Vision Brief for a new development

confluence at Inglewood Vision Brief

Version 1.0 Issued 2019.03.28

confluence at Inglewood Vision Brief

Located at

9 Avenue SE + 12 Street SE Inglewood

Prepared on behalf of Rylan Graham

Version 1.0

Issued

2019.03.28

Prepared by

Hemant Chauhan Arvind Gopalakrishnan Jon Maselli Janu Raj

EVDS 622

Real Estate Development and Finance University of Calgary Winter Semester, 2019

Contents

Executive Summary

1. Introduction and Context

CGMR Group is pleased to submit a vision brief for an assembly of lands at 1301, 1305, and 1309 9 Avenue SE, in the heart of Calgary’s historic neighbourhood of Inglewood. The CGMR Group team consists of urban planners Hemant Chauhan, Arvind Gopalakrishnan, Jon Maselli, and Janu Raj. As an established firm for over 20 years, CGMR Group has acquired a large portfolio of clients who have expressed interest in the project type and design outlined in this vision brief.

Project Description . . . . . . . . . . . . . . ................................................................................

Site History . . . . . . . . . . . . . . . . . . . . . . . . . . ...............................................................................

Policy Context . . . . . . . . . . . . . . . . . . . . . ................................................................................

Community Profile . . . . . . . . . . . . . . . ...............................................................................

The Case for Confluence . . . . . . ................................................................ ...............

Proposed Land Use Redesignation .....................................................................

O6 O8 1O 11 12 13

2. Design Concept.

Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................................................................................

Conceptual Visualization . . . . . ...............................................................................

By the Numbers . . . . . . . . . . . . . . . . . . . ...............................................................................

Site Access and Circulation . ................................................................................

16 18 21 22

3. Stakeholder Engagement Key Stakeholders . . . . . . . . . . . . . . . . .................................................................. .............. 26

4. Revenue and Operating Costs Cost Breakdown . . . . . . . . . . . . . . . . . . . ............................................................................... 32

5. Development Schedule Project Timeline . . . . . . . . . . . . . . . . . . ................................................................................ 4O Go/No Go Decision and Next Steps ..................................................... .............. 42 References . . . . . . . . . . . . . . . . . . . . . . . . . . ................................................................................. 44

The following document outlines preliminary studies and site analysis, local policy context, design concepts, stakeholder engagement, as well as revenue and operating costs and project schedule. Confluence will not only be an invaluable asset to the neighbourhood around Inglewood, but will also establish a new standard for brownfield site remediation and development within Calgary.

1

Introduction and Context

Project Description

Located at the corner of 9 Avenue SE and 12 Street SE, Confluence is a proposed mixed-use multi-residential development with a grocery store and café located at grade. The development is comprised of 63 units over five storeys, and has been designed to respond to the Inglewood main street corridor context as well as nearby heritage structures such as the city-owned East Calgary Telephone Exchange Building.

BO

RI

VE

R

8A ve S

The name “Confluence” was chosen due to the site’s location at the intersection of 9 Avenue SE and 12 Street SE, as well as its close proximity to the meeting point of the Bow and Elbow Rivers. 12 Street SE acts as a gateway into Inglewood from Memorial Drive and the communities of Alyth/Bonnybrook and Ramsay, and Confluence is strategically positioned to capitalize on this excellent location.

Moreover, 9 Avenue SE directly connects to Downtown Calgary and the East Village, providing Confluence with a high visibility location and direct access from all nearby neighbourhoods. The site’s existing conditions consist of a ParkPlus surface parking lot facility as well as a retail cannabis dispensary.

Nearby amenities include a delicatessen and various retail stores.

E

9A ve S

Project Site 1301, 1305, 1309– 9 Ave SE

E

St S

E

10

11

Av eS

E

Figure 1.1: Site location

Av eS

E

12

This document is intended to provide a planning analysis which in turn has informed the strategic location choice and architectural design of the building.

CGMR Group has examined relevant city policies, such as the Inglewood/Ramsay ARP and 9 Avenue SE Main Streets Plan in order to propose a contextuallyappropriate development solution. Confluence will be a welcome addition to Inglewood’s ever-growing main street corridor.

