Capstone lands for sale by City of Red Deer. (rdnewsNOW/ Alessia Proietti)

By Alessia Proietti

Early bird gets the worm

Three lots in Capstone can now be bought below market value for multi-family developments

Sep 5, 2023 | 10:23 PM

The early bird can get the worm in Red Deer’s Capstone neighbourhood as three parcels of land can now be purchased below market value.

At their meeting on Tuesday, city council approved the sale of lands at 5436 47 Street at a reduced price of $250,000 per parcel, designated for multi-family development.

The resolution to receive such offers was initially passed at council’s June 12 meeting.

Under the Municipal Government Act (MGA), the City had to advertise the proposal of transferring land for less than its market value in the local newspaper for two weeks. Residents then had 60 days to petition; the City confirmed none were received.

According to the Capstone Parcel Map, the three parcels in question are under the Residential section, named L1, L2, and L3. The City says each lot has a market value of around $750,000.

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Capstone Parcel Map; three parcels sold below market value are inside red boxes (Red Deer city council September 5 agenda p. 52)

City Manager Tara Lodewyk confirmed that one developer, Sorrento Homes, has already completed the development permit stage for their multi-residential building, which would be the first in the neighbourhood. She says they expressed to build a five-storey building of around 60 suites and have met their design requirements with regards to frontage, greenspace, and other elements.

She says the City is already in negotiations with a separate developer for another one of the parcels.

“Capstone is a longstanding dream of the new neighborhood in the heart of the community and what I’ve read many times is what makes a successful neighbourhood is having people live in it and this is an important step towards that goal,” said Councillor Michael Dawe. “When they live there then they shop there, they recreate there, they do all kinds of things that make for vibrancy and activity.”

The vision for the pedestrian-friendly and dense Capstone neighbourhood first arose in 2016 with the Riverlands (Capstone) Area Redevelopment Plan (ARP).

No development occurred in the area until September 2022 when council approved a site exception for East Lincoln Properties who voiced interest in building a strip mall.

READ: Red Deer city council approves site exception for potential strip mall in Capstone

The City changed their approach in February 2023, amending the ARP to provide more flexibility in its development regulations to attract investment.

READ: Red Deer’s Capstone development regulations tweaked for flexibility

The $250,000 incentive was previously offered through the Downtown Economic Incentive Program for any residential development over $4 million dollars.

Administration states that while it is not sustainable for the Land Bank to collect less revenue on land sales, it is still a relatively good investment for the City based on the municipal tax revenue it would generate. As an example, even if The City were to provide the land for free, when its market value is $750,000, and a developer completes a development valued at $15 million, municipal tax revenue would equal roughly $120,000 in the first year after completion, resulting in a 16 per cent return on investment.

Another part of the incentive package is a potential rental guarantee for developers who meet a specific set of requirements. Lodewyk explained that, as a way of providing certainty to developers that they can obtain the rental rates necessary to support the project, the City could supplement rent to a developer for a specific amount if needed. The City says the benefit is the reduced risk to the developer in an unstable market situation.

“We are open for business in Capstone and the L-shaped parcels are the beginning. We know that a developer takes more risk when you are the first one in,” said Lodewyk.

Administration explained that Red Deer is currently dealing with various unfavourable factors like high inflation and supply chain issues affecting construction, low growth and rental rates, housing shortages, rising interest rates, competition with neighbouring communities, and ongoing homelessness and social disorder in the downtown.

Lowdewyk says development in the Capstone area helps increase their housing stock, particularly with the upcoming expansion of the Red Deer Regional Hospital bringing in workers, and will attract people to the downtown area.

She anticipates that similar requests may come forward for other parcels of land but would have to be brought back to council.

Mayor Ken Johnston said that at the Federation of Canadian Municipalities conference this June, Prime Minister Justin Trudeau said that cities will need to “step up” when it comes to housing.

“Whether you agree or not, the fact is, the need across our country is so acute that if we don’t start problem solving, pardon the pun, on the ground, which is what we’re doing today, we’ll still be waiting for other orders of government to get their own act together,” he said.