The first new land sale in Red Deer’s Capstone neighbourhood for a multi-family residential development could gain final approval from city council on Tuesday.
Councillors will be asked to support selling 2.6 acres of city-owned land at 5436-47th St. to local developer Sorento Homes for $250,000 below market value. The developers are proposing a five-story building containing about 62 suites.
According to the city’s land and economic development department, the market price for a similar-sized property is almost $2 million, or $750,000 per acre, but Sorento would get it for a quarter-million dollars less.
Reasons for the discounted price were stated in the public notice: Sorento Homes is unsure, under the current economic conditions, if all of the suites can be rented at market prices so future subsidies might be needed.
Market considerations were also a factor. City officials acknowledged this is not the best time for builders to invest in large new projects because of the high cost of borrowing, inflated construction prices, supply chain issues and Red Deer’s still relatively low population growth.
However, there is a local need for more housing and rental suites as the city’s vacancy rate is near zero because no new multi-residential projects have been built in about a decade.
About two years ago, city council created economic incentives to encourage residential development in the downtown. Among these was financing of up to $250,000 to kick-start new residential projects in the city’s core.
Erin Stuart, the city’s general manager of development services, previously said the city is lowering the land price by that amount because the residential project “aligns with our concept of encouraging multi-residential development in the downtown.”
A report to council states no members of the public objected to the lower price land sale after the public notice was run in the Advocate for two weeks and the 60-day petition period lapsed.
The property that Sorento Homes wants to build on is just west of Carnival Cinemas could be completed by the end of 2024 at earliest, stated Stuart, who believes all of Red Deer will benefit from having more housing available.
The city has been working for years on a variety of strategies to attract private investment to Capstone.
“To kick-start development…the City needs to help reduce the risk developers face in the current Red Deer market,” states a report to council. Administration was directed “to be creative in marketing and to be open to negotiating deals in line with what the development community is looking for.”
When the city yards were relocated out of the riverside neighbourhood a decade ago, 25 acres of vacant land were opened up in Capstone. Of that 25 acres, 18 acres are developable and the other 7 acres are reserved for parks, roads and utilities. The entire neighbourhood is 91 acres.