Vic News: Density grants boost bottom line for builders

Density dilemma

Density grants boost bottom line for builders

Sharon Tiffin/Victoria News
Retired architect Charles Gurd has crunched the numbers and
concluded that developers stand to gain millions.

By Brennan Clarke
Victoria News
Feb 14 2007

Victoria city councillors can’t seem to place a value on the extra floor area they’ve been granting developers lately, so Charlie Gurd thought he’d lend them a hand.

Gurd, a retired architect who sits on the city’s advisory planning commission, recently completed a cost review of five major building projects. He found that city council is giving away a lot of density and getting little in return.

“In relation to worldwide industry standards, Victoria is getting almost nothing in amenity tradeoffs for the bonus density its giving out,” Gurd said.

For example, a much-debated development known as “The Garden,” at 640 Michigan St., is poised to receive almost 60,000 square feet of extra floor area beyond what the existing zoning allows.

Gurd’s numbers show the developer will make and extra $6-million net profit, while the city is to receive $450,000 for its affordable housing trust fund.

But that’s small potatoes compared to The Well, a Caledonia Street office/residential complex for which 160,000 square feet of floor area is proposed.

Gurd says the net profit would jump from $32 million to $48 million should council approve the density lift, while the city would receive $114,000, some extra pay parking and a mid-block walkway.

The practice of giving developers extra density in return for “community amenities” such as park land, public art and infrastructure improvements has been the subject of much debate the last 18 months.

Critics say amenities such as the man-made waterfall that will be incorporated into The Falls at the corner of Courtenay and Douglas streets provide little value to the community, yet boost developers’ profits enormously.

In recent months, council has talked about forcing developers to open their books and demonstrate why they need the extra density to make their projects work.

Known as a “pro forma,” it’s common practice in Vancouver, but Victoria councillors have so far shied away from following suit.

Not your average planning commission member, Gurd has a graduate degree in architecture from Rice University and worked for such notables as I.M. Pei and Arthur Erickson during his 30-year career.

Estimating the extra profit that results from extra density is simple math, he said.

“Really, you just assign a per-square-foot cost and a per-square-foot profit,” he said, adding that the raw numbers came from reports on the projects prepared by city staff.

Gurd says the developers of Mozart House on Yates Street will make an extra $4 million if allowed a 30,000-square-foot increase. The Juliet, at 760 Johnson, calls for nearly 40,000 more square feet, pushing the net profit from $8.6 million to $12.9 million.

Townline Group, which plans to redevelop the former Bay building into The Hudson, has requested more than 230,000 additional square feet that would generate an extra $26 million in profit. However, Townline principal Rick Illich has said mandatory heritage upgrades to the building could cost up to $20 million.

Gurd admits the estimates could be a little high, but insists his “calculations are in the ballpark.”

“Developers are getting about $100 million over five projects... at the bottom end of that range it might be $85 million,” he said. “But I ran these by couple of other developers in Victoria and they’re in the ballpark.”

Coun. Pam Madoff, the most vocal critic of the city’s bonus-density policy, pointed out that the practice was meant to encourage residential units at a time when no one was interested in building housing downtown.

Now that market forces have made downtown residential an attractive proposition, the incentives are no longer needed, she said.

“What we’re doing is penalizing office construction downtown... even though residential is booming,” she said. “There’s a huge windfall that goes to a property developer (when extra density is granted.) The question is have we taken that into consideration and are we dealing with it in a responsible way?”

mailto:bclarke@vicnews.com

Gurd admits the estimates could be a little high, but insists his “calculations are in the ballpark.”

Gurd admists the estimates could be a little high. So we have an article in the paper on numbers that are believed to be inaccurate? What was Mr. Clarke thinking?

Anyways, perhaps Mr. Gurd can tell us why Parc Residences barely scraped a profit, why Astoria broke dead even and why the Mozart stalled?

Mr. Gurd, btw, is an architect from Montreal (and arrived here roughly one year ago) who is known for having designed museums and a suburban-styled town in the Saudi desert.

Coun. Pam Madoff, the most vocal critic of the city’s bonus-density policy, pointed out that the practice was meant to encourage residential units at a time when no one was interested in building housing downtown.

