Mid Rise Rental Replacement Study by City of Toronto City Planning

Potential for Rental Housing Replacement In Mid-Rise Redevelopment Along the Avenues City of Toronto Official Plan Review Prepared for: The City of Toronto June 2012

Potential for Rental Housing Replacement In Mid-Rise Redevelopment Along the Avenues Table of Contents Executive Summary .......................................................................................................................... i 1.0

Introduction .......................................................................................................................... 1

2.0

Approach .............................................................................................................................. 3

3.0

Market Overview .................................................................................................................. 6

4.0

Test Site Selection............................................................................................................... 10

5.0

Methodology ...................................................................................................................... 16

6.0

Summary of Site Market Observations .............................................................................. 19

7.0

Financial Analysis ................................................................................................................ 28

8.0

Summary of Analysis .......................................................................................................... 46

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Executive Summary N. Barry Lyon Consulting and DTAH Architects Limited were retained by the City of Toronto to examine the relatively inactive and underdeveloped low-rise apartment sites and segments of the Avenues to study the role that the Official Plan’s rental housing replacement policies may have played in redevelopment decision making. The study also examines what, if any, adjustments to the current policies may be considered in an effort to improve development feasibility and extend the benefits of Avenues-style development to areas of the City where they are currently absent. Our analysis examines six case studies of hypothetical developments in various Avenues throughout the City. For each of the selected sites, DTAH prepared a conceptual redevelopment plan for the property based on the City’s Mid-Rise Building Performance Standards. From this work, NBLC undertook market and financial analysis that tested various rental replacement standards in weak, base and strong market conditions. Our study focuses on the sites that have small rental buildings in areas that illustrate evidence of market demand or, in the case on Eglinton Avenue, potential for growing demand as a result of transit infrastructure investments. In the majority of our studies we found that, even without the rental replacement policy, the land value of sites, redeveloped as mid-rise buildings would not exceed the value of the existing rental or rental/retail development. In the final case study on Bathurst Street, the relatively high demand and pricing is enough to support the redevelopment of the site and the required replacement of the 22 rental units. In our review, only one of the sites studied (1484-1492 Dundas Street West) suggested that relief from the rental replacement policy would help support mid-rise redevelopment on the property. However, if the site was assembled with the adjacent property, the additional density would likely be sufficient to make the project feasible within the existing policy context. In most of the case studies, we found that growing demand and increasing prices will eventually make site redevelopment feasible. It is also likely that, as the rental stock on these sites age, the value of these properties will decline which will further incentify redevelopment of these sites. In general, we did not see any significant rationale to adjust the current policy to accelerate development. Market demand remains the core factor driving the pace of the market. A reduction of the replacement requirement in our view would benefit only a limited number of developments that might in the future, otherwise become viable. In any case, an adjustment to the policy would also have the effect of reducing the rental replacement requirement in areas that do not require assistance. Therefore, any adjustment to the rental replacement policy would likely have to be geographic concentrated to address only those areas’ weak market characteristics. Since the market is highly dynamic, an approach of this nature raises significant implementation issues without any compensating policy benefit. The significant influence of market conditions, along with the rapidly gentrifying character of many Avenue segments, suggests that amendments to the existing rental housing replacement policies of the Official Plan are unnecessary at this time. It is likely that over time, demand and pricing for midrise condominium apartment housing along most of the Avenues will increase, further supporting the City’s rental replacement policy. Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

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1.0

Introduction

The City of Toronto’s Official Plan identifies four areas of the City where the majority of growth and reurbanization is planned, one of which is the Avenues. Unlike other policy growth areas, Avenues have at their heart, a major street, and penetrate into almost every corner of the City, acting as both interfaces between neighbourhoods and the focal points for others. Due to their extensive distribution across the City, their reurbanization has the potential to improve the day-to-day lives of many Torontonians. Conversely, their stagnation can have a destabilizing effect on the neighbourhoods that surround them. The associated land use polices for the Avenues in the Official Plan generally seek to encourage redevelopment and urbanization of these important arteries through a mid-rise built form that contributes to the animation of the streetscape and promotes a more efficient and sustainable, multi-modal living environment. At their best, Avenues can serve as a community focal point, complete with community-oriented retail and services, supported by a residential population housed in sensitively and well-designed buildings. The Avenues designation has helped guide the development of many excellent additions to the City and has injected new life into some its most important streets. Numerous mid-rise buildings along designated Avenues, such as Queen Street, High Park, Sheppard Avenue, Yonge Street and Avenue Road have been constructed. About 30% of the projects in development within the City are 11 storeys or less in height. Of these, 29 developments are currently underway within areas designated as Avenues. However, the implementation of the Avenues policies faces both pragmatic and economic challenges that have curtailed redevelopment in some areas of the City that would benefit the most. Lack of market demand, fragmented land ownership, insufficient lot depths, competing land uses, are all factors that have discouraged redevelopment in other designated Avenues. This study specifically examines, within the context of the City’s review of the Official Plan, the impact of policy requirements to replace rental housing as part of new mid-rise development within the Avenues.

1.1

Purpose Statement & Background

The existing Official Plan was adopted by City Council in November 2002 and brought into force by the Ontario Municipal Board in June of 2006. The Official Plan’s existing rental housing replacement policies contained within Section 3.2.1 and Rental Housing Demolition and Conversion By-law (Appendix ‘A’) have been viewed by some developers and landowners as an impediment to the redevelopment of rental apartment sites, particularly on smaller sites in areas that are sensitive to increases in building height beyond typical mid-rise levels. This study arises out of, and forms part of, the City’s 5-year Official Plan Review process. It focuses on relatively inactive and underdeveloped low-rise apartment sites and segments of the Avenues to examine the role that the Official Plan’s rental housing replacement policies may have played in development feasibility decisions.

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The study also examines what, if any, adjustments to the current policies may be considered in an effort to improve development feasibility and extend the benefits of Avenues-style development to areas of the City where they are currently absent.

1.2

Rental Replacement Policies of the Official Plan

The rental replacement policies of Section 3.2.1 of the Official Plan are provided in Appendix ‘A’ of this report, with the relevant policy direction for this study summarized as follows: 

Rental housing units are to be protected and maintained.



Existing rental housing units which have affordable rents and mid-range rents are to be retained in new development on sites containing six or more rental units.



New development that would remove all or part of a private building or a related group of buildings resulting in the loss of six or more rental units will not be approved unless: - All of the housing units exceed mid-range rents; or, - At least the same number, size and type of rental housing units are replaced and maintained with rents similar to those in effect at the time of the redevelopment application. Replacement rents, for a period of 10 years, will be the rent at the time of first occupancy increased annually by not more than the Provincial Rent Increase Guideline or similar guideline approved by City Council. In addition, an acceptable tenant relocation and assistance plan; or, -

Where City Council has determined that the rental housing market is in a healthy state, demonstrated by significant net gains in supply, the proposal’s retention of supply of units in rental housing sub-sectors in the geographic sub-area, and at least four quarters of vacancy rates above 3.0%;

We note that the replacement policies of the Official Plan currently utilize the strategic threshold of six rental housing units, below which, no replacement is required. At or above this total, all rental units are required to be replaced, subject to the other parameters not being satisfied.

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2.0

Approach

2.1

The Economics of Mid-Rise Development within the Avenues

As it stands, significant segments of Toronto’s Avenues have experienced limited infill development and urban renewal, particularly those outside of the Downtown or not in proximity to affluent neighbourhoods. The failure of these Avenues to attract mid-rise development has resulted in many segments becoming increasingly marginalized. Figure 1, below, illustrates in thematic form, with the intensity of development activity illustrated in yellow (low) and increasing to red (high), the level of reurbanization along the City’s Avenues, based on a survey of the types of built forms that have been constructed, the relative health of retail at grade and the overall level investment. Figure 1 – Intensity of Development Activity along City of Toronto’s Avenues

Intensity of Development Activity Low

High

Figure 1 nicely illustrates the demand side of the equation. As with most classes of real estate development, the pattern of investment is strongest as one approaches the downtown core and along major subway lines, where accessibility, services, employment, and opportunities for entertainment and socialization are the greatest. These factors create demand for new living and working spaces. Where these factors become less favourable, demand weakens. Kingston Road and Eglinton Avenue, at both its Eastern and Western extremities are good examples. The factors impacting demand along the Avenues are the same as those in every other part of the City. On the supply side of the economic equation, the landscape is different from developing in other parts of the City. The Avenues designation and the draft Mid-Rise Buildings Performance Standards provide specific direction on building height and built form, which, in turn, impact allowable densities and limit the amount of revenue that can be generated from a development. The development Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

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density can be further reduced by the peculiarities of historic lot patterns including, irregular shapes, narrow widths and shallow depths, and rear lane access issues. Providing appropriate setbacks from surrounding land uses is also a critical issue and can limit the development density. As most Avenues are surrounded by stable residential neighbourhoods, care must be taken to ensure height and massing are sensitive and compatible with the existing community. While the physical aspects of the site and the community can reduce the revenue potential of a midrise building, the costs of land can further erode the economics of redevelopment. Areas designated as Avenues are typically traditional shopping streets that are historically composed of thin and long parcels, developed with retail space at grade and with a residential unit(s) above. To assemble the land area necessary for a mid-rise development, it is often the case that several of these properties must be acquired. If the property is occupied, then the developer is faced with the additional expense of compensation for the business (if owner occupied) or for settling early lease termination issues. In addition to these extra land acquisition costs, the uncertainty and time required to assemble several parcels discourage the interest of many developers. If there are rental housing units on the site, the costs of meeting the Cityâ&#x20AC;&#x2122;s Rental Replacement Policy must also be addressed. The economics of mid-rise development feasibility are typically in place when the issues and costs associated with land supply can be overcome by pricing. To date, as Figure 1 illustrates, this has been achieved in the areas where the market demand is strongest. In other areas itâ&#x20AC;&#x2122;s clear that demand and pricing has not been sufficient to overcome the costs. In some areas, there is simply no demand for new work or living spaces at the current time for redevelopment (regardless of planning or land costs issues). This study isolates the impact of the Rental Replacement Policy on the economic equation in the areas designated as Avenues throughout the City to determine if the policy, in itself, is discouraging reinvestment.

2.2

Establishing a Feasibility Model to Properly Guide Policy Testing

As this analysis is intended to inform the 5-year Official Plan Review process, it is important that the methodology and associated findings demonstrate a direct (isolated) causal link between the existing rental replacement requirements and the lack of development. Layered on top of this fundamental question are other important considerations, such as which Avenues warrant testing and how to properly account for changing market conditions between today and the next five-year review. Our overall approach has, therefore, been to conceptually design and test a series of prototypical developments on sites within the City that involve rental housing. To this end, the City of Toronto and NBLC selected six test sites to identify and scrutinize the economics of mid-rise development in conjunction with the Cityâ&#x20AC;&#x2122;s rental replacement policy. The sites were chosen to reflect the broad array of neighbourhoods, residential markets, property types and densities which typically contain rental housing along the Avenues which the City could target for additional redevelopment by modifying its rental replacement policy. Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

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The study examines the development feasibility of these properties based on market research that establishes realistic revenue expectations for a future residential condominium development on the sites and a conceptual design, prepared by DTAH. NBLC developed market briefs for each of the selected sites, providing guidance in terms of pricing, appropriate unit sizing, absorption rates, number of parking spaces, amenity requirements and other key parameters for each site. The market briefs also look forward 10 years, enabling NBLC to gauge the impact that long term market trends and infrastructure investments will have on each siteâ&#x20AC;&#x2122;s redevelopment viability under the Cityâ&#x20AC;&#x2122;s existing rental replacement policy. Utilizing the market parameters obtained through our research, NBLC and DTAH then generated a conceptual redevelopment site plan and built form model for each of the test sites, in general accordance with the Cityâ&#x20AC;&#x2122;s Mid-Rise Guidelines. The plans provided a reasonable estimate of development density for the property and identified any site issues that could create market or development issues. Based upon these site plans, a residual land value analysis was prepared that summarizes and inputs the associated revenues and deducts the development costs and profit, to illustrate the potential value of the land. This potential land value is then compared to the existing land value in its current use. Our model tests numerous rental housing replacement scenarios ranging from full replacement, to no replacement, to test its role on the feasibility of development. In each case, we compare the resulting land value to the land value of the redevelopment scheme to assess whether a developer, or perhaps the landowner, would be economically motivated to redevelop the site with a mid-rise building. A detailed description of our methodology is found in Section 5.0

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3.0

Market Overview

The following section provides an overview and assessment of the GTA residential apartment marketplace to better understand current market conditions influencing feasibility across a broad range of Avenues contexts. The market analyses conducted for each site facilitate the financial analyses associated with each of the site development scenarios, providing recommended market inputs such as anticipated index pricing, unit sizes, sales absorptions, levels of amenity and parking requirements.

3.1

Toronto Rental Market Context

The Toronto rental market is composed of purpose-built rental buildings and a secondary rental market, which includes a growing component of privately owned condominium apartment units. In both sectors, conditions are very tight, with low vacancy rates. According to CMHC, Toronto vacancy rates at the end of the fourth quarter 2011 were averaging just 1.4%, and 1.3%, for purpose-built and condominium apartment unit rentals, respectively. The following summarizes the core features of the Toronto and GTA rental marketplace:



With the cost of home ownership increasing, a consistent influx of approximately 80,000 to 100,000 immigrants arriving in the GTA annually, and an increasing number of young professionals working Downtown and Toronto’s Centres, rental demand remains strong. Renters in the City desire well-located units with proximity to higher-order transit, and employment, translating to even tighter rental market conditions in central and accessible locations. These fundamentals have also largely driven investor sales in condominium apartment projects, which supply rental units in these transit-oriented, urban locations. This desire to live in the City of Toronto is evident in the City’s population increase of approximately 107,000 residents between 2006 and 2011. 1



The tremendous growth of the condominium apartment market throughout the GTA in the past decade has brought with it a highly publicized increase in investor activity. Steadily increasing property values, low interest rates and a resilient economic climate have created an environment where investors feel safe investing in GTA real estate, and particularly within condominium apartment projects. The current investor driven market is extremely diverse. However, perhaps the most common motivating factor for investor activity is the prospective of stable long‐term cash‐flows from renting units.



The City’s purpose‐built rental apartment market has shown little to no growth in recent years as escalating land, construction and financing costs present an increase in risk exposure to the development community. Moreover, most developers require short term profitability, whereas a purpose‐built rental project can take years to begin realizing positive returns. Toronto’s investor community has capitalized on this market opportunity and is largely supplying (de facto) rental apartment market demand in the form of private condominium rentals.

Statistics Canada census data.

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

3.2

Despite the significant quantity of condominium apartment units entering the rental market, and the substantial amount of condominium apartment projects set to be completed in the next few years, market fundamentals (demand outpacing supply), suggest that the rental market will continue to remain strong into the near future.

GTA Condo Market Context

The GTA-based condominium apartment market has steadily grown over the past 10 years in response to provincial planning policy which limited growth in the low density land supply, as well as strong population growth through immigration, demographics, affordability, and the demand to live in high quality urban neighbourhoods. In 2011, GTA high-rise sales shattered all previous records, totaling a combined (new sales and re-sales) 51,150 units 2. The following additional points summarize the current market:

2 3



New high-rise sales in the GTA totaled 28,466 units in 2011, a 28%, or 6,212 unit, increase over the previous record, set in 2007 of 22,250 unit sales. High-rise re-sales in the GTA also set a record in 2011 with 22,684 re-sales; 1,755 more units than the previous record set in 2010.



18,997 of the 28,466 unit GTA total, or 67%, were sold within the municipal boundaries of the City of Toronto 3.



Aside from economic factors, such as the low interest rates, rising low-rise home prices, new project launches in amenity-rich neighbourhoods, and heavy investor activity fueled the remarkable sales volumes in 2011.



As previously noted, the current investor-driven market is extremely diverse, comprised of local and international buyers, with varying motivations for investing in the GTA high-rise marketplace.



Examples of the most common reasons for GTA high-rise investment include the appeal of a growing multi-cultural marketplace, short-term value appreciation, stable long-term cashflows from renting units and/or a safe capital holding strategy based on the perceived stability of the Canadian economy.



In March of 2012, the most recent month of available sales data at the time of writing this report, there were 1,959 new high-rise sales in the GTA (1,243 sales were within the City of Toronto), almost 950 more sales than the 1,011 units sold in February 2012. Year-over-year, March 2012 sales were 8% below March 2011, which saw 2,140 new high-rise sales.



With the City of Toronto, March 2012 sales totaled 1,243 units, or just over 63% of the GTA total. This is more typical of 2009/2010 activity following the recession, but below 2011’s record numbers.



Overall, the GTA, including the City of Toronto, residential market fundamentals are strong. However, in the near term NBLC envisions high-rise sales moderating in 2012 given the

Sales data based on information provided by RealNet Canada Inc. Toronto total calculated by NBLC utilizing RealNet Canada Inc. base data.

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impact of European economic events, possible interest rate fluctuations, and most importantly, the anticipated completion of a significant quantity of condominium apartment units within the GTA. 

3.3

Over the coming five year period leading up to the next five-year Official Plan review, the factors that drive high density residential development, such as demand for transit services, affordability, demographics, immigration, commuting costs, and an energetic and exciting urbanizing environment all point to continued growth.

Toronto Mid-Rise Market 

The anticipated increasing demand for condominium apartment living in the coming decades is supported by land use policy initiatives such as – the Provincial Policy Statement, the Growth Plan for the Greater Golden Horseshoe (Growth Plan) and Official Plan land use policy areas such as the Avenues, Centres and the Downtown and Central Waterfront which emphasize more efficient land use patterns that better utilize existing and planned infrastructure.



This overarching policy framework has been embraced by the development community and purchasers alike, as just under 120,000 higher density apartment units have been sold within the GTA between 2006 and 2011, and now substantially outpaces low-rise unit sales 4. Of this total, approximately 88,000 units, or 73 percent, were sold within the City of Toronto alone.



Within the condominium apartment market is the smaller mid-rise segment encompassing buildings between 3 to 11-storey buildings. These projects are typically found within the existing established communities or along arterial roads, such as the Avenues, which are usually well-served by transit and in proximity to an abundance of amenities such as shops and restaurants.



As of April 30th, 2012, 87 of the 298 actively marketing mid/high-rise residential projects in the City of Toronto were mid-rise projects of between 3 and 11 storeys, representing 29% of the overall total.



The mid-rise projects were comprised of 10,275 stacked and apartment condominium units, or 13% of the total number of units within mid/ high-rise projects.



29 of the 87 marketing mid-rise projects are located along the Avenues, while 18 are located in the Downtown and Central Waterfront.

Higher density apartment units include units within both high-rise and mid-rise buildings.

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Figure 2 â&#x20AC;&#x201C; Mid Rise Projects in the City of Toronto

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4.0

Test Site Selection

A total of six test sites were selected to provide a broad sampling of market contexts, rental replacement requirements, site sizes and configurations, built form potential and geographic representation across the Cityâ&#x20AC;&#x2122;s Avenues. The rationale for selecting these sites, along with their characteristics is described in the sections to follow.

4.1

SITE 1: 2501 Eglinton Avenue West

Site 1 was selected as a site that is within a relatively weak market but is expected to improve with the addition of the EglintonScarborough Crosstown LRT. The site was also selected for its westerly location along Eglinton Avenue West,that has experienced minimal redevelopment. The addition of high order transit to this part of the City is expected to have significant positive bearing on the marketability of the property. The site is located at the southwest corner of the intersection of Venn Crescent and Eglinton Avenue, 450 metres east of Keele Street. With a generously-setback 4-storey rental apartment building, the site is currently relatively underutilized, given its Avenue location. Of note to this analysis, is the potential for additional redevelopment on nearby rental housing sites with underutilized built form potential. Table 1

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4.2

SITE 2: 3453 to 3515 Bathurst Street

Site 2 is located along the east side of Bathurst Street, stretching the entire block between Deloraine Avenue and Old Orchard Grove, to a depth of just over 36 metres. The character of the surrounding area is one of transition, from expensive re-built homes starting immediately to the east, to more modest detached bungalow homes to the west of Bathurst Street. This site was selected to test the viability of redeveloping a retail plaza with a limited number of rental apartments (14) located on the 2nd floor, and with moderate lot depth which impacts achievable building height. As a retail plaza example, the site enables the evaluation of the impact that higher retail rents and higher value properties may have on the feasibility of redevelopment in a mid-rise format. Table 2

4.3

SITE 3: 2357 to 2369 Eglinton Avenue East

Site 3 is representative of the traditional automobile-oriented retail plazas in the former City of Scarborough. Although most of these plazas are located within areas with insufficient market to demand to substantiate redevelopment, this portion of Eglinton Avenue East provides an opportunity

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evaluate the market impact of the future Eglinton-Scarborough Crosstown LRT and the nearby Kennedy Station Mobility Hub. The site is located within a community that is dominated by aging high density residential rental buildings (largely constructed pre1972) surrounding stable, low density communities and automobile-oriented retail plazas similar to that on the subject site. The viability of the rental housing replacement policies could therefore have a significant impact on the redevelopment of this portion of Eglinton Avenue East. The retail strip malls in the area are primarily occupied by suppliers of services and goods that serve the local community. While retail rental rates are typically weak within these shopping plazas, vacancies are low. The subject site is somewhat different in that the majority of retail units are owned by three ownership groups who are leasing the space. Re-investment has been limited in the area due to the weak retail rental rates, the fragmented ownership pattern and the lack of market demand for ownership (residential) condominium development. Site 3â&#x20AC;&#x2122;s large front yard parking fields offer an opportunity to better utilize the potential of the site and introduce mid-rise typology. Table 3

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4.4

SITE 4: 1484 to 1492 Dundas Street West

Site 4 is a very small assembly composed of three separate ownerships, with 10 existing rental apartment units and ground floor retail. It is located at the northwest corner of Dufferin Street and Dundas Street, and is representative of Downtown Torontoâ&#x20AC;&#x2122;s west end Avenues sites. As much of Dundas Street West and other nearDowntown Avenues in the west end are already experiencing redevelopment and rapid gentrification, the site was selected to examine the economic issues surrounding the replacement of a small number of units, but with likely higher than average land cost associated with the assembly due to high demand for residential apartment living and retail space. Table 4

4.5

SITE 5: 2988 to 2994 Keele Street

Site 5 is located at the southwest corner of Keele Street and Whitburn Crescent, across from Downsview Park, roughly midway between Wilson Street to the south, and Sheppard Avenue West to the north. Although the Keele Street Avenue has experienced very limited reinvestment and redevelopment away from Wilson, it possesses significant quantities of rental housing, typically in low-rise forms which underutilize their respective sites. Accordingly, this site will allow for the Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

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examination of emerging influences associated with the significant Park (Parc Downsview Park) and transit improvements (Spadina Subway Extension), and to determine whether they are enough to invigorate market interest and encourage redevelopment under a variety of rental replacement scenarios.

