CITY OF VANCOUVER

ADMINISTRATIVE REPORT

 

Date:

January 23 2004

 

Author:

Cameron Gray

 

Phone No.:

7207

 

RTS No.:

03084

 

CC File No.:

4664

 

Meeting Date:

March 9, 2004

TO:

Vancouver City Council

FROM:

Director, Housing Centre

SUBJECT:

Performing Arts Lodge - Bayshore Gardens

RECOMMENDATION

Recommendation B is a grant and requires 8 affirmative votes of Council.

GENERAL MANAGER'S COMMENTS

The General Manager of Community Services RECOMMENDS approval of A and B.

COUNCIL POLICY

Council requires that 20% of the units in new neighbourhoods be designated for affordable housing, with a priority for core-need households. Council policy is to consider affordable housing proposals not subsidized through senior government programs or payment-in-lieu, for affordable housing sites that were submitted for senior government funding and did not receive it, or if there is little likelihood of funding forthcoming. The zoning for the new neighbourhoods allows Council to approve such non-profit rental or co-operative housing initiatives and to define affordability as circumstances require.

Grants require 8 affirmative votes of Council.

PURPOSE

This report seeks Council approval of the finalized arrangements for the development of the affordable housing component of Bayshore Gardens by the Performing Arts Lodge of Vancouver (PAL Vancouver), and approval to match a $500,000 grant from BC Housing, and approval to match fundraising that PAL Vancouver will undertake for its Bayshore Gardens' project, from Council consideration of this report to completion of the project, to a maximum City contribution of an additional $500,000.

BACKGROUND

In 1991 Council approved the redevelopment of the surface parking lots serving the Bayshore Hotel for up to 980 units of which 230 had to be rental and 20% of the remaining 750 had to be non-market (now affordable) housing. To date 406 condominiums and 165 rental units have been completed.

On September 13, 2001, Council approved amendments to the Bayshore Gardens CD-1 (CD-1 #321) that resulted in a reduction in the affordable housing obligation to 13% of the 750 units that were not restricted to rental housing. The affordable housing was to be developed as part of a larger building consisting of underground parking serving the hotel and the development above, retail space, a childcare centre and condominiums as well as the affordable housing. The location of the site containing the affordable housing component is noted on Figure 1.

Figure 1

The Bayshore Gardens' affordable housing component is integrated within the larger building. It is sandwiched between underground parking and retail below and market condominiums above. The affordable housing component must be developed at the same time as the market components proceed. At the end of May 2002, the developers of Bayshore Garden's advised that they wanted to proceed with the development of the larger project with construction to commence in 2004.

In July 2002, a proposal call process was undertaken to select a non-profit housing sponsor to develop the Bayshore Garden's affordable housing component. As the Province had cancelled its HOMES BC program, no senior government funding was likely to be available for the project, so potential sponsors needed to have the capacity to raise the equity required for the project to be viable and to generate the necessary affordability.

On November 7, 2003, Council selected the Performing Arts Lodge of Vancouver (PAL Vancouver) as the sponsor for the Bayshore Gardens' affordable housing component. PAL Vancouver proposed to raise $5,000,000 in equity by mid-2003 and to develop 111 units of housing for seniors and the disabled with 60% of the units to be rented to core-need households at rents equal to 30% of their income (50% shallow core and 10% deep core-need households). PAL Vancouver priority is to provide housing for seniors and the disabled from the performing arts industry who cannot afford market rents.

On March 27, 2003, Council received a report updating Council on the status of PAL Vancouver's Bayshore Gardens' proposal. At that time PAL Vancouver, by pre-leasing 7 of 12 of the units ($1,840,000) and through fundraising ($664,449), had raised the necessary equity for the project to be viable ($2,500,000) and was continuing to fund raise for the equity to generate the necessary affordability. Council approved the revised PAL Vancouver proposal with final approval to be subject to report back later in 2003.

