Why Victoria Paid $10 Million for a Pandora Avenue Property That Cost $3.7 million in 2016

932 Pandora Avenue pictured in 2018 (Google Maps)

When the City of Victoria bought two properties across the street from Our Place last month, it paid more than two and a half times what the lot had cost just four years earlier.

The spike in price, which makes the small lot one of the most profitable real estate sales in modern Victoria history, is due in part to the city’s own action to rezone the land for a high-density condo project.

Located right next to the Pandora Street McDonalds, 932 Pandora is a parking lot and autoglass warehouse purchased by developer Kang & Gill Ltd. for $3.7 million in 2016.

Although the land was planned as the site of a 10-storey condo development, with the city’s purchase of the property for $9.595 million, it means that the land appreciated roughly $4000 for every day that it was owned by Kang & Gill.

According to real estate experts, a changing neighbourhood and the city’s own approved rezoning of the site led to the escalated price tag.

Gerry Marolla, a provincial assessor whose valuation of the Pandora property was cited in the City’s purchase, said the land was significantly undervalued at the time it was purchased by Kang & Gill. “Since 2018 and 2019 there's been a number of mixed-use land sales throughout Greater Victoria that indicated that values were low,” said Marolla. “You can point to 1045 Yates Street that sold in 2018 for $28.75 million dollars, or $420 per square foot.”

Marolla also noted 1050 Pandora Ave., the site of the old Wellburn's Market, which he said sold in 2018 for $10 million, and the nearby lot at 975/981 Pandora, just next door to Our Place, which was purchased as a development site for $7.6 million.

“Everything along that area is selling for significant dollars and so the assessments now are reflecting the market values,” he added.

BC Assessment had 932 Pandora valued at $9.5 million before the City of Victoria sale. Only the year prior, however, it had been valued at $7.5 million.

Derek Holloway, who worked for BC Assessment for three decades, said in an interview that provincial assessments of mixed-use properties often trailed market values for years, and have only caught up recently.

“I know that BC Assessment has sometimes struggled in the past when they have mixed use properties because they're done by two different teams: there’s a team for multifamily residential and there’s a team for commercial and quite often they didn't collaborate as well as they should have,” he said.

He also said understaffing compared to the volume of real estate activity in B.C. contributed to a lag in valuations.

“As the market took off, and they got more sales, they realized how much they were understaffed and they did in fact — from about 2017 or 2018 until 2020 — they've sort of played a bit of catch up,” added Holloway. “It’s an interesting situation because they could have been

not under assessing, but quite often they struggle with keeping up with properties that are mixed use and unique in nature.”

Bill Eisenhauer, a spokesperson for the City of Victoria, said in a statement that “in most instances BC Assessment values tend to be lower than the market because the timing lags to the prior year.”

Commercial property values in Greater Victoria have increased exponentially in recent years. Prior to the COVID-19 pandemic, BC Assessment forecasted local commercial properties would increase 5 to 15 per cent in value in 2020.