Table 5

4.6

SITE 6: 3253 to 3257 Bathurst Street

Site 6 is located within a strengthening market area with a few new recent developments, five blocks north of Lawrence Avenue West, along the east side of Bathurst Street in the former City of North York. The site contains an older 3.5-storey rental apartment building with 22 rental units, and as such, is representative of the size and scale of potential rental replacement redevelopment along the Avenue. Unlike Site 2 several blocks to the north, Site 6 does Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

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not possess any existing businesses or retail space that might influence the value of the existing parcel and therefore the viability of redevelopment. The corner location and large area also offers opportunities for improved density and ease of construction. Table 6

Site 6 Characteristics 3253 - 3257 Bathurst Street

Existing Site Statistics sqm

Site Area

1,757

18,912

Total GFA

2,078

22,367

Density (xFSI)

1.18

Existing Rental Units Avenue ROW Width (m/ft) Lot Frontage (m/ft) Lot Depth (m/ft)

22 27

291

24.0

258

775

Sources: NBLC, DTAH, Google Maps, City of Toronto

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5.0

Methodology

The methodology provided below is intended to illustrate a better understanding of the implications and sensitivity of achieving the objective of promoting redevelopment along the ‘Avenues’ while balancing the need to protect and conserve existing rental housing units.

5.1

Financial Model Methodology

An underlying goal of our market and financial research is to test which projects would otherwise be considered viable development mid-rise projects today and in the near future were it not for the requirement to replace rental units with like units (all other factors being equal). In today’s market, purpose-built units rarely, if ever, support land values comparable to that of condominium apartment development. Furthermore, the City’s rental replacement policies require that new unit rents cannot exceed the City’s guidelines for affordable and mid-range units, which further reduces revenue potential, and therefore land value, compared to condominium apartment developments. With lower revenue, and the construction cost of rental replacement units roughly on par with condominium apartments, each unit replaced results in a reduction in land value. The impact of this is further compounded as each rental replacement unit required reduces the number of saleable condominium apartment units within a development site, which are in turn required to subsidize the replacement units. In order to determine the impact of rental replacement on the viability redevelopment at the selected test sites, NBLC undertook the following steps. 1. Value the existing properties in their current form, assuming that for redevelopment to be viable and attractive to developers, the existing property value would need to be exceeded; 2.

Develop a residual land value model (RLV) to test condominium apartment development land values on the test sites, under the following scenarios: a)

No existing rental units are required to be replaced;

The number of rental units replaced would be iteratively calculated to a level/amount that maintains the feasibility of redevelopment;

Full replacement of the number of rental units.

Market sensitivity analyses were conducted for all of the above housing replacement scenarios to gauge the impact of rental replacement and redevelopment feasibility under three scenarios: Low:

A slowdown in the Toronto high-rise market;

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High:

The continued growth in demand for mid/high-rise condominium apartment units in Toronto based on current trends at the time of preparing this report; and,

Future:

The impact of future development trends/infrastructure within the next 10 years on each site, as if they existed today. For example, this scenario would consider the construction of the Eglinton-Scarborough Crosstown LRT, the extrapolation of neighbourhood trends, and the construction of planned developments and new parks, including their projected impact on the surrounding urban fabric.

Prepare conceptual massing plans for each of the test sites in accordance with the "MidRise Building Performance Standards" contained in Section 3 of the report entitled "Avenues & Mid-Rise Buildings Study”, dated May 2010. The conceptual massing was utilized to determine development parameters in the RLV model, such as the gross and saleable floor areas associated with each use, among others.

The RLV values were compared to existing values, factoring in a risk premium for the existing landowner to sell, to determine whether redevelopment would likely occur.

The RLV methodology utilized in each site analysis determines the revenue attributed to the project based on market parameters, subtracts the hard and soft costs of developing the project, resulting in a calculated “Residual Land Value and Profit”. The profit value is then subtracted from this amount to determine the residual land value (in future dollars), or the value attributed to the site once all revenues and costs associated with the proposed development are accounted for, resulting in the calculation of the “Residual Land Value” in future dollars. This value is then discounted based on the anticipated level of developer risk to arrive at a present day RLV, or land value of the site, in present dollars.

5.1.1

Valuation of Rental Replacement Units

For the purposes of the RLV methodology, the value of the rental replacement (new) units is based on a capitalization of net income, shown in the formula provided below. 

(Average Net Unit Size * Average Gross Rent PSF) – Operating Cost Estimate = Net Operating Income.



Net Operating Income / Cap Rate = End Price Per Net Square Foot, assuming: o

Operating costs are equal to 40% of gross income; and,

5.5% capitalization rate for new purpose-built rental units.

NBLC also assumes that the rental replacement portions of the buildings will be sold off as a portfolio of units to a single buyer at the time of completion.

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5.1.3

Existing Land Values

The value of the existing rental structures plays a critical role in determining the feasibility of any new development. Any redevelopment of the test sites will require the proposed development to generate a land value in excess of what the existing building could obtain on the open market. Due to the private ownership of the existing structures on the subject sites, a detailed valuation based on tenant rolls, rents and operating costs is not possible for the purposes of this study. However, NBLC has been able to find comparable transactions for each site and has utilized these values to generate an estimate of the siteâ&#x20AC;&#x2122;s existing value. For retail buildings, NBLC based its land value on an estimate of net rents for the market area and capitalization rates.

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6.0

Summary of Site Market Observations

The following provides a summary of our market research conducted to support the revenue, sales absorption rates and other market inputs required for the residual land value model for each prototypical development site. This market research was conducted winter-spring months of 2012. A more fulsome description of our market analysis for each site is provided in Appendices 2 and 3.

6.1

Site 1 Market Observations (2501 Eglinton Avenue West)

Site 1 is located within the Silverthorn neighbourhood of the City of Toronto, which is characterized by its hilly terrain and modest and affordably priced housing. This part of the City offers excellent value for money for homes with the majority of current listing under $400,000. Other observations include: 

The area has seen very little reinvestment due, in part, to the relative affordability of the detached housing market, but also given the weak character of the street environment. There are no active condominium apartment developments, office projects or any other significant forms of investment within this part of Eglinton Avenue.



From a sales and marketability perspective, the subject site enjoys 24-hour public (surface bus) transit and is within a 10-minute drive of Highways 400 and 401 via Black Creek Drive.



As well, the site has within close proximity, a range of retail outlets along Eglinton. However, the quality and range of retail is limited. Nearby Westside Mall, featuring a new FreshCo grocery store, offers the best day to day shopping.



The Eglinton-Scarborough Crosstown LRT could provide significantly improved Subway-style transit service to this location with a planned stop just 400 metres to the west (Keele Station) and 700 metres to the east (Caledonia Station). Access to reliable and quick transit ranks very high on the list of purchaser requirements for high density housing. The addition of this regular, rapid transit system, connecting to the subway will likely have a significant impact on the demand for real estate and new investment in the area.



The Crosstown will also likely significantly alter modal splits in the area, reducing the demand for parking, which in turn, improves the profitability of high density real estate development.



Over the next ten years, we expect the market demand in the area surrounding the subject site to improve dramatically as a result of the LRT.



Similar to the other projects in the area, NBLC believed that a redevelopment on Site 1 would feature small suite sizes and an affordable pricing strategy under the survey market conditions. End-users would likely include first-time home buyers and move-down empty nesters from the neighbourhood.

For the purposes of the financial analysis, the following market parameters have been utilized:

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Table 7

Market Assumptions - Condominium Apartment Site 1: 2501 Eglinton West (Retail/Rental) Scenario Uni t Si ze (SF) Gros s -to-Net Effi ci ency Ra ti o Index Revenue Per Squa re Foot End Pri ce per Uni t Revenue Infl a tor Abs orpti on Ra te (Sa l es per month) Renta l Repl a cement Rent (PSF) Per Month* Reta i l Rent (PSF) Per Yea r Sugges ted Pa rki ng Ra ti o (Sta l l s Per Uni t) Pa rki ng Revenue Per Sta l l Above Gra de Cons tructi on Cos t - Condo (PSF) Above Gra de Cons tructi on Cos t - Renta l (PSF) Above Gra de Cons tructi on Cos t - Reta i l (PSF) Bel ow Gra de Cons tructi on Cos t - Pa rki ng (PSF)

Present Low 750 88% $400 $300,000 1.5% 5 $1.72 $15 0.8 $0 $150 $145 $145 $85

Current 750 88% $415 $311,250 2.0% 8 $1.72 $20 0.8 $0 $150 $145 $145 $85

Hi gh 750 88% $420 $315,000 2.5% 10 $1.72 $22 0.8 $0 $150 $145 $145 $85

Future 750 88% $430 $322,500 2.0% 10 $1.72 $25 0.5 $15,000 $150 $145 $145 $85

* Rental Replacement Rents based on Affordable and Mid-Range Rents in the City of Toronto applied to a unit mix breakdown provided by the City for the subject site. Source: N. Barry Lyon Consultants Limited

6.2

Site 2 Market Observations (3453-3515 Bathurst Street)

Located on the east side of Bathurst Street, approximately 550 metres south of Highway 401, Site 2 is situated adjacent to some of North Toronto’s most prestigious residential neighbourhoods (e.g. Ledbury Park and Lawrence Manor). Other market observations include: 

NBLC surveyed six comparable actively marketing (new) condominium apartment projects in the vicinity of the subject site at the time of survey. Three well-located projects were positioned towards the affluent move-down empty nester market, with units averaging around 1,000 square feet in size, and remaining units being sold at an average index price of around $675 per square foot. These projects had experienced reasonably strong sales absorption rates, averaging about 4 sales per project per month overall, although the two newest had averaged a much stronger 29 sales per project per month at the time of research.



The closest project to Site 2 was Cranbrooke Village, by Options for Homes, located at Bathurst Street and Sarnac Boulevard. Options for Homes is a non-profit organization whose mandate is to provide affordable ownership for low-income individuals. At Cranbrooke Village, Options for Homes was lending 13% of the purchaser price towards down payments (this loan is payment free). Although almost sold out at the time of survey, this project has had a moderating effect on local pricing.



Of note, Deloraine Residences immediately south of the subject site, is nearing completion, with sales at only 35%. The relatively high pricing and slow sales pace suggests pricing limitations for units above the $500,000 mark.



At the time of the market survey, NBLC suggested that new condominium apartment units on Site 2 could achieve index pricing of $575 per square feet for units averaging in the 900

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square foot range. This was slightly below the prime location projects in the study area, but well above the affordably positioned product. 

Under the above pricing and sizing strategy, overall average sales absorptions were anticipated to be around 6 per month.



Under a future 10-year scenario we envision that this stretch of Bathurst Street will continue to progress with new projects completing gaps in the street wall and the pedestrian and landscaped qualities of the streetscape gradually improving. We believe the surrounding area’s affluence will continue to strengthen with average index pricing for units strengthening to $600 psf in present dollars, for slightly smaller-sized units averaging 850 square feet. Average sales absorptions of 8 per month should be achieved.



Due to the slightly larger unit sizes, a slightly higher parking ratio of 1.0 space per unit, inclusive of visitor and retail parking, had been recommended at this location at the time of survey. We anticipate that parking demand for this location will moderate over the next ten years to around 0.8 spaces per unit.

For the purposes of the financial analysis, the following market parameters have been utilized: Table 8 Market Assumptions - Condominium Apartment Site 2: 3453-3515 Bathurst (Retail/Rental) Scenario

Present Low

Current

Hi gh

Future

Uni t Si ze (SF)

900

850

Gros s -to-Net Effi ci ency Ra ti o

88%

Index Revenue Per Squa re Foot

$525

$550

$575

$600

End Pri ce per Uni t

$472,500

$495,000

$517,500

$510,000

Revenue Infl a tor

1.5%

2.0%

2.5%

2.0%

Abs orpti on Ra te (Sa l es per month)

$1.73

Reta i l Rent (PSF) Per Yea r

$25

$30

$32

$30

Sugges ted Pa rki ng Ra ti o (Sta l l s Per Uni t)

1.0

0.8

$15,000

$20,000

$25,000

$30,000

Above Gra de Cons tructi on Cos t - Condo

$165

Above Gra de Cons tructi on Cos t - Renta l

$160

Above Gra de Cons tructi on Cos t - Reta i l

$150

Bel ow Gra de Cons tructi on Cos t - Pa rki ng

$85

Renta l Repl a cement Rent (PSF) Per Month*

Pa rki ng Revenue Per Sta l l

6.3

Site 3 Market Observations (2357 – 2369 Eglinton Avenue East)

The large size of Site 3, in combination with the relative weakness of the apartment condominium market in the this part of the former City of Scarborough, warranted the inclusion of townhomes in the conceptual site plan design and feasibility analysis to allow for the simultaneous marketing of a wider range of unit types, hitting a broader spectrum of buyers. Market observations included:

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

The site falls within the Scarborough Junction neighbourhood, a culturally diverse community offering a broad mix of housing types. The site shares its southerly and easterly boundaries with rental apartment buildings and townhomes and therefore has a residential context to tie into. Affordable priced low density housing, in the form of detached, semis and back-splits are all found within close proximity to this site.



From a market perspective, the site benefits from the nearby Kennedy Mobility Hub. This site will be redeveloped with a new station, currently in design, that will accommodate the new Eglinton-Scarborough Crosstown LRT and replacement of the SRT link to Scarborough Town Centre. The expansion of this Mobility Hub will integrate services for the Toronto Transit Commission’s (TTC’s) Kennedy Subway, GO Transit’s Kennedy Station, and the new Crosstown LRT Line, making it one of the best served transit areas in the City.



NBLC surveyed four projects that share similar site and market attributes that are marketing in the area. With the exception of 2150 Condos, which is a multi-phased high-rise project, all projects are mid-rise, averaging 8-storeys in height.



In general, the lack of urban context in conjunction with weaker transit, have limited the amount of investment in the area. The few projects that have emerged outside of the Scarborough Town Centre site have succeeded by offering very affordable pricing.



Based on our review of the market, we recommended that the maximum achievable index price at the time of the market survey for new high-rise condominium development in the area would be in the $365 to $375 psf range, and average 700 square feet per unit. Even at this affordable pricing range we anticipated that demand would be modest, given the character of the community in its current state.



In terms of townhouse development, NBLC surveyed five stacked townhouse developments. Traditional stacked townhomes have sold at a faster pace than the back-to-back stacked townhomes.



Of note, there has been three recent traditional townhouse developments launched in close proximity to the subject site, indicative of the demand for homes yielding a lower index price value, given their larger size and higher land cost.



Overall, the townhouse projects have mostly attracted young singles and couples from the local area and few, if any, investors. In addition, Upper Beach Villas and Nature’s Path have also attracted many move-down buyers, while Nature’s Path has also appealed to many immigrant families.



With the new Eglinton LRT and Mobility Hub improvements over the next 10 years we expect that demand and the selling price per square foot of for condominium apartments would increase substantially to about $450 per square foot (in present dollars). Both stacked townhouse and back-to-back townhouse prices should also follow a similar rate of increase.

For the purposes of the financial analysis, the following market parameters have been utilized:

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Tables 9a, 9b & 9c Market Assumptions - Condominium Apartment Site 3: 2357-2369 Eglinton Ave East (Rental) Scenario

Present

Future

Low

Current

Hi gh

750 88% $365 $273,750 1.5%

750 88% $375 $281,250 2.0%

750 88% $400 $300,000 2.5%

700 88% $450 $315,000 2.0%

3 $1.69

5 $1.69

7 $1.69

12 $1.69

Reta i l Rent (PSF) Per Yea r

$15

$20

$22

$25

Sugges ted Pa rki ng Ra ti o (Sta l l s Per Uni t) Pa rki ng Revenue Per Sta l l

1 $0

0.8 $15,000

$145 $140 $140 $85

Uni t Si ze (SF) Gros s -to-Net Effi ci ency Ra ti o Index Revenue Per Squa re Foot End Pri ce per Uni t Revenue Infl a tor Abs orpti on Ra te (s a l es per month) Renta l Repl a cement Rent (PSF) Per Month*

Above Gra de Cons tructi on Cos t - Condo (PSF) Above Gra de Cons tructi on Cos t - Renta l (PSF) Above Gra de Cons tructi on Cos t - Reta i l (PSF) Bel ow Gra de Cons tructi on Cos t - Pa rki ng (PSF)

Market Assumptions - Condominium Stacked Townhouse Site 3: 2357-2369 Eglinton Ave East (Retail/Rental) Scenario

Present

Future

Low 1100 100% $265

Current 1100 100% $255

Hi gh 1100 100% $275

$291,500 1.5% 3

$280,500 2.0% 2

$302,500 2.5% 4

$319,000 2.0% 8

1 $0

1 $15,000

Above Gra de Cons tructi on Cos t - Condo (PSF) Above Gra de Cons tructi on Cos t - Renta l (PSF) Above Gra de Cons tructi on Cos t - Reta i l (PSF)

$105 $100 $0

Bel ow Gra de Cons tructi on Cos t - Pa rki ng (PSF)

$85

Uni t Si ze (SF) Gros s -to-Net Effi ci ency Ra ti o Index Revenue Per Squa re Foot End Pri ce per Uni t Revenue Infl a tor Abs orpti on Ra te (Sa l es per month) Sugges ted Pa rki ng Ra ti o (Sta l l s Per Uni t) Pa rki ng Revenue Per Sta l l

1100 100% $290

Market Assumptions - Condominium Back-to-Back Townhouses Site 3: 2357-2369 Eglinton Ave East (Retail/Rental) Scenario

Present

Future

Low 1000 100% $275 $275,000 1.5% 3 1 $0

Current 1000 100% $265 $265,000 2.0% 2 1 $0

Hi gh 1000 100% $285 $285,000 2.5% 4 1 $0

1000 100% $300 $300,000 2.0% 8 1 $15,000

Above Gra de Cons tructi on Cos t - Condo (PSF)

$100

Above Gra de Cons tructi on Cos t - Renta l (PSF) Above Gra de Cons tructi on Cos t - Reta i l (PSF) Bel ow Gra de Cons tructi on Cos t - Pa rki ng (PSF)

$100 $0 $85

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6.4

Site 4 Market Observations (1484-1492 Dundas Street West)

Site 4 is located in the Brockton Village neighbourhood, but also borders the Dufferin Grove and Beaconsfield communities. These neighbourhoods are characterized by tree-lined streets and a variety of housing types, dating to the 1890’s, with the majority of homes selling in the $550,000 to $750,000 range. In more recent years, infill residential developments, including townhomes, conversions and mid-rise condominium apartments have begun to emerge in the area. Other market observations include: 



The majority of condominium apartment development in this area of the city has largely consisted of mid-rise and or loft-style projects. With the exception of Carnaby, which has a height of 20-storeys, the comparable developments surveyed range between 6 and 10storeys in height, averaging 8-storeys overall.



These smaller boutique buildings have almost entirely attracted end-user purchasers, such as first-time home buyers and empty nesters from the local neighbourhood, leading to somewhat slower absorption rates, averaging 1.6 sales per month, per project at the time the market was surveyed. However, some of the newer projects, including three projects launched in the two months prior to survey, have started drawing investor interest.



With the exception of Carnaby, which is less comparable due to its larger scale, suites in the neighbourhood averaged 890 square feet in size, with an average end price of $435,000 ($552 per square foot).



Similar to the smaller boutique condominium apartment projects in the area, for the purposes of the financial analysis, end-pricing was kept relatively affordable at $600 psf for a relatively small average unit size around 600 square feet overall.



Similar to comparable projects in the area, development on Site 4 would likely experience a majority of end-user purchasers with some investors, likely leading to an overall average absorption rate of around 8 units per month under the conditions at the time of survey.



Given the fast pace of gentrification in the neighbourhood, and increasing interest from investors in the area, an overall future (10-year) index price of $650 psf per unit could be achieved, with an overall absorption rate of around 10 sales per month.



At the time of survey, parking at this location should be provided at an average ratio of 0.5 spaces per unit, including visitor parking. However, it is conceivable that a much lower parking ratio could be marketed in the area.

For the purposes of the financial analysis, the following market parameters have been utilized:

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Table 10 Market Assumptions - Condominium Apartment Site 4: 1484-1492 Dundas Street West (Retail/Rental) Scenario

Present Low

Current

Hi gh

Future

Uni t Si ze (SF)

650

600

Gros s -to-Net Effi ci ency Ra ti o

85%

88%

Index Revenue Per Squa re Foot

$575

$600

$625

$650

End Pri ce per Uni t

$373,750

$390,000

$406,250

$390,000

Revenue Infl a tor

1.5%

2.0%

2.5%

2.0%

$1.81

Reta i l Rent (PSF) Per Yea r

$20

$22

$25

$30

Sugges ted Pa rki ng Ra ti o (Sta l l s Per Uni t)

0.5

$20,000

$30,000

$35,000

$40,000

Above Gra de Cons tructi on Cos t - Condo (PSF)

$180

Above Gra de Cons tructi on Cos t - Renta l (PSF)

$175

Above Gra de Cons tructi on Cos t - Reta i l (PSF)

$160

Bel ow Gra de Cons tructi on Cos t - Pa rki ng (PSF)

$90

Abs orpti on Ra te (Sa l es per month) Renta l Repl a cement Rent (PSF) Per Month*

Pa rki ng Revenue Per Sta l l

6.5

Site 5 Market Observations (2988 – 2992 Keele Street)

The subject site is located in the Downsview/Wilson neighbourhood, which is largely characterized by detached, semi-detached, and split level houses built in the 1950’s and 1960’s, inhabited by a largely Italian and Jewish population. More recently, infill development in the form of larger custom detached homes has been occurring, particularly in proximity to Parc Downsview Park, which has helped transform the character of the area. Other market observations included: 

The subject site benefits from an attractive location, having access to Highway 401, bus service along Keele Street and Sheppard Avenue West, and the proposed Sheppard West subway station planned to be completed by the end of 2015, which will be less than 15 minutes away by public transit. As well, Downsview Park provides an array of recreational and view opportunities, Yorkdale Shopping Centre offers nearby regional level shopping, and the redeveloped Humber River Regional Hospital is close by.



