’s standard requirement for major development, i.e. social housing, daycare, park, public art and library levy will be provided. Any special requirements will be provided on the basis that the development will be appropriately compensated.

The Blueways Team’s work is in progress, and any suitable recommendation resulting from their work would be taken into consideration in the Creekside Landing concept.

A preliminary economic analysis on the Creekside Landing concept indicates that, based on current market condition, the development should generate a cash flow of $12 Million upon completion of the project, or 4.5% Internal Rate of Return. The return is in addition to social housing and other public benefits which would be provided in Creekside Landing. No profit is built into the proforma analysis, and the cash flow will be the only available resource to cover development uncertainties. In addition to the return, the City will also benefit from a larger assessment base for purposes of property taxes, and increased economic activities due to construction.

Generally speaking, in order for the Creekside Landing concept to be economically viable, approximately 530 useable floorplates of 6,000 sq.ft. on 44 building parcels, plus the village commercial space, will be required. Using an average site coverage of 6,000 sq.ft. per parcel the necessary floor space could be accommodated in an even plateau of 12 storey towers. Such a rigid uniformity is not consistent with Vancouver’s tradition of urban form and would not readily suit the needs and expectations of the varied socio-economic groups who are envisaged to be making this a socially and economically sustainable community. The plateau concept would have a diminished appeal to the private market, resulting in significant lower selling values.

The type of varied housing form such as in the proposed concept therefore reflects the accomplishment of economic targets in a form of building and open space that caters to all of the community’s members.

No Development

A strategy normally open to the City is to not develop the lands but to hold the real estate as an investment for the short to medium term, until a better market condition. This strategy is not advisable as significant soil remediation cost will be required within the short term. The rental revenues will not be sufficient to recover soil remediation cost and land carrying cost, resulting in a significant investment loss. A hold would result in significant financial loss, regardless of the length of time. The amount of loss would increase as the holding time increases. For a holding time of sixteen years, the cumulated losses would wipe out the entire value of the real estate without achieving a single City objective.

The site environmental requirements were introduced at a time much after the City has purchased the lands, except that when the former Canron site was bought, the issue was beginning to emerge. The weak land holding economics is a direct result of unforeseen change in environmental legislation, of which the effects have to be dealt with at the present time.

Summary

Summing up, the City lands are the last major development site on False Creek and an opportunity for a new residential neighbourhood, as illustrated in the Creekside Landing concept in this report. The lands are let-go industrial lands, therefore there is no existing residents to be disrupted, and an appropriate development in this location would take some pressure off any potential redevelopments in established residential neighbourhoods in the City.

Based on current market condition, the Creekside Landing concept would produce a modest return of 4.5% IRR, or a cash flow of $12 to $15 Million upon project completion, compared with an equity/investment loss of no development of $12 Million over a similar time frame. In terms of Net Present Value based on a return of 7%, the Creekside Landing concept would show a loss of $6.5 Million compared with a loss of $18 Million in the case of no development.

Even in the event of a down-turn at the time when the City lands have been developed and being sold, the City may lose on a lower selling revenue, but needed housing supply, public amenities, roads, infrastructure and other objectives will be achieved. When compared with the no development alternative which would not provide the public benefits, to proceed with development is still clearly a better choice. Furthermore, in times of poor demand, the City may have a choice of not selling the lands, but to wait for a market upturn, at which time, assuming that the new zoning and serviced sites are in place, the City would be well positioned to take advantage of the upturn.

Therefore, the down-side uncertainty is considered acceptable in the circumstance.

As to the right timing to develop the lands, one should be mindful of the need for two years to rezone the lands, and a number of years to develop over 40 Acres of lands. At any point in time, when a decision is required on whether or not to proceed with planning and development of the lands, the uncertainty of time changing things plus the associated risks in the future, will always be present. Therefore, now is as suitable as any time, for the City to embark upon the planning and development of the lands. Furthermore, the City’s weak defensive economic position of holding the lands due to significant site remediation and land carrying costs, resulting in significant investment losses, indicates that a delay is not in the financial and social interest of the City.

Recommendation

In conclusion, it is recommended that the City should proceed with planning and development of the lands at Southeast False Creek immediately. The next step would be a two year public process to gain rezoning of the lands for a new residential neighbourhood as envisioned in the Creekside Landing concept. At the end of the rezoning, the City may wish to pause, to review the market condition at that time before moving on to the physical development of the lands.

Last modified: April 8, 1997
(c) 1997 City of Vancouver