Now that market forces have made downtown residential an attractive proposition, the incentives are no longer needed, she said.

Right, so let's discourage it now by making residential projects too costly to build or too costly to purchase.

Anyone else see how destructive these individuals are to our local economy and the health of our region? Councillor Madoff flips on issues like a fish out of water. At one point, during the 2020 forum, she was "concerned" that not enough people take an interest in downtown development projects. So what does the community do? It becomes active by attending public hearings en masse and even forms the Downtown Residents Association. Councillor Madoff's reaction to this community interest, which she made public at a public hearing, was that the public did not understand what it was championing.

That Madoff remark is one for the ages.

Gurd says the net profit would jump from $32 million to $48 million should council approve the density lift, while the city would receive $114,000, some extra pay parking and a mid-block walkway.

The city would also receive extra density in an area that really needs it, but Mr. Gurd seems to be assuming extra density is a bad thing.

So is he saying the Mozart might be rolling again if it can get some extra density?

Anyway, the main point here is that the "extra" density developers are after is -- in most instances -- much ado about nothing. The only reason it's "extra" is because the existing rules are unrealistically tight.

If we change the rules tomorrow to only allow 2 stories, the naysayers would start slamming requests to build 4 stories.

Folks, in every other city you'll find developers building (or trying to build) much taller buildings than they are in Victoria. Even in much smaller cities. The idea that developers are shamelessly building monster buildings in Vic and reaping huge profits out of it just doesn't hold any water. Yes, the tallest Bay tower sets a precedent, but then we know precisely why they're asking for that bit of extra height in that case.

Criticizing Radius seems absolutely "twilight zone" bizarre to me. Downtown Victoria is begging for a project like that, in that location.

I think Mr. Gurd's calculator is broken.

People can lose perspective when they view everything as a potential cash cow to be milked. The same attitude prevails in Vic re: tourists and tourism.

If you sincerely believe developers are making good profits then start demanding that they spend more money on the design and finishing of their buildings, instead of trying to pick their pockets for other purposes.

Just a friendly reminder to those reading this forum: Vibrant Victoria was created, in part, to combat this biased style of media coverage that dwells on the policies and views of a small, albeit vocal, group of individuals.

Since the launch of Vibrant Victoria, the formation of the DRA and the public weighing in on development issues in record numbers, the Times Colonist has made an incredible turn-around on its development-related coverage whereas News Group publications, such as Victoria News, continue to promote biased anti-development sentiments.

Townline Group...has requested more than 230,000 additional square feet that would generate an extra $26 million in profit. However, Townline principal Rick Illich has said mandatory heritage upgrades to the building could cost up to $20 million.

Gurd admits the estimates could be a little high, but insists his “calculations are in the ballpark.”

I'm not clear on this bit. So does Gurd agree it will cost $20 million to upgrade the Bay store?

I can count about eight major projects right now that are either stalled, failed, breaking even or on shaky financial ground, due mainly to construction cost increases and/or unexpected soil remediation costs.

I would be surprised if there's a local project that made over 10% profit this past year.

So where are all the extra millions?

Give a zero, take a zero, it's all good.

Wow. What a dumb article.

aastra is right:

...the main point here is that the "extra" density developers are after is -- in most instances -- much ado about nothing. The only reason it's "extra" is because the existing rules are unrealistically tight.

and

People can lose perspective when they view everything as a potential cash cow to be milked. The same attitude prevails in Vic re: tourists and tourism.

If you sincerely believe developers are making good profits then start demanding that they spend more money on the design and finishing of their buildings, instead of trying to pick their pockets for other purposes.

The existing allowed density is pitiful, and the constant attempts to cast moral suspicion on anyone making a profit in Victoria is typical of a resentful, loser-town mentality. It's as though these people don't want Victoria to thrive. At the same time, there's this attitude that anyone who does have some money (or stands to make some) should pay through the nose for the privilege. (Hence, milk the tourists, they're just rich Americans who can afford to keep us in clover anyway... Yeah, as if.)