This site will enjoy improved access to the TTC Spadina Subway line with the planned opening of the Sheppard West Station which will provide direct access to York University and Downtown



Although not a condominium apartment project, Neighbourhoods of Downsview Park, a 92 stacked-townhouse unit project located within the Parc Downsview Park master planned development, would compete with a condominium apartment project on the site at the time survey.



Specifically, Neighbourhoods of Downsview Park currently offered units priced between $249,900 and $349,900. Launched through broker events in November 2011, the project was well received by the purchasing public with long line ups at pre-launch events. However, this

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did not necessary translate into sales, with the sales absorption rate currently averaging 10.4 sales per month. 

Projects in the study area utilized small unit sizes, of around 800 square feet on average to create affordable price points to attract a large proportion of first-time home buyers. Additionally, both Ion Condominium Residences and The Station had experienced a high degree of investor sales. To a lesser extent, purchasers also included move-down buyers from the area.



Launched in November 2011, Ion Condominium Residences, located around Keele Street and Wilson Avenue, was considered a good comparable project to that which could occur on Site 5 due to its close proximity. The 11-storey, 200-unit project has done relatively well for the area, selling around 54% of its units within the first 3 months of actively marketing. The project focused on attracting young professionals, specifically prospective employees of the proposed nearby Humber River Regional Hospital, by offering affordable suites to drive sales.



Located around Keele Street and Wilson Avenue, Max by Beaverbrook Homes, launched in November 2004 and sold out its 144 units by May of 2008. Although an older generation building now, NBLC examined resales within the building to assess the level of demand in the area. Within the past year, 19 units in the building were listed for sale, of which 14 sold (a sales-to-listings ratio of 75%). Additionally, these resales experienced a 95% sales-to-list price ratio, further indicating strong demand for these units and the area in general.



At the time of survey, new condominium apartment project on the subject site would have benefitted from sweeping views of Downsview Park’s new lake, hills and planting areas, and would have likely achieve an overall index price similar to other comparable projects in the area, averaging around $450 per square foot overall, for units averaging 750 square feet.



Given the automobile dependence in the area, a parking ratio of at least 1.0 stall per unit inclusive of visitor parking, was suggested.

For the purposes of the financial analysis, the following market parameters have been utilized: Table 11 Market Assumptions - Condominium Apartment Site 5: 2988- 2992 Keele Street (Rental) Scenario

Present

Future

Low 750 88% $435 $326,250 1.5% 5 $1.94 1

Current 750 88% $450 $337,500 2.0% 7 $1.94 1

Hi gh 750 88% $475 $356,250 2.5% 10 $1.94 1

700 88% $500 $350,000 2.0% 12 $1.94 0.8

Pa rki ng Revenue Per Sta l l Above Gra de Cons tructi on Cos t - Condo (PSF)

$0 $160

$20,000 $160

Above Gra de Cons tructi on Cos t - Renta l (PSF)

$155

Above Gra de Cons tructi on Cos t - Reta i l (PSF)

$150

Bel ow Gra de Cons tructi on Cos t - Pa rki ng (PSF)

$85

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6.6

Site 6 Market Observations (3253-3257 Bathurst Street)

Similar to Site 2, Site 6 is located within the increasingly coveted neighbourhood of Ledbury Park, which has become popular with young professional families with dual incomes. In addition to the Site 2 market observations, our analysis also the noted the following for Site 6: 

Site 6 benefits from access to transit along Bathurst Street, with connections to the BloorDanforth Subway, as well as its proximity to Lawrence Avenue, for connections to the nearby Lawrence Station and Lawrence West Station for Subway access.



The site also benefits from shopping within walking distance along Bathurst Street, including Lawrence Plaza, providing local ethnic delicacies, restaurants, bakeries, and other daily needs. A short drive to Avenue Road to the east provides a wider array of shopping.



The closest project to the subject site was Cranbrooke Village, by Options for Homes, a nonprofit organization whose mandate is to provide affordable ownership for low-income individuals.



Units at Cranbrooke Village have the lowest index pricing in the area, averaging $390 psf, with units averaging roughly 730 square feet in size and for an average end price of $268,427. The project has done well, with 85% of the units now sold. The affordable entry level pricing has been achieved by providing very basic finishes, including 8 foot ceilings on typical floors.



For Site 6, NBLC assumed that Cranbrooke Village would be sold out by the time a project on the subject site is launched and that new condominium apartment units on the subject site would likely achieve a slightly higher price than Cranbrooke Village by offering slightly superior interior features and finishes, and targeting a broader range of purchaser groups. Most notably, a new design would likely feature 9 foot ceilings, an industry standard today.

For the purposes of the financial analysis, the following market parameters have been utilized: Table 12 Market Assumptions - Condominium Apartment Site 6: 3253-3257 Bathurst Street (Rental) Scenario

Present

Future

Uni t Si ze (SF) Gros s -to-Net Effi ci ency Ra ti o Index Revenue Per Squa re Foot End Pri ce per Uni t Revenue Infl a tor Abs orpti on Ra te (Sa l es per month) Renta l Repl a cement Rent (PSF) Per Month* Reta i l Rent (PSF) Per Yea r Sugges ted Pa rki ng Ra ti o (Sta l l s Per Uni t) Pa rki ng Revenue Per Sta l l Above Gra de Cons tructi on Cos t - Condo (PSF)

Low 800 88% $525 $420,000 1.5% 6 $1.70 $25 1 $15,000 $165

Current 800 88% $550 $440,000 2.0% 10 $1.70 $30 1 $20,000 $165

Hi gh 800 88% $575 $460,000 2.5% 12 $1.70 $32 1 $25,000 $165

750 88% $600 $450,000 2.0% 12 $1.70 $30 0.8 $30,000 $165

Above Gra de Cons tructi on Cos t - Renta l (PSF) Above Gra de Cons tructi on Cos t - Reta i l (PSF) Bel ow Gra de Cons tructi on Cos t - Pa rki ng (PSF)

$160 $150 $85

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7.0

Financial Analysis

The following section examines the results of the financial analyses conducted for each of the conceptual site development designs, based upon the range of market and development parameters described in Section 6.

7.1

SITE 1: 2501 Eglinton Avenue West

NBLCâ&#x20AC;&#x2122;s financial analysis determined that a mid-rise redevelopment of Site 1 would not be a feasible redevelopment candidate, falling considerably short of the land value needed to make redevelopment feasible, even without the replacement of rental housing. The limited revenue potential of the site and the market conditions in the local area responsible for generating low index pricing, are the primary constraints on redevelopment. The future development of the Eglinton-Scarborough Crosstown LRT is expected to have a positive impact on this section of Eglinton Avenue West, significantly improving pricing in the study area. However, the resultant increase in land value does not offset significant impediments to redevelopment, particularly the existing rental buildingâ&#x20AC;&#x2122;s high value and the limited mid-rise redevelopment density potential of 2.7x FSI, achieving a ratio of market rate housing GFA to rental replacement GFA of just 1.8 to 1. The Cityâ&#x20AC;&#x2122;s rental replacement policy is therefore not a significant or primary constraint in the redevelopment of this site.

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Table 13

Financial Analysis Results Summary Site 1: 2501 Eglinton Avenue West Current Market Conditions Scenario No Rental Replacement

Feasible Level of Rental Replacement

Current Rental Replacement Requirement

Va l ue of Exi s ti ng Property

$1,790,000

Redevel opment Ti ppi ng Poi nt - Requi red La nd Va l ue *

$1,969,000

$627,236

-$1,341,764

-$1,969,000

Redevel opment Ti ppi ng Poi nt - La nd Va l ue (Per Sq.Ft)

$41

La nd Va l ue Under Redevel opment Scena ri o (Per Sq.Ft)

$13

La nd Va l ue Exces s /Shortfa l l Per Squa re Foot Bui l da bl e

-$28

-$41

24,326

1.35

2.69

Project Statistics Financial Summary (Totals)

Number of Repl a cement Renta l Uni ts La nd Va l ue Under Redevel opment Scena ri o Profi t Sel l i ng Si te As Redevel opment Vs . Exi s ti ng Va l ue

Financial Summary (Per Sq.Ft Buildable)

Existing Building Exi s ti ng Bui l di ng (GFA) Sq.Ft Number of Exi s ti ng Renta l Uni ts Exi s ti ng Dens i ty (FSI)

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) Propos ed Dens i ty Propos ed Bui l di ng (GFA) Sq.Ft

48,470

Propos ed Res i denti a l (GFA) Sq.Ft

46,317

Propos ed Reta i l (GFA) Sq.Ft

2,153

Number of Condomi ni um Uni ts

Number of Repl a cement Renta l Uni ts

$18,129,666

$11,723,681

$3,568,505

Reta i l Revenue

$677,704

$675,831

Tota l Revenue

$19,085,897

$16,148,150

$394

$333

Soft Cos ts

$4,879,358

$4,210,927

Ha rd Cos ts

$10,385,201

$10,077,386

Tota l Devel opment Cos t

$15,264,559

$14,288,313

$315

$295

Tota l Res i dua l La nd Va l ue a nd Profi t (future$)

$3,821,338

$1,859,837

Tota l Profi t (future$) - 15% of Revenue

$2,821,106

$1,859,837

Tota l Res i dua l La nd Va l ue (future$)

$1,000,232

Project Revenue Condomi ni um Revenue Renta l Repl a cement Revenue

Tota l Revenue (Per Sq.Ft)

Construction Cost

Tota l Devel opment Cos t (Per Sq.Ft)

Residual Land Value and Profit

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 29

Table 14 2501 Eglinton Avenue West - Market Sensitivity Analysis Scenario Project Stats

Current No Rental Replacement

Redevelopment Tipping Point - Land Value (Per $41 Sq.Ft) Land Value Under Redevelopment Scenario $13 (Per Sq.Ft) Land Value Excess/Shortfall Per ($28) Square Foot Buildable Value of Existing $1,790,000 Property Redevelopment Tipping Point - Required Land $1,969,000 Value * Number of Replacement 0 Rental Units Land Value Under $627,236 Redevelopment Scenario Profit Selling Site As ($1,341,764) Redevelopment Vs. Existing Value Source: N. Barry Lyon Consultants Limited

Low

High

Future

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

$41

$61

$41

$61

$41

$61

$13

$18

$31

$11

($28)

($41)

($37)

($61)

($23)

($59)

($10)

($51)

$1,790,000

$1,969,000

$627,236

$180,115

$849,396

$94,471

$1,491,114

$517,877

($1,341,764)

($1,969,000)

($1,788,885)

($1,969,000)

($1,119,604)

($1,874,529)

($477,886)

($1,451,123)

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 30

7.2

SITE 2: 3453 to 3515 Bathurst Street

Although a new development on Site 2 would be able to achieve relatively high index price points for new condominium apartments, the resultant residual land value is unable to exceed the existing land value attributed to the site, based largely on recent land sales. We suspect there may already be some degree of land speculation in the area, whereby developers are purchasing lands and accepting low yields on the existing retail space as a technique to hold property. As such, the 10% risk premium applied by NBLC’s methodology may have already been imputed within the recent transactions. The scenario where no rental replacement is required may have some marginal viability. Over the next 10 years, NBLC expects that the character of Bathurst will continue to improve. As a result of the upmarket shift of the site’s surrounding, prices for condominiums and retail are expected to increase at a pace exceeding inflation. As a result, Site 2 is projected to transition to a viable redevelopment site within 10 years’ time, even with the application of the City’s existing rental replacement policy. However, it should be noted that this site reflects an exceptional example of rental replacement opportunity due to its large size, low existing density (1.0 FSI), considerable revenue potential. The conceptual development model also illustrates that a ratio of 10 market apartment units to every one rental replacement unit could be achieved which would be sufficient to support the implementation of the rental housing replacement policy.

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 31

Table 15

Financial Analysis Results Summary Site 2: 3453-3515 Bathurst Street Current Market Conditions Scenario No Rental Replacement

Feasible Level of Rental Replacement

Current Rental Replacement Requirement

Va l ue of Exi s ti ng Property

$6,403,336

La nd Va l ue Requi red to Redevel op Si te*

$7,043,670

Project Statistics Financial Summary (Totals)

La nd Va l ue Under Redevel opment Scena ri o

$6,348,111

$5,515,315

Profi t Sel l i ng Si te As Redevel opment Vs . Exi s ti ng Va l ue

-$695,559

-$1,528,355

Redevel opment Ti ppi ng Poi nt - La nd Va l ue (Per Sq.Ft)

$59

La nd Va l ue Under Redevel opment Scena ri o (Per Sq.Ft)

$53

$46

La nd Va l ue Exces s /Shortfa l l Per Squa re Foot Bui l da bl e

-$6

-$13

32,485

Number of Repl a cement Renta l Uni ts

Financial Summary (Per Sq.Ft Buildable)

Existing Building Exi s ti ng Bui l di ng (GFA) Sq.Ft Number of Exi s ti ng Renta l Uni ts Exi s ti ng Dens i ty (FSI)

0.96

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) 3.56

3.56

Propos ed Bui l di ng (GFA) Sq.Ft

Propos ed Dens i ty

119,899

Propos ed Res i denti a l (GFA) Sq.Ft

111,288

8,611

109

$58,012,721

$52,762,825

$2,221,255

Propos ed Reta i l (GFA) Sq.Ft Number of Condomi ni um Uni ts Number of Repl a cement Renta l Uni ts

Project Revenue Condomi ni um Revenue Renta l Repl a cement Revenue Reta i l Revenue

$4,119,855

$4,112,107

Tota l Revenue

$65,574,794

$62,227,244

$547

$519

Soft Cos ts

$17,376,456

$16,497,560

Ha rd Cos ts

$27,715,123

$27,235,354

Tota l Devel opment Cos t

$45,091,579

$43,732,914

$376

$365

Tota l Res i dua l La nd Va l ue a nd Profi t (future$)

$20,483,216

$18,494,330

Tota l Profi t (future$) - 15% of Revenue

$9,701,153

$9,211,235

Tota l Res i dua l La nd Va l ue (future$)

$10,782,062

$9,283,095

Tota l Revenue (Per Sq.Ft)

Construction Cost

Tota l Devel opment Cos t (Per Sq.Ft)

Residual Land Value and Profit

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 32

Table 16 3453 Bathurst Street - Market Sensitivity Analysis Scenario

Project Stats

Redevelopment Tipping Point Land Value (Per Sq.Ft) Land Value Under Redevelopment Scenario (Per Sq.Ft) Land Value Excess/Shortfall Per Square Foot Buildable Value of Existing Property

Current

Low

High

Future

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

$59

$53

$46

$37

$31

$68

$59

$75

$59

$67

($6)

($13)

($22)

($28)

$17

$6,403,336

$7,043,670

$6,348,111

$5,515,315

$4,391,595

$3,724,971

$8,096,067

$7,017,283

$7,109,638

$9,024,234

$6,997,778

$7,976,249

($695,559)

($1,528,355)

($2,652,075)

($2,652,07)5

($3,318,699)

$1,052,397

($26,387)

$65,968

$1,980,563

($45,892)

$932,579

Redevelopment Tipping Point $7,043,670 Required Land Value * Number of Replacement Rental 0 Units Land Value Under $6,348,111 Redevelopment Scenario Profit Selling Site As ($695,559) Redevelopment Vs. Existing Value Source: N. Barry Lyon Consultants Limited

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 33

7.3

SITE 3: 2357 to 2369 Eglinton Avenue East

NBLC found that Site 3 would not be a feasible redevelopment candidate, even without the required replacement of existing rental housing units. The value of the existing properties combined with the currently low achievable condominium pricing at Site 3, were the primary constraints to supporting the feasibility of redevelopment. Looking toward the future, NBLC expects that the introduction of the Scarborough-Eglinton Crosstown LRT will significantly improve pricing in the study area. This increase in revenues, combined with the siteâ&#x20AC;&#x2122;s large size, and therefore its ability to provide for a high ratio of market rate housing GFA to rental replacement GFA (9 to 1), is expected to make the site a viable redevelopment candidate even with the application of existing rental replacement policies. This site analysis illustrates that factors such as transit, and the associated market boost it provides, in conjunction with a balanced mix of (simultaneously marketing) product types, are the primary drivers of redevelopment feasibility, and not the Cityâ&#x20AC;&#x2122;s rental replacement policy, particularly on lower density retail/residential parcels along the Avenues.

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 34

Table 17

Financial Analysis Results Summary Site 3: 2357-2369 Eglinton Ave East Current Market Conditions Scenario No Rental Replacement

Feasible Level of Rental Replacement

Current Rental Replacement Requirement

Va l ue of Exi s ti ng Property

$5,028,894

La nd Va l ue Requi red to Redevel op Si te*

$5,531,783

Project Statistics

Financial Summary (Totals)

Number of Repl a cement Renta l Uni ts La nd Va l ue Under Redevel opment Scena ri o

$876,722

-$4,655,062

Redevel opment Ti ppi ng Poi nt - La nd Va l ue (Per Sq.Ft)

$34

La nd Va l ue Under Redevel opment Scena ri o (Per Sq.Ft)

La nd Va l ue Exces s /Shortfa l l Per Squa re Foot Bui l da bl e

-$29

19,418

0.31

3.35

Profi t Sel l i ng Si te As Redevel opment Vs . Exi s ti ng Va l ue

Financial Summary (Per Sq.Ft Buildable)

Existing Building Exi s ti ng Bui l di ng (GFA) Sq.Ft Number of Exi s ti ng Renta l Uni ts Exi s ti ng Dens i ty (FSI)

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) Propos ed Dens i ty Propos ed Bui l di ng (GFA) Sq.Ft

210,434

Propos ed Res i denti a l (GFA) Sq.Ft

198,593

Propos ed Reta i l (GFA) Sq.Ft

11,840

177

159

$68,198,860

$62,444,727

$3,492,657

Reta i l Revenue

$3,852,687

$3,836,285

Tota l Revenue

$73,105,471

$70,740,016

$347

$336

Soft Cos ts

$19,375,715

$18,772,706

Ha rd Cos ts

$43,556,956

$42,436,624

Tota l Devel opment Cos t

$62,932,670

$61,209,330

$299

$291

Tota l Res i dua l La nd Va l ue a nd Profi t (future$)

$10,172,800

$9,530,686

Tota l Profi t (future$) - 15% of Revenue

$8,896,826

$8,254,711

$876,722

Number of Condomi ni um Uni ts Number of Repl a cement Renta l Uni ts

Project Revenue Condomi ni um Revenue Renta l Repl a cement Revenue

Tota l Revenue (Per Sq.Ft)

Construction Cost

Tota l Devel opment Cos t (Per Sq.Ft)

Residual Land Value and Profit

Tota l Res i dua l La nd Va l ue (future$)

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 35

Table 18 2357 Eglinton Avenue East - Market Sensitivity Analysis Scenario Project Stats

Redevelopment Tipping Point - Land Value (Per Sq.Ft) Land Value Under Redevelopment Scenario (Per Sq.Ft) Land Value Excess/Shortfall Per Square Foot Buildable Value of Existing Property Redevelopment Tipping Point - Required Land Value * Number of Replacement Rental Units Land Value Under Redevelopment Scenario Profit Selling Site As Redevelopment Vs. Existing Value

Current

Low

High

Future

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

$34

$15

$16

$13

$46

$34

$42

($29)

($31)

($19)

($18)

($21)

$12

$5,028,894

$5,531,783

$876,722

$531,466

$2,501,879

$2,581,016

$2,186,414

$7,443,147

$5,532,025

$6,768,076

($4,655,062)

($5,000,318)

($3,029,905)

($2,950,768)

($3,345,370)

$1,911,363

$242

$1,236,293

Source: N. Barry Lyon Consultants Limited

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 36

7.4

SITE 4: 1484 to 1492 Dundas Street West

Despite the considerable estimated residual land value in a mid-rise redevelopment scenario, the redevelopment of the site is likely unfeasible, irrespective of the Cityâ&#x20AC;&#x2122;s rental replacement policy. The site is primarily constrained by the value of existing structures and uses, and the considerable existing density, at 2.6 times the area of the site. Looking towards the future, it is expected that condominium apartment pricing along this section of Dundas Street West will continue to increase, as infill development continues to improve the character and amenity of Dundas Street West. However, due to the low anticipated ratio of market rate housing GFA to rental replacement GFA at this site (3.6 to 1), the site is still unlikely to become a viable redevelopment candidate under the existing rental replacement policy. Although the value of the structures on the site are the primary constraint to redevelopment of the site, the removal of rental replacement requirement could assist in motivating the redevelopment of the property by pushing the residual land value to $2.4 million, which is within $460,000 of the tipping value of the property.