6

W

To Downtown Calgary via 9 Ave SE

ELBOW R IVER

Inglewood/Ramsay Station Future Green Line LRT

12 St S

E

Project Site 1301, 1305, 1309– 9 Ave SE

9

e Av

SE

BO

W

RIV

ER

12 St SE To Memorial Dr via 12 St SE/Zoo Rd NE

Figure 1.2: Site context 7

Site History

Inglewood holds the distinction of being Calgary’s oldest neighbourhood, having been established in 1875. As such, 9 Avenue SE was considered the city’s original main street, prior to the development of Downtown Calgary and Beltline neighbourhoods. Today, the commercial corridor is home to a number of boutique retail stores and community services located in city-designated historic buildings. Many of these historic structures are located within viewing distance of Confluence, including the East Calgary Telephone Exchange Building designed in Romanesque Revival style in 1909, and the Dougall Block and Blow Block buildings designed in Edwardian Commercial style in 1910 and 1908 respectively.

Confluence borrows design elements from these heritage buildings to create a cohesive and contextually-sensitive transition along 9 Avenue SE.

1947

Figure 1.3: Aerial photos showing site evolution over time 8

1964

1301 and 1305 9 Avenue SE were originally the site of a Texaco gas station and mechanic shop. Earliest records of this use date back to the Calgary Fire Insurance Plan documents from 1947. Prior to this, the land was not utilized for any specific purpose. The gas station had expanded over time, as seen in the 1964 aerial photography imagery in Figure 1.3. In 1992, the gas station was demolished and the land title rights transferred ownership. Since 2015, the land has been owned by HOK, an architecture, engineering and planning firm formerly known as Hellmuth, Obata + Kassabaum with headquarters in the United States and offices located internationally. CGMR Group has worked under the assumption that the land is still contaminated and has not been remediated since the demolition of the gas station in 1992.

1991

1993

Community Profile

According to the City of Calgary’s municipal census of 2014, Inglewood had a population of 3.647 living in 1,987 dwellings, a 4.8% increase from its 2011 population of 347 (The City of Calgary: Inglewood profile). With a land area of 2.5 sq.km, its population density in 2014 was 1,458/km2.

The City of Calgary states that the residents in this community had a median income of $68,642 in 2011, and about 19% low income residents in the neighbourhood (The City of Calgary: Inglewood profile). A proportion of 32.8% of the buildings were condominiums or apartments, and 36.2% of the housing was used for renting. As of 2006, 44.5% of Inglewood homes comprised of apartments and condominiums, with the remaining 44.7% being single-detached and attached homes (bungalows and two storey).

With a diverse range of population residing in Inglewood and about 40% not living in a family, but living with relatives, non relatives or alone, it needs to revisit its housing typologies to suit the needs of the future residents. In order to achieve increased density and reduced dependence on automobile, the community demands varied housing alternatives that are in close proximity to their daily needs.

(Source: City of Calgary)

9

Policy Context

Confluence falls inside the framework of multiple City of Calgary planning documents and policies. At the highest level, the development aligns with principles found in the Municipal Development Plan (MDP), followed by the Inglewood Area Redevelopment Plan (ARP), 9 Avenue SE Streetscape Master Plan, and Green Line LRT Plan.

Confluence follows multiple recommended policies found in the MDP, including land use strategies to provide for a broad mix of residential, employment and retail uses, as well as focusing highest density developments along intersections of main streets (Bylaw 19P2017). Retail services will also be provided at grade in accordance with the MDP bylaw. Confluence will also create a strong pedestrian environment allowing people to traverse along 9 Avenue SE easily and safely.

The Confluence project site is located within the boundaries of the Inglewood ARP, with a new draft document currently in production as of March 2017.

This document is highly relevant to the success of the project given its recent revisions. The leading core idea found in the ARP promotes the upgrading and intensification of 9 Avenue SE (2.1.1). Confluence follows this vision with its strategic location within the community. The project also follows other ARP goals, including 2.1.5 — “Encourage a mix of uses that will provide options for residents to meet their needs locally”, 2.1.7 — “Preserve the human scale of buildings”, 2.1.9 — “Provide for a variety of choice in housing types”, 2.1.10 — “Encourage the development of commercial […] amenities in the community”, and others (see Figure 1.4).

Confluence also follows specifically designated policies in the ARP for the 9 Avenue SE main street. Large format retail is not allowed, with the exception of

10

Vision and Core Ideas

2.1.1 – Encourage and guide the upgrading and intensification of the 9 Avenue S.E. main street.

2.1.2 – Integrate the Light Rail Transit (LRT) line, 17 Avenue Bus Rapid Transit (BRT) and station into the existing community and guide the intensification of land near the transit station.

2.1.3 – Encourage new residential development and population increases that will support the revitalization of local facilities, support rapid transit investment, maintain the viability and improve the quality of the local school, and provide a market for local area retailers.