PROJECT STATUS

PAL Vancouver and Bayshore Gardens Development Limited Partnership have completed their negotiations regarding the design of the project and the price PAL Vancouver will pay for the project upon its completion. The Development Permit (DE407671) has been issued. The purchase price for the project is $15,393,267. PAL Vancouver has now pre-leased all 12 of the life lease units which will generate $3,144,000 in equity and fundraised $884,582 in cash and secured pledges for a total of $4,028,582 in equity. BC Housing has provided a conditional commitment to guarantee a mortgage of $12,000,000 which is based on PAL Vancouver subsidizing 99 of the units at rents averaging 80% of market. The conditions are standard, and PAL Vancouver is not expected to have difficulty satisfying them. A mortgage of $12,000,000 means that $3,393,267 of PAL Vancouver's equity is required to cover the purchase price for the project, leaving $635,415 to achieve deeper levels of affordability.

PAL Vancouver's proposal, when selected by City Council to sponsor the development of the affordable housing component of Bayshore Gardens, was to raise $5,000,000 in equity so that 60% (66 of the 111 units) could accommodate core-need households (50% shallow core-need and 10% deep core-need). With the $4,000,000 in equity that PAL Vancouver has raised to date, 45% (50) of the units could accommodate shallow core-need households paying an average of $650/month in rent, approximately 60% of market rents. Rents of $550/month are required to accommodate deep core need seniors as that would allow them to be subsidized through the Province's SAFER (Shelter Assistance for Elderly Renters) program.

PAL Vancouver is committed to continue fundraising during the construction period and beyond. Most of those in the performing arts industry who can no longer work because of age or disability are in core-need and many are in deep core-need. PAL Vancouver would like to increase the percentage of deep core need seniors the project can accommodate beyond the 10% they originally proposed to at least the 30% accommodated in the HOMES BC projects funded up to 2001. While PAL has not achieved the original $5,000,000 commitment they have been successful in raising most of the promised equity, and have established an on-going fundraising program for the project.

In addition to guaranteeing the financing for the project, BC Housing has agreed to provide a capital grant of $500,000. BC Housing's grant will be funded through the Federal/Provincial Affordable Housing Agreement. It is recommended that Council approve a matching grant of $500,000. It is also recommended that Council match fundraising that PAL Vancouver will undertake between Council approval of this recommendation, if it is approved, and the date the project is completed in early 2006, up to a maximum City contribution of a further $500,000. If PAL Vancouver can raise $500,000 in matching funds, the mortgage loan would be reduced to $10,000,000 and the project could accommodate 66 core need households (60% of the units in the project), of which 33 are in deep core need (30% of the units). The source of funds for the City capital grants would be the Affordable Housing Fund. Recently the City was able to negotiate a $1,000,000 contribution to the Affordable Housing Fund from a project at 1120 West Georgia St. This is close to Bayshore Gardens and the Bayshore Gardens affordable housing component would be an appropriate place to invest this $1,000,000. The grant would be payable in early 2006 when PAL's project is completed.

In its original proposal, PAL Vancouver asked for the right to buy the freehold interest in the air-space parcel that will accommodate the Bayshore Gardens' affordable housing component. Council agreed to this request on condition that PAL Vancouver successfully raises the $5,000,000 in equity to achieve a viable project and PAL's affordability objectives. PAL acknowledges that it has not achieved the $5,000,000 in equity and is not pursuing purchase of the air-space freehold at this time. They have reserved the right to ask a future Council to sell it to them, once they have achieved the project's affordability objectives, recognizing that a future Council will be under no obligation to approve such a request. They also understand that a future Council would likely require a Housing Agreement to secure the affordability commitment, and may require any capital grant from the City to be repaid.

In the unlikely event that final approval for the financing for PAL Vancouver's project is not achieved by the end of May 2004, or if PAL Vancouver is unable to close when the project is completed in early 2006, Bayshore Gardens Limited Development Partnership reserves the right to ask Council to select an alternative sponsor or to allow the project to be converted to market rental.

