Quote:
Originally Posted by esquire
^ I'd be satisfied with a low-rise 3 to 6 storey building that hugs the sidewalk... that alone would be an improvement. However, a one-storey strip-mall along the lines of the TD building further north would be a major letdown...
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The issue here is that land is generally sold at its greatest entitlements, not the most feasible. And this is generally why legitimate and knowledgeable developers have opted to stay in the suburbs for the most part. The reason I brought up the Winter Club lands is because it's a very similar situation. The vendor and its representatives look at the very basic entitlements associated with the property and derive from there how many units one can squeeze out. They then assign a land value per unit based on comparable sales, multiply it out, and out of a very simple hat comes a price.
The problem with doing something like this is that it leaves aside most of the variables that go into determining the value of land. That is, requirements for easements, rights-of-way and setbacks, certain engineering constraints, required parking, and our very favorite, costs of construction. The land actually becomes less valuable as the costs of construction rise because the consumer rarely differentiates between wood frame and concrete for the price they're willing to pay for a unit of similar layout and spec. So while realtors think that valuing property is as easy as comparing two similar addresses with similar entitlements, it doesn't work that way at all.
And that's why lots sit undeveloped. If you're paying for land that accommodates 100 units but you're a chasing a rate of return that doesn't exist, you don't have a project. And that's what's happened on the Winter Club land. You'll never sell 100 units and you can't build to rent them at sustainable revenue streams, so they hit the market waiting for the next greater fool to come along.