9.3 Key Assumptions for Financial Analysis

9.3.1 Assumptions for Rezoning Scenarios

The detailed assumptions for all of our analysis are included in each of the proformas contained in the attachments. Some assumptions vary on a property by property basis (to reflect building form, and specific neighbourhood market conditions).

The major assumptions for our strata titled development financial analysis are as follows:

1. Average sales price assumptions vary by location and form of construction:
   • Woodframe strata apartment projects are assumed to achieve average sales prices ranging from $360 per square foot to $490 per square foot depending on the location. Some new projects currently marketing in Victoria are achieving higher average prices, but these projects are located in unique, high amenity locations (such as adjacent to Beacon Hill Park).
   • Concrete strata apartment projects (at the Town Centre sites) are assumed to achieve average sales prices ranging from $515 to $525 per square foot depending on location.
2. Average lease rates for new retail space in Urban Village and Town Centre locations are assumed to be $25 per square foot net, except for sites in Cook Street Village where lease rates are assumed to average $35 per square foot net. Net operating income from retail space is capitalized at 6.5% to estimate total market value.
3. Residential commissions are assumed to be 3% of sales revenue.
4. Marketing is assumed to total 2% of sales revenue.
5. Leasing commissions on the commercial space are set at 17% of Year 1 lease income.
6. Rezoning costs (application fees, architects, consultants, management, disbursements) are assumed to total $100,000. This assumes that rezoning is consistent with the OCP plan so costs are minimized, otherwise the cost would likely be higher.
7. Construction cost assumptions are as follows:
   • Hard construction costs (excluding parking) for woodframe apartment buildings are assumed to range from about $120 per square foot to $150 per square foot depending on location and quality of finishings.
   • Hard costs for concrete apartment buildings (excluding parking) are $195 per square foot.
   • Costs for grade level commercial space in mixed-use buildings is assumed to be $175 per square foot.
   • Parking costs are assumed to average $35,000 per stall (assuming one level of underground parking) to $40,000 per stall (assuming two levels of underground parking) and $7,500 per surface parking stall.

In total, hard costs including parking range from about $165 to $195 per square foot for woodframe buildings (depending on quality and location), $185 to $205 per square foot for mixed use lowrise buildings and $245 for concrete buildings.

The construction costs are based on information published by BDC Development Consultants, Altus Group, BTY Group and on discussions we had with developers who are active in the Victoria multifamily residential market.

8. As separate landscaping cost allowance of $10 per square foot of site area is included.

9. Demolition costs are estimated separately for each site depending on the existing improvements.

10. An allowance of $2,500 per lineal metre of site frontage is included for upgrades to the adjacent sidewalks, boulevard, street trees, lighting, and road to centre line.

11. Connection fees are assumed to total about $50,000 per site.

12. Soft costs and professional fees (permits, engineering, design, legal, survey, appraisal, accounting, new home warranties, insurance, deficiencies and other professional fees) and development management total 12% of hard costs. This excludes the soft costs and professional fees associated with the rezoning process.

13. Post construction costs are included for six months following project completion.

14. A contingency allowance of 5% of hard and soft costs is included.

15. Interim financing is charged on all costs (including land) at 6% per year. In addition, a financing fee equivalent to 1% of total projects costs is included.

16. Residential and commercial DCCs are included at current rates.

17. Property taxes are based on 2014 mill rates and our own estimate of the assessed value during development.

18. Developer’s profit margin is set at 15%, which is the typical minimum profit margin target for new multifamily development in Victoria.

9.3.2 Property Assembly Assumptions

For some types of properties, it is possible that developers who are assembling sites could have to pay a premium over the market value of the property under its existing use and zoning. For example, in a single family area designated for higher densities, some home owners will be interested in selling their property at the same time that a developer is interested in purchasing, but adjacent owners may not be interested in selling and may require a premium over market value to be enticed to sell. If the required premium is too high, then it is reasonable to assume that assembly is premature and the site is not yet a redevelopment site. However, for some properties some reasonable premium should be factored in.