Attached to this report as Appendix A are two Memoranda of Understanding that set out the detailed arrangements between the parties. The first sets out the long term arrangements between PAL Vancouver, BC Housing and the City. The second (appended to the first) sets out the arrangements for the development of the project between PAL Vancouver, Bayshore Gardens Development Limited Partnership, and the City.

FINANCIAL IMPLICATIONS

The proposal to provide a matching capital grant to PAL Vancouver of up to $1,000,000 requires 8 affirmative votes of Council. The grant would be provided from the Affordable Housing Fund and credited against the $1,000,000 contribution to the Affordable Housing Fund required as a condition of the rezoning of 1120 West Georgia St.

SOCIAL IMPLICATIONS

The PAL Vancouver project will achieve in Bayshore Gardens the City's objective of creating mixed income communities in the new neighbourhoods being developed throughout the City and, in the case of Bayshore Gardens, along Coal Harbour.

CONCLUSION

It is recommended that Council give final approval to the development of the affordable housing component in Bayshore Gardens by PAL Vancouver. PAL will develop 111 units for seniors and disabled with priority for those in the performing arts industry. The necessary equity and financial guarantees are in place for the project to proceed. PAL Vancouver raised $4,000,000 in a difficult fund raising climate, and is committed to continue its fundraising activities. This is, however, $1,000,000 short of its original $5,000,000 fundraising commitment. It is recommended that Council approve grants totalling $1,000,000 from the Affordable Housing Fund; $500,000 would be a grant to match a $500,000 grant from BC Housing and $500,000 would be a grant subject to PAL Vancouver raising matching funds. If PAL can raise $500,000 most of the units in the project would be able to accommodate core-need households including those in deep core-need. If Council approves the recommendations in this report, construction of the larger project containing the affordable housing component will commence later this spring, for completion in early 2006.

- - - - -

APPENDIX A

Memorandum of Understanding
between
BC Housing Management Commission (BC Housing),
the City of Vancouver (the City), and
Performing Arts Lodge Vancouver (PAL Vancouver),
and dated for reference January 1, 2004,

in respect of the development of an air space parcel (the Parcel) to be created out of property owned by the Bayshore Gardens Development Limited Partnership (BGDLP) legally described as PID 024-781-401, Lot V, Except: Part subdivided by Plan BC5715, of the Public Harbour of Burrard Inlet, Plan LMP45854, (Lot V).

Option to Purchase the Parcel

The City holds an Option to Purchase the Parcel for affordable housing registered in the Lower Mainland Land Title Office (the Land Title Office) under BP 100782 as modified by BR 321407. The Option to Purchase requires BGDLP to create the Parcel, and the City to purchase it if a Project Commitment is issued. The purchase price for the Parcel is $30 per buildable sq. ft., adjusted in accordance with the Vancouver Consumer Price Index with a base of November 1991. The City pays 25% of the purchase price and BGDLP is deemed to receive the balance through the capital budget for the affordable housing project. The Option to Purchase requires BGDLP to allocate a minimum of 84,700 buildable sq. ft. to the affordable housing to be developed on the Parcel and requires BGDLP to develop and construct the affordable housing project within the Parcel (Project) for 93% of the sum of the Maximum Unit Prices applicable to the affordable housing.

Sponsor

On November 7, 2002, City Council selected PAL Vancouver to be the sponsor and operator of the Project. PAL Vancouver committed to raise $5,000,000 in equity which PAL Vancouver would invest in the Project. Under its original proposal, PAL Vancouver's equity would ensure that the Project was economically viable and that 60% of the units could accommodate core-need households (50% of the units occupied by shallow core-need households and 10% by deep core-need seniors).

Lot V Development

BGDLP intends to begin construction of the development on Lot V in 2004. A Development Permit for the Lot V development has been issued (DE407671) and the Lot V development has been assigned the address of 1616 Bayshore Drive. The Lot V development as approved under DE407671 consists of:

Subdivision of Lot V

BGDLP will be subdividing the completed Lot V development into air space parcels, including the Parcel. The boundaries of the Parcel will be determined by the final air space plan to be prepared by BGDLP, approved by the City's Approving Officer, and registered in the Land Title Office.

