The marketing campaign to divest Northwest Healthcare Properties REIT’s (NWH.UN-T) Riley Park Health Centre just started this week, but is already drawing a lot of interest according to the brokers enlisted to sell the property.
“We’ve been flooded with calls and e-mails, a lot coming out of B.C.,” Goodman Commercial principal Mark Goodman told RENX.
Vancouver-based Goodman and Calgary-based NAI Advent have worked together in the past and joined forces again to market the three-storey, 74,952-square-foot medical office building. It sits on 6.02 acres at 1340-1402 8th Ave N.W., at the corner of 14th Street NW in Calgary’s Hillhurst neighbourhood.
The redevelopment site’s mixed-use – general zoning permits 1.048 million square feet of density and heights ranging from 115 to 148 feet. The Draft Riley Local Area Plan, scheduled to be heard by city council this fall, proposes a height increase up to 26 storeys on the eastern part of the site and 12 storeys on the western segment.
The property offers developers the potential to create a master-planned, mixed-use community in one of Calgary’s most sought-after areas.
NAI Advent senior vice-president and principal Harvey Russell told RENX that Northwest Healthcare Properties REIT acquired the property for $7 million in 2007 and feels the time is right to sell.
“I’m guessing these guys have got bigger fish to fry and they’re going to take their cash and move on to something else,” Russell said.
Desirable location for residential development
The site is close to the Southern Alberta Institute of Technology campus, as well as shopping, dining and amenities centred around the trendy Kensington Village district. Nearby Riley Park features green space, an outdoor wading pool, a popular trail network and the Hillhurst Sunnyside Community Association recreation centre.
Future residents would have views across the Bow River to downtown Calgary, which is easily accessible from the nearby Sunnyside C-Train station.
The City of Calgary is working on streetscape and public realm improvements in the area to enhance walkability, bicycle connections, park spaces and overall accessibility in the community.
“It just checks all the boxes and I don’t think there’s another site like this in inner-city Calgary,” Russell said. “There’s a whole bunch of empty nesters that want to go to that maintenance-free lifestyle and they can get that in a centre like this that’s got synergy, amenities, some retail and coffee shops and whatnot.”
Russell envisions 1,200 housing units at the site in a mix of sizes, heights and formats, including condominiums, purpose-built rental and potentially seniors housing.
Holding income until redevelopment
The building was formerly Grace Hospital but continues to function as a community healthcare hub that provides a range of medical services from a variety of specialist tenants. It currently provides abundant surface parking for tenants and visitors as well as financial stability through $1.15 million in annual net income while redevelopment plans are finalized.
Most tenants have leases with six-month demolition clauses so a new owner could vacate the premises when it’s ready to redevelop, according to Russell.
Russell said he’s been involved with the sale of seven smaller sites in the area that transacted for between $50 and $95 per buildable square foot, which is the highest in Calgary.
Goodman said the owner is looking for offers of $40 million and above for the site. No bid deadline has been set, but Russell said he’s already received “a pretty darn good offer.”
Russell thinks condo units on the site would sell for $700 to $1,000 per square foot while rental apartments would lease for $3.30 to $3.70 per square foot.
“That’s the high-water mark for Calgary,” Russell observed, “but there’s no lack of money in this city.”
Calgary is attractive to Vancouver developers
Goodman is in his 22nd year in the real estate business and said he’s never been in a cycle “that’s been this tough in terms of liquidity in the market.” His firm has brokered 11 transactions this year and he thinks there’s light at the end of the tunnel, but acknowledges that deal activity has been slow.
“For a lot of developers, fatigue has set in in the Vancouver market and it’s really hard,” Goodman said. “In some cases, even if you throw in the land for free you can’t make sense of the deal.”
A lot of Vancouver developers are frustrated with that city’s long entitlement process, high taxes and development charges, and Goodman said Calgary is a more business-friendly environment for many of these companies.