To determine a realistic assumption about potential assembly costs, we divided properties in the study area into two different categories:

1. Income-producing commercial properties which are owned by investors. The market value of an income-producing property is based on the capitalized value of its income stream or on its land value under existing zoning, whichever is higher. When a property’s land value exceeds its value as an income producing property, it is a redevelopment candidate.

Some of the investment properties in the study area are smaller, so assembly (likely a maximum of one extra lot) may be required to achieve the densities that are envisioned in the case study analysis. We assume these properties are acquired and assembled by developers when the current owner/investor is interested in selling. Any developer interested in assembling adjacent properties could acquire an initial property and then hold it as an income producing property until the adjacent owner is interested in selling. Because there is an income stream, the developer is earning a return on investment and can be patient while waiting for a small adjacent property to come available. Therefore, our analysis assumes that developers of income producing properties do not pay a significant premium to assemble these sites.

2. Single family homes. In most cases a minimum of two or three lots will be required to create an attractive development site so assembly will be required. Our analysis assumes that developers will need to pay a premium to some owners to entice them to sell their home, allowing the developer to complete an assembly.

For home owners that are not planning on selling, moving will involve out-of-pocket costs, time, and risks that they would not otherwise have incurred. To entice these owners to sell, we assume that the developer would need to pay a premium to the seller to cover the costs of purchasing a replacement house (of similar quality in a similar priced neighbourhood).

To estimate a reasonable assembly cost allowance, we assume an average cost of about $650,000 per home (a typical value for an older home in a higher value neighbourhood that could be a redevelopment candidate). We assume the premium would need to cover the following out of pocket expenses:

• Property transfer tax on the replacement house for the seller. Assuming a $650,000 replacement house, this would be about $13,000.
• Any realty commissions incurred by the seller as part of the transaction (alternatively, the developer could cover these costs which has the same impact on the developer’s acquisition costs). A full realty commission would be roughly $21,000 (assuming a value of $650,000) if the house is listed on the MLS. However, we assume a reduced realty fee of $10,000 as the house would not need to be listed on the MLS and may only involve one agent (representing the seller in the transaction).
• Any legal fees incurred by the seller. We assume legal costs would be about $2,000.
• Moving costs for the seller. We assume a maximum of about $5,000.
• A budget for the seller to redecorate and make repairs at the new replacement house to make it comparable to the existing house. We allow about $25,000 to ensure that the seller has an appropriate budget to make any repairs at the replacement house and redecorate (additional funds would be needed for any renovations).

These items total about $55,000 or about 8% of the assumed value of the home. This suggests a premium of roughly 8% is ample to cover out of pocket expenses. This expense premium could be lower if the new home does not require repairs or if the commission or the sale of the existing home can be reduced.

In addition to recovering these costs, a home owner who was not planning on selling would likely require a financial incentive to be interested in selling and moving. The magnitude of the incentive required would likely vary from owner to owner.

Allowing an additional $75,000 (equivalent to about 12% for a $650,000 existing home) would likely be ample incentive for many home owners to sell to a developer (particularly given that no capital gains tax would be paid if the owner lived in the house). The seller could use this to acquire a better property (i.e., larger, newer, high priced location) or for other purposes.

The total estimated assembly premium (to cover costs and provide an incentive) is roughly 20% of existing market value. This suggests it is reasonable to assume that a developer would need to pay a premium of about 20% of market value to assemble existing single family homes in the area. The assembly premium could be even higher if a specific lot needs to be purchased by the developer to proceed with a project. However, it could also be lower if the developer can acquire the initial lot in the assembly at market value (on the basis that the initial lot owner is interested in selling).

Therefore, for this analysis, we assume that:

1. A developer building a mixed use project at existing commercial properties would not need to pay a premium for lot assembly.

2. A developer assembling a series of single family lots would need to pay an average of a 20% premium to the existing home owners to cover the costs of purchasing a replacement house (of similar quality in a similar priced neighbourhood) and provide additional funds as an incentive to sell (to upgrade the replacement house or for alternative purposes).