The Project

The Project consists of 111 units of housing and 5,633 sq. ft. of amenity space. The Project will consist of 111 units (99 1-bedroom units and 12 2-bedroom units), plus amenity space. In addition, 61 parking spaces along with storage, bicycle storage and service/utility space will be allocated to the Project in the underground parking that BGDLP will be developing on Lot V.

The total buildable square footage in the Project, as defined by DE407671 which excludes amenity space, is 80,477 sq. ft. This is less than the 84,700 buildable sq. ft. to be set aside by BGDLP in the Option to Purchase. The City and PAL Vancouver have agreed to this reduction in the buildable sq. ft. to be allocated to the Project in return for the development of the amenity space for the Project as set out in DE407671.

Construction standards for the Project will generally conform to the HOMES BC 2001 Non-Profit Housing Design and Construction Standards.

PAL Vancouver/City/BGDLP Memorandum of Understanding

PAL Vancouver, the City and BGDLP have signed a Memorandum of Understanding dated January 1, 2004, which is Appendix A to this Memorandum of Understanding. It sets out the terms and under which BGDLP will design and build the Project, the price and terms under which BGDLP will sell the completed Project to PAL Vancouver, and the terms and conditions under which the City will buy the Parcel from BGDLP.

BGDLP will build the Project for PAL Vancouver as a turn-key project. BGDLP will provide the construction financing for the Project. PAL Vancouver will pay BGDLP $15,393,267, with adjustments as BGDLP and PAL Vancouver may approve, for the completed Project. Subject to registration of the Parcel in the Land Title Office, PAL Vancouver will pay BGDLP on that business day which is 45 days after issuance of the occupancy permit for the Project.

Mortgage Financing

PAL Vancouver currently has $4,000,000 in equity to be applied against the Purchase Price. The City acknowledges that this is less than PAL Vancouver's required $5,000,000 equity commitment when PAL Vancouver was selected as sponsor for the Project. PAL Vancouver is committed to achieve the remainder of the equity by occupancy in early 2006.

The mortgage required for the Project given PAL Vancouver's current equity is $12,000,000. BC Housing has provided a Conditional Mortgage Commitment for an amount up to $12,000,000 to PAL Vancouver for the Project. BC Housing will provide Final Mortgage Commitment (Project Commitment) for the Project once the lender for the take out financing has been secured, a turn-key project development agreement has been signed, and agreement has been reached regarding the terms of the lease agreed to between PAL Vancouver and the City and regarding the terms of the operating agreement between PAL Vancouver and BC Housing.

Life Lease Units

PAL Vancouver has pre-leased the 12 2-bedroom units in the Project as life lease units. The prepayment commitments total $3,144,000. This amount forms part of PAL Vancouver's equity to be invested in the Project. The residents of these units have each paid a $5,000 non-refundable deposit and will pay a further deposit of 10% of their pre-payment amounts within 60 days of approval of this Memorandum of Understanding by the City, Project Commitment, or issuance of the building permit for the Project whichever is later. The balance of the pre-payment for these units is payable within 45 business days of substantial completion of the Project. The life lease residents will pay a monthly charge to cover their share of the costs of operating the Project. On the expiry of their terms, the life lease units may only be returned to PAL Vancouver, in return for which PAL Vancouver will pay the life lease residents the same pre-payment amount as the life lease residents paid initially for their units. PAL Vancouver is responsible for ensuring that the life leases complete.

Affordability

PAL Vancouver will ensure that at all times a minimum of 50 units will be rented to persons with gross household incomes below the Core Need Income Threshold as published by BC Housing from time to time and rents charged for the units must not act as a barrier to occupancy, that is, the rents must be reasonably affordable to eligible tenants.