2.1.4 – Protect and enhance Inglewood’s unique character, which is a function of its history, geography and residents.

2.1.5 – Encourage a mix of uses that will provide options for residents to meet their needs locally.

2.1.6 – Preserve, where possible, Inglewood’s historic buildings.

2.1.7 – Preserve the human scale of buildings and rich mixture of commercial and recreational activities of the area.

2.1.8 – Provide a framework for land use controls that are compatible with the character of the community.

Figure 1.4: Alignment of Confluence with Inglewood ARP policies

Confluence development

grocery stores and other similar uses which provide daily goods and services.

This use is permitted as long as the development includes a residential or office component, which the Confluence project respects (3.4.2.a.). The intersection of 9 Avenue SE and 12 Street SE is specifically mentioned in policy 3.4.4, recommending wayfinding signage, street furniture, and signature architecture reflecting Inglewood’s historic and urban character. The design choices seen in Confluence have been chosen based on materiality and architecture style of adjacent buildings, and wayfinding and seating will also be incorporated into the development.

Following multiple community engagement sessions, the City of Calgary has created the 9 Avenue SE Streetscape Master Plan with the intent to create a vibrant and attractive main street within the community of Inglewood. This plan also places importance on the intersection of 9 Avenue SE and 12 Street SE noting that there are many underused sites and spaces along 9 Avenue SE, including this location. The plan mentions the need for more commercial services and businesses as well, a condition which Confluence satisfies.

The project site also falls within a 10 minute walking distance of the proposed Inglewood/Ramsay Green Line LRT station. The City of Calgary has identified this station for transit oriented development (TOD) in their Green Line Long Term Vision Plan. With a projected increase of 6,650 residents after the station’s construction, Confluence fulfills part of this residential growth estimate.

Additionally, the MAX Purple bus line connects directly to the project site, allowing further potential for transit use.

Vision and Core Ideas

Confluence development

2.1.9 – Provide for a variety of choice in housing types, recognizing the diversity in household types, sizes and incomes.

2.1.10 – Encourage the development of commercial, tourist and recreational amenities in the community.

2.1.11 – Encourage transit and active modes as preferred transportation options for the Plan Area.

2.1.12 – Provide a safe and convenient environment for pedestrians and cyclists.

2.1.13 – Improve neighbourhood open space systems.

2.1.14 – Facilitate the efficient movement of all modes of travel through the area in order to meet the needs of both regional through traffic and the area’s residents and users.

2.1.15 – Promote a healthy physical environment by addressing noise, pollution, odour and other environmental concerns.

2.1.16 – Encourage the growth of community spirit.

Figure 1.4 (con’t): Alignment of Confluence with Inglewood ARP policies

11

The Case for Confluence

Responses to the “Main Streets” public engagement activities which took place from November 2014 through May 2015 convey that the residents expressed a lack of available facilities to enhance local small scale businesses. Also, the residents expressed that the 9 Avenue SE is being under-utilized as an access to commercial services needed for day to day uses (such as groceries, hardware, pharmacy etc.) within the neighbourhood.

21

,00

A detailed market study of the existing facilities within the community reveals that it lacks a grocery store resulting in residents perceiving Inglewood as a food desert. Also, as this site falls under the influence zone of the proposed Green Line Inglewood/Ramsay LRT Station, a grocery store within a 5 minute walk would play a significant role in improving the quality of the transit station planning area, also enhancing the vibrancy of 9 Avenue SE as a main street. This would also help maximize the use of public transit infrastructure.

0v

eh

Project Site 1301, 1305, 1309– 9 Ave SE

icl es /

24

16

,00

10

This proposal thus, aims to develop a mid-rise mixed use building that would house 63 dwelling units (condos) with a grocery store and café at grade. A development of this nature and size on 9 Avenue SE, would allow for an increase in population that would help enhance the existing facilities, and also improve the quality of the street. Further, locating the development on a corner plot of a primary intersection would reduce the impact on the adjacent properties.

The grocery store will be beneficial for people of all ages and income groups and would further reinforce the feeling of community among the residents of Inglewood.

10 min walkshed to grocery stores Figure 1.5: Site characteristics 12

h

10 min walkshed to LRT station

0

mi

nw alk

10 min walk warp

Land Use Redesignation

Proposed Land Use Change A land use redesignation from Direct Control (DC) on lots 1301 and 1305 and Mixed Use - Active Frontage (MU-2) on lot 1309 to Mixed Use - General is proposed for the project site. This change would allow for the development to be located facing a commercial street with residential uses and commercial uses at grade. The City only allows for the rezoning of Direct Control Districts providing that the development integrates innovative and unique ideas onto the site.

