Transcript [Business Communication]

Presentation to Planning 101 by the
Alliance for Building a Better Ottawa
1:30 – 2:30 pm Monday, February 14, 2011
By
Cal Kirkpatrick | President | Colonnade Development
Jack Stirling | Vice President, Land Development | Minto Communities Inc.
Stephen Martin | Vice President, Development | Minto Commercial Properties Inc.
1
The Economics of Development
by the Alliance for Building a Better Ottawa
Who is the “Alliance”?
Greater Ottawa Home Builders Association (GOHBA)
Building Owners & Managers Association (BOMA)
General Contractor’s Association (GCA)
Ottawa Construction Association (OCA)
Professional Engineers of Ontario – Ottawa Chapter
2
The Economics of Development
by the Alliance for Building a Better Ottawa
Guiding Principles of the “Alliance”
 The purpose of the Alliance for Building a Better Ottawa is to
represent the commercial development, construction and
home building industry in communication with decision
makers at all levels of government and both the residents
and business community of Ottawa.
 The Alliance will continue to work in partnership with Council
and City staff to build a vibrant and dynamic city.
 The Alliance for Building a Better Ottawa will continue to
work towards building sustainable residential and
employment communities that meet public demand and
expectations.
 The Alliance as part of its objective to building a better
Ottawa will be sharing its varied expertise with City staff and
Council/Committee.
3
The Economics of Development
by the Alliance for Building a Better Ottawa
Case Studies
+ 150 stacked townhomes
location: suburbs
size: 10 acre site
development cost: $28 million
10 storey 200,000 sq. ft office tower
location: downtown
size: 0.75 acre site
development cost: $60 million
4
The Economics of Development
by the Alliance for Building a Better Ottawa
Project Wrap-up
Hand over
Construction Completion
Building Permit
Registration
Obtain Financing
Design concept plan
Internal review
Begin retaining Consultants
/ preparation of required studies
The Economics of Development
by the Alliance for Building a Better Ottawa
* Committee Approval
* StaffApproval
-
Appraisal
Survey
Ph1 ESA
Physical Reports
- soil
- topographical
- traffic impact brief
- archaeological
- noise
- functional servicing
- Internal reviews
- Lawyer searches
- Business Case
* Public Consultation
Purchase the Land
-
Jun. 1, 2011
Day 240
Applications
Jan. 1, 2011
Day 90
* Pre-consultation with City Staff
Oct. 30, 2010
Day 30
Due Diligence
Site Plan (6 months)
Legal Clearance
Zoning Amendment (9 months)
Process Timeline:
Oct. 1, 2010
Day 1
- Property
Investigation
- Title Check
- Financials
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Final Approval
Draft Plan (12 months)
Offer Investigation
Applications
Purchase the Land
Due Diligence
Offer Investigation
Development Timeline & Expenses
6
Site Plan (6 months)
Official Plan Amendment
Draft Plan of Subdivision
Zoning Amendment
Site Plan
Condominium
Approval Required for the following Reports/Studies
- Planning Rationale
- Engineering Plans
- Landscape Plans
- Composite Utility Plan
- Architectual Drawings
- Light & Shadow Study
- Stormwater Management Plan
- Watermain Report
- Geotechnical Report
- Tree Conservation Report
- Hydro One Agreement
- Noise Study
- Traffic Study
- Archeological Report
- Cultural Heritage Study
- Environmental Study
Project Wrap-up
Legal Clearance
* Agreement
Final Approval
Zoning Amendment (9 months)
* Committee Approval
* StaffApproval
* Agreement
* Committee Approval
* StaffApproval
* Agreement
* Committee Approval
* StaffApproval
Draft Plan (12 months)
Marketing Release *
-
Jun. 1, 2013
Day 970
* Public Consultation
Applications
Jun. 1, 2011
Day 240
Hand over
Construction Completion
Site Plan (6 months)
Building Permit
Zoning Amendment (9 months)
Registration
Draft Plan (12 months)
Legal Clearance
Final Approval
Applications
Purchase the Land
Due Diligence
Offer Investigation
Development Timeline & Expenses
- Subdivision
- Site Plan
- Servicing Agr.
The Economics of Development
by the Alliance for Building a Better Ottawa
- Building construction
Jul. 15, 2014
Day 1365
Project Wrap-up
Hand over
Construction Completion
Building Permit
Registration
Project Wrap-up
Jul. 1, 2014
Day 1350
Hand over
Site Plan (6 months)
Legal Clearance
Final Approval
Zoning Amendment (9 months)
Construction Completion
Applications
Registration
Draft Plan (12 months)
Building Permit
Aug. 7, 2013 Aug. 21, 2013
Day 1035
Day 1050
- File Legal Docs.
- RoW
- maintenance
- survey plans
- etc.