It should be noted that assembly costs would likely vary significantly from property to property, depending on the current property owner’s interest in selling and relocating, and on the alternatives that the developer has to acquire a different site. Our analysis examines a scenario that we think is reasonable. If home owners are not willing to sell at a 20% premium over market value, then it could be argued that the site is not yet a candidate for assembly and redevelopment.

9.4 Summary of Results

The following exhibits summarize the results of our analysis for each case study site. The exhibits divide the sites into four different categories based on the OCP designation.

Exhibit 5: Urban Residential Sites (OCP Density = 2.0 FSR)

Exhibit 6: Small Urban Village Sites (OCP Density = 2.0 FSR)

Exhibit 7: Large Urban Village Sites (OCP Density = 2.5 FSR)

Exhibit 8: Town Centre Sites (OCP Density = 3.0 FSR)

9.5 Financial Analysis

This section contains the detailed financial analysis that we completed for the case study sites. We included the analysis for the nine sites that were determined to be financially attractive for rezoning and redevelopment as these sites are able to support a CAC. The sites are listed in numeric order.

We have not included the sites that are not yet financially viable for rezoning and redevelopment and do not yet support a CAC.

Site 2

Site 2 is located in the James Bay neighbourhood. It is a 12,947 square foot site improved with an older 10,000 square foot single storey commercial building. The site is zoned C1-S allowing commercial or mixed-use development at a maximum density of 1.4 FSR. It is designated Large Urban Village allowing commercial or mixed-use development at a maximum density of 2.5 FSR, with a base density of 1.5 FSR.

Existing Value

To estimate the existing value, we considered four different indicators:

1. The existing assessed value is $1,757,900.
2. Based on our estimate of the potential rent that can be generated by the existing building, we estimate that the value of the property as an income-producing investment property is about $1,700,000 (similar to the assessment).
3. Based on our land residual analysis (proforma analysis), the property has a market value of about $700,000 to $800,000 as a development site under existing zoning at 1.4 FSR, which is less than the income-producing value, indicating the site is not attractive for redevelopment under existing zoning.
4. Based on our land residual analysis (proforma analysis), the property would have a market value of about $800,000 if rezoned to the base OCP density of 1.5 FSR.

The existing value for our analysis is the highest of these indicators, or $1,757,900.

Estimated Land Value at Maximum OCP Density of 2.5 FSR

The following proforma shows our estimate of the site's value if rezoned and redeveloped at the maximum permitted OCP density of 2.5 FSR. As shown in the proforma, the estimated land value at the maximum OCP density is about $1,850,000.

Site 2 - Estimated Supportable Land Value at 2.5 FSR

Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)

Site and Building Size

Strata Revenue and Value

Commercial Revenue and Value

Pre-Construction Costs

Construction Costs

Local Government Levies

Financing Assumptions

Marketing and Commissions

Property Taxes

Allowance for Developer's Profit

Site 2 - Estimated Supportable Land Value at 2.5 FSR (continued)

Analysis

Fixed Rate CAC Calculation Site 2

As shown in the following exhibit, this case study site supports an estimated CAC of about $5 per square foot of additional permitted floorspace over the base OCP density of 1.5 FSR.

Site 5

Site 5 is located in the Fairfield neighbourhood (in Cook Street Village). It is a 34,872 square foot site improved with an older 17,000 commercial building. The site is zoned CR-3M allowing commercial or mixed-use development at a maximum density of 1.0 FSR. It is designated Large Urban Village allowing commercial or mixed-use development at a maximum density of 2.5 FSR, with a base density of 1.5 FSR.

Existing Value

To estimate the existing value, we considered four different indicators:

1. The existing assessed value is $4,311,300.
2. Based on our estimate of the potential rent that can be generated by the existing building, we estimate that the value of the property as an income-producing investment property is about $4,300,000, similar to the existing assessment.
3. Based on our land residual analysis (proforma analysis), the property has a market value of about $2.2 million as a development site under existing zoning at 1.0 FSR which is less than the value under existing use so the site is not attractive for redevelopment under existing zoning.
4. Based on our land residual analysis (proforma analysis), the property would have a market value of about $3.7 million if rezoned to the base OCP density of 1.5 FSR.