Confluence respects this by including an urban grocery store on its grade-level commercial floor in an area of the city which is considerably under-serviced by food distributors.

DC MU-2

The change would also allow for a development of up to five storeys in height (20 metres) and a floor area ratio (FAR) of 3. Building setbacks of 3 metres are required along both 9 Avenue SE and 12 Street SE. The City of Calgary created the Mixed Use - General land use type to allow for increased development along main streets like 9 Avenue SE.

Concurrent Development Permit Application A concurrent development permit application will be submitted to the City in order to expedite the development process. Typically, land use redesignation applications must be approved prior to the submission of a development permit.

In this case, both applications will be submitted and reviewed side-by-side to allow for a quicker turnaround time on construction. Additionally, this process reinforces the notion that the developer is serious with their proposal and plans to continue with construction after the land is rezoned.

MU-1

Max height: 20m Max FAR: 2.92

Figure 1.6: Proposed land use redesignation 13

2

Design Concept

Approach

The intersection of 9 Avenue SE and 12 Street SE is a prime location for a development like this to occur, and hence the focus would be towards activating street frontage on both sides. In order to do that, a café will be integrated along with a grocery store and the setbacks are given considering the building bylaws of 3 metres on all the sides.

16

The image shown above reflects massing and orientation. The light blue colour massing indicates commercial space. The dark blue massing indicates residential and support spaces. The main floor will comprise of a grocery store as well as a café and the four floors above that would comprise of luxury condominiums, based on the market analysis.

The building structure will be 4 storeys above a 1-storey podium of retail space at grade and a 2-storey underground parkade. Brick exterior shall be comparable with brick type and colour used on the historic East Calgary Telephone Exchange Building. The buildings street façade will be designed to architecturally delineate the shopping and café spaces.

CGMR Group proposes utilizing existing features from the City-owned historic East Calgary Telephone Exchange Building to design and construct 63 for-sale luxury condominiums. Confluence will not only be an invaluable asset to the neighbourhood around Inglewood, but will also establish a new standard for brownfield site remediation and development within Calgary.

Each condominium will be approximately 600 to 800 square feet in size.

An integral feature of their design will be the prominence of the materials complimenting the historic building adjacent to the site. All condominium units will feature exposed brickwork on their façade along with walk-out balconies and unique stonework patterns on the columns. Sandstone material will be used on grocery store exterior walls to synchronize building aesthetics with the prominent heritage buildings on 9 Avenue SE. The colours emphasized on the façade will be red and brown buff shades as this type of design features traditional red and tan brick with punch windows.

The condominiums will offer open and spacious floor plans, ten foot ceilings, a sound retardant floor system, medium finishes including crown moulding in all rooms, new carpeting, full size washer and dryer, granite counter tops, ceramic tile flooring in the bathroom, and generous sized balconies. The entrance of the condominiums and ingress and egress to the parking will be located at the laneway to the rear of the site.

As developers we recognize that a significant aspect of any brownfield redevelopment is the coordination of traffic flow for residents, service providers and retail customers. In order to minimize the impact on surrounding roads and neighbourhoods, the project proposes to maintain and utilize existing access

points and traffic control systems. Externally, the vehicular circulation plan maximizes separation between tenant, customer and service uses. Segregation of vehicular and pedestrian traffic is paramount in a mixed-use environment.

It is anticipated that the project will include 80 parking stalls. The loading and service areas will be on the rear side of the development adjacent to the laneway.

The physical spaces making up the public realm are not left as stand-alone entities, but will have a relationship to one another as part of a street wide network. The café will also have an outdoor space for sitting integrated in the setback.

Sound dampening measures such as sound attenuation blankets shall be used to reduce noise transmission between the commercial and residential spaces.

Pedestrian oriented exterior spaces, as well as site amenities, including furniture and landscaping will be included. Access to the upper residential floors will be supported via an elevator in first floor lobby located adjacent to the commercial spaces. Enclosed egress stairways shall also be provided.

This mixed use development is proposed considering various benefits that it will provide to the neighbourhood such as social/quality of life improvements – the aim is to make it pedestrian friendly while creating a socially connected cultural landscape. Economic benefits include shared public infrastructure and higher rents to improve return on investment. The most significant environmental benefits include a reduction in vehicular dependency for day-to-day grocery shopping, focusing density instead of contributing to sprawl, and supporting transit by being located along the MAX Purple bus line and within a 10 minute walk of the Inglewood/Ramsay Green Line LRT station.

