PavCo close to finalizing 75-year land lease, chairman says
Derrick Penner
Sun
BC Pavilion Corp may be close to signing off on a land lease deal that will help pay off the $458-million cost of the new roof for BC Place Stadium. STEPHANIE LAMY/AFP/Gety Images FILES
British Columbia was still in mid-recession last March when the BC Pavilion Corp. put out a call for interest in developing land around BC Place Stadium as a way to help finance the building’s $458-million roof replacement.
Less than a year later, pavilion corporation (PavCo) chairman David Podmore is hinting PavCo is close to signing off on a 75-year lease that will use up 700,000 square feet of the 1.4 million square feet of development the stadium lands can accommodate.
“I’m quite happy with the value we’re receiving,” Podmore said in an interview Wednesday. “I think it’s a fair value.”
And a value, he said, that isn’t discounted due to the fact that PavCo is leasing the land rather than selling it, nor discounted owing to the economic downturn that B.C. has been through. However, it was not a value that Podmore was willing to disclose while PavCo is finalizing negotiations with its proponent, except to say he is comfortable that the corporation will hit its goals for raising more than $100 million for the roof project from selling development rights.
The value for the 700,000 square feet put up for lease could reach $60 million to $100 million on its own, based on estimates offered to The Vancouver Sun.
Paul Richter, an analyst with the research firm RealNet, noted that in 2007, the CBC sold the “air rights” for the 385,000 square feet of space it was allowed to build above its property downtown at Hamilton and Robson for $34.4 million, or $89 per buildable square foot.
Richter said a rough guess would put the value of PavCo’s 700,000 square feet of developable space on the west side of BC Place at Pacific Boulevard and Terry Fox Way in the $60-million range.
However, developer Ward McAllister, head of Ledingham McAllister, thought the price could be $150 to $200 per buildable square foot, valuing the spot at $100 million to $140 million, depending on how much of the 700,000 square feet is residential development and how long the lease is. “There hasn’t been any trades downtown for a long time,” McAllister said. “Outright residential would sell between $150 and $200 a square foot.”
That would put the BC Place lands in the range of the $193 million that Millennium Development paid to the City of Vancouver for 1.4 million square feet of development space in southeastern False Creek.
The City of Richmond is home to another example of a municipality using its land to support a community project. Richmond sold 7.4 hectares of land adjacent to the Olympic speed skating oval to Aspac Developments Ltd. for $141 million, with proceeds helping to pay for construction costs of the oval.
McAllister said developers favour longer terms when contemplating land-lease arrangements rather than outright purchases, with 99 years being the preferred length of time.
McAllister said that in his company’s experience with building at the University of B.C., the buyers of housing units were willing to pay the same prices on 99-year leases as they would for outright purchases. “There really wasn’t any discounting from the buying public for not being fee-simple,” McAllister said.
Don Matheson, chief financial officer of the UBC Properties Trust, the university subsidiary developing land on behalf of UBC’s endowment fund, said a 99-year lease term equates to about three generations, and is longer than some of the buildings being built are expected to last.
To date, the UBC Properties Trust has developed some 2,660 residential housing units on campus, which has contributed $282 million to the university’s endowment fund. However, Matheson said the value of housing units will wind up being discounted at some point closer to renewal. “If there’s five years left on a lease, what are you going to pay for that unit?” Matheson said. He added that at the end of the lease, UBC will have the option to renew leases or pay the leaseholders a fair value for the improvements on the units and take the land back if it needs property for additional university space. “Probably, somebody is going to come by and redevelop the property even before the term is up,” Matheson said.
It is the prospect of being able to take land back for redevelopment that attracted PavCo to the preference of leasehold development. “If anyone is looking at rebuilding a stadium on that site, a totally new stadium, 50 or 60 years from now, having control of those adjacent lands would probably be helpful,” Podmore said.
And selling development rights is not the only source of funds to support the overall refurbishment of BC Place, which will total $565 million in the end, including the new roof, a $55-million upgrade of washrooms and concessions in time for the Olympics and $40 million of deferred maintenance work.
PavCo is contributing $41 million in capital funds that were not spent from the final $883-million budget for the Vancouver Convention and Exhibition Centre expansion.
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SUPPORTIVE DEVELOPMENT
It is not uncommon for public entities to raise money by selling development rights to private developers. Here are a couple of recent examples.
Vancouver
Millennium Water project
– Sold to Millennium in 2006 for $193 million
– 10 hectares
– Total of 1.4 million square feet of development, including 1,100 housing units
Richmond
Olympic oval lands
– Sold to Aspac Developments Ltd. in 2007 for $141 million
– 7.4 hectares.
– Total of 2.2 million square feet of development, including 2,000 housing units
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