Subject to paying operating costs, including debt payments, PAL Vancouver will ensure that a minimum of 66 units will be rented to persons with gross household incomes below the Core Need Income Threshold ("core need"); and that a minimum of 33 of these 66 units will be rented to persons with gross household income below 70% of the Core Need Income Threshold ("deep core need"). In the first year of operations, the greater of $650 or 30% of monthly gross household income is considered to be reasonably affordable rent for a core-need tenant; and the greater of $550 or 30% of monthly gross household income is considered to be reasonably affordable rent for a deep-core need tenant occupying a one bedroom unit. With the exception of up to 12 units to be leased to life lease tenants, rents charged for all units will not exceed 90% of market rent. All prospective tenants (except life lease tenants) will be income tested six months before move-in and periodically thereafter.

Capital Fund Raising

In addition to the $3,144,000 in life lease commitments, PAL Vancouver has raised $506,582 in cash and $378,000 in secured pledges for a total of $884,582 which is additional equity to be invested in the capital cost of the Project. PAL Vancouver will continue to fund raise during the construction of the Project and all funds, net of the reasonable fundraising and administration costs normally incurred by a non-profit housing society, raised during that time will go to reduce the amount of the mortgage required for the Project, thereby increasing the affordability levels.

Subject to approval of City Council, BC Housing and the City will each provide a capital grant of $500,000 to the Project to be used to reduce the amount of the mortgage required for the Project. In addition, the City will match all funds raised by PAL Vancouver from the date of Council approval of this Memorandum of Understanding to substantial completion of the Project to a maximum of an additional $500,000 in City funds, in order to achieve a greater number of deep core need seniors units than originally proposed by PAL Vancouver.

Lease and Prepaid Rent

The City will lease the Parcel to PAL Vancouver for 60 years commencing from the date the City purchases the Parcel from BGDLP. The lease will be for a nominal prepaid rent.

PAL Vancouver Option to Purchase

PAL Vancouver's original proposal included the freehold purchase of the Parcel. City Council agreed in principle to allow PAL Vancouver to purchase the freehold subject to PAL Vancouver successfully raising $5,000,000 in equity plus the necessary equity to fulfill the City's obligations under the Option to Purchase. PAL Vancouver acknowledges that it has not been able to raise the equity required to purchase the freehold interest in the Parcel, and is not pursuing that purchase at this time. However, PAL Vancouver reserves the right to seek City Council approval should they be able to raise sufficient equity in the future to buy the freehold interest in the Parcel on the terms and conditions in the Option to Purchase. PAL Vancouver acknowledges that it will be up to the City Council of the day to approve or not approve any request to purchase the freehold interest in the Parcel, and that the Council of the day may require a Housing Agreement to secure the affordability requirements set out in this Memorandum of Understanding, and may require that PAL Vancouver repay any grant provided to the Project by the City, as a condition of the sale of the freehold interest in the Project to PAL Vancouver.

Resident Criteria

PAL Vancouver's mandate is to provide affordable housing to members and former members of the performing arts industry (performers, agents, front office workers, directors, set designers, carpenters, ushers, concession workers, etc.), with a priority to seniors and the disabled who are in core-need i.e. would have to pay more than 30% of their gross household income to rent market housing in the Vancouver region. PAL Vancouver will give priority to members of the performing arts industry but will not restrict tenancy to members of the performing arts industry.

Operating Budget

PAL Vancouver will invest the net potential cash flow generated by the Project into achieving the affordability objectives for the Project as set out in this Memorandum of Understanding. The operating budget for the first year of operations is attached as Appendix B. It indicates that with a mortgage of $12,000,000, 50 units can accommodate shallow core-need households paying the greater of $650/month or 30% of monthly gross household income. With an additional $2,000,000 in equity, resulting in a mortgage of $10,000,000, the Project will be able to generate 33 units to accommodate shallow core-need households paying an average of $650/month, and 33 units to accommodate deep core-need seniors paying the greater of $550/month or 30% of monthly gross household income. This would achieve the enhanced affordability objective for the Project of accommodating 66% core-need households, half in deep core-need, as set out in the affordability section of this Memorandum of Understanding.