The existing value for our analysis is the highest of these indicators, or $4,311,300.

Estimated Land Value at Maximum OCP Density of 2.5 FSR

The following proforma shows our estimate of the site's value if rezoned and redeveloped at the maximum permitted OCP density of 2.5 FSR. As shown in the proforma, the estimated land value at the maximum OCP density is about $6,600,000.

Site 5 - Estimated Supportable Land Value at 2.5 FSR

Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)

Site and Building Size

Strata Revenue and Value

Commercial Revenue and Value

Pre-Construction Costs

Construction Costs

Local Government Levies

Financing Assumptions

Marketing and Commissions

Property Taxes

Allowance for Developer's Profit

Site 5 - Estimated Supportable Land Value at 2.5 FSR (continued)

Analysis

Fixed Rate CAC Calculation Site 5

As shown in the following exhibit, this case study site supports an estimated CAC of about $49 per square foot of additional permitted floorspace over the base OCP density of 1.5 FSR.

Site 7

Site 7 is located in the Fernwood neighbourhood. It is an 8,891 square foot site improved with an older 3,000 square foot single storey retail building. The site is zoned CR-4 allowing commercial or mixed-use development at a maximum density of 1.6 FSR. It is designated Large Urban Village allowing commercial or mixed-use development at a maximum density of 2.5 FSR, with a base density of 1.5 FSR.

Existing Value

To estimate the existing value, we considered four different indicators:

1. The existing assessed value is $839,600.
2. Based on our estimate of the potential rent that can be generated by the existing building, we estimate that the value of the property as an income-producing investment property is $836,000, similar to the existing assessment.
3. Based on our land residual analysis (proforma analysis), the property has a market value of about $500,000 as a development site under existing zoning at 1.6 FSR, which is less than the value under existing use so this site is not attractive for redevelopment under existing zoning.
4. Based on our land residual analysis (proforma analysis), the property would have a market value of about $300,000 if rezoned to the base OCP density of 1.5 FSR.

The existing value for our analysis is the highest of these indicators, or $839,600.

Estimated Land Value at Maximum OCP Density of 2.5 FSR

The following proforma shows our estimate of the site's value if rezoned and redeveloped at the maximum permitted OCP density of 2.5 FSR. As shown in the proforma, the estimated land value at the maximum OCP density is about $900,000.

Site 7 - Estimated Supportable Land Value at 2.5 FSR

Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)

Site and Building Size

Strata Revenue and Value

Commercial Revenue and Value

Pre-Construction Costs

Construction Costs

Local Government Levies

Financing Assumptions

Marketing and Commissions

Property Taxes

Allowance for Developer's Profit

Site 7 - Estimated Supportable Land Value at 2.5 FSR (continued)

Analysis

Fixed Rate CAC Calculation - Site 7

As shown in the following exhibit, this case study site supports an estimated CAC of about $5 per square foot of additional permitted floorspace over the base OCP density of 1.5 FSR.

Site 8

Site 8 is located in the North Park neighbourhood. It is 24,120 square foot lot that is improved with an older industrial building. The site is zoned M-2 (industrial) and is designated Urban Residential allowing apartment development at a maximum density of 2.0 FSR.

Existing Value

To estimate the existing value, we considered two different indicators:

1. The existing assessed value is $1,740,000. Based on sales of similar industrial properties, the assessment is a good reflection of existing value.
2. Based on our land residual analysis (proforma analysis), the property would have a market value of about $1,400,000 as a development site at the base OCP density of 1.2 FSR.

The existing value is the highest of these indicators, or $1,740,000.

Estimated Land Value at Maximum OCP Density of 2.0 FSR

The following proforma shows our estimate of the site's value if rezoned and redeveloped at the maximum permitted OCP density of 2.0 FSR. As shown in the proforma, the estimated land value at the maximum OCP density is about $2,653,000.

