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A feasibility study for the private development of a retirement village in Metropolitan Vancouver Boaden, Bruce Geoffrey

Abstract

The purpose of this study is to examine the nature and extent of housing demand in Metropolitan Vancouver attributable to people over the age of fifty-five. This is to be done in order to verify whether or not the private development of a specified retirement village in Vancouver would be financially feasible and prove to be a profitable investment. In this study, a retirement village is defined to be a planned, low density development of permanent buildings designed to house "active" adults over the age of fifty-five and equipped to provide a wide range of services and leisure activities. This concept of a retirement village is distinct from the many housing developments for the elderly initiated by different non-profit organizations in Canada. The body of this paper involves three broad areas of study, each interrelated. These include an analysis of the potential market, the selection of a suitable location, and an examination of the financial implications of such a development. In order to understand the nature of the problem, it was necessary to make considerable use of research findings regarding the habits and the needs of the elderly. In addition to this, the characteristics of many of the retirement villages in the United States fitting our definition, were examined. Many features common to most of these villages were incorporated in the general design of the village proposed in this study. Initially, the market analysis involves consideration of the general housing demand and supply situation in Metropolitan Vancouver. Particular reference is then made to the characteristics of the elderly and the part they play in total housing demand. Selection of a suitable location for the proposed village is made on the basis of a number of criteria previously formulated. The financial analysis involves estimates of capital cost, operating expenses and revenues, and net cash flows. From these, expected equity yields are then calculated under various assumptions regarding the cost of debt capital, the retention period, and the reversion value. The results of these analyses indicate that Metropolitan Vancouver holds considerable market potential for the development of a retirement village of the type proposed in the study. While there are many feasible locations in Vancouver for the village, the city of White Rock meets the stated criteria adequately and is suggested as the ideal location. The expected profitability of the proposed development is not easily stated as it is dependent upon a number of assumptions. Yields on equity indicate a wide range of possibilities showing the village to be unprofitable under some assumptions and extremely profitable under others.

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