17

Conceptual Visualization

Figure 2.1: View #1 of proposed development, looking south

Figure 2.2: View #2 of proposed development, looking southwest

Figure 2.3: View #3 of proposed development

By the Numbers

Site Area

1,875 m2 20,184 sq ft

Building Height

0.19 ha 0.46 ac

Building Intensity

2.92 Maximum Floor Area Ratio 121 m2 Building Footprint 5,128 m2 Gross Floor Area

20 m Maximum Height

Dwelling Units

5 Storeys

On-Site Parking

80 Underground Parkade Stalls

63 Total Units 5 Studio Units 48 1-Bedroom Units 10 2-Bedroom Units

Retail Space

1,208 m2 Net Commercial Floor Area (13,000 sq ft)

21

Site Access and Circulation

9A ve S

E

12

St

SE

Retail entry

Secondary entry

63 UNIT MULTI-RESIDENTIAL MIXED-USE BUILDING

Retail entry

Loading Fire exit

P

La n

ew ay

Figure 2.4: Proposed site access and circulation 22

Pedestrian circulation

3

Stakeholder Engagement

Key Stakeholders

1. Government Officials and Organizations a) City of Calgary Planning & Development Department þþ

The City’s Planning & Development Department is directly responsible for determining and implementing the growth of the city.

þþ

The transportation department would assess the feasibility and efficiency of the proposed development as it falls under the influence area of the proposed Green line LRT station.

þþ

The City’s planning department plays a vital role in analysing the expectations of the community and the City and conveying the developer’s ideas with respect to the proposed development.

þþ

It also plays a significant role in the approval of the proposal with respect to its adherence to TOD policies.

þþ

Organizing pre-application meetings with the developer in order to ensure that the proposed development aligns with the existing City guidelines, policies and land use by-laws.

þþ

26

b) City of Calgary Transportation Department

Providing guidance for growth strategies and land use planning.

The City develops the long term land use vision and provides the required tools to execute the vision by supplying up-to-date information on land, housing, population and other relevant data.

þþ

The planning department assists in re-designating the land for a particular use (permitted uses and discretionary uses).

þþ

It process applications, permits, licenses and inspections.

Calgary building services ensures compliance with the rules and regulations influencing the development use and its occupancy.

c) City of Calgary Environmental Department þþ

This department helps determine the suitability of the site for the proposed development with respect to the existing site conditions.

þþ

It also oversees the approvals based on the proposed development’s adherence to site contamination policies.

2. The Developer The owner and the development consultants together function as the DEVELOPER of the real estate project. While the owner is responsible for decision making, the development consultant manages the development process from inception to completion. The consultants play a significant role in acting as a centre of communication between the city officials, adjoining land owners and the owner, thus assisting the owner make strategic and profitable business decisions.

Some of the roles of the developer include: þþ

Identifying, evaluating and acquiring the land/property.

þþ

Conducting a comprehensive site study encompassing environmental conditions, geotechnical investigations, existing traffic circulation & numbers, and legal documents relevant to the development.

þþ

Supervising the preparation of the project timeline and concept drawings. Presenting the project proposal to all the stakeholders.

þþ

Conducting market research and analysis to determine the demand and budget for the proposed development.

þþ

Preparing operating cost budgets.

þþ

Ensuring that the proposal is in line with the city guidelines and policies. This is extremely important while preparing applications for approval from the City. Also ensuring that the project is suitable for the site and the neighboring landowners in order to avoid a backlash.

þþ

Preparing branding and marketing materials and conducting the advertising, application, and pre-sales processes

þþ

Arranging financing for the project (equity, investors, loans, line of credit etc.)

þþ

Coordinate with contractors and create a construction contract that considers all project costs, and determine the procurement methods.

þþ

Undertake the construction of the project as per the development proposal with minimum delays and budget overruns.

þþ

Maintaining the legal documents confirming the timely completion of the project.

27

3. Community Associations of Inglewood and Ramsay þþ

At the neighbourhood level, community associations play a significant role as advisors in local planning and land development activity, and as representatives voicing the needs of the residents.

þþ

Maintaining a consistent participation in the engagement process in order to be informed about the details of the proposal.

þþ

Reviewing and providing suggestions on proposed land use and development plans.

4. Existing ParkPlus Users

28

þþ

Ensuring that the existing users are informed well in advance about the phases of construction thereby causing less inconvenience.

þþ

Ensuring that the Calgary Parking Authority arranges for the parking requirements of the existing users.