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 37

Table 19

Financial Analysis Results Summary Site 4: 1484-1492 Dundas Street West Current Market Conditions Scenario No Rental Replacement

Feasible Level of Rental Replacement

Current Rental Replacement Requirement

Va l ue of Exi s ti ng Property

$2,607,017

La nd Va l ue Requi red to Redevel op Si te*

$2,867,718

Project Statistics Financial Summary (Totals)

La nd Va l ue Under Redevel opment Scena ri o

$2,410,336

$1,575,858

Profi t Sel l i ng Si te As Redevel opment Vs . Exi s ti ng Va l ue

-$457,382

-$1,291,860

Redevel opment Ti ppi ng Poi nt - La nd Va l ue (Per Sq.Ft)

$71

La nd Va l ue Under Redevel opment Scena ri o (Per Sq.Ft)

$60

$39

La nd Va l ue Exces s /Shortfa l l Per Squa re Foot Bui l da bl e

-$11

-$32

19,418

Number of Repl a cement Renta l Uni ts

Financial Summary (Per Sq.Ft Buildable)

Existing Building Exi s ti ng Bui l di ng (GFA) Sq.Ft Number of Exi s ti ng Renta l Uni ts Exi s ti ng Dens i ty (FSI)

2.61

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) 5.39

5.39

Propos ed Bui l di ng (GFA) Sq.Ft

Propos ed Dens i ty

40,149

Propos ed Res i denti a l (GFA) Sq.Ft

33,422

Propos ed Reta i l (GFA) Sq.Ft

6,727

Number of Condomi ni um Uni ts

Number of Repl a cement Renta l Uni ts

$19,035,422

$14,841,537

$1,627,344

Project Revenue Condomi ni um Revenue Renta l Repl a cement Revenue Reta i l Revenue

$2,323,099

$2,320,520

Tota l Revenue

$21,643,884

$19,011,902

$539

$474

Soft Cos ts

$5,492,988

$4,808,367

Ha rd Cos ts

$9,154,863

$8,918,998

Tota l Devel opment Cos t

$14,647,850

$13,727,365

$365

$342

Tota l Res i dua l La nd Va l ue a nd Profi t (future$)

$6,996,034

$5,284,537

Tota l Profi t (future$) - 15% of Revenue

$3,203,778

$2,818,410

Tota l Res i dua l La nd Va l ue (future$)

$3,792,256

$2,466,127

Tota l Revenue (Per Sq.Ft)

Construction Cost

Tota l Devel opment Cos t (Per Sq.Ft)

Residual Land Value and Profit

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 38

Table 20 1484 Dundas Street West - Market Sensitivity Analysis Scenario Project Stats

Current

Low

High

Future

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

$71

$60

$39

$45

$27

$74

$71

$51

$85

$71

$61

($11)

($32)

($26)

($44)

($20)

$14

($10)

$2,607,017

$2,867,718

$2,410,336

$1,575,858

$1,819,515

$1,099,599

$2,974,557

$2,867,768

$2,046,200

$3,428,254

$2,867,737

$2,451,861

($457,382)

($1,291,860)

($1,048,203)

($1,768,119)

$106,838

$50

($821,519)

$560,536

$19

($415,857)

Source: N. Barry Lyon Consultants Limited

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 39

7.5

SITE 5: 2988 to 2994 Keele Street

This development would require the acquisition of two properties directly across from the newly completed Downsview Park. The value of these lands is currently estimated at about $2.4M. The proposed conceptual massing diagram suggests that a building of about 10 storeys and 107,521 square feet of GFA, is likely feasible. This suggests a total unit count of about 126 new condominium apartments, of which, 22 would have be in affordable rental tenure, resulting in a ratio of market rate housing to rental replacement of 5.5 to 1. Based on the estimate of condominium pricing, this amount of density would support a land value of between $1.4M and $2.3M, depending on the application of the rental replacement policy. This amount would likely be insufficient to provide an economic motivation for the land owner to redevelop the site under any current policy scenario. However, the index pricing at Site 5 is expected to increase with the completion of Downsview Park, the Spadina/University subway extension and development of residential parcels within Downsview Park itself. We anticipate that pricing increases within the 10-year timeframe will make the site a viable redevelopment candidate, even under the existing policies which require the replacement of 22 rental units. The Cityâ&#x20AC;&#x2122;s rental replacement policy is therefore not a significant or primary constraint to the redevelopment of this site, primarily due to the high value of the existing rental apartment buildings and the current market demand in the neighbourhood.

Site 5 Conceptual Design Characteristics 2988 - 2994 Keele Street

Potential Redevelopment Statistics sqm

Total GFA

9,989

107,521

Condominium Apartment GFA

8,460

91,062

Rental Apartment GFA

1,529

16,458

Rental Townhouse GFA

Retail GFA

Density x FSI

5.3

# of New Condo Apt Units

107

Average New Condo Unit

852

Average Rental Replacement Unit Size

658

Affordable Units

Mid-Range Units

Ratio of New Unit to Replacement

4.90

New Parking Ratio (blended ratio)

0.8

Source: NBLC, DTAH, Google Maps, City of Toronto

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 40

Table 21

Financial Analysis Results Summary Site 5: 2988-2994 Keele Street Current Market Conditions Scenario No Rental Replacement

Feasible Level of Rental Replacement

Current Rental Replacement Requirement

Va l ue of Exi s ti ng Property

$2,420,000

La nd Va l ue Requi red to Redevel op Si te*

$2,662,000

Project Statistics

Financial Summary (Totals)

La nd Va l ue Under Redevel opment Scena ri o

$2,274,482

$1,458,242

Profi t Sel l i ng Si te As Redevel opment Vs . Exi s ti ng Va l ue

-$387,518

-$1,203,758

Redevel opment Ti ppi ng Poi nt - La nd Va l ue (Per Sq.Ft)

$25

La nd Va l ue Under Redevel opment Scena ri o (Per Sq.Ft)

$21

$14

La nd Va l ue Exces s /Shortfa l l Per Squa re Foot Bui l da bl e

-$4

-$11

22,604

1.12

Number of Repl a cement Renta l Uni ts

Financial Summary (Per Sq.Ft Buildable)

Existing Building Exi s ti ng Bui l di ng (GFA) Sq.Ft Number of Exi s ti ng Renta l Uni ts Exi s ti ng Dens i ty (FSI)

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) 5.30

5.30

Propos ed Bui l di ng (GFA) Sq.Ft

Propos ed Dens i ty

107,521

Propos ed Res i denti a l (GFA) Sq.Ft

107,521

126

107

$48,132,954

$40,717,199

$3,703,554

Propos ed Reta i l (GFA) Sq.Ft Number of Condomi ni um Uni ts Number of Repl a cement Renta l Uni ts

Project Revenue Condomi ni um Revenue Renta l Repl a cement Revenue Reta i l Revenue

Tota l Revenue

$48,857,540

$45,033,780

$454

$419

Soft Cos ts

$12,248,354

$11,284,399

Ha rd Cos ts

$25,528,541

$24,648,725

Tota l Devel opment Cos t

$37,776,895

$35,933,124

$351

$334

Tota l Res i dua l La nd Va l ue a nd Profi t (future$)

$11,080,644

$9,100,655

Tota l Profi t (future$) - 15% of Revenue

$7,219,943

$6,663,113

Tota l Res i dua l La nd Va l ue (future$)

$3,860,701

$2,437,543

Tota l Revenue (Per Sq.Ft)

Construction Cost

Tota l Devel opment Cos t (Per Sq.Ft)

Residual Land Value and Profit

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 41

Table 22 2994 Keele Street - Market Sensitivity Analysis Scenario Project Stats

Current

Redevelopment Tipping Point Required Land Value * Number of Replacement Rental Units Land Value Under Redevelopment Scenario Profit Selling Site As Redevelopment Vs. Existing Value

High

Future

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

$25

$21

$14

$15

$38

$25

$28

$50

$25

$38

$11

$10

$17

$14

$25

$13

$2,420,000

$2,662,000

$2,274,482

$1,458,242

$1,575,742

$879,614

$4,128,790

$2,662,024

$3,026,336

$5,324,174

$2,662,055

$4,104,066

$387,518

$1,203,758

$1,086,258

$1,782,386

$1,466,790

$24

$364,336

$2,662,174

$55

$1,442,066

Redevelopment Tipping Point Land Value (Per Sq.Ft) Land Value Under Redevelopment Scenario (Per Sq.Ft) Land Value Excess/Shortfall Per Square Foot Buildable Value of Existing Property

Low

Source: N. Barry Lyon Consultants Limited

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 42

7.6

SITE 6: 3253 to 3257 Bathurst Street

This corner lot site on Bathurst Street offers a large and deep property with excellent site access, yielding an estimated 96,272 square feet of development space. The 3-storey 22 unit rental building has an estimated value of about $3.2 million. The proposed mid-rise redevelopment of Site 6 would yield a market to rental housing ratio of 4.7 to 1. This relatively high ratio, combined with the site’s relatively low existing property value and premium pricing on Bathurst, results in the project’s estimated residual land value ($3.9M) exceeding the redevelopment tipping point with the current rental replacement requirements. As a result, if Site 6 were to be sold today, it is likely that a residential developer could bid a higher price than a rental apartment purchaser. In the case of Site 6, the City’s rental replacement policy, while reducing the value of the site, has been sufficiently counterbalanced by market demand for condominium apartment housing, and therefore no adjustment to the City’s replacement policy appears necessary to induce redevelopment at this location.

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 43

Table 23

Financial Analysis Results Summary Site 6: 3253-3257 Bathurst Street Current Market Conditions Scenario No Rental Replacement

Feasible Level of Rental Replacement

Current Rental Replacement Requirement

Va l ue of Exi s ti ng Property

$3,162,502

La nd Va l ue Requi red to Redevel op Si te*

$3,478,752

La nd Va l ue Under Redevel opment Scena ri o

$5,148,043

$3,478,752

$3,916,268

Profi t Sel l i ng Si te As Redevel opment Vs . Exi s ti ng Va l ue

$1,669,291

$437,516

Redevel opment Ti ppi ng Poi nt - La nd Va l ue (Per Sq.Ft)

$36

La nd Va l ue Under Redevel opment Scena ri o (Per Sq.Ft)

$53

$36

$41

La nd Va l ue Exces s /Shortfa l l Per Squa re Foot Bui l da bl e

$17

22,367

1.18

5.09

Project Statistics Financial Summary (Totals)

Number of Repl a cement Renta l Uni ts

Financial Summary (Per Sq.Ft Buildable)

Existing Building Exi s ti ng Bui l di ng (GFA) Sq.Ft Number of Exi s ti ng Renta l Uni ts Exi s ti ng Dens i ty (FSI)

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) Propos ed Dens i ty Propos ed Bui l di ng (GFA) Sq.Ft

96,272

Propos ed Res i denti a l (GFA) Sq.Ft

83,506

Propos ed Reta i l (GFA) Sq.Ft

12,766

Number of Condomi ni um Uni ts

Number of Repl a cement Renta l Uni ts

$45,621,167

$34,776,008

$37,569,603

$4,310,346

$3,198,772

Reta i l Revenue

$6,087,777

$6,062,363

$6,068,907

Tota l Revenue

$52,389,669

$45,667,697

$47,397,931

$544

$474

$492

Soft Cos ts

$13,631,284

$11,895,946

$12,340,844

Ha rd Cos ts

$22,394,581

$21,298,948

$21,580,655

Tota l Devel opment Cos t

$36,025,865

$33,194,895

$33,921,499

$374

$345

$352

Tota l Res i dua l La nd Va l ue a nd Profi t (future$)

$16,363,804

$12,472,803

$13,476,431

Tota l Profi t (future$) - 15% of Revenue

$7,756,342

$6,772,308

$7,025,592

Tota l Res i dua l La nd Va l ue (future$)

$8,607,462

$5,700,495

$6,450,839

Project Revenue Condomi ni um Revenue Renta l Repl a cement Revenue

Tota l Revenue (Per Sq.Ft)

Construction Cost

Tota l Devel opment Cos t (Per Sq.Ft)

Residual Land Value and Profit

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 44

Table 24 3253 Bathurst Street - Market Sensitivity Analysis Scenario Project Stats

Current

Redevelopment Tipping Point Required Land Value * Number of Replacement Rental Units Land Value Under Redevelopment Scenario Profit Selling Site As Redevelopment Vs. Existing Value

High

Future

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

No Rental Replacement

Feasible Level of Rental Replacement

Existing Rental Replacement Policy

$36

$53

$36

$41

$37

$36

$26

$68

$36

$53

$74

$36

$58

$17

($10)

$32

$17

$38

$22

$3,162,502

$3,478,752

$5,148,043

$3,478,754

$3,916,268

$3,533,444

$3,478,762

$2,534,526

$6,538,017

$3,479,354

$5,084,584

$7,158,564

$3,478,933

$5,600,061

$1,669,291

$437,516

$54,692

$10

($944,226)

$3,059,265

$602

$1,605,832

$3,679,812

$181

$2,121,309

Redevelopment Tipping Point Land Value (Per Sq.Ft) Land Value Under Redevelopment Scenario (Per Sq.Ft) Land Value Excess/Shortfall Per Square Foot Buildable Value of Existing Property

Low

Source: N. Barry Lyon Consultants Limited

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 45

8.0

Summary of Analysis

Our analysis examined just six case study sites. Within the City, the variations of site and market conditions within the Avenues are numerous. Given the experience in the market, we understand that in the areas of high demand, mid-rise development is already occurring within the Avenues. The rental replacement policy certainly has a bearing on the economics attached to these projects. Larger rental housing project sites are likely unfeasible to be redeveloped for mid-rise buildings, but these buildings are likely worthy of protection within the context of the policy goals. On the other side of the spectrum, are Avenues that lack market demand for condominium apartment or office development at virtually any (lower) price or rental rate. These sites are located in the suburban extents of the Avenues that have not yet had the time to mature to a point where they have become desirable as high density development sites. Our study focused on the sites that have small rental buildings in areas that illustrate evidence of market demand or, in the case on Eglinton Avenue, potential for growing demand as a result of transit infrastructure investment. In case study site numbers 1 to 5, we found that, even without the rental replacement policy, the land value of sites, redeveloped as mid-rise buildings in todayâ&#x20AC;&#x2122;s market would not exceed the existing value of the existing rental or rental/retail development. In the final case study on Bathurst Street (Site 6), the relatively high demand and pricing is enough to support the redevelopment of the site, and the required replacement of the 22 rental units. In our review, only the Dundas Street West case study for Site 4 suggested that relief from the rental replacement policy would help support mid-rise redevelopment on the property. However, if the site was assembled with the adjacent property, the additional density would likely be sufficient to make the project feasible within the existing policy context. In most of the case studies, we found that growing demand and increasing prices will eventually make site redevelopment feasible. It is also likely that as the rental stock on these sites age, the value of these properties will decline which will further incentify redevelopment.

8.1

Could Policy Modifications Accelerate Mid-Rise Development?

In each of our case studies we assessed the impact of modifying the rental replacement policy by eliminating or reducing the number of rental replacement units. In most cases, as discussed above, we found that other market and economic factors overshadowed the cost of replacing existing rental units. There are certainly cases where the rental replacement policy is impacting on the viability of a development. However, we also illustrate that in most cases, as market demand grows, the economics for redevelopment improve. Some sites, due to the large number of rental units on the property, will never be feasible for redevelopment and this is, perhaps, a good policy outcome providing they are well maintained. Our work also illustrated that in some cases, small variances that allow additional density may make the difference between a viable and non-viable development. Where it is the intent of the developer to meet the rental replacement policy requirement, flexibility in the allowable density and height may be appropriate. However, in general, we did not see any significant rationale to adjust the current policy to accelerate development. Market demand remains the core factor driving the pace of redevelopment. A Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 46

reduction of the replacement requirement, in our view, would benefit only a limited number of developments that might, in the future, otherwise become viable. In any case, an adjustment to the policy would also have the effect of reducing the rental replacement requirement in areas that do not require assistance. Therefore, any adjustment to the rental replacement policy would likely have to be geographically-based to address only those areas’ weak market characteristics. Since the market is highly dynamic, an approach of this nature raises significant implementation issues.

8.2

Conclusion

Based on our analysis, NBLC does not believe the implementation of the above-noted potential modifications to the City’s existing rental replacement policies is warranted or necessary. Based on our detailed financial analysis, existing market conditions and individual site factors (i.e. size, depth, configuration, etc.) play a greater role in redevelopment viability on most existing lower density rental housing sites than the current requirement for a one-to-one rental unit replacement. Our findings in this regard, are as follows: 

A redevelopment project’s viability is heavily influenced by a neighbourhood’s achievable index pricing for condominium apartment units. Therefore, accessibility to mass-transit, parks, shops, restaurants, community amenities and aesthetic qualities, such as landscaping and streetscaping, are important drivers of feasibility.



Many of the Avenue segments in which the City would seek to stimulate redevelopment lack the required characteristics to achieve the index pricing necessary to induce development even without the existing policy requirements for rental replacement housing.



Along Avenue segments where gentrification and/or new and planned rapid transit infrastructure are likely to lead to higher index pricing, our analysis indicates that, in most cases, rental replacement will not be a constraint to development, as the higher achievable condominium pricing can, or soon will, support the cost of rental replacement in most cases.



A site’s existing built density and property value relative to the potential new density plays a substantial role in determining the risk and cost/benefit of proceeding with new residential development, particularly when the demolition of existing (revenue generating) buildings are involved. Altering the City’s rental replacement policy will not change the often substantial value of capitalized income streams rental housing provides to owners.



Smaller retail plazas along the Avenues with large off-street surface parking fields represent the “low hanging fruit” for potential redevelopment along Avenues, as their lower existing density and significant frontage allow for substantial new infill development. Based on NBLC’s analysis, the ratio of market rate residential GFA to rental replacement GFA is typically quite high for such properties. As a result, existing rental replacement policies are not a substantial constraint on redevelopment from a development density perspective. Many of retail strip plazas with second floor apartments could economically justify redevelopment in the near future based on anticipated increases in condominium index pricing. However, the fragmented nature of ownership, and the prevalence of family run businesses creates significant barriers to lot assembly and often represents the primary constraint to redevelopment.

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 47



Based on NBLC’s study there appear to be a small proportion of sites and Avenues segments which have sufficient condominium index pricing to justify redevelopment but are not feasible primarily due to a low ratio of market rate housing to rental replacement housing in a redevelopment scenario. In such cases, a modification to the City’s rental replacement policy may induce redevelopment in the short term. However, in most cases, and assuming market demand trends remain relatively consistent these locations are a matter of a few years away from achieving price appreciation that is sufficient to overcome the rental replacement cost constraint.



Such neighbourhoods also often possess less complicated, unencumbered and underutilized sites that are capable of supporting condominium apartment development in the meantime.



In many instances, such Avenues may also be thriving pedestrian-oriented retail/restaurant/service commercial streets with substantial reinvestment already occurring and limited, or even unwanted, need for policy intervention.



If the City still wished to pursue a reduction of rental replacement requirements for the small proportion of sites requiring intervention, it is likely that the policy amendment could produce unfair and unbalanced results due to the unique characteristics of each of site. Without a case-by-case analysis, rental replacement requirements might be unnecessarily lowered on sites which may currently be viable or become so in the near future, resulting in a reduction of affordable housing stock to the benefit of existing landowners and developers by further increasing their land value.



However, we do not recommend the introduction of a site-by-site feasibility analysis requirement as a part of the rezoning process, as that would introduce an additional unnecessary layer of cost and uncertainty to the development process, and place onerous requirements on City staff.



As the current vacancy for purpose-built rentals in Toronto sits at 1.4% and housing prices are increasing more rapidly relative to income, a solution that would decrease affordable housing stock to induce the development of private market housing may pose considerable challenges from a policy perspective.

The significant influence of market conditions, along with the rapidly gentrifying character of many Avenue segments, indicates that amendments to the existing rental housing replacement policies of the Official Plan are unwarranted and unnecessary at this time. It is likely that with the passage of time, demand for mid-rise condominium apartment housing along most of the Avenues will increase, simultaneously supporting the City’s rental replacement policy and those which support Avenuesstyle development.

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Page | 48

Appendix 1:

Rental Replacement Policies of the City of Toronto Official Plan

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Appendix 2:

NBLC Memorandum â&#x20AC;&#x201C; March 30, 2012

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Memo To:

Paul Bain & Deanna Chorney

Company:

City of Toronto

From:

N. Barry Lyon Consultants Limited

Phone:

(416) 364-4414

Re:

Mid-Rise Rental Replacement Study- Assumptions and Methodology

Date:

March 30, 2012

Further to our most recent meeting on February 29, 2012, this memorandum provides a summary of our market and financial feasibility assumptions and methodology for two of the six redevelopment scenarios prepared by DTAH and NBLC corresponding to the following mid-rise rental replacement study sites: 

2501 Eglinton Avenue West (Site 1); and,



3453 to 3515 Bathurst Street (Site 2)

The following analyses examine the feasibility of replacing rental housing units within these redevelopment scenarios under a range of market conditions. The analyses are also intended to serve as a template, subject to your input, for future analyses on the remaining sites, identify additional required sensitivity testing, and provide a preliminary framework of potential policies for evaluation. 1.1

Approach & Methodology

As the findings of the final report could lead to Official Plan policy amendments having City-wide repercussions, it is important that the underlying methodology of the analysis be sound and defensible. The methodology is intended to provide a better understanding of the implications of achieving the following study goals: a) Promote redevelopment along particular ‘Avenues’ on underutilized low-rise rental apartment sites, to create jobs and housing, while improving the streetscape and pedestrian environment; b) Balance re-urbanization with a desire to protect and conserve existing rental housing units. The financial analysis is reliant upon a number of land use planning, design and market research inputs, and as such, we have structured this memorandum in the following manner:



The second section describes the site and conceptual development design characteristics. This includes the building size and scale and its relationship with surrounding land uses.



Section 3.0 provides an overview of the residential condominium marketplace for each site, including conclusions regarding anticipated pricing, unit sizing, sales absorptions, and parking requirements. Existing ground floor commercial are also reviewed.



This section concludes with financial model input recommendations for each market sector, under both current and future scenarios.



The financial modeling methodology is described in Section 4.0, including existing valuation assumptions, redevelopment assumptions, and sensitivity testing assumptions.



The results of our financial modelling are presented in Section 5.0, including their implications for achieving the study goals.



Section 6.0 identifies key next steps in the study process, including potential sensitivity analyses and policy amendment ideas that warrant further testing.