Site 8 - Estimated Supportable Land Value at 2.0 FSR

Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)

Site and Building Size

Strata Revenue and Value

Commercial Revenue and Value

Pre-Construction Costs

Construction Costs

Local Government Levies

Financing Assumptions

Marketing and Commissions

Property Taxes

Allowance for Developer's Profit

Site 8 - Estimated Supportable Land Value at 2.0 FSR (continued)

Analysis

Fixed Rate CAC Calculation - Site 8

As shown in the following exhibit, this case study site supports an estimated CAC of about $36 per square foot of additional permitted floorspace over the base OCP density of 1.2 FSR.

Site 11

Site 11 is located in the Burnside neighbourhood. It is an assembly of two single family homes and a vacant lot totaling 22,800 square feet. The site is zoned R1-B allowing single family use and is designated Urban Residential allowing apartment development at a maximum density of 2.0 FSR.

Existing Value

To estimate the existing value, we considered two different indicators:

1. The existing assessed value is $819,300. Based on sales of similar older houses in the neighbourhood, the assessment is a good reflection of existing value.
2. Based on our land residual analysis (proforma analysis), the property would have a market value of about $600,000 as a development site at the base OCP density of 1.2 FSR.

The existing value is the highest of these indicators, or $819,300. Because these are single family homes, we include a 20% assembly cost allowance bringing the total existing value to $983,160.

Estimated Land Value at Maximum OCP Density of 2.0 FSR

The following proforma shows our estimate of the site's value if rezoned and redeveloped at the maximum permitted OCP density of 2.0 FSR. As shown in the proforma, the estimated land value at the maximum OCP density is about $1,273,000.

Site 11 - Estimated Supportable Land Value at 2.0 FSR

Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)

Site and Building Size

Strata Revenue and Value

Commercial Revenue and Value

Pre-Construction Costs

Construction Costs

Local Government Levies

Financing Assumptions

Marketing and Commissions

Property Taxes

Allowance for Developer's Profit

Site 11 - Estimated Supportable Land Value at 2.0 FSR (continued)

Analysis

Fixed Rate CAC Calculation - Site 11

As shown in the following exhibit, this case study site supports an estimated CAC of about $12 per square foot of additional permitted floorspace over the base OCP density of 1.2 FSR.

Site 19

Site 19 is located in the Burnside neighbourhood. It is an assembly of four single family lots totaling 29,314 square feet. The site is zoned R3-2 allowing apartment development at a maximum density of 1.6 FSR and is designated Urban Residential allowing apartment development at a maximum density of 2.0 FSR.

Existing Value

To estimate the existing value, we considered three different indicators:

1. The existing assessed value is $1,551,000. Based on sales of similar older houses in the neighbourhood, the assessment is a good reflection of existing value.
2. Based on our land residual analysis (proforma analysis), the property would have a market value of about $1,000,000 as a development site at the base OCP density of 1.2 FSR.
3. Based on our land residual analysis (proforma analysis), the property would have a market value of about $1,400,000 as a development site under existing zoning at 1.6 FSR, which is slightly lower than its value under existing use so this site is not yet attractive for redevelopment under existing zoning.

The existing value is the highest of these indicators, or $1,551,000. Because these are single family homes, we include a 20% assembly cost allowance bringing the total existing value to $1,861,200.

Estimated Land Value at Maximum OCP Density of 2.0 FSR

The following proforma shows our estimate of the site's value if rezoned and redeveloped at the maximum permitted OCP density of 2.0 FSR. As shown in the proforma, the estimated land value at the maximum OCP density is about $2,110,000.

Site 19 - Estimated Supportable Land Value at 2.0 FSR

Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)

Site and Building Size

Strata Revenue and Value

Commercial Revenue and Value

Pre-Construction Costs

Construction Costs

Local Government Levies

Financing Assumptions

Marketing and Commissions

Property Taxes

Allowance for Developer's Profit

Site 19 - Estimated Supportable Land Value at 2.0 FSR (continued)

Analysis

Fixed Rate CAC Calculation - Site 19

As shown in the following exhibit, this case study site supports an estimated CAC of about $8 per square foot of additional permitted floorspace over the base OCP density of 1.2 FSR.