5. Inglewood Silver Threads Association (NGO) þþ

As a neighbour, the NGO building that functions as a seniors’ activity centre needs to be informed about the project in a timely manner

þþ

The developer must take into consideration any suggestions the NGO has, with respect to the form of the building, its orientation, and the intensity of activities the influencing safety and quality of the street.

4

Revenue and Operating Costs

Cost Breakdown

Project Statistics Areas Land Area (acres)

0.46

Land Area (sf)

20,184

FAR

2.92

Gross Building Area (GBA, sf)

59,000

Total Saleable Area (SA, sf)

55,200

Efficiency

93.56%

Construction

Start Date

End Date

Period

01-Sep-19

01-Dec-20

15 months

Residential Unit

Type

# of Units

Area per Suite (sf)

Area (sf)

Sale Price/Unit

Sale Price/Unit (psf)

Total Sale Price

A

Studio

5

600

3,000

$339,999

$567

$1,699,995

B

1 Bed

48

650

31,200

$359,999

$554

$17,279,952

C

2 Bed

10

800

8,000

$419,999

$525

$4,199,990

63

670

42,000

$367,936

$549

$23,179,937

# of Stalls

Parking Ratio

0

--

Parking - Underground

80

1.27 per unit

Parking - Visitor/HDC

0

--

80

1.27 per unit

Total - Sales

Misc. Revenue

Parking - Surface

Total Parking

32

Commercial Unit

Area (sf)

Sale Price (psf)

Total Sale Price

Retail

13,000

$400

$5,200,000

Office

0

$350

--

13,000

$400

$5,200,000

$367,936 per unit

$549 psf saleable area

$23,179,937

Commercial

$400 psf saleable area

$5,200,000

Total Value

$481 psf GBA

$28,379,937

Total - Base Rent

Misc. Revenue

Parking - Surface Parking - Underground Total Parking

# of Stalls

Parking Ratio

10

0.8 per 1,000 sf

0

--

10

0.8 per 1,000 sf

Sales Revenue Residential

33

Project Costs Land Value

$10,128,112 per acre

Hard Costs Soft Costs Closing Costs & Commissions Interest

$200 psf GBA

$4,140,857

$250 psf GBA

$14,750,000

21%

of Hard Costs

$53 psf GBA

$3,024,000

5%

of Sales Value

$24 psf GBA

$1,386,497

60% Util.

$16 psf GBA

$935,865

$7 psf GBA

$415,940

6% Int.,

Financing Fees

2%

Hard Cost Contingency

5%

of Hard Costs

$13 psf GBA

$720,000

Soft Cost Contingency

3%

of Soft Costs

$2 psf GBA

$90,720

Government Subsidy

-$350,000

Total Project Costs

$2,573,021 psf GBA

$25,113,879

$264,972 psf GBA

$2,616,058

Development Return Metrics Profit (= Value less Costs)

Return Metrics

34

Profit Margin

(= Profit / Costs)

10.4%

Return on Equity

(= Gross Equity Required / Profit)

60.6%

Cash on Cash (ROI)

(= Cash Equity Required / Profit)

116.5%

Construction/Term Loan Amount Loan Amount 75% LTV at Completion

$20,797,000

85% of Project Costs

$21,724,000

Loan Amount (Minimum of above)

$330,111 per unit

$20,797,000

Equity Requirement Project Costs Less: Loan Amount

$25,113,879 -$20,797,000

Gross Equity Requirement

$4,316,879

Add: Current Land Debt

$2,070,428

Less: Land Value

-$4,140,857

Cash Equity Requirement

$2,246,450

35

In order to find out the site acquisition costs, current market value of the land is to be determined. This is done utilizing the ‘Spin2’ tool from the Government of Alberta to find out comparable land sales. Using this, costs are obtained accurately as per current market rate and is done by looking at land parcels on the same intersection. The inflation/deflation in the land value is calculated using the Housing Price Index tool from the The Canadian Real Estate Association and adjusted in the final land value. Since the selected land is a brownfield site and would require remediation, a 25% depreciation has been considered. This leaves us with a three lot site worth $4,140,857 as of March 2019.

Hard Costs Site work costs including the demolition of the cannabis store estimated at approximately $5.00 per square foot. The other two lots are used for surface parking. The below grade parking structure adds 80 parking stalls with a cost of $20,475 per stall or $63 per square foot. The construction cost for the retail space at grade is estimated at $189 per square foot, with residential units estimated at $245 per square foot. The construction cost for condominiums is significantly higher as we plan to construct luxury condo units. The mentioned estimated costs have been referred from 2019 Canadian Costs Guide by Altus Group. Since the building is going to be a five storey structure with around 20 metres in height, it is to be constructed with a concrete frame structure which explicates the higher construction costs per square foot. Although, a perfect rectangular shape will help decrease overall construction costs. A hard cost contingency of 5% has been considered for the retail space and apartments to cover unpredicted changes in construction costs and design adjustments.