Assumptions & Methodology Memorandum

Page 2

2.0 Site & Development Characteristics 2.1

Site 1 - 2501 Eglinton Avenue West

Site 1 is situated along a portion of Eglinton Avenue West that is characterized by substantial rise in the terrain, some 150 to 200 feet above Black Creek to the west. The site is located at the southwest corner of the intersection of Venn Crescent and Eglinton Avenue, 450 metres east of Keele Street. 

To the west, Eglinton features an eclectic by pedestrian scaled mix of traditional “Main Street” style commercial blocks, 1960’s-era low-rise brick rental apartment buildings, and Plaut Manor, an 8-storey affordable rental building constructed in the early 1990s.



To the east, the uses are more automobile-oriented, and include a 22-storey rental apartment building, a service centre/used car lot, and the Westside Mall.



The site is in close proximity to low-rise residential uses, sharing its easterly and southerly boundaries with moderately-sized detached post-war homes on relatively large lots.

A summary of the existing site characteristics are provided in Table 1 below. Table 1

The proposed massing in the redevelopment scenario features an 8-storey building that steps down in heights to the south and east following a 45 degree angular plane as prescribed in the City’s Mid-Rise Guidelines. Although some visitor parking is provided at grade, the majority of parking would be provided in an underground garage. The proposed potential redevelopment statistics are in Table 2 below.

Assumptions & Methodology Memorandum

Page 3

Table 2

2.2

Site 2 - 3453-3515 Bathurst Street

Bathurst Street itself, has shown renewed interest from the development community with redevelopment projects like Deloraine Residences immediately to south, and the larger scale Cranbrooke Village about 8 blocks to the south.



The subject site and the block to the north are comprised of 1950s-style retail strip plazas with single aisles of parking between the store facades and the street line. The plaza’s are occupied by many longstanding and popular tenants catering to both the local Jewish Community and the wider Toronto populace (eg. What-A-Bagel, Daiter’s Fresh Market).



The east side of Bathurst Street from Deloraine south to Fairlawn Avenue, is comprised of more traditional Main Street-style pre-war commercial retail with rear parking.

Assumptions & Methodology Memorandum

Page 4

ď&#x201A;§

The west side of Bathurst Street is more disorganized with several gaps in the urban fabric comprised of surface parking and vacant lots, as well as a mix of retail strip plazas, townhomes and the world-renowned Baycrest medical and research facilities a few blocks to north.

A summary of the existing site characteristics are provided in Table 3 below. Table 3

The proposed massing in the redevelopment scenario features an 8-storey building that steps down in height to the following a 45 degree angular plane as prescribed in the Cityâ&#x20AC;&#x2122;s Mid-Rise Guidelines. Although some visitor and retail parking is provided at grade, the majority of parking would be provided in an underground garage. The proposed potential redevelopment statistics are in Table 4 below.

Assumptions & Methodology Memorandum

Page 5

Table 4

Assumptions & Methodology Memorandum

Page 6

3.0

Market Review

3.1

Condominium Apartment Market

3.1.1

Site 1 – 2501 Eglinton Avenue West

The following provides an overview of the existing condominium apartment market for Site 1: 

The subject site is located in the Silverthorn neighbourhood, which is characterized by a hilly terrain and affordably price detached homes, currently reselling for about $400,000.



From a sales and marketability perspective, the subject site enjoys 24-hour public (surface bus) transit at its doorstep, panoramic views to the west, and is within a 10-minute drive of Highways 400 and 401. As well, the site is within walking distance of local shops, restaurants and services, including the nearby Westside Mall, featuring a new FreshCo

grocery store. 

This particular area of the City has seen limited new high-rise condominium apartment development. As such, NBLC expanded the study area and surveyed relevant condominium apartment projects actively marketing between Scarlett and Avenue Roads and from Wilson to St. Clair Avenues.



In general, condominium apartment projects have been affordably positioned to achieve reasonably strong sales absorption rates, through the offering of smaller unit sizes. The

Assumptions & Methodology Memorandum

Page 7

six projects surveyed average around 720 square feet and $355,000 per unit per project. ď&#x201A;§

Area projects have attracted a broad purchaser base, including investors and end-users. End-users have largely including first-time home buyers and move-down empty nesters.

Assumptions & Methodology Memorandum

Page 8

Table 5 Actively Marketing (New) Condominium Apartment Projects in the Study Area As of January 31, 2012

Project Name / Developer Hill Condominiums in the Upper Village BS채R Group of Companies

Ion Condominium Residencees Fernbrook Homes and Cityzen Urban Lifestyle

Perspective Condominiums Pianosi Development Corporation

Rushton Residences Goldman Group & Lash Development Corp

Treviso Condominiums Lanterra Developments

Treviso Condominiums II Lanterra Developments

Total Open Date Status* Units

Nov-11

Jul-11

May-11

Nov-10

Apr-11

Pre

Totals/Averages: 6 Projects

201

199

423

532

1,474

Total Sales

% Sold

53%

109

103

360

278

919

54%

52%

77%

85%

52%

62%

Storeys Size Range (sq. ft.)

393

510

602

579

382

465

1,365

940

1,173

823

1,232

1,059

382 - 1365

Price Range

$259,990 - $789,990

$242,900

$441,900

$289,900 - $549,900

$331,990 - $425,990

$182,900 - $569,900

$205,900

$537,900

$182900 - $789990

Avg. $PSF** Org. Curr.

$632

$450

$441

$530

$471

$468

$474

Abs. Rate*** 70% Overall -

18.2

41.4

16.1

6.1

2.5

244.9

25.1

28.8

76.8

21.0

$629

$457

$468

$535

$478

$467

$480

*Status: "Pre" = pre construction, "UC" = under construction, "SI" = standing inventory; **Original index values are based on total inventory, current index values are based on remaining inventory; ***70% sales absorption rate is calculated from the project opening date until at least 70% sales, the overall absorption rate is calculated from the project opening date until January 31,2012. Source: RealNet Canada Inc. and N. Barry Lyon Consultants Limited

Assumptions & Methodology Memorandum

Page 9

3.1.2 

Recommended Market Inputs for Financial Analysis Similar to the other projects in the area, NBLC believes that a redevelopment on Site 1 will feature small suite sizes and an affordable pricing strategy under current market conditions.



New condominium apartment units on the subject site could average roughly 750 square feet overall. Under this assumption, these units are likely to achieve an overall average selling price of around $415 per square foot (psf).



It should be noted that the projects in the expanded study area are all considered to be in superior locations from a sales perspective, compared to the subject site, resulting in investor interest.



2501 Eglinton Avenue West is not currently considered an investor location, which will likely result in a slower than average unit sales absorption rate of around 8 units per month.



Parking at this location should be provided at an average ratio of 0.8 spaces per unit, including visitor parking.



In the next 10 years, the Eglinton-Scarborough Crosstown LRT could provide significantly improved Subway-style transit service to this location with a planned stop just 400 metres to the west (Keele Station) and 700 metres to the east (Caledonia Station). This improved rapid transit access could open up Eglinton Avenue to more investors, and could push pricing to around $430 psf, and unit sales absorption rates to around 10 units per month.



The Crosstown will likely significantly alter modal splits in the area, making owning a car and parking at this location less necessary. We envision a parking ratio of around 0.5 spaces per unit will be marketable upon completion of the Crosstown line.

3.1.3 

Site 2 – 3453-3513 Bathurst Street Located on the east side of Bathurst Street, approximately 550 metres south of Highway 401, Site 2 is situated adjacent to some of North Toronto’s most prestigious residential neighbourhoods (e.g. Bedford Park and Lawrence Manor). Low-rise homes in the vicinity are currently reselling, on average, for $1.6 million.



NBLC surveyed six comparable actively marketing (new) condominium apartment projects in the vicinity of the subject site. Three well-located projects are positioned towards the affluent move-down empty nester market, with units averaging around 1,000 square feet, and remaining suites averaging $676 per square foot. These projects have experienced reasonably strong sales absorption rates, averaging about 4 sales per project per month overall. The two newest projects have averaged a much stronger 29 sales per project per month.



The closest project to the subject site is Cranbrook Village, by Options for Homes, located at Bathurst Street and Sarnac Boulevard (two lights north of Lawrence Avenue). Options for Homes is a non-profit organization whose mandate is to provide affordable ownership for low-income individuals. At Cranbrook Village, Options for Homes is lending 13% of the purchaser price towards down payments (this loan is payment free).

Assumptions & Methodology Memorandum

Page 10

ď&#x201A;§

Units at Cranbrook Village are priced from $184,489 to $566,674, averaging about $387 per square foot, and sales have averaged more than 16 per month since opening in September 2010.

Legend Actively Marketing Condominium Apartment Projects

Assumptions & Methodology Memorandum

Page 11

Table 6

Assumptions & Methodology Memorandum

Page 12

3.1.4 

Recommended Inputs for Financial Analysis New condominium apartment units on the subject site are likely to achieve pricing slightly below the prime located projects, but well above the affordably positioned product. NBLC estimates a rate of around $575 per square feet for units averaging in the 900 square foot range for this location.



Under the above pricing and sizing strategy, overall average sales absorptions are anticipated to be around 6 per month.



Due to the slightly larger unit sizes, a slightly higher parking ratio of 1.0 space per unit, inclusive of visitor and retail parking should be utilized at this location.



Under a future 10 year scenario we envision that this stretch of Bathurst Street will continue to be progress with new projects completing gaps in the street wall and the pedestrian qualities of the streetscape gradually improving. We believe the surrounding area’s affluence will continue to strengthen with average index pricing for units strengthening to $600 psf in present dollars, for slightly smaller sized units averaging 850 square feet, and average sales absorptions of 8 per month.



The increase in affluence and popularity of the location will require a similar parking ratio of 0.8 spaces per unit.

3.2

Rental Apartment Market

The City of Toronto provided NBLC with a breakdown of existing rental units by bedroom type for each of the subject properties, based on different City’s records. The City also provided a set of ideal preferred replacement unit sizes which are, in most cases, smaller than current units but reflective of the average size of units by suite type on the market. This information was utilized for the purposes of our financial pro forma as the average replacement unit size and the total rental replacement Gross Floor Area (GFA) required for each subject site. NBLC then applied the CMHC established affordable and mid-range rents for the City of Toronto to calculate the average monthly rental rate per square foot allowable for rental replacement units. The above Rental Replacement Calculations are provided in Tables 7 and 8 below. Table 7 – Rental Replacement Assumptions Site 2 - 2501 Eglinton West (Retail/Rental) 27m ROW Unit Type Bachelor 1 Bedroom 2 Bedroom Total Average Rent Per Sq. Ft*

# 6 10 5 21

Size (SF) 450 600 750 593

Affordable Rent Per Month $822 $979 $1,161 $977

$ PSF* $1.83 $1.63 $1.55 $1.65

# 0 0 2 2 $1.72

Mid Range Rent Per Size (SF) Month 450 600 750 $1,741 750 $1,741

$ PSF*

$2.32 $2.32

* Indicates the gross rental rate per square foot per month Source: N. Barry Lyon Consultants Limited

Assumptions & Methodology Memorandum

Page 13

Table 8 – Rental Replacement Assumptions Site 4 - 3453 Bathurst (Retail/Rental) 27m ROW Unit Type

Size (SF) 650 750 650

1 Bedroom 2 bedroom Total/Average Average Rent Per Sq. Ft*

11 0 11

Affordable Rent Per Month $979 $979

$ PSF* $1.51 $1.51

Mid Range Rent Per Size (Sf) Month 650 $1,468 750 $1,741 741 $1,716

# 1 10 11 $1.94

$ PSF* $2.26 $2.32 $2.32

* Indicates the gross rental rate per square foot per month Source: N. Barry Lyon Consultants Limited

3.3

Ground Floor Commercial Rental Rates 

NBLC also surveyed the local retail market to establish the likely rental revenue attributable to the ground floor retail required by City Planning Policy.



NBLC only surveyed units with net rents, as varying operating costs between units would not allow for effective comparison of gross leases.



The following rents were surveyed in recent leases surrounding the following subject sites: Table 9 - Retail Comparables - 2501 Eglinton Avenue West Lease Date

Retail Address 2120 Eglinton Avenue W

Total Area

List

Lease

PSF/Mth

Net/Gross

Dec-11

1,766

$15.00

PSF

Net

Sep-09

1,858

$16.00

PSF

Net

970 Eglinton Avenue W

Oct-10

975

$22.00

PSF

Net

950 Eglinton Avenue W

Sep-10

1,100

$24.00

$23.00

PSF

Net

2,162

$16.00

PSF

Net

7,861 Total/ Average Source: N. Barry Lyon Consultants Limited

$17.64

2400 Eglinton Ave A3



Description Office/Retail. Mostly professional office. Corner office for medical, legal, other professional offices etc. Office/Retail. Corner office for medical, legal, other professional offices etc. Allan Road/Eglinton. Located between Starbucks and Timothys. Allan Road/Eglinton. Was an Asian Restaurant Newer Plaza. Anchor tenants: Shoppers, Price Chopper, Rogers Video, Canadian Tire, CIBC

$19.00

NBLC expects that retail units at 2501 Eglinton Avenue West will achieve a net rent of $20 per square foot, and will be capitalized at a rate of 7%. Table 10 - Retail Comparables - 3253 - 3257 & 3453 - 3515 Bathurst Street Lease Date

Total Area

List

Lease

PSF/ Mth

Net/ Gross

3500 Bathurst Street

May-10

3,524

$60.00

$42.00

PSF

Net

182 Wilson Avenue

Apr-10

1,606

$15.00

$14.00

PSF

Net

186 Wilson Avenue

Feb-10

1,236

$20.00

PSF

Net

184 Wilson Avenue

Oct-11

749

$24.00

$18.69

PSF

Net

3671 Bathurst Street

May-11

1,537

$30.00

$25.00

PSF

Net

970 Eglinton Avenue W

Oct-10

975

$22.00

PSF

Net

9,627

$35.92

$27.95

Retail Address

Total/ Average

Assumptions & Methodology Memorandum

Description Small strip plaza, new renos, and newly built-out for restaurant At base of well maintained high rise building. Tenants: video store, salon, etc. A bit far from site. At base of well maintained high rise building (same as above) was hair salon At base of well maintained high rise building (same as above) Corner location of 2-storey retail/office building. Tenants: Coffee Time, Esthetics, Flower Market Allan Road/Eglinton. Located between Starbucks and Timothys.

Page 14

Source: N. Barry Lyon Consultants Limited

ď&#x201A;§

NBLC expects that retail units at 3453 Bathurst will achieve a net rent of $20 per square foot, and will be capitalized at a rate of 7%.

Assumptions & Methodology Memorandum

Page 15

4.0 Financial Model Methodology An underlying goal of our market and financial research is to test which projects would otherwise be considered viable development projects today and in the near future, were it not for the requirement to replace rental units with like units (all other factors being equal). In today’s market, purpose built that of condominium apartment states that rents cannot exceed further reduces revenue, and developments.

rental units rarely, if ever, generate land values comparable to development. Furthermore, the City’s rental replacement policy the City’s guidelines for affordable and mid range units, which therefore land value compared to condominium apartments

With lower revenue and the construction cost of rental replacement units roughly on par with condominium apartments, each unit replaced results in a reduction in land value. This impact of this is further compounded as each rental placement unit required reduces the number of saleable condominium apartment units within a development site which are required to subsidize the replacement units. In order to determine the impact of rental replacement on the viability redevelopment at the selected subject sites, NBLC undertook the following steps. 1.

Valued the existing properties in their current form, assuming that for redevelopment to be viable, and attractive to developers, this value would need to be exceeded;

Developed a residual land value model (RLV) for a condominium apartment development on the subject sites under the following scenarios: a) No existing rental units must be replaced; b) Rental unit replacement calculated to a level/amount which maintains the feasibility of redevelopment; c) Rental units replaced as per the City’s existing rental replacement policy; d) Sensitivity analyses were conducted for all of the above scenarios to gauge the impact on rental replacement and redevelopment feasibility under three market scenarios:



Low:

A slowdown in the Toronto high-rise market;



High:

The continued growth in demand for high-rise in Toronto; and,



Future: The impact of future development trends/infrastructure within the next 10 years on the subject site, as if they existed today (ie. The Eglinton Crosstown, Neighbourhood Redevelopment, New Parks)

Assumptions & Methodology Memorandum

Page 16

4.1

RLV Methodology

The RLV methodology utilized in the above mentioned analysis determines the revenue attributed to the project, less the hard and soft costs of developing the project, resulting in a calculated “Residual Land Value and Profit”. The profit value is then subtracted from this amount to determine the residual land value (in future dollars), or the value attributed to the site once all revenues and costs associated with the proposed development are accounted for, resulting in the calculation of the “Residual Land Value” in future dollars. This value is then discounted to the present day to give the RLV, or land value of the site, in present dollars. 4.1.1 

Valuation of Rental Replacement Units The value of the rental replacement (new) units is based on a capitalization of net income, shown in the formula provided below. 1) Average Net Unit Size * Average Gross Rent PSF – Operating Cost Estimate = Net Operating Income. 2) Net Operating Income / Cap Rate = End Price Per Net Square Foot:



4.2

Assuming operating costs are equal to 40% of gross income; and,

Assuming a 5.5% capitalization rate for new purpose built rental units.

NBLC also assumes that the rental replacement portions of the buildings will be sold off as a portfolio of units to a single buyer at the time of completion. Existing Land Values

As outlined in the methodology of this study, the value of the existing rental structures plays a critical role in determining the feasibility of any new development. Any redevelopment of the subject sites will require the proposed development to generate a land value in excess of what the existing building could obtain on the open market. Due to the private ownership of the existing structures on the subject sites, a detailed valuation based on tenant rolls, rents and operating costs is not possible for the purposes of this study. However, NBLC has been able to find comparable transactions for each site and has utilized these values to generate an estimate of the sites existing value. 4.3

2501 Eglinton Avenue West

In the case of 2501 Eglinton Avenue West, the rental residential property had transacted in 2011, conveniently establishing the value of the site on the open market. Due to this exact value, comparable trades were not required for the site. The site’s transaction value was $ 1.79 million.

Assumptions & Methodology Memorandum

Page 17

4.4

3453 Bathurst Street West

3453 Bathurst is a 2 storey commercial retail plaza with rental residential occupying the second level of the structure. The structure itself is composed of 5 individual parcels, each with a similar ratio of GFA to site area. In 2011, two of parcels were purchased, which accounted for over 50% of the subject in area, establishing an accurate representation of the sites market value, reflecting the existing income stream generated by the properties and potential for future development. Table 11 - 3453 - Bathurst (Valuation of Existing Structure) Property 3513 Bathurst 3507 Bathurst

Year

Area (SF)

Purchase Price

Price Per SF

2011 2011

5,963 11,722

$1,100,000 $2,270,000

$184.46 $193.65

17,685

$3,370,000

$190.56

Total/Average Source: N. Barry Lyon Consultants Limited

Based on the average value of the subject site at $191 per square foot of parcel (land) area, multiplied by the total site area of 33,703, NBLC has estimated the value of the total parcel assembly at $6.4 million. 4.5

Redevelopment (Residual) Land Valuation Model

4.5.1 Residual Land Value (RLV) Assumptions In addition to the assumptions contained in Tables 12 and 13, to follow, the following additional assumptions have been employed in the RLV pro forma analysis: 

A developer’s profit of 15.0% of gross revenues;



A discount rate of 10.0%;



Soft costs, including development charges, building permits, municipal taxes and provincial land transfer taxes, parkland dedication and public art contribution have been included;



The model assumes that each site will sell within 1 year, and that the sites will be rezoned and obtain site plan approval within 2.5 years for a development similar to that conceptually designed by DTAH, and presented at the meeting on February 29, 2012. After which, marketing and sales would commence;



Provisions for the Harmonized Sales Tax (HST) have been incorporated;



Total Hard construction cost estimates are based upon 2011 Altus Helyar Construction Cost Guide, with above grade and below grade construction costs calculated separately. Estimated costs exclude landscaping, contingencies and servicing, which are calculated separately;



The model assumes a lump sum demolition fee of $100,000 for the existing structures per site;



The model does not account for any potential extraordinary costs specific to the subject site, which may include upgraded external services to the lot line, earthworks, environmental constraints, site contamination, etc;

Assumptions & Methodology Memorandum

Page 18



NBLC assumes that no redevelopment of the existing properties will occur unless the residual land value generated by the proposed redevelopment of the site exceeds the properties existing value by 10%. The 10% premium reflects the profit motive necessary for an owner/buyer to initiate the significantly more complex process of selling a redevelopment site relative to an income generating asset; and,



As per NBLC’s market analysis, the following recommendations have been utilized, including assumptions for an additional 3 alternative market scenarios to the current surveyed market conditions, which include (low market demand, high market demand, and future (10 year) market demand).

Scenario

Table 12 - Assumptions Site 2 - 2501 Eglinton West (Retail/Rental) 27m ROW Present

Unit Size (SF) Gross-to-Net Efficiency Ratio Index Revenue Per Square Foot End Price per Unit Revenue Inflator Absorption Rate (Sales per month) Rental Replacement Rent (PSF) Per Month* Retail Rent (PSF) Per Year Suggested Parking Ratio (Stalls Per Unit) Parking Revenue Per Stall Above Grade Construction Cost - Condo Above Grade Construction Cost - Rental Above Grade Construction Cost - Retail Below Grade Construction Cost - Parking

Low 750 88% $400 $300,000 1.5% 5 $1.72 $15 0.8 $0 $150 $145 $145 $85

Current 750 88% $415 $311,250 2.0% 8 $1.72 $20 0.8 $0 $150 $145 $145 $85

High 750 88% $420 $315,000 2.5% 10 $1.72 $22 0.8 $0 $150 $145 $145 $85

Future 750 88% $430 $322,500 2.0% 10 $1.72 $25 0.5 $0 $150 $145 $145 $85

Scenario

Table 13 - Assumptions Site 4 - 3453 Bathurst (Retail/Rental) 27m ROW Present

Unit Size (SF) Gross-to-Net Efficiency Ratio Index Revenue Per Square Foot End Price per Unit Revenue Inflator Absorption Rate (Sales per month) Rental Replacement Rent (PSF) Per Month* Retail Rent (PSF) Per Year Suggested Parking Ratio (Stalls Per Unit) Parking Revenue Per Stall Above Grade Construction Cost - Condo Above Grade Construction Cost - Rental Above Grade Construction Cost - Retail Below Grade Construction Cost - Parking

Low 900 88% $550 $495,000 1.5% 4 $1.94 $25 1.0 $15,000 $165 $155 $150 $85

Current 900 88% $575 $517,500 2.0% 6 $1.94 $30 1.0 $25,000 $165 $155 $150 $85

High 900 88% $585 $526,500 2.5% 8 $1.94 $32 1.0 $30,000 $165 $155 $150 $85

Future 850 88% $600 $510,000 2.0% 8 $1.94 $30 0.8 $30,000 $165 $155 $150 $85

Page 19

5.0 Preliminary Results of Financial Modelling The analysis below should be considered a preliminary draft financial analysis, intended to gauge the relative impact of rental replacement and future market conditions on the viability of redevelopment on the selected subject sites. 5.1

2051 Eglinton Avenue West 

Given the $1.79 million property value of the existing multi-residential structure located at 2501 Eglinton Avenue West, any new development at the site is estimated to require a residual land value of $1.97 million, or 10% premium, in order to incentivize the existing asset owner or future site buyers to consider the challenging and risk prone redevelopment process.