Site 21

Site 21 is located in the Fairfield neighbourhood. It is an assembly of two single family lots totaling 12,540 square feet. The site is zoned R3-A1 allowing apartment development at a maximum density of 1.2 FSR and is designated Urban Residential allowing apartment development at a maximum density of 2.0 FSR.

Existing Value

To estimate the existing value, we considered three different indicators:

1. The existing assessed value is $1,239,100. Based on sales of similar older houses in the neighbourhood, the assessment is a good reflection of existing value.
2. Based on our land residual analysis (proforma analysis), the property would have a market value of about $900,000 as a development site at the base OCP density of 1.2 FSR.
3. Based on our land residual analysis (proforma analysis), the property would have a market value of about $900,000 as a development site under existing zoning at 1.2 FSR which is less than its value under existing use, so this site is not yet financially attractive for redevelopment under existing zoning.

The existing value is the highest of these indicators, or $1,239,100. Because these are single family homes, we include a 20% assembly cost allowance bringing the total existing value to $1,486,920.

Estimated Land Value at Maximum OCP Density of 2.0 FSR

The following proforma shows our estimate of the site's value if rezoned and redeveloped at the maximum permitted OCP density of 2.0 FSR. As shown in the proforma, the estimated land value at the maximum OCP density is about $1,676,000.

Site 21 - Estimated Supportable Land Value at 2.0 FSR

Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)

Site and Building Size

Strata Revenue and Value

Commercial Revenue and Value

Pre-Construction Costs

Construction Costs

Local Government Levies

Financing Assumptions

Marketing and Commissions

Property Taxes

Allowance for Developer's Profit

Site 21 - Estimated Supportable Land Value at 2.0 FSR (continued)

Analysis

Fixed Rate CAC Calculation - Site 21

As shown in the following exhibit, this case study site supports an estimated CAC of about $14 per square foot of additional permitted floorspace over the base OCP density of 1.2 FSR.

Site 23

Site 23 is located in the Jubilee neighbourhood. It is an 11,742 square foot vacant site. The site is zoned R3-A2 allowing apartment development at a maximum density of 1.2 FSR and is designated Urban Residential allowing apartment development at a maximum density of 2.0 FSR.

Existing Value

To estimate the existing value, we considered four different indicators:

1. The existing assessed value is $868,000.
2. The site recently sold for $1,150,000.
3. Based on our land residual analysis (proforma analysis), the property has a market value of about $1,000,000 as a development site under existing zoning at 1.2 FSR. This site is attractive for redevelopment under existing zoning.
4. Based on our land residual analysis (proforma analysis), the property would have a market value of about $900,000 if rezoned to the base OCP density of 1.2 FSR.

The existing value for our analysis is the highest of these indicators, or $1,150,000.

Estimated Land Value at Maximum OCP Density of 2.0 FSR

The following proforma shows our estimate of the site's value if rezoned and redeveloped at the maximum permitted OCP density of 2.0 FSR. As shown in the proforma, the estimated land value at the maximum OCP density is about $1,600,000.

Site 23 - Estimated Supportable Land Value at 2.0 FSR

Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)

Site and Building Size

Strata Revenue and Value

Commercial Revenue and Value

Pre-Construction Costs

Construction Costs

Local Government Levies

Financing Assumptions

Marketing and Commissions

Property Taxes

Allowance for Developer's Profit

Site 23 - Estimated Supportable Land Value at 2.0 FSR (continued)

Analysis

Fixed Rate CAC Calculation - Site 23

As shown in the following exhibit, this case study site supports an estimated CAC of about $36 per square foot of additional permitted floorspace over the base OCP density of 1.2 FSR.

Site 26

Site 26 is a 47,480 square foot property located in the Burnside neighbourhood that is improved with an older 55 room motel. The site is zoned T-1 and is designated Urban Residential allowing apartment development at a maximum density of 2.0 FSR.

