COLUMN: Developer offered to build civic centre, tower at fixed cost

If the city agreed to the original proposal from Uptown Property Group, it could have saved millions on the contruction of the Downtown civic centre, avoided having to build an office tower on its own, and the whole project could have been completed more than a year ahead of schedule.

That's the picture painted in a document I received last week through a Freedom of Information request to the City of New Westminster.

The document is UPG's response to the city's request for proposals, dated Aug. 19, 2010.

As part of its agreement with the provincial government, BC Lottery Corporation and Gateway Casinos, the city had $35 million in something called Development Assistance Compensation (DAC) money earmarked for a new civic centre Downtown. It sought to finesse the situation by finding a partner from the development community to work with the city and build an office tower above the civic centre. The rationale was to save on shared costs and create new office space on Columbia Street, adding jobs and vitality Downtown.

The RFP from Uptown suggested the company build the entire project—including the office tower, underground parking and the shell of the civic centre—for a fixed price on a specific timeline. It also said that, if the city wished, UPG would "fit out" the civic centre portion of the project—meaning do all the interiors—at an additional fixed cost. The figures for the latter were calculated based upon UPG's estimates of similar facilities in the region, according to the RFP.

"The cost…" states the RFP, "has been estimated based upon the floor plans attached hereto. We and our construction advisor believe this estimate is reasonably accurate as the quantitative standards are well defined."

Later in the document, it states that, "To estimate these costs [for the fit out] the actual construction costs for recently completed, similar civic facilities were used."

So if the city chose to have UPG build the entire project, the company was committing to deliver it for less than the $35 million available, the document reveals.

Sharing costs with the private partner, as the city originally intended, for things such as parking would "reduce the net project cost to the City to the $35 million available under the DAC agreement."

But as many New West residents know, that's not what city council chose to do.

Instead of simply paying UPG to build the entire project, the city chose to be more hands on, with both parties acting as the developer for their respective parts of the project.

As mentioned in a previous column, that partnership was fraught with difficulty from the start and never resulted in a formal agreement. UPG finally pulled out altogether November 2011, and this spring the city announced it would build and finance the entire project on its own.

So instead of having a turn-key project handed over to the city for $35 million, the city is instead spending $41.4 million for the civic centre, $12.5 million for the underground parking and $33 million for the office tower, totalling $87 million. And possibly another $7 million for "tenant improvements" to make the office space ready if tenants require it. In total, $94 million.

In my read of the RFP, there is one mitigating factor to consider.

The city opted to add an additional level of parking, to total three levels.

Based upon the city's budget of about $12.5 million for the parkade, and what I understand about how developers calculate the cost per stall, it's reasonable to assume the extra level should cost about $4 million.

So the $35 million could have been around $39 million or so.

The question remains: Why didn't city council jump at the fixed cost option UPG pitched?

It would have meant more financial security, and lower costs for the civic centre.

It would have prevented the city from having to borrow up to $59 million, and roll the dice on finding a buyer for the office tower or enough leasees to make it viable.

And the entire project would have been much further along by now.

UPG said it could complete the project by September 2013.

As it stands now, the project won't be done until December 2014.

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