Operating Agreement

There will be an operating agreement between PAL Vancouver, the City and BC Housing that BC Housing will administer. BC Housing is not providing any on-going subsidy to tenants beyond SAFER as part of this operating agreement, which will have the same 60 year term as the lease. It will oblige PAL Vancouver to submit an annual budget for each upcoming year to BC Housing and the City for their approval, and will oblige PAL Vancouver to submit audited financial statements for the operation of the Project and its fund raising at the end of each fiscal year to BC Housing and the City. BC Housing will establish core-need thresholds.

Surpluses

The Project is expected to generate an annual positive cash flow. Surpluses will be accumulated until a reserve equal to the cost of operating the Project for 6 months (excluding debt charges) has been established. The reserve is to be used to cover operating shortfalls should any occur.

Subsequent surpluses (net of any increases in operating and debt service costs) will be used to first replenish the reserve should it fall below 6 months operating cost, and second to ensure that at least 60% of the units are occupied by households in core-need, half in deep-core need. When the reserve and affordability objectives for the Project have been achieved, surpluses can be used to reduce the rent for all tenants, except life lease tenants, to 30% of income, reduce the Project's mortgage, fund resident activities, purchase life lease units as units are vacated for conversion to monthly rental, or, to develop and subsidize City-approved affordable housing elsewhere in the City of Vancouver.

On-Going Fund Raising

Throughout the lease term, PAL Vancouver intends to raise funds for the Project as required to achieve the affordable housing objectives set out in this Memorandum of Understanding. PAL Vancouver will provide an annual budget and fundraising plan to the City and BC Housing with the intent of raising a minimum of one quarter of the Project's annual operating budget.

Schedule

The development schedule proposed for the Project is:

Development Permit December 11, 2003
Report to Council February 24, 2004
Project Commitment March 24, 2004
Construction Start April 2004
Issuance of Occupancy Permit December 2005
Purchase of Parcel/Project February 2006

Once this Memorandum of Understanding has been signed, it will be presented to Vancouver City Council, to PAL Vancouver's Board of Directors, and to BC Housing's Development Committee for approval. No legal rights or obligation shall be created or arise until all legal documentation has been fully executed on terms and conditions satisfactory to the solicitors for the City, PAL Vancouver and BC Housing.

Phil Boname Craig Crawford Cameron Gray
for PAL Vancouver for BC Housing for the City of Vancouver

___________________ ___________________ __________________

___________________ ___________________ __________________
Date Date Date

Memorandum of Understanding

between

Bayshore Gardens Development Limited Partnership (BGDLP)

the City of Vancouver (the City), and

Performing Arts Lodge Vancouver (PAL Vancouver)

dated for reference January 1, 2004,

in respect to the development of 581 Cardero St., an air space parcel (the Parcel) to be created out of Lot V, Except Part Subdivided by Plan BCP5715, of the Public Harbour of Burrard Inlet, Plan LMP45854, PID 024-781-401 (Lot V), to accommodate the Bayshore Gardens' affordable housing requirement.

Bayshore Gardens Development

BGDLP is developing Bayshore Gardens, a comprehensive development on the Bayshore Hotel's former surface parking lots north of Georgia St, east of Denman St. and west of Cardero St. The Comprehensive Development Plan for 1601 West Georgia St. (CD-1 (321)) was first adopted in 1991 and subsequently amended. CD-1(321) allows Bayshore Gardens to be developed with 750 residential units and 230 rental residential units, as well as retail, hotel and marina uses. CD-1 (321) for Bayshore Gardens requires that 13% of the 750 residential units be developed for affordable housing as City Council may define.