The DTHA site plan proposes a maximum total GFA of 48,470 square feet for a new development at the subject site. This size is primarily dictated by the City of Toronto’s Mid-Rise development guidelines in effect along Eglinton Avenue and to the surrounding residential lot boundaries.



At this size, the proposed structure would need to generate a residual land value of $41 per buildable square foot in order to generate the required land value ($1.97 million) to make redevelopment of the site feasible.

No Rental Replacement Scenario 

Even without any rental replacement the site is expected to fall considerably short of the land value needed to make redevelopment feasible.



Due to local market conditions, including amenities and transit options, new condominium apartments are expected to generate a relatively low index condominium apartment selling price of $415 psf.



The limited revenue potential of the site results in a residual land value of $647,077, or $13 per buildable square foot, which falls considerably short of the required $41 per buildable square required to make redevelopment viable at 2501 Eglinton Ave West.

Rental Replacement Scenario 

With the added requirement to replace the rental housing units in the new development, the residual land value drops to $1 per square foot buildable.

Sensitivity Analysis 

The future development of the Eglinton Crosstown is expected to have a positive impact on this section of Eglinton West. Commute times will be considerably reduced, the retail character of the avenue will improve, local home prices are expected to rise, and NBLC estimates that the achievable index price of condominium, in today’s dollars, will rise to $430 psf

Assumptions & Methodology Memorandum

Page 20

ď&#x201A;§

These future developments are expected to increase the residual land value per buildable square foot to $31 per buildable square foot (without rental replacement) and $18 per buildable square foot with replacement of all 24 units.

ď&#x201A;§

Despite the estimated increase in land value resulting from the Eglinton Crosstown, the sites estimated existing $1.79 million dollar value as well as limited redevelopment density of (2.7 FSI), are the primary impediments to redevelopment of the site over the next 10 years, even with no requirement for rental replacement.

2501 Eglinton Avenue West - Summary of Results of Financial Analysis Current Market Conditions Scenario Project Stats

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

$1,790,000 $1,969,000 0 $647,077 -$1,321,923

$1,790,000 $1,969,000 24 $39,056 -$1,929,944

$41 $13 -$27

$41 $1 -$40

24,326 24 1.35

Financial Summary (Totals) Value of Existing Property Redevelopment Tipping Point - Required Land Value * Number of Replacement Rental Units Land Value Under Redevelopment Scenario Profit Selling Site As Redevelopment Vs. Existing Value

Financial Summary (Per Sq.Ft Buildable) Redevelopment Tipping Point - Land Value (Per Sq.Ft) Land Value Under Redevelopment Scenario (Per Sq.Ft) Land Value Excess/Shortfall Per Square Foot Buildable

Existing Building Existing Building GFA (Sq.Ft) Number of Existing Rental Units Existing Density (FSI)

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) Proposed Density Proposed Building GFA (Sq.Ft) Proposed Residential GFA (Sq.Ft) Proposed Retail GFA (Sq.Ft) Number of Condominium Units Number of Replacement Rental Units

2.69

48,470 46,317 2,153 54 0

48,470 46,317 2,153 36 24

$18,129,666 $0 $677,704 $19,085,897 $394

$11,990,799 $3,419,558 $675,910 $16,270,504 $336

$4,847,718 $10,385,201 $15,232,919 $314

$3,711,457 $10,084,615 $13,796,072 $285

$3,852,978 $2,821,106 $1,031,872

$2,474,432 $2,412,940 $61,492

Project Revenue Condominium Revenue Rental Replacement Revenue Retail Revenue Total Revenue Total Revenue (Per Sq.Ft)

Construction Cost Soft Costs Hard Costs Total Development Cost Total Development Cost (Per Sq.Ft)

Residual Land Value and Profit Total Residual Land Value and Profit (future$) Total Profit (future$) - 15% of Revenue Total Residual Land Value (future$)

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited Assumptions & Methodology Memorandum

Page 21

5.2

3453 Bathurst Avenue West 

Given the $6.4 million property value of the existing retail plaza with second storey rental residential at 3453-3515 Bathurst, any new development at the site is estimated to require a residual land value of $7.0 million (10% premium), in order to incentivize the existing asset owner or future site buyers to consider the challenging and risk prone redevelopment process.



The DTHA site plan proposes a maximum total GFA of 113,258 square feet for a new development at the subject site. This size is primarily dictated the City of Toronto’s MidRise development guidelines in affect along Bathurst Street.



At this size, the proposed building would need to generate a residual land value of $62 per buildable square foot in order to generate the required land value ($7.0 million) to make redevelopment of the site feasible.

No Rental Replacement Scenario 

Due to the favourable local market conditions along Bathurst and recent luxury developments along Avenue Road to the East, the subject site is expected to achieve a relatively high index value of $575 per saleable square foot in current market conditions.



The considerable index value achievable at the subject site results in a residual land value of $7.3 million, or $64 per buildable square foot. This estimated redevelopment land value exceeds the $62 per buildable square foot required to induce redevelopment.



However, the above scenario assumes no requirement for the replacement of existing rental housing stock.

Rental Replacement Scenario 

The existing Bathurst site has 14 rental apartment properties which are required to be replaced according to City policy.



With the added requirement to replace the rental housing units in the new development, the residual land value drops to $59 per square foot, slightly below the threshold required to induce redevelopment.

Feasible Level of Rental Replacement 

NBLC ran an iterative development model, which identifies the maximum level of rental replacement possible while maintaining the viability of a redevelopment at the subject site.



Our analysis indicates that a redevelopment of the subject site could support the replacement of 5 rental housing units, while still meeting the $62 per buildable square foot threshold required to tip the sites highest and best use towards redevelopment.

Sensitivity Analysis 

NBLC expects that the character of Bathurst will continue to improve over the next 10 years, as move down buyers seek move down Condominium in this nascent high-rise

Assumptions & Methodology Memorandum

Page 22

avenue. As a result of the evolution and upmarket shift of the site’s surroundings, prices for condominiums and retail rental are expected to increase at a pace exceeding inflation. 

If the above improvements existed today, NBLC estimates that the proposed redevelopment would yield a residual land value of $71 per buildable square foot with no rental replacement policy.



However, more importantly, it suggests that if the redevelopment replaced all 14 existing units within the proposed redevelopment as per city policy, that the site would yield a residual land value of $65 per buildable square foot, exceeding the $62 per buildable square foot tipping point.



Based on the NBLC analysis, this indicates that 3453-3515 Bathurst will likely become a viable redevelopment site within 10 years, even with the City’s existing rental replacement policy.



However, it should be noted that this property reflects an exceptional example of rental replacement opportunity. 3453-3515 Bathurst is a large site, with a low existing density (1.0 FSI), few rental replacement units, and is situated along an Avenue with considerable revenue potential for new condominium apartments.

Assumptions & Methodology Memorandum

Page 23

3453 Bathurst Street - Summary of Results of Financial Analysis Current Market Conditions Scenario No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

Value of Existing Property

$6,403,336

Land Value Required to Redevelop Site*

$7,043,670

Project Stats Financial Summary (Totals)

Number of Replacement Rental Units

$7,265,032

$7,043,864

$6,662,346

$221,362

$194

-$381,324

Redevelopment Tipping Point - Land Value (Per Sq.Ft)

$62

Land Value Under Redevelopment Scenario (Per Sq.Ft)

$64

$62

$59

Land Value Excess/Shortfall Per Square Foot Buildable

-$3

32,485

0.96

Land Value Under Redevelopment Scenario Profit Selling Site As Redevelopment Vs. Existing Value

Financial Summary (Per Sq.Ft Buildable)

Existing Building Existing Building (GFA) Sq.Ft Number of Existing Rental Units Existing Density (FSI)

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) Proposed Density

3.36

Proposed Building (GFA) Sq.Ft

113,258

Proposed Residential (GFA) Sq.Ft

104,647

8,611

102

$57,003,689

$54,979,679

$51,520,297

$918,277

$2,488,845

Retail Revenue

$4,114,708

$4,111,848

$4,106,969

Total Revenue

$64,943,487

$63,699,126

$61,573,639

$573

$562

$544

Soft Costs

$16,915,784

$16,455,664

$15,670,613

Hard Costs

$26,154,720

$25,965,040

$25,641,597

Total Development Cost

$43,070,504

$42,420,703

$41,312,210

$380

$375

$365

$21,872,982

$21,278,423

$20,261,429

Proposed Retail (GFA) Sq.Ft Number of Condominium Units Number of Replacement Rental Units

Project Revenue Condominium Revenue Rental Replacement Revenue

Total Revenue (Per Sq.Ft)

Construction Cost

Total Development Cost (Per Sq.Ft)

Residual Land Value and Profit Total Residual Land Value and Profit (future$) Total Profit (future$) - 15% of Revenue

$9,607,585

$9,425,388

$9,114,983

Total Residual Land Value (future$)

$12,265,397

$11,851,386

$11,146,446

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited

Assumptions & Methodology Memorandum

Page 24

2501 Eglinton Avenue West - Market Sensitivity Analysis Current

Scenario N o R ent al R ep lacement

Project Stats

Low

F easib le Level o f R ent al R ep lacement

C ur r ent C it y R eq uir ed R at io o f R ent al R ep lacement

High

N o R ent al R ep lacement

F easib le Level o f R ent al R ep lacement

C ur r ent C it y R eq uir ed R at io o f R ent al R ep lacement

N o R ent al R ep lacement

Future

F easib le Level o f R ent al R ep lacement

C ur r ent C it y R eq uir ed R at io o f R ent al R ep lacement

N o R ent al R ep lacement

F easib le Level o f R ent al R ep lacement

C ur r ent C it y R eq uir ed R at io o f R ent al R ep lacement

Redevelopment Tipping Point - Land Value (Per Sq.Ft)

$41

$60

$41

$60

$41

$60

Land Value Under Redevelopment Scenario (Per Sq.Ft)

$13

$18

$31

$18

Land Value Excess/Shortfall Per Square Foot Buildable

$27

$40

$37

$60

$23

$51

$42

$1,790,000

Redevelopment Tipping Point - Required Land Value * $1,969,000

$1,969,000

Value of Existing Property

Number of Replacement Rental Units Land Value Under Redevelopment Scenario

$1,969,000

$647,077

$39,056

$194,559

$871,861

$417,933

$1,513,055

$849,311

$1,321,923

$1,929,944

$1,774,441

$1,969,000

$1,097,139

$1,551,067

$455,945

$1,119,689

Profit Selling Site As Redevelopment Vs. Existing Value $1,321,923 Source: N. Barry Lyon Consultants Limited

3453 Bathurst Street - Market Sensitivity Analysis Current

Scenario Project Stats

N o R ent al R ep lacement

F easib le Level o f R ent al R ep lacement

Low C ur r ent C it y R eq uir ed R at io o f R ent al R ep lacement

N o R ent al R ep lacement

F easib le Level o f R ent al R ep lacement

High C ur r ent C it y R eq uir ed R at io o f R ent al R ep lacement

N o R ent al R ep lacement

F easib le Level o f R ent al R ep lacement

Future C ur r ent C it y R eq uir ed R at io o f R ent al R ep lacement

N o R ent al R ep lacement

F easib le Level o f R ent al R ep lacement

C ur r ent C it y R eq uir ed R at io o f R ent al R ep lacement

Redevelopment Tipping Point - Land Value (Per Sq.Ft)

$62

Land Value Under Redevelopment Scenario (Per Sq.Ft)

$64

$62

$59

$45

$42

$75

$62

$68

$71

$62

$65

Land Value Excess/Shortfall Per Square Foot Buildable

$17

$21

$12

Value of Existing Property

$6,403,336

Redevelopment Tipping Point - Required Land Value *

$7,043,670

$7,265,032

$7,043,834

$6,662,346

$5,133,248

$4,703,992

$8,446,961

$7,042,454

$7,741,886

$8,065,701

$7,043,821

$7,361,945

$221,362

$164

$381,324

$1,910,422

$2,339,678

$1,403,291

$1,216

$698,216

$1,022,031

$151

$318,274

Number of Replacement Rental Units Land Value Under Redevelopment Scenario Profit Selling Site As Redevelopment Vs. Existing Value Source: N. Barry Lyon Consultants Limited

Market & Financial Feasibility Memorandum

Page 25

6.0 Next Steps The results of our analysis have demonstrated that only the Bathurst Street location will not require policy subsidies to induce redevelopment under the existing rental replacement policies in the ten year time frame. This suggests that, in the near future, the market will support the implementation of the Avenues mid-rise vision, and no new policy amendments are required for that location, with similar site and development characteristics. In contrast, the Eglinton Avenue West site warrants policy intervention in a broader sense (not just from the rental replacement policies) in both the current and 10 year time frames. Redevelopment of the site is not feasible for residential redevelopment even without the requirement to replace rental units. This is due to a combination of both market and achievable built form/density constraints, which are further complicated by the inherent value of the existing rental units. We feel that the methodology and assumptions employed to date are appropriate for further testing on the remaining sites. Each site, however, is unique and it is possible that analysis conducted on the additional sites may improve our methodology to date. Our work to date is leading us toward several themes that may become part of the ultimate study recommendations. These include: 

Site size: It appears to us that larger sites with multiple phases of development can more readily absorb the cost of replacing rental units. Sites larger than a certain size, of about 3,000 square metres (32,000 square feet) can accommodate two or more phases of development. A policy consideration may be that a specific size of site would be precluded from any relief from the rental replacement policy that might be considered as part of this study.



Density: The work conducted to date and our other research in these areas, suggest that a significant number of sites could meet the existing policy requirement with a modest increase in allowable density. The right-of-way width of street frontage dictates maximum building heights along the Avenues and therefore the achievable density. We should consider the possibility of allowing minor variances that would allow the angular plane and height limits to be exceeded to allow development to support the rental housing replacement policy.



Specific areas of the City do not require financial feasibility assistance and are capable of paying cash in lieu of constructing rental replacement units. Clearer policy direction should be provided in this regard to both developers and City housing policy administrators.



The focus of any relief should be on marginal feasibility areas (current and the next 5-10 years) which we will recommend as we complete our research.



We believe that there will be certain areas of the City that are not currently receiving development interest due to market conditions and that those conditions will not change significantly over the next 10 to 15 years, irrespective of the current policy. These areas should not be the current focus of analysis or policy relief.



We also believe that other areas of the City, especially those along the Eglinton subway line, will improve significantly from a market viewpoint and will re-develop with the existing policy requirements in place.

Assumptions & Methodology Memorandum

Page 26

ď&#x201A;§

If a relief mechanism to the policy is determined appropriate for further consideration, a cap system should be considered, or a specific limit per project to remove the risk of excessive rental unit removal.

Through the testing and analysis of the four additional sites we hope to explore these ideas and others in greater detail.

Assumptions & Methodology Memorandum

Page 27

Appendix 3:

NBLC Memorandum â&#x20AC;&#x201C; April 19, 2012

Potential for Rental Housing Replacement in Mid-Rise Redevelopment along the Avenues City of Toronto Official Plan Review

Memo To:

Paul Bain & Deanna Chorney

Company:

City of Toronto

From:

N. Barry Lyon Consultants Limited

Phone:

(416) 364-4414

Re:

Mid-Rise Rental Housing Replacement Study:

Date: April 19, 2012

Prototypical Site Development Analysis: Sites 3 to 6 The following memorandum summarizes the draft analyses completed on the four remaining prototypical mid-rise development sites that comprise the basis of our policy testing research for the Rental Housing Replacement Study. 2357 Eglinton Avenue East NBLC found that the site would not be a feasible redevelopment candidate, even without the required replacement of existing rental housing. The value of the existing properties combined with the currently low pricing at the subject site, were the primary constraints on redevelopment. Looking toward the future, NBLC expects that the introduction of the Scarborough-Eglinton Crosstown will significantly improve pricing in the study area. This increase in revenues, combined with the high ratio of market rate housing GFA to rental replacement GFA (9 to 1) as proposed in the DTAH massing, is expected to make the site a viable redevelopment candidate even with rental replacement units. This study has illustrated that factors such as transit and pricing are the constraints on redevelopment at present and not the Cityâ&#x20AC;&#x2122;s rental replacement policy, particularly on low density retail/residential parcels along the Avenues. 1484 Dundas Street West Despite the considerable estimated land value in a redevelopment scenario, at present the site is not a feasible redevelopment candidate. The site is primarily constrained by the value of existing structures on the site, and its considerable density at 2.6 FSI. Looking towards the future, it is expected that pricing along this section will increase, as infill development continues to improve the character of Dundas West. However, as a result of the low ratio of market rate housing to rental replacement at this site (3.6 to 1) as provided in the DTAH massing, the site will not likley be a viable redevelopment candidate under the existing rental replacement policy.. Although the value of the structures on the site are the primary constraint to redevelopment of the site a reduction in the number of replacement rental units could assist in motivating the redevelopment of the property.

Page 1

2994 Keele Street The proposed DTAH massing achieves a considerable ratio of market rate housing GFA to rental replacement GFA, (5.5 to 1). Based on forecasted condominium pricing, the sites value as a redevelopment parcel falls just short of the tipping point required to induce redevelopment. The achievable index pricing at the subject site is expected to increase with the completion of Downsview Park, the Spadina/University subway extension and development of residential parcels at Downsview. Based on these factors it is expected that the site will become a viable redevelopment candidate in the near future. The cityâ&#x20AC;&#x2122;s rental replacement policy is not significant constraint to the redevelopment of this site, primarily due to its low density, and the positive impact on future pricing with the area improvements 3253 Bathurst Street This proposed redevelopment would yield a ratio of 4.7 square feet of market rate housing to each square foot of rental replacement. This high ratio, combined with the premium pricing achievable on Bathurst results in the projects estimated land value, with rental replacement units, to exceed the tipping point. As a result, if the site were sold today, it is likely a residential developer would bid a higher price than a rental apartment purchaser. In the case of 3253 Bathurst, the cityâ&#x20AC;&#x2122;s rental replacement policy, while reducing the value of the site, has been sufficiently offset by market demand for housing along this stretch of Bathurst and no adjustment to city policy appears necessary induce redevelopment.

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1.0

2357 â&#x20AC;&#x201C; 2369 Eglinton Avenue East

1.1

Site and Existing Development Characteristics

The subject site is located at 2357-2369 Eglinton Avenue East, just west of Kennedy Road, in the former municipality of Scarborough. The site is located within a community that is dominated by aging high density residential rental buildings (largely constructed pre 1972) surrounding stable, low density communities and automobile-oriented retail plazas similar to that on the subject site. The retail strip malls in the area are primarily occupied by suppliers of services and goods that serve the local community. While retail rental rates are typically weak within these shopping plazas, vacancies are low. The lack of major retail chains, and small store sizes and frontages suggest a high propensity of owner-occupiers. The subject site is somewhat different in that the majority of retail units are owned by three ownership groups who are sub-leasing the space. Re-investment has been limited in the area due to theses weak rental rates and the lack of market demand for ownership (residential) condominium development. Figure 1: Aerial View of 2357 - 2369 Eglinton Avenue East

The site selected in this analysis is large with considerable lot depth and frontage. To the west of the property is an existing older rental building of 7 storeys. To the rear of the site is an established low density neighbourhood with townhouse development. Table 1 summarizes the relevant site statistics associated with the existing use.

Page 3

Table 1: Site 3 Characteristics 2357 - 2369 Eglinton Avenue East Existing Site Statistics sqm

Site Area

5,840

62,861

Total GFA

3,930

42,302

Density (xFSI)

0.67

Existing Rental Units Avenue ROW Width (m)

23 36

388

Lot Frontage (m)

73.27

Lot Depth (m)

79.76

1.2

Market Review

The following section provides an overview of the residential context, followed by an analysis of the comparable condominium apartment marketplace in relation to the subject site. 

The site falls within the Scarborough Junction neighbourhood, a culturally diverse community offering a broad mix of housing types. The site shares its southerly and easterly boundaries with rental apartment buildings and townhomes. Affordable priced low density housing, in the form of detached, semis and back splits are all found within close proximity to this site.



From a market perspective, the site benefits from the nearby Kennedy Mobility Hub. This site will be redeveloped with a new station, currently in design, that will accommodate the new Scarborough-Eglinton CrosstownLRT and replacement of the SRT link to Scarborough Town Centre. The expansion of this hub will integrate station services for the Toronto Transit Commission’s (TTC’s) Kennedy Subway, GO Transit’s Kennedy Station, and the new TTC Scarborough-Eglinton CrosstownLine, making it one of the best served transit areas in the City.



The site also benefits from shopping opportunities along Eglinton Avenue, including big box stores, restaurants, strip plazas and other services.



While there has been limited new residential development that is directly comparable to the subject site. NBLC surveyed four projects that share similar site and market attributes that are marketing in the area.

Page 4

Figure 2: Comparable Actively Marketing Condominium Apartment Projects



With the exception of 2150 Condos, which is a multi-phased high-rise project, all projects are mid-rise, averaging 8-storeys in height.