36

Soft Costs Soft costs include expenditures associated with land assembly, permits and fees, legal fees, marketing, engineering, utility, architectural consultancy fees, insurance, organizational overhead, connection fees, taxes, closing costs and environmental testing and taxes fee. Soft costs have been estimated to be 21% of total hard costs. A soft cost contingency of 3% has been considered for the process to cover unpredicted expenses and emergencies.

Apart from hard and soft costs, 2% financing fees has been considered. Also, 5% of sales value has been considered as closing costs and commissions.

Project costs have also been decreased by the subsidy of $350,000 received from Federation of Canadian Municipalities in the form of ‘Brownfield Site Redevelopment’.

Equity Terms Since most lenders will give the lesser amount out of 75% of total LTV (loan to value) costs at completion and 85% of total project costs, the 75% of LTV costs at completion are much lesser than its counterpart. So the required equity is remaining 25% i.e. $20,797,000.

Construction Financing

Risks and Challenges

For financing requirements, a regional bank will be consulted as they provide the most competitive terms. The terms for the construction loan from a regional bank are as follows: LTC: 75%; Term: 15 months; and Rate: 6%

Timing: Although the considered contingencies help in dealing with unexpected changes to some extent, the spectrum of uncertain events is extremely vast and events like design and construction alterations and contractor postponements/ errors, construction costs, project maintenance, poor weather, entitlement delays, returns and risk may all impact the overall financial situation of the project.

Financial benefits will highly rely on the developer’s ability to deliver the project as early as possible.

The interest rate has been considered after the assumption that no presales will be required. Although, the average interest rate is 4.5% but considering that we require two mortgages for purchasing the land as well as moving forward with the construction, the interest rate has been assumed to be 6%.

Returns The sale prices for apartments and retail space have been decided on in accordance with current market prices for the properties with similar nature and quality in Calgary. The sources include Rentfaster, Loopnet, Spacelist and CMHC portal.

Disposition Strategy The idea is to sell the whole property by units and pay the mortgage at once within the period of 15 months from the day construction starts. If apartments or retail units are held for longer than assigned period, the loan interest will decrease the profit margins.

Market Risks: Calgary’s current housing market is quite demanding for a diverse range of housing options. Given the ‘missing middle’ in housing typologies and considering the location of chosen site, the units seem quite acceptable by the market. However, financial markets are unpredictable and rely on multiple actors.

An unlikely event or financial crisis may diminish consumer ability or desire to purchase units.

Rate Risks: Although current mortgage interest rates are significantly low, there are multiple factors that tend to effect it substantially. The economic crisis of 2008 is a perfect example of this.

Construction Cost Risk: The cost of construction embodies the bulk of initial expenses that will be withstood by the developer. A hike in construction costs will have a considerable impact on the revenues from the development. Since oil is the main source of energy used to yield and transport cement, brick, steel and other construction materials, construction costs are highly linked with oil prices.

37

5

Development Schedule

Project Timeline

2019

2020 SEP

OCT

N OV

Pre-application meeting

DEC

Application submission

Pre-development studies and design Pre-application engagement Ongoing communication with City administration Stakeholder and community engagement - On-site signage - Project website - Attendance at Inglewood Sunfest event - Newsletter advertorials

40

- Canada Post mailers - Dedicated phone line - Dedicated email

City application review

JAN

FEB

Calgary Planning Commission hearing

MAR

APR

City Council public hearing

M AY

Construction begins

JUN

JUL

Sales of residential units begins

AUG

SEP

OCT

N OV

Construction completion 15 months after starting date Landscaping and public realm improvements

Ongoing communication with stakeholders and community

41

Go/No Go Decision and Next Steps

Factors considered

Is the project in our area of expertise?

Are we able to buy the land at reasonable rate?

Is the project profitable enough for us, based on its budget and fees?

Would the project present a possibility to expand our expertise or market?

Is the cost to develop our proposal reasonable?

Is the proposal in sync with the market’s needs and preferences?

Do we have the internal or external resources to pull this project off effectively?

Does this project really fit our corporate vision, strategy and goals?

Is the project’s subsidy funding certain?

Is the site shape amenible to construction?