Existing Value

To estimate the existing value, we considered three different indicators:

1. The existing assessed value is $1,950,400.
2. Based on recent sales of older motel properties in Victoria, the value of the property as an operating motel is about $50,000 per room, or $2,750,000.
3. Based on our land residual analysis (proforma analysis), the property would have a market value of about $1,486,000 as a development site at the base OCP density of 1.2 FSR.

The existing value is the highest of these indicators, or $2,750,000.

Estimated Land Value at Maximum OCP Density of 2.0 FSR

The following proforma shows our estimate of the site's value if rezoned and redeveloped at the maximum permitted OCP density of 2.0 FSR. As shown in the proforma, the estimated land value at the maximum OCP density is about $2,889,000.

Site 26 - Estimated Supportable Land Value at 2.0 FSR

Major Assumptions (shading indicates figures that are inputs; unshaded cells are formulas)

Site and Building Size

Strata Revenue and Value

Commercial Revenue and Value

Pre-Construction Costs

Construction Costs

Local Government Levies

Financing Assumptions

Marketing and Commissions

Property Taxes

Allowance for Developer's Profit

Site 26 - Estimated Supportable Land Value at 2.0 FSR (continued)

Analysis

Fixed Rate CAC Calculation - Site 26

As shown in the following exhibit, this case study site supports an estimated CAC of about $3 per square foot of additional permitted floorspace over the base OCP density of 1.2 FSR.

Density Bonus and Affordable Housing Policy: Analysis and Recommendations

April 2016

Prepared for: City of Victoria

By: Coriolis Consulting Corp.

Table of Contents

1.0 Introduction........................................................................................................... 1 1.1 Background...........................................................................................................................1 1.2 Report Organization.............................................................................................................3 1.3 Professional Disclaimer.......................................................................................................3

2.0 Study Area for Analysis ....................................................................................... 4 2.1 Downtown Core Area ...........................................................................................................4 2.2 Outside of the Downtown Core Area..................................................................................5

3.0 Analysis for Core Area Study Area ..................................................................... 7 3.1 Evaluation of Potential Fixed Rate CAC.............................................................................7 3.1.1 Approach................................................................................................................7 3.1.2 Case Study Financial Analysis for Residential Density Bonus Locations .............8 3.1.3 Case Study Financial Analysis for Commercial Density Bonus Locations ..........11 3.1.4 Key Implications...................................................................................................12 3.2 Evaluation of Potential Affordable Housing Contributions from Rezonings in the Core Area ............................................................................................................................13 3.2.1 Affordable Housing Assumptions.........................................................................13 3.2.2 Approach..............................................................................................................14 3.2.3 Summary of Estimates of Supportable Affordable Housing ................................15 3.3 Summary of Core Area Analysis.......................................................................................20 3.3.1 Target Fixed Rate CAC Analysis .........................................................................20 3.3.2 Affordable Housing Analysis................................................................................21 3.4 Policy Options to Consider for Sites in the Core Area...................................................22 3.4.1 Identification of Policy Options.............................................................................22 3.4.2 Evaluation of Policy Options ................................................................................23 3.5 Recommendations for the Core Area...............................................................................25

4.0 Analysis for Rezonings Outside the Core Area ............................................... 27 4.1 Evaluation of Potential Fixed Rate CAC Outside of the Core Area...............................27 4.1.1 Smaller Rezonings...............................................................................................27 4.1.2 Major Rezonings ..................................................................................................27 4.2 Evaluation of Potential Affordable Housing Contributions from Rezonings Outside the Core Area ......................................................................................................................28 4.2.1 Approach..............................................................................................................28 4.2.2 Summary of Estimates of Supportable Affordable Housing ................................28 4.2.3 Recommended Approach to Affordable Housing Outside the Core....................31

5.0 Recommendations.............................................................................................. 33 5.1 Inside the Core Area...........................................................................................................33 5.2 Outside the Core Area........................................................................................................34

6.0 Attachments - Financial Analysis...................................................................... 36 6.1 Approach to CAC Analysis................................................................................................36 6.2 Key Assumptions for Financial Analysis.........................................................................37 6.3 Approach to Affordable Housing Analysis ......................................................................39 6.4 Representative Case Study Financial Analysis ..............................................................40