What does it mean, exactly, when Gurd says,

“In relation to worldwide industry standards, Victoria is getting almost nothing in amenity tradeoffs for the bonus density its [sic!] giving out,”

Does it even make sense to take "worldwide industry standards" (whose? Tokyo's? Stockholm's? San Francisco's? Shanghai's?) and (if they exist) apply them to Victoria?

And this takes the cake:

“What we’re doing is penalizing office construction downtown... even though residential is booming,” [Coun. Pam Madoff] said.

I find this really distressing, because it looks as though she's championing office construction, when in fact she is using offices to beat residential. In other words, it doesn't seem to matter what it is that's getting built -- the important thing is having something to beat it to smithereens with. I have never heard the councillor champion office construction before, so she's clearly just using this to oppose development, period.

What's Vibrant Victoria's pro-forma say?

That's a question only Charlie can answer.

I am shocked by this article's bizarre examples.

For example, a much-debated development known as “The Garden,” at 640 Michigan St., is poised to receive almost 60,000 square feet of extra floor area beyond what the existing zoning allows.

This was the Chard project that was so vehemently killed by the JBNEA. The total offer for ammenities was close to a million dollars. Anyways it is a dead project so why use it as an example and it certainly is not "poised to receive" anything.

Gurd says the developers of Mozart House on Yates Street will make an extra $4 million if allowed a 30,000-square-foot increase.

Again using the present tense "will" if allowed, pretty sure that City has passed that one and then it tanked because it was unprofitable. If it is sooo profitable then why hasn't anyone bought the rights to build it. I mean we could all use an easy 4 million dollars!!

This article is so poor on facts and so one sided that it almost does not deserve any rebuttals.

Development is not some rash you need to apply cream to. It is a healthy part of any city.

Also why is it only bad when you make millions building condos? I mean you bulldoze a mountain and strip it of any sort of plant life throw up a couple thousand SFDs connect them with kms of road way that have no connection to transit and your a freakin hero! I mean if your building houses you can dynamite a sacred cave and you get a little bad press but it blows over. Flash forward businessman of the year again.

Build a multi-use building with office, residential, university and public space close to transit and you are no better than an internet scammer.

I seriously cannot even believe these are real people saying this!

Wow! Developers might make a profit. Then again, they could go bankrupt. It's high risk.

Something most of these twits don't understand....

“What we’re doing is penalizing office construction downtown... even though residential is booming,” [Coun. Pam Madoff] said.

Say, Gateway Green and Radius office proposals are in planning as we speak. What a perfect opportunity to see if C. Madoff is as concerned about office proposals as this soundbite leads us to believe.

Newspaper writers and community activists would be well advised to pick up a book on elementary economics from any good public library.

There they'd learn about high risk investing.

LOW RISK

Savings bonds

GICs

Managed mutual funds

Stock market

Real estate development

Venture capital

HIGH RISK

Now that market forces have made downtown residential an attractive proposition...

It'd be nice if the city of Victoria would start doing its part in this regard.

“Developers are getting about $100 million over five projects... at the bottom end of that range it might be $85 million”

It's useless to say how much the developers are making when we do not know how much they are spending. Does anyone know the costs for developing 640 Michigan, The Well, Mozart House, The Juliet, and The Hudson?

But that’s small potatoes compared to The Well, a Caledonia Street office/residential complex for which 160,000 square feet of floor area is proposed.

“What we’re doing is penalizing office construction downtown...

It would certainly seem so, in this instance. When condos are proposed, people complain because it isn't office space. When office space is proposed, people complain because it's TOO MUCH office space.

The existing allowed density is pitiful, and the constant attempts to cast moral suspicion on anyone making a profit in Victoria is typical of a resentful, loser-town mentality. It's as though these people don't want Victoria to thrive. At the same time, there's this attitude that anyone who does have some money (or stands to make some) should pay through the nose for the privilege. (Hence, milk the tourists, they're just rich Americans who can afford to keep us in clover anyway... Yeah, as if.)

Interesting thought... maybe why Victoria has so many panhandlers... the idea that everyone who is richer owes us a life of ease trickles all the way down to the bottom.