Are we able to make the most out of our site?

Final Decision

42

Go (Yes)

No Go (No)

Based on market research and an analysis of potential operating costs, CGMR Group has concluded that the project meets a profit margin of 10.4%. Given this, we recommend proceeding with the project’s development.

Next steps will include preparing a concurrent land use redesignation application and development permit application submission to the City. Stakeholder and community engagement efforts will continue until project completion in late 2021. These efforts include installing on-site signage at the corner of 9 Avenue SE and 12 Street SE, preparing an informational website about the project, attending the Inglewood Sunfest event in August 2019, publishing advertorials in local community newsletters, distributing mailers to surrounding residents, and conducting face-to-face interviews with local community members.

Once the land use change and development permits have been approved, the project will continue forward to a Calgary Planning Commission hearing session, followed by a City Council public hearing. After these steps have been completed, project construction may begin.

References

Altus Group. (2019). 2019 Canadian cost guide. Retrieved from https://www.altusgroup.com/news_ insights/2019-Canadian-cost-guide

LoopNet. (n.d.). Calgary Canada retail space for sale and rent. Retrieved from https://www.loopnet. com/intl/canada/alberta/calgary_retail-space/

Canada Mortgage and Housing Corporation. (n.d.). Housing market information portal. Retrieved from https://www03.cmhc-schl.gc.ca/hmiportal/en/#Profile/1/1/Canada

Moretti, A. T. (2012). Development proposal for a mixed-use project, Arlington, VA. [Practicum project].

Retrieved from https://jscholarship.library.jhu.edu/bitstream/handle/1774.2/36093/ Morettini_Development%20Proposal%20for%20A%20Mixed-use%20Project%2c%20 Arlington%2c%20VA_2012_Sislen.pdf?sequence=1&isAllowed=y

Canadian Real Estate Association. HPI tool. Retrieved from https://www.crea.ca/housing-market-stats/ mls-home-price-index/hpi-tool/ City of Calgary. (2017). 9 Avenue SE streetscape master plan. Calgary, AB: City of Calgary.

City of Calgary. (2017). Property Tax. Retrieved from http://www.calgary.ca/CFOD/Finance/Pages/ Property-Tax/property-tax.aspx?redirect=%2Fca%2Ffs%2Fpages%2Fproperty-tax%2F City of Calgary. (2018). Municipal Development Plan (Office consolidation, December 2018). Calgary, AB: City of Calgary.

Rudy, L. J. (2014). Getting started with go/no-go decision making. Retrieved from https://business. tutsplus.com/articles/getting-started-with-gono-go-decision-making--cms-21362 Public Archives Canada. (1947). National Map Collection: Calgary 736. [Photo].

Spacelist. (n.d.). Office, retail & industrial spaces. Retrieved from https://www.spacelist.ca/

City of Calgary. (2018). Inglewood ARP: Draft. Calgary, AB: City of Calgary.

University of Calgary Spatial and Numeric Data Services. (1964). Aerial photo of Calgary. [Photo].

City of Calgary. (2019). Green line: Long term vision plan. Calgary, AB: City of Calgary.

University of Calgary Spatial and Numeric Data Services. (1991). Aerial photo of Calgary. [Photo].

City of Calgary. (2019). Main streets: 9 Avenue SE. Retrieved from http://www.calgary.ca/PDA/pd/ Pages/Main-Streets/Main-Streets.aspx?redirect=/mainstreets#9-ave-se City of Calgary. (n.d.). Inventory of historic resources. Retrieved from http://www.calgary.ca/PDA/pd/ Pages/Heritage-planning/Inventory-of-evaluated-historic-resources.aspx City of Fargo. (2016). Proposal for a vibrant mixed use development. Retrived from http://files. cityoffargo.com/content/fddf8b78ad1dd25bacd21043993e200d5cfa1f7c/City%20of%20 Fargo%20-%202nd%20Ave%20N%20and%20Roberts%20St_Enclave%20Development.pdf CivicWorks. (2018). 19+2 Vision brief. Calgary, AB: CivicWorks.

Foto Flight. (1993). Aerial photo of Calgary. [Photo].

Government of Alberta. (n.d.). Spin2 spatial information system. Retrieved from https://alta.registries. gov.ab.ca/SpinII/logon.aspx Kastes. (2019). Role of the real estate development consultant. Retrieved from http://www.wgkastes. com/role_of_the_real_estate_development_consultant_sepia.pdf

44

RentFaster. (n.d.). Apartments & houses for rent in Canada. Retrieved from https://www.rentfaster.ca/

46