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Purchase the Land
Jul. 7, 2013
Day 1005
Legal Clearance
Due Diligence
Offer Investigation
Development Timeline & Expenses
- Reimbursement of any frontend infrastructure
- Release of letters of credit
- Discharge of agreement obligations
The Economics of Development
by the Alliance for Building a Better Ottawa
Project Wrap-up
Hand Over
Construction Complete
Building Permit
Site Plan (6 months)
Registration
Zoning Amendment (9 months)
Legal Clearance
Draft Plan (12 months)
Final Approval
TIME
Applications
Purchase the Land
Due Diligence
000 000
Offer Investigation
The Cost of Development over Time
2 million
4 million
6 million
8 million
COST
10 million
12 million
14 million
16 million
18 million
20 million
Land
$
3,250,000
Municipal Fees
$
400,000
Servicing
$
3,750,000
Development Charges
$
2,100,000
House Construction
$
15,000,000
Profit (15%)
$
3,500,000
TOTAL
$
28,000,000
22 million
24 million
26 million
28 million
Residential model shown.
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Developers start to break even only when:
- Leases commence (end of construction)
- Home sales are finalized & closed (end of construction)
- Developments are completed
First home closing /
Lease commencement
The Economics of Development
by the Alliance for Building a Better Ottawa
Risks & Delays
TIME
material or labour shortages
weather
market changes
staff shortage
interest rate changes
process delays
referral to the OMB
owner/tenant makes changes
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Changes assumptions – and
financing is dependant on those
assumptions
=
Added costs – financing costs,
increased labour costs to meet
deadlines
End users are notified & affected tenants may back out, homeowners
may have sold previous house
The Economics of Development
by the Alliance for Building a Better Ottawa
Sample Impact of Delays
Residential
 Project is scheduled to begin infrastructure servicing in the
summer and asphalt paving in October
 Delays of 2-3 weeks are encountered twice annually during the
two to three year duration of the development process
 As a result, the asphalt paving is pushed 3 months into January
 Asphalt plants only open May to December = delay escalates
 Schedule revised from October paving to May = 8 months
 Other impacts include:
 Contractors scheduled to start work in October cannot start
until June – temporary lay-offs may occur
 Building permits fees, DCs, and revenue opportunities lost
for 8 months
 Homeowners are notified and affected by the delay
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The Economics of Development
by the Alliance for Building a Better Ottawa
Sample Impact of Delays
Commercial
 Lead tenant for a new development has a fixed occupancy
date which forms part of the binding agreement with
performance milestones
 Delays in the front end of the development process extend the
project schedule
 As a result of the delays, the developer cannot meet the
tenants’ milestones or occupancy date
 Developers choice:
 Option 1 - pay additional costs to attempt to expedite project
 Option 2 - terminate the project
 Option 1 may result in a non- competitive development
 Option 2 is a lost opportunity for the development industry and
City’s economic development and revenue
11
The Economics of Development
by the Alliance for Building a Better Ottawa
Risk Mitigation
Why don’t developers just wait until they’re completely approved to go on sale?
 Developers need to assume risk in initiating developments
 Development process & spending need to start prior to full approvals in order to:
Project Wrap-up
Hand Over
 Commit to buyers or tenants occupancy
requirements
1 million
2 million
COST
Construction Comple
Site Plan (6 months)
 Establish market position and capitalize
on opportunities
Building Permit
Zoning Amendment (9 months)
Registration
Draft Plan (12 months)
Legal Clearance
Final Approval
Applications
Purchase the Land
Due Diligence
000 000
Offer Investigation
TIME
 Receive input on design from the market
and tenants
3 million
4 million
 Shorten the development timeline i.e.
reduce interest on construction loan
5 million
6 million
7 million
8 million
9 million
At Marketing Release: $5M spent
 Be positioned for financing i.e. meet preleasing or pre-sales requirements
10 million
11 million
12 million
Residential model shown.
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13 million
The Economics of Development
by the Alliance for Building a Better Ottawa
Project Wrap-up
Construction Completion
Hand Over
Building Permit
Site Plan (6 months)
Legal Clearance
Zoning Amendment (9 months)
Registration
Draft Plan (12 months)
Final Approval
TIME
Applications
Purchase the Land
Due Diligence
000 000
Offer Investigation
The Financial Impact of Delays
2 million
4 million
6 million
8 million
10 million
COST
12 million
14 million
16 million
18 million
20 million
22 million
24 million
26 million
28 million
30 million
32 million
Money that could be better
spent on innovation,
sustainability, land mark
sites for Ottawa
34 million
36 million
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The Economics of Development
by the Alliance for Building a Better Ottawa
Summary
 Development must be ahead of the market since the process
takes years
 Specific commitments are needed for development financing
 Development time line must be maintained to align with
market demand
 Together, we need to keep Ottawa competitive and
affordable
 We need to provide an environment that encourages
economic development and growth
(Greater Ottawa, 2010: 16 400 jobs on site; 13 700 indirect jobs, 30 100 total)
 Cost efficiency leads to innovation, land mark development
and a vibrant City
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The Economics of Development
by the Alliance for Building a Better Ottawa
Thank you
Questions & Answers
Cal Kirkpatrick | President | Colonnade Development
Jack Stirling | Vice President, Land Development | Minto Communities Inc.
Stephen Martin | Vice President, Development | Minto Commercial Properties Inc.
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The Economics of Development
by the Alliance for Building a Better Ottawa