In general, the lack of urban context, vibrant streets, weaker transit and a number of other factors have limited the amount of investment in the area. The few projects that have emerged outside of the Scarbourgh Town Centre site have succeeded by offering very affordable pricing.



Although the oldest, Wilshire on the Green is the closest mid-rise project in proximity to the subject site. It is the only project in the surveyed sample that is near a higher-order transit (Warden Subway Station). It is also the only project that has reached 70% sales, however it took roughly 11 months to arrive at this mark. Units at Wilshire on the Green average around 770 square feet in size and $299,013 in price, the second highest amongst the comparable projects but still exceptionally affordable in the Toronto marketplace. Overall, units average roughly $273,732 for 750 square feet.



In terms of townhouse development, NBLC surveyed five stacked townhouse developments. Traditional stacked townhomes have sold at a faster pace than the back-to-back stacked townhomes. This sales pace is slightly skewed upwards as it includes Nature’s Path by Your Home Developments, which has done exceptionally well since launching, at an average rate of 23 sales per month. Taking Nature’s Path out of the equation, the overall sales absorption rate across the two product types is at par, at 1.3 sales per project, per month.



Page 5



Overall, the townhouse projects have mostly attracted young singles and couples from the local area and few, if any, investors. In addition, Upper Beach Villas and Nature’s Path have also attracted many move-down buyers. Nature’s Path has also appealed to many immigrant families.

Page 6

1.3

Development Concept

The proposed massing in the redevelopment scenario features an 11-storey building fronting Eglinton Avenue that steps back after the sixth and ninth floors to provide an appropriately scaled street wall, and a number of terraced unit opportunities. Three grade-related (wood-frame) development blocks round out the concept plan to the south of the apartment building. These blocks feature a central spine of back-to-back stacked townhouses within a 4-storey built form and two rows of traditional townhomes. Parking for all units would be provided underground to free up the ground plane for landscaping, private amenity space, and shared amenity/green space. In addition to providing an appropriate transition in built form scale between the apartment building and the low-rise housing to the south, the grade-related housing in the plan also provides sufficient product type differentiation (to the apartment condominium units) to allow for the simultaneous marketing of these phases of the project, improving the feasibility of this hypothetical project. Table 4: Site 3 Development Concept 2357 - 2369 Eglinton Avenue East Potential Redevelopment Site Statistics sqm

Total GFA

19,550

210,434

Condominium Apartment GFA

12,560

135,192

Condominium Townhouse GFA

4,428

47,662

Rental Apartment GFA

1,462

15,739

Retail GFA

1,100

11,840

Density x FSI # of New Condo Apt Units # of New Townhouse Units Average New Condo Unit Average Rental Replacement Unit Size Affordable Units Mid-Range Units Ratio of New Unit to Replacement New Parking Ratio (blended ratio)

3.3 159 79

852

602 23 0 6.9 0.8

Page 7

1.4

Recommended Market Parameters



Based on our review of the market we will assume that the maximum achievable index price of a new high-rise condominium development in the area would be in the $365 to $375 psf range. Even at this affordable pricing range we would expect demand to be modest given the character of the community in its current state.



New condominium apartment units on the subject site would likely average in the range of 700 square feet.



With the new Eglinton LRT and mobility hub improvements over the next 10 years we expect that the price per square foot of revenue will increase substantially to about $450 per square foot (in present dollars).



Stacked townhouses would average around 1,000 square feet overall. This could translate into 2-bedroom units from 900 square feet to 3-bedroom units up to 1,200 square feet.



The suggested overall average index price for the stacked townhomes at this location is between $275 and $285 psf, including HST.

Page 8

1.5

Financial Analysis

The analysis below should be considered a preliminary draft financial analysis, intended to gauge the relative impact of rental replacement and future market conditions on the viability of redevelopment on the selected subject site. Existing Site Value In the case of 2357 Eglinton Avenue East, NBLC identified two parcels within the existing plaza (2367 & 2369 Eglinton Avenue East) which transacted in 2009. At the time, these sites, which are equivalent all other parcels in terms of built form, sold for about $72 per square foot of site area. For the purposes of this analysis we assume that values have since inflated, rising to approximately $80 per square foot of surface area. Based on a total site area of 62,861 square feet, this equates to a total value of $5.0 million. Redevelopment Analysis 

Given the $5.0 million property value of the existing retail plaza with second floor rental apartments, any new development at the site is estimated to require a residual land value of $5.5 million, or a 10% premium, in order to encourage the existing asset owner or future site buyers to consider the redevelopment process.



The DTHA site plan for 2357 Eglinton Avenue East proposes a total of 210,434 square feet of new development at the subject site, based on the principles of the City of Toronto’s Mid-Rise development guidelines. It is likely that additional density in apartment form could fit on the site. However, the volume of units to be sold would have been a market concern. We therefore diversified the product type to include stacked townhomes and traditional (through) townhomes.



Based on the above, and the base financial parameters outlined in our earlier March 30, 2012 memorandum, to achieve the 10% premium, a blended residual land value of $34 per buildable square foot would be required (without rental replacement) as a target land value.

No Rental Replacement Scenario 

If the site were sold immediately, with no rental replacement requirement cost, the proposed site plan by DTAH is expected to generate a residual land value of only $5 per buildable square foot based on our market inputs.



This small but positive land value is largely attributable to the townhouse component which generates a modest land value.



Due to the low achievable index pricing expected at the subject site in the current market at $375 per square foot, a development with no requirement for replacement rental, would still fail to generate the necessary land value to make the project feasible.



The redevelopment site has a total present value of $0.9 million, well below its existing $5.0 million dollar value.

Rental Replacement Scenario 

As the condominium apartment yields no land value, the addition of 23 replacement apartments, has no impact on land value, but does reduce the expected profit margin for the condominium apartment below the required 15% of gross revenue.

Page 9

Sensitivity Analysis 

The future development of the Scarborough-Eglinton Crosstown is expected to have a significant positive impact on the desirability of this section of Eglinton East for residential development, resulting in substantially higher index pricing. Commute times will be considerably reduced, the retail character of the Avenue will improve, local home prices are expected to rise, and NBLC estimates that the achievable index price of condominium, in today’s dollars, will rise to $450 psf. The supporting table can be found in Appendix A.



These future developments are expected to increase the residual land value per buildable square foot to $46 per buildable square foot (without rental replacement) and $42 per buildable square foot with replacement of all 23 units.



Although redevelopment of the site at present is unfeasible, even without rental replacement, NBLC’s analysis indicates that the site could become a viable redevelopment parcel with the completion of the Scarborough-Eglinton Crosstown by 2020.



Site 3’s low existing FSI of 0.3 is characteristic of the many lower density retail plazas along Eglinton Avenue, and the proposed substantial site density increase to 3.3 FSI under the conceptual site plan is largely the driving force behind the site’s feasibility.



The site has a very high ratio of saleable condominium floor area to replacement rental floor area. For every square foot of rental housing which would require replacement, the new site plan adds 9 new square feet of market rate housing and retail.

Page 10

Table 5: 2357 Eglinton Ave East - Summary of Results of Financial Analysis Scenario Current Market Conditions No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

Value of Existing Property

$5,028,894

Land Value Required to Redevelop Site*

$5,531,783

Project Stats

Financial Summary (Totals)

Number of Replacement Rental Units Land Value Under Redevelopment Scenario Profit Selling Site As Redevelopment Vs. Existing Value

$876,722

-$4,655,062

$34

Financial Summary (Per Sq.Ft Buildable) Redevelopment Tipping Point - Land Value (Per Sq.Ft) Land Value Under Redevelopment Scenario (Per Sq.Ft)

Land Value Excess/Shortfall Per Square Foot Buildable

-$29

19,418

0.31

3.35

Proposed Building (GFA) Sq.Ft

210,434

Proposed Residential (GFA) Sq.Ft

198,593

Proposed Retail (GFA) Sq.Ft

11,840

177

159

$68,198,860

$62,444,727 $3,492,657

Existing Building Existing Building (GFA) Sq.Ft Number of Existing Rental Units Existing Density (FSI)

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) Proposed Density

Number of Condominium Units Number of Replacement Rental Units

Project Revenue Condominium Revenue Rental Replacement Revenue

Retail Revenue

$3,852,687

$3,836,285

Total Revenue

$73,105,471

$70,740,016

$347

$336

Soft Costs

$19,375,715

$18,696,793

Hard Costs

$43,556,956

$42,436,624

Total Development Cost

$62,932,670

$61,133,417

$299

$291

Total Residual Land Value and Profit (future$)

$10,172,800

$9,606,599

Total Profit (future$) - 15% of Revenue

$8,896,826

$8,330,624

$876,722

Total Revenue (Per Sq.Ft)

Construction Cost

Total Development Cost (Per Sq.Ft)

Residual Land Value and Profit

Total Residual Land Value (future$)

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited

Page 11

2.0

1484-1492 Dundas Street West

2.1

Site and Development Characteristics

1484-1492 Dundas Street West is situated on the northwest corner of Dufferin Street and Dundas Street in Downtown Toronto’s west end. This is a very small property composed of three separate ownerships but in an area that is rapidly gentrifying. This property was selected to examine the economic issues surrounding the replacement of a small number of units but with likely high than average land cost associated with the assembly and the required mid rise density. 

Directly north of the subject site is a rear laneway and a surface parking lot for the RyanOdette Funeral Home.



To the northeast is St. Anne’s Anglican Church and St. Anne’s Place, a 110 unit apartment for seniors.



This particular stretch of Dundas Street West, to the east, west and south of the site is comprised of two and three-storey storefronts, with apartments above. Two-storey semidetached and row homes line Dufferin Street to the north and south of the subject site.



The following table summarizes the relevant site and building statistics. Table 6: Site 4 Characteristics 1484 – 1492 Dundas Street West

Existing Site Statistics sqm

Site Area

692

7,449

Total GFA

1,804

19,418

Density (xFSI)

2.61

Existing Rental Units

Avenue ROW Width (m)

Lot Frontage (m)

Lot Depth (m)

2.2

Market Review

The subject site is located in the Brockton Village neighbourhood, but also borders the Dufferin Grove and Beaconsfield communities. These neighbourhoods are characterized by tree-lined streets and a variety of housing types, dating to the 1890’s and with many home selling in the $600,000 to $700,000 range. In more recent years, infill residential developments, including townhomes, conversions and condominium apartments have begun to emerge in the area.

Page 12

Figure 3: Comparable Actively Marketing Condominium Apartment Projects



The subject site enjoys numerous locational benefits, such as 24-hour streetcar and bus service along Dundas and Dufferin Streets, numerous shops, restaurants and services along Dundas Street and a strong residential context. The site is also within walking distance of Ossignton Avenue, one of Toronto’s latest trendy up-and-coming neighbourhoods.



The majority of condominium apartment development in this area of the city has largely consisted of mid-rise and or loft-style projects. With the exception of Carnaby, which is 20storeys high, the comparable developments surveyed range between 6 and 10-storeys in height, averaging 8-storeys overall.



These smaller boutique buildings have almost entirely attracted end-user purchasers, such as first-time home buyers and empty nesters from the local neighbourhood, leading to somewhat slower absorption rates, averaging 1.6 sales per month, per project (investor launch effect sales generate higher absorption rates). However, some of the newer projects, including three projects launched in the past two months, have started drawing investor interest.



With the exception of Carnaby, which is less comparable due to its larger size, suites in the neighbourhood average 890 square feet in size and $435,000 in price, translating to a current index price of $552 psf.

Page 13

ď&#x201A;§

Carnaby, which recently launched in March, is the most affordable project averaging $308,000 per unit, achieved by unit sizes which average just 645 square feet. According to sales staff at Carnaby, within the first month of launching, the project had sold around 70% of its units, which typically represents the pre-sales threshold for construction financing and is indicative of strong investor presence given the low price point.

Page 14

2.3

Development Concept

This site is constrained due its smaller size, and as such is representative of many Avenues style developments that may include an assembly of only a few properties. The constrained size and width of the site requires either an alternative parking stacker solution, or a somewhat inefficient and limited underground parking solution. For the purposes of this exercise we have assumed that one level of underground parking can be provided with access from the rear lane. We note that the area amenities and good transit have significantly lessened the need to provide parking spaces, and these types of minimalistic parking solutions have proven to be very marketable. The proposal rises a total of six storeys, stepping back at the fourth storey to replicate the lower scale rhythm of building heights on the street. Over 6,000 square feet of retail and service commercial space has been proposed at grade level, with the remainder of the ground level space assigned to residential lobby and loading functions. Table 8: Site 4 Development Concept 1484 Dundas Street Potential Redevelopment Site Statistics Total GFA

sqm 3,730

sf 40,149

Condominium Apartment GFA

2,422

26,069

Rental Apartment GFA

683

7,353

Rental Townhouse GFA

625

6,727

Retail GFA Density x FSI

5.4

# of New Condo Apt Units

Average New Condo Unit

765

Average Rental Replacement Unit Size

625

Affordable Units

Mid-Range Units

Ratio of New Unit to Replacement

3.4

New Parking Ratio (blended ratio)

0.5

Page 15

2.4

Market Parameters



In order to keep end-pricing relatively affordable, unit sizes should be kept relatively small, averaging around 600 square feet overall.



Similar to the smaller boutique condominium apartment projects in the area, and given the relatively smaller units, the subject site is likely to achieve average index pricing of around $600 per square foot (psf), translating to an end price of around $390,000 per unit.



Despite some investors being attracted by the significant amount of recent redevelopment in the area, and new projects with relatively affordable units, the neighbourhood mainly consists of an end-user purchaser base.



Similar to comparable projects in the area, the subject site will likely experience a majority of end-user purchasers with some investors, likely leading to an overall average absorption rate of around 8 units per month.



Parking at this location should be provided at an average ratio of 0.5 spaces per unit, including visitor parking.



Given the quickly redeveloping neighbourhood and increasing interest from investors in the area, an overall future index value of $650 psf per unit could be achieved, with an overall absorption rate of around 10 sales per month.

Page 16

2.5

Financial Analysis

The analysis below should be considered a preliminary draft financial analysis, intended to gauge the relative impact of rental replacement and future market conditions on the viability of redevelopment on the selected subject site. Existing Site Value 1484 Dundas Street West is the amalgamation of four individual parcels located on the northwest corner of Dundas Street West and Dufferin Street. The assembled site is composed of two to three story structures with ground floor retail and rental apartments above. NBLC’s research identified three recent transactions (1474, 1491 and 1514 Dundas Street West) all in 2010 which were comparably sized parcels with similar built form to the subject site. These parcels transacted at an average price of $315 per square foot of site area. Given the recent surge of development activity and condominium launches along Dundas West in 2012, and the subject site’s superior corner location at Dufferin, NBLC has estimated a value of $350 per square foot for this 7,449 square foot site, equating to a total assembled site value of $2.6 million. Redevelopment Analysis 

We assume that any redevelopment of 1484 Dundas Street west, would not only need to meet the estimated $2.6 million dollar value, but exceed it by a 10% premium ($2.9 million) in order to encourage the existing asset owner or future site buyers to consider redevelopment.



The DTHA site plan proposes a GFA of 40,149 square feet for a new development at the subject site, representing a density of 5.4 FSI.



Despite the relatively high FSI of the new development, the existing structures located on the subject already achieve an FSI of 2.6.



As a result, the proposed new development would be required to yield a residual land value of $71 per buildable square foot in order to match the existing site value and the required 10% premium.

No Rental Replacement Scenario 

Due to the high achievable index pricing achievable on Dundas West ($600 psf), the subject site is estimated to yield a residual land value of $60 per buildable square foot in the current market.



However, even without the requirement for rental replacement, this value falls short of the RLV necessary to induce the site’s redevelopment.



As a redevelopment parcel, the site would be expected to yield a land value of only $2.4 million.

Page 17

Rental Replacement Scenario 

The addition of the city’s 1 to 1 rental replacement policy, which would see the redevelopment include the demolished 10 rental units, significantly decreases the residual land value of the proposed redevelopment.



Under the replacement scenario in current market conditions, the residual land value is creased to $1.7 million, or $40 per buildable square foot.



This is $31 per buildable square foot short of the value needed to induce development.

Sensitivity Analysis 

Given the rapid transformation of Dundas Street, which is now caught in a cycle of real estate development driving improved retail and amenities, which then drives additional retail development, NBLC expects that the gentrification of Dundas West will push land values up considerably in 10 years time. Our future forecast is for index prices to rise to $650 per square foot in today’s dollars.



The supporting table for this sensitivity analysis can be found in Appendix A.



As a result of rapid index price inflation, the land value per buildable square foot in a non rental replacement scenario is expected to reach a land value of $85 per buildable square foot or $3.4 million and exceed the tipping point for redevelopment (existing site value and 10% premium, $2.9 million)



The addition of a rental replacement would drop the land value to $62 per buildable square foot or $2.5 million, below the tipping point.



Under the city’s rental replacement policy and the maximum GFA allowable as per the midrise guidelines, the site achieves a ratio of 3.6 square feet of new market rate housing to 1 square foot rental replacement.



NBLC’s financial analysis indicates that a ratio of 6.7 square feet of market rate housing to each rental replacement square foot would be required on the site in 10 years time to make redevelopment of the site feasible.



This shows that despite a very strong market context, and a reasonably sized development site, there is insufficient density to compensate for the additional costs associated with the rental housing replacement policy.

Page 18

Table 9: 1484 Dundas Street West - Summary of Results of Financial Analysis Scenario Current Market Conditions No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

Value of Existing Property

$2,607,017

Land Value Required to Redevelop Site*

$2,867,718

Land Value Under Redevelopment Scenario

$2,410,336

$1,593,779

Profit Selling Site As Redevelopment Vs. Existing Value

-$457,382

-$1,273,939

Redevelopment Tipping Point - Land Value (Per Sq.Ft)

$71

Land Value Under Redevelopment Scenario (Per Sq.Ft)

$60

$40

Land Value Excess/Shortfall Per Square Foot Buildable

-$11

-$32

19,418

2.61

5.39

Proposed Building (GFA) Sq.Ft

40,149

Proposed Residential (GFA) Sq.Ft

33,422

Proposed Retail (GFA) Sq.Ft

6,727

Number of Condominium Units

Number of Replacement Rental Units

$19,035,422

$14,841,537

$1,627,344

Project Stats

Financial Summary (Totals)

Number of Replacement Rental Units

Financial Summary (Per Sq.Ft Buildable)

Existing Building Existing Building (GFA) Sq.Ft Number of Existing Rental Units Existing Density (FSI)

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) Proposed Density

Project Revenue Condominium Revenue Rental Replacement Revenue Retail Revenue

$2,323,099

$2,320,520

Total Revenue

$21,643,884

$19,011,902

$539

$474

Soft Costs

$5,492,988

$4,780,321

Hard Costs

$9,154,863

$8,918,998

Total Development Cost

$14,647,850

$13,699,319

$365

$341

Total Residual Land Value and Profit (future$)

$6,996,034

$5,312,583

Total Profit (future$) - 15% of Revenue

$3,203,778

$2,818,410

Total Residual Land Value (future$)

$3,792,256

$2,494,173

Total Revenue (Per Sq.Ft)

Construction Cost

Total Development Cost (Per Sq.Ft)

Residual Land Value and Profit

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited

Page 19

3.0

2988-2994 Keele Street

3.1

Site and Development Characteristics

2988 – 2994 Keele Street is situated on the northwest corner of Keele Street and Whitburn Crescent, roughly one kilometre from both Wilson Street to the south, and Sheppard Avenue West to the north, in Toronto’s Downsview/Wilson neighbourhood. This site, directly across from the near complete Downsview Park, is located within an Avenue that has seen only modest reinvestment due to lack of market demand and available development sites. The purpose of selecting this site is to examine whether the emerging influences associated with the park and transit improvements are enough to justify redevelopment and to explore what, if any, impact the rental housing protection policy has on the feasibility of development. Figure 4: Aerial View of 2988-2944 Keele Street



Directly across from the subject site, on the east side of Keele Street, is Downsview Park, Canada’s only urban national park, spanning a vast 572 acres. The rear portion of the subject site is adjacent on the northwest side to Blayden Public School and its respective green space.



This particular stretch of Keele Street, along the west side, is generally characterized by mainly residential uses, including low to mid-rise apartment buildings, and semi-detached homes. In addition to these uses, single-detached homes comprise a large proportion of the neighbourhoods found off of Keele Street.



The following chart summarizes the relevant site characteristics.

Page 20

Table 10: Site 4 Characteristics 2988 – 2994 Keele Street Existing Site Statistics Site Area

sqm 1,883

sf 20,268

Rental and Retail GFA

10,287

110,728

Total GFA

10,287

Density (xFSI) Existing Rental Units

Avenue ROW Width (m)

Lot Frontage Lot Depth

3.2

110,728 5.46

37.6 50

Market Review

The subject site is located in the Downsview/Wilson neighbourhood, which is largely characterized by detached, semi-detached, and split level houses built in the 1950’s and 1960’s, inhabited by a largely Italian and Jewish population. More recently, infill development in the form of larger custom detached homes has been occurring along the abundant amount of parkland and green space in the area. In particular, Parc Downsview Park has been a large focus of development that is help transform the character of the area.



The subject site benefits from an attractive location, having access to Highway 401, bus service along Keele Street and Sheppard Avenue West, and the proposed Sheppard West subway station planned to be completed by the end of 2015, which will be less than 15 minutes away by public transit. Furthermore, Downsview Park provides an array of recreational and view opportunities, and Yorkdale Mall offers nearby shopping.



This site will enjoy improved access to the TTC Spadina Subway line with the planned opening of the Sheppard West Station which will provide direct access to York University and Downtown



Neighbourhoods of Downsview Park, located within the Parc Downsview Park master planned development, offers 92 stacked units in close proximity to the subject site, and would compete with a condominium apartment project on the site.



