Hi Phil235, I've been going over the numbers. Mirabella is paying 65M for the air rights. If anyone has any knowledge of what the actual surface area of the air rights is, please share. Right now, the city is pitching that it's air rights for a planned development of 770 units. Say you average 700'/unit, 18% inefficiency. That's a GCA of 636,000ft2.
Your GCA per sqft is 102.20$/ft2. This would be, if I'm not mistaken, a record for Ottawa and maybe even Toronto in the height of Covid. In Toronto, prime location, in the height of the market in Q2 19, they hit 73.50$/ft2. Bullben has it at 147$/ft2 but they half the GFA numbers for some reason... Currently, Toronto is 37$/ft2 in the lates released figures.
Right now, land values in Ottawa are trading at 40$/ft2 in prime location. So your best bet, in the current market is that L 2.0 would fetch 25.4M and I doubt you would have many bids coming in. 24M or so of the 65M is going to go towards construction costs/debt. So if Mirabella doesn't close, this project is now underfunded and the tax payers are on the hook.
Anyone know who the other proponents behind Mirabella were?
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Originally Posted by phil235
The air rights are a risk, sure, but are they really a big risk? They are a relatively modest piece of the puzzle. Sure, Mirabella could pay the deposits and walk away (still unclear if there would be an additional penalty for doing that), but is that really likely? They are a sophisticated developer - there is no doubt that their bid took into account changing market conditions. I think the risk of a delay in construction is bigger than the risk that they pay $6 million and decide to walk away with nothing. If they don't build, it's much more likely that they try to sell the air rights to another developer and recoup some of their investment (which would go well beyond the deposit paid to the City).
Even if they walk away, it's not like the City is out $65 million. They will just award the rights to another developer. Yes, the price would be lower, but the $65 million was much higher than anticipated in the first place. So the real risk is that we end up somewhere in the ballpark of the original projections for revenue from air rights. Not exactly devastating.
This seems way overblown to me - just a typical risk on a major project. Probably less costly and disruptive than the risk of a major subcontractor going belly up. That I would be more worried about, as it would definitely cause major delays.
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