Report: Developers paid more than market value for city lots
By REMO ZACCAGNA Business reporter
Developers of a proposed commercial and residential project on two large downtown lots paid millions more than market value, a declassified city report shows.
The report, released Thursday , showed that W.M. Fares Group and Banc Developments Ltd. bid and ultimately won the competition for two parking lots on Clyde Street, divided by Birmingham Street, for $14.78 million.
That is more than the listed market value of $11.564 million of the two properties, colloquially known as Mary Ann and Margaretta, named after the Schmidt sisters who once lived in the area.
The next highest bidder was a joint submission of $14 million from Urban Capital Property and Killiam Properties Inc.
There were eight bids in all, but only the top two put in proposals for the two lots. The remaining bids were solely made on the 33,869-square-foot Mary Ann lot.
The high bids did not come as a surprise to the city, said Peter Stickings, HRM manager of real estate, who noted the strength of the retail sector on Spring Garden Road, as well as other residential projects in the works as a big draw.
"I think with the announcement of the Central Library and sort of the transformation of that area, all of these things I think have elevated the interest in these properties. And then, of course, eight qualified proponents were bidding, so with competition brings stronger value to the process," he said. "I think if you note some of the lower bids were more indicative of the market appraisal, which would have been performed by a third-party appraiser."
Requests for proposals on projects of this nature often have bids that exceed their market value. It’s the nature of doing business, said Robert Musset, senior vice-president at CB Richard Ellis Limited in Atlantic Canada.
"The value of those sites is tied directly to the density that was allowed within the offering memorandum that was set out by the city. And you can see that range of pricing that came in," he said. "Some people priced it more aggressively than others and reviewing their spreadsheet it looks like they did a pretty good job in evaluating the various components of the bid and allocating a certain amount of importance to each area."
Another lot, the former Halifax Infirmary site on Queen Street, nicknamed Rosina, is expected to be put on the market by the city next year. That site is appraised at $4.851 million, according to the city report.
But that, too, is expected to go for more.
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