Specifically, Neighbourhoods of Dowsview Park currently offers units priced between $249,900 and $349,900. Launched through broker events in November

Page 21

2011, the project was well received by the purchasing public with long line ups at pre-launch events. However, this did not necessary translate into sales, with the sales absorption rate currently averaging 10.4 sales per month. Figure 5: Comparable Actively Marketing Condominium Apartment Projects



Legend Actively Marketing Condominium Apartment SOURCE: DMTI SPATIAL CANMAP AND N.BARRY LYON CONSULTANTS

Projects



Currently there are three actively marketing condominium apartment projects in proximity to the subject site, offering units priced between $242,900 for a one-bedroom unit to $703,490 for a larger penthouse unit, averaging around $340,000.



Given the level of affordability created largely by small unit sizes, which average 800 square feet, these projects attract a large proportion of first-time home buyers. Additionally, both Ion Condominium Residences and The Station have experienced a high degree of investor sales. To a lesser extent, purchasers also include move-down buyers from the area.



Launched in November 2011, Ion Condominium Residences, located around Keele Street and Wilson Avenue, is good comparable project to the subject site, given its close proximity and size. The 11-storey, 200-unit project has done relatively well for the area, selling around 54% of its units within the first 3 months of actively marketing. The project focused on attracting young professionals, specifically prospective employees of the proposed nearby Humber River Regional Hospital, by offering affordable suites to drive sales.



Located around Keele Street and Wilson Avenue, Max by Beaverbrook Homes, launched in November 2004 and sold out its 144 units by May of 2008. Although an older generation Page 22

building now, we have examined resales within the building to assess the level of demand in the area. ď&#x201A;§

Within the past year, 19 units in the building were listed for sale, of which 14 sold (a sales-tolistings ratio of 75%), in under 2 months, on average. Additionally, these resales experienced a 95% sales-to-list price ratio, further indicating strong demand for these units and the area in general.

Page 23

3.3

Development Concept

The development concept for this site sought to provide appropriate transitions to the low-rise community to the west by applying the building height and angular plane principles of the Mid-rise Guidelines. The site plan has been organized to the utilize the existing rear (westerly) access off of Whitburn Crescent for vehicular traffic an additional egress/ingress directly off of Keele Street. The site is of a sufficient size and configuration to allow for a moderately efficient underground parking garage layout. Table 12: Site 3 Development Concept 2988 Keele Street Potential Redevelopment Site Statistics sqm

Total GFA

8,911

107,521

Condominium Apartment GFA

7,382

91,062

Rental Apartment GFA

1,529

16,458

Rental Townhouse GFA

Retail GFA

Density x FSI

5.3

# of New Condo Apt Units

107

Average New Condo Unit Average Rental Replacement Unit Size Affordable Units Mid-Range Units

852

658 11 11

Ratio of New Unit to Replacement

4.90

New Parking Ratio (blended ratio)

0.8

Page 24

3.4

Market Parameters



A new condominium apartment project on the subject site will benefit from sweeping views of Downsview Park’s new lake, hills and planting areas and could achieve an overall index value similar to other comparable projects in the area, averaging around $450 per square foot overall, for units averaging 750 square feet.



Given the pricing strategy and demand in the area, the overall anticipated average absorption rate is around 7 sales per month.



Given the automobile dependence in the area, a parking ratio of at least 1.0 stall per unit inclusive of visitor parking, is suggested.

Page 25

3.5

Financial Analysis

Existing Site Value NBLC’s research identified 6 comparable rental apartment building transactions along Keele Street since April of 2009. The surveyed buildings ranged in size from 11 to 60 suites, and sold for an average price of $90,000 per unit. Given the recent appreciation of multi-residential assets in the past 2 years due to rising rents and capitization rate compression, and the site’s proximity to Downsview Park, NBLC has estimated an average current suite value of $110,000 per unit. Based on the 2994 Keele’s 22 existing units, this yields a total site and building value of $2.4 million. Redevelopment Analysis 

The redevelopment of 2994 Keele would require that a proposed new structure yield a residual land value of $2.7 million, which would includes the 10% premium, or hurdle necessary to encourage an existing asset owner or developer to forgo the capitalized cashflow of the existing building and undertake the considerably more risk prone task of condominium development.



With the relatively low value of existing units, and their low density, 2994 Keele Street would only require that a new development achieve a land value of about $25 per buildable square foot in order to stimulate redevelopment of the site.



The DTHA site plan proposes a GFA of 107,521 square feet for a new development at the subject site, representing a density of 5.3x FSI.



This also represents a ratio of 5.5 square feet of market rate housing for each square foot of rental replacement housing as required by the City of Toronto.

No Rental Replacement Scenario 

With no requirement for rental replacement housing, a new condominium apartment development at the site is estimated to generate a residual land value of $21 per buildable square foot or a total site value of $2.3 million, just below the tipping point for redevelopment.

Rental Replacement Scenario 

The adherence to the City’s rental replacement policy, which would see 22 rental units constructed within the proposed new structure, reduces the residual land value to $14 per buildable square foot or $1.5 million.



This decrease is not as significant as seen in other rental replacement test sites, primarily due to the higher ratio of market rate housing GFA to rental placement GFA.



Given the current market strength, the land values generated by a development, including rental replacement, is $11per buildable square foot short of the tipping point necessary for redevelopment.

Page 26

Sensitivity Analysis Looking 10 years into the future, Downsview Park will have been largely completed, and despite the competition from development within Downsview’s residential neighbourhoods, the overall transformation of those neighbourhoods and extension of the subway line will have a strong impact on achievable pricing in the study area. The supporting table for this sensitivity analysis can be found in Appendix A. 

NBLC estimates that index pricing in today’s dollars will rise from $450 psf to $500 psf, which would increase the residual land value in a non rental replacement scenario to $50 per buildable square foot.



At $50 per buildable square foot, the site’s value for redevelopment easily exceeds the $25 per square foot tipping point based on the existing value of the structure on the site. Even with the City’s required rental replacement requirement, the site yields a residual land value of $39 per buildable square foot, suggesting that no rental replacement policy intervention is warranted for this location along Keele Street.



Our analysis indicates that with the increase in index pricing at the subject site, up to 47 rental units could be feasibly replaced on this site in 10 years time.

Page 27

Table 13: 2994 Keele Street - Summary of Results of Financial Analysis Scenario Current Market Conditions

Project Stats

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

$2,420,000 $2,662,000 0 $2,274,482 -$387,518

$2,420,000 $2,662,000 22 $1,495,798 -$1,166,202

$25 $21

$25 $14

-$4

-$11

22,604 22 1.12

5.30 107,521 107,521 0 126 0

5.30 107,521 107,521 0 107 22

$48,132,954 $0 $0 $48,857,540 $454

$40,717,199 $3,703,554 $0 $45,033,780 $419

$12,248,354 $25,528,541 $37,776,895 $351

$11,221,623 $24,648,725 $35,870,348 $334

$11,080,644 $7,219,943 $3,860,701

$9,163,432 $6,663,113 $2,500,319

Financial Summary (Totals) Value of Existing Property Land Value Required to Redevelop Site* Number of Replacement Rental Units Land Value Under Redevelopment Scenario Profit Selling Site As Redevelopment Vs. Existing Value

Financial Summary (Per Sq.Ft Buildable) Redevelopment Tipping Point - Land Value (Per Sq.Ft) Land Value Under Redevelopment Scenario (Per Sq.Ft) Land Value Excess/Shortfall Per Square Foot Buildable

Existing Building Existing Building (GFA) Sq.Ft Number of Existing Rental Units Existing Density (FSI)

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) Proposed Density Proposed Building (GFA) Sq.Ft Proposed Residential (GFA) Sq.Ft Proposed Retail (GFA) Sq.Ft Number of Condominium Units Number of Replacement Rental Units

Project Revenue Condominium Revenue Rental Replacement Revenue Retail Revenue Total Revenue Total Revenue (Per Sq.Ft)

Construction Cost Soft Costs Hard Costs Total Development Cost Total Development Cost (Per Sq.Ft)

Residual Land Value and Profit Total Residual Land Value and Profit (future$) Total Profit (future$) - 15% of Revenue Total Residual Land Value (future$)

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited

Page 28

4.0

3253-3257 Bathurst Street

4.1

Site and Development Characteristics

The subject site is located at 3253-3257 Bathurst Street, north of Lawrence Avenue East, in the former municipality of North York. The subject site contains a 3.5 storey rental apartment building with 22 rental units, and as such, is representative of the size and scale of potential rental replacement redevelopment sites in the area. The site is located within a strengthening market area with a few new recent developments. It was selected to test the analysis with a medium-sized rental building in an emerging market area. The corner location and large area also offers opportunities for improved density and ease of construction. The following summarizes the surrounding land use pattern: 

To the east is Woburn Park with a rental apartment building to the northeast.



South of the subject site, across Cranbrooke Avenue, is a strip retail plaza with apartments and offices on the 2nd floor.

Figure 6: Aerial of the Subject Site



To the west of the subject site, across Bathurst Street is Davick Court, a rental apartment development consisting of four building with surface parking. The new Cranbrooke Village development is also along the east side of Bathurst Street.



The table on the following page summarizes the relevant site characteristics.

Page 29

Table 14: Site 4 Characteristics 3253 – 3257 Bathurst Street Existing Site Statistics sqm

Site Area

1,757

18,912

Total GFA

2,078

22,367

Density (xFSI)

1.18

Existing Rental Units Avenue ROW Width (m) Lot Frontage Lot Depth

4.2

22 27

291 24.0 72

Market Review

The subject site is located within the increasingly coveted neighbourhood of Ledbury Park, which has become popular with young professional families with dual incomes. Homes along Lawrence Avenue range around $700,000 with many rebuilt homes in the internal streets generally selling for between $1,000,000 and $2,000,000. 

The subject site benefits from access to transit along Bathurst Street, with connections to the Bloor-Danforth Subway, as well as the nearby Lawrence Station on the Yonge Subway line and Lawrence West Station on the University-Spadina line.



The site also benefits from shopping along Bathurst Street, providing local ethnic delicacies, restaurants, bakeries, and other daily needs. A short drive to Avenue Road to the east provides a wider array of shopping.



NBLC surveyed six actively marketing condominium apartment projects, totalling 1,621 units. Overall, units range between $182,900 at Treviso Condominiums and $2,335,000 at 1717 Avenue Road. With the exception of 1717 Avenue Road and Deloraine Residences, the most expensive projects surveyed, units average around 723 square foot in size and $367,564 in price.



The closest project to the subject site is Cranbrooke Village, by Options for Homes, located at Bathurst Street and Sarnac Boulevard (two lights north of Lawrence Avenue). Options for Homes is a non-profit organization whose mandate is to provide affordable ownership for low-income individuals.



Of note, Deloraine Residences located north of the subject site, has been constructed, with sales at only 35% suggesting resistance to end pricing above the $500,000 mark for this location. The sales office for the boutique project is temporarily closed.

Page 30

Figure 7: Comparable Actively Marketing Condominium Apartment Projects

ď&#x20AC;˘

Legend SOURCE: DMTI SPATIAL CANMAP AND N. BARRY LYON

Actively Marketing Condominium Apartment Projects

CONSULTANTS

Page 31

4.3

Market Parameters

Recent developments in the area including the affordably priced Cranbrooke Village suggest an emerging demand for development in the area. The revitalization and redevelopment of the nearby Toronto Community Housing`s Lawrence Heights development will also bring attention and market interest into the area. For this site, we therefore assumed the following market parameters in our financial analysis. ď&#x201A;§

That Cranbrooke Village would be sold out by the time a project on the subject site is launched.

ď&#x201A;§

New condominium apartment units on the subject site are likely to achieve a slightly higher price than Cranbrooke Village by offering slightly superior interior features and finishes, and targeting a broader range of purchaser groups. Most notably, a new design would likely feature 9 foot ceilings, an industry standard today.

ď&#x201A;§

For a new mid-rise development on the subject site, NBLC believes that new condominium apartment units will average around $450,000 in price ($600 psf) for an average unit size of 750 square feet.

Page 32

4.4

Development Concept

Utilizing the principles of the Mid-Rise Guidelines, DTAH has suggested a mid-rise building that will be sensitive to the stable neighbourhood and park to the east be stepping the building downward in that direction. This terracing, while expensive from a construction view point, should generate sale price premiums. The maximum height of the proposed building is 9 storeys, with the ground level occupied a significant amount of retail floor area (12,000 square feet). The relatively narrow width of the site creates an inefficient (single-loaded) underground parking design, which will be somewhat offset by a lower visitor parking space requirement due to the presence of on-street parking. The narrow site width also creates shorter separation distances to the existing rental building to the north, which we estimate will be less than 12 metres away. The design response will be to splay units in an east or westerly direction to minimize the number of units experiencing the shorter separation distance. Table 16: Site 4 Development Concept 3253 - 3257 Bathurst Street Potential Redevelopment Site Statistics Total GFA

sqm 8,944

sf 96,272

Condominium Apartment GFA

6,396

68,847

Rental Apartment GFA

1,362

14,659

Rental Townhouse GFA

1,186

12,766

Retail GFA Density x FSI

5.1

# of New Condo Apt Units

Average New Condo Unit Average Rental Replacement Unit Size Affordable Units Mid-Range Units

909

586 16 6

Ratio of New Unit to Replacement

3.4

New Parking Ratio (blended ratio)

0.8

Page 33

4.5

Financial Analysis

Existing Site Value NBLC found no comparable rental apartment transactions in the immediate vicinity of 3253 Bathurst. Instead we utilized the provided City of Toronto rents and rental data assumptions provided to NBLC to produce a simplified monthly cashflow model, and subtracted operating costs and capitalize the rent. This analysis yields an average suite value of $143,750 which is comparable to transactions further south on Bathurst Street and represents a total value of $3.2 million for the subject site. Redevelopment Analysis 

Based on the $3.2 million value of the site, we assume that with our 10% premium any redevelopment of the site would be required to yield a residual land value of about $3.5 million in order for any developer or owner to proceed with its demolition and development of a condominium apartment project.



At the proposed size, the proposed structure would need to generate a residual land value of $36 per buildable square foot in order to exceed the required threshold land value of ($3.5 million) to make redevelopment of the site feasible.



Based on the city’s rental replacement policy and the proposed built form, the redevelopment of the site would result in a ratio of 4.7 square feet of market rate housing to each square foot of rental replacement.

No Rental Replacement Scenario 

At present, without the requirement for rental replacement, the redevelopment of the subject site is expected to generate a residual land value of $5.1 million or $53 per buildable square foot, which significantly exceeds the tipping point necessary for redevelopment.

Rental Replacement Scenario 

Even with the construction of the significantly less profitable 22 rental replacement units, and corresponding drop in market rate GFA, the proposed redevelopment would yield a residual land value of about $4.0 million or $41 per buildable square foot. This indicates that a development on the site as proposed by DTAH could be feasible while still meet the City`s requirements for rental housing replacement.



The feasibility of this project is driven by strong rents, the high achievable pricing for condominium apartments, and the considerable increase in FSI from 1.2 in the existing structure to 5.1 in the proposed redevelopment scheme.

Sensitivity Analysis 

Looking to the future, Bathurst Street is expected to follow a trajectory of development similar to Avenue Road, with the gradual infill of vacant and low density parcels. This redevelopment of the street will attract better retail and induce further development and is expected to increase index prices in the neighbourhood.



The supporting table for this sensitivity analysis can be found in Appendix A.



As prices continue their upward climb, the feasibility of replacing rental units in existing apartments will become increasingly apparent on sites similar to 3253 Bathurst Street.



It should be noted that any revision to the City’s rental replacement policy on comparable sites, would sacrifice the City’s rental stock to induce development, which is likely to

happen regardless of changes to policy. And in effect the City would convert its rental housing stock into bonus land value for existing property owners. Table 17: 3253 Bathurst Street - Summary of Results of Financial Analysis Scenario Current Market Conditions No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

Value of Existing Property

$3,162,502

Land Value Required to Redevelop Site*

$3,478,752

Land Value Under Redevelopment Scenario

$5,148,043

$3,482,501

$3,953,952

Profit Selling Site As Redevelopment Vs. Existing Value

$1,669,291

$3,749

$475,200

Redevelopment Tipping Point - Land Value (Per Sq.Ft)

$36

Land Value Under Redevelopment Scenario (Per Sq.Ft)

$53

$36

$41

Land Value Excess/Shortfall Per Square Foot Buildable

$17

22,367

1.18

5.09

Proposed Building (GFA) Sq.Ft

96,272

Proposed Residential (GFA) Sq.Ft

83,506

Proposed Retail (GFA) Sq.Ft

12,766

Number of Condominium Units

Number of Replacement Rental Units

$45,621,167

$34,466,274

$37,569,603

$4,433,644

$3,198,772

Project Stats

Financial Summary (Totals)

Number of Replacement Rental Units

Financial Summary (Per Sq.Ft Buildable)

Existing Building Existing Building (GFA) Sq.Ft Number of Existing Rental Units Existing Density (FSI)

DTHA Proposed Structure (Allowable As Per Mid-Rise Guidelines) Proposed Density

Project Revenue Condominium Revenue Rental Replacement Revenue Retail Revenue

$6,087,777

$6,061,638

$6,068,907

Total Revenue

$52,389,669

$45,475,915

$47,397,931

$544

$472

$492

Soft Costs

$13,631,284

$11,760,596

$12,278,770

Hard Costs

$22,394,581

$21,267,737

$21,580,655

Total Development Cost

$36,025,865

$33,028,333

$33,859,426

$374

$343

$352

Total Residual Land Value and Profit (future$)

$16,363,804

$12,447,582

$13,538,505

Total Profit (future$) - 15% of Revenue

$7,756,342

$6,744,233

$7,025,592

Total Residual Land Value (future$)

$8,607,462

$5,703,349

$6,512,913

Total Revenue (Per Sq.Ft)

Construction Cost

Total Development Cost (Per Sq.Ft)

Residual Land Value and Profit

* Represents a 10% Premium over the properties existing value required to induce redevelopment Source: N. Barry Lyon Consultants Limited

Page 35

Appendix A: Sensitivity Analysis

2347 Eglinton Ave West - Market Sensitivity Analysis Scenario

Current

Low

High

Future

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

Redevelopment Tipping Point - Land Value (Per Sq.Ft)

$34

Land Value Under Redevelopment Scenario (Per Sq.Ft)

$15

$16

$14

$46

$34

$42

Land Value Excess/Shortfall Per Square Foot Buildable

$29

$31

$19

$18

$20

$12

Value of Existing Property

$5,028,894

Redevelopment Tipping Point - Required Land Value *

$5,531,783

$876,722

$531,466

$2,501,879

$2,581,016

$2,223,971

$7,443,147

$5,531,784

$6,807,290

$4,655,062

$5,000,318

$3,029,905

$2,950,768

$3,307,813

$1,911,363

$1,275,507

Project Stats

Number of Replacement Rental Units Land Value Under Redevelopment Scenario Profit Selling Site As Redevelopment Vs. Existing Value Source: N. Barry Lyon Consultants Limited

1484 Dundas Street West - Market Sensitivity Analysis Scenario

Current

Low

High

Future

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

Redevelopment Tipping Point - Land Value (Per Sq.Ft)

$71

Land Value Under Redevelopment Scenario (Per Sq.Ft)

$60

$40

$45

$28

$74

$71

$51

$85

$71

$62

Land Value Excess/Shortfall Per Square Foot Buildable

$11

$32

$26

$44

$20

$14

$10

Value of Existing Property

$2,607,017

Redevelopment Tipping Point - Required Land Value *

$2,867,718

$2,410,336

$1,593,779

$1,819,515

$1,117,314

$2,974,557

$2,867,718

$2,064,173

$3,428,254

$2,867,718

$2,469,813

$457,382

$1,273,939

$1,048,203

$1,750,404

$106,838

$803,545

$560,536

$397,905

Project Stats

Number of Replacement Rental Units Land Value Under Redevelopment Scenario Profit Selling Site As Redevelopment Vs. Existing Value Source: N. Barry Lyon Consultants Limited

2994 Keele Street - Market Sensitivity Analysis Scenario

Current

Low

High

Future

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

Redevelopment Tipping Point - Land Value (Per Sq.Ft)

$25

Land Value Under Redevelopment Scenario (Per Sq.Ft)

$21

$14

$15

$38

$25

$29

$50

$25

$39

Land Value Excess/Shortfall Per Square Foot Buildable

$11

$10

$16

$14

$25

$14

Value of Existing Property

$2,420,000

Redevelopment Tipping Point - Required Land Value *

$2,662,000

$2,274,482

$1,495,798

$1,575,742

$916,032

$4,128,790

$2,662,000

$3,064,767

$5,324,174

$2,662,000

$4,142,718

$387,518

$1,166,202

$1,086,258

$1,745,968

$1,466,790

$402,767

$2,662,174

$1,480,718

Project Stats

Number of Replacement Rental Units Land Value Under Redevelopment Scenario Profit Selling Site As Redevelopment Vs. Existing Value Source: N. Barry Lyon Consultants Limited

3253 Bathurst Street - Market Sensitivity Analysis Scenario

Current

Low

High

Future

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

No Rental Replacement

Feasible Level of Rental Replacement

Current City Required Ratio of Rental Replacement

Redevelopment Tipping Point - Land Value (Per Sq.Ft)

$36

Land Value Under Redevelopment Scenario (Per Sq.Ft)

$53

$36

$41

$37

$36

$27

$68

$36

$53

$74

$36

$59

Land Value Excess/Shortfall Per Square Foot Buildable

$17

$32

$17

$38

$22

Value of Existing Property

$3,162,502

Redevelopment Tipping Point - Required Land Value *

$3,478,752

Land Value Under Redevelopment Scenario

$5,148,043

$3,482,501

$3,953,952

$3,533,444

$3,478,753

$2,571,017

$6,538,017

$3,476,552

$5,122,880

$7,158,564

$3,478,752

$5,638,233

Profit Selling Site As Redevelopment Vs. Existing Value

$1,669,291

$3,749

$475,200

$54,692

$907,735

$3,059,265

$2,200

$1,644,128

$3,679,812

$2,159,481

Project Stats

Number of Replacement Rental Units

Source: N. Barry Lyon Consultants Limited

Page 37