BGDLP and the City entered into legal agreements designating Lot V as the location for the required affordable housing, and the City holds an Option to Purchase the Parcel consisting of at least 84,700 sq. ft. of floor space, as defined by the development permit ultimately approved for the development on Lot V. The Option to Purchase is registered in the Land Title Office under number BP100782 as modified by BR321407. The Option to Purchase requires that BGDLP develop and construct the required affordable housing at 93% of the maximum unit price that would be allowed under the budget for BC Housing's HOMES BC program or the successor program in place at the time.

Lot V

CD-1 (321) contemplates Lot V being developed with a single structure containing underground parking to serve, inter alia, the Bayshore Hotel and the development on Lot V itself which includes retail facing Cardero, a childcare centre, the required affordable housing for Bayshore Gardens and market housing. The underground parking for the Lot V development has already been constructed on Lot V with the remaining components to be constructed above it. The Lot V development will include a major alteration to the existing underground parking structure on Lot V. The completed Lot V development will be subdivided into air space parcels and a remainder lot with the City to acquire the Parcel pursuant to the Option to Purchase.

Proposal Call

At the end of May 2002 BGDLP advised the City that it wished to proceed with the development of Lot V. The City initiated a proposal call process to select a sponsor to participate in the development of the required affordable housing component and to operate it once it is completed. PAL Vancouver submitted a proposal (the Project) to develop the Parcel with 111 units (99 1-bedroom units and 12 2-bedroom units) of which 10% may be rented at market rents and 90% at below market rents, with 60% rented at rents geared to the incomes of those that cannot afford market rents. PAL Vancouver committed to raise $2.5 million in equity by the end of January 2003 that would ensure the Project's economic viability and an additional $2.5 million by the end of April 2003 to achieve the Project's affordability objectives, for a total of $5 million in equity that PAL Vancouver would invest in the Project. On November 7, 2002, City Council approved PAL Vancouver as the sponsor for the Bayshore Gardens required affordable housing.

Lot V Development

BGDLP has retained Downs Archambault Architects (DA) to design the Lot V development including the Project. On behalf of BGDLP, DA developed a design acceptable to BGDLP and PAL Vancouver, and submitted it to the City's regulatory process for approval. On December 11, 2003, the Director of Planning issued DE407671 for 1616 Bayshore Drive which includes the Project. The design for the Lot V development, including the Project, as approved by the City's regulatory process and as set out in DE407671 is acceptable to BGDLP and PAL Vancouver.

The Project as defined by the approved DE407671 will consist of 80,477 sq. ft. of residential floor space (99 1-bedroom units and 12 2-bedroom units) and 5,633 sq. ft. of amenity space for a total of 86,110 sq. ft. of floor space. The Project will have a lobby on the ground floor facing Cardero, will share the second floor with the childcare, occupy all of floors 3 through 7 (excluding the market townhouses facing Bayshore Drive) and share the 8th floor with the market housing. The residential units are located on floors 2 through 7 and the amenity space is located on the 3rd and 8th floors. BGDLP will provide 61 parking spaces, space for garbage collection and space required for storage and utilities for the Project in the underground parking on Lot V.

Utilities serving the air space parcels to be developed on Lot V, including the Parcel, will be provided to each parcel separately and metered separately.

As the amenity space is excluded from the approved floor space for the Project, not all the 84,700 sq. ft. of floor space allocated to the Bayshore Garden's required affordable housing in the Option to Purchase is required for the Project. BGDLP may use the unused 4,223 sq. ft. for market housing elsewhere in Bayshore Gardens as permitted by CD-1 (321).

Project Price

BGDLP will develop and construct the Project at 93% of the 2001 BC Housing's HOMES BC maximum unit price budget for the Project as adjusted to meet PAL Vancouver's program. 93% of the 2001 HOMES BC maximum unit price budget for the Project is $15,393,267. This is the base purchase price that PAL Vancouver will pay BGDLP for the Project. As set out in the Development Agreement, this price is subject to adjustment for extras for finishes, fixtures and equipment above and beyond BC Housing's 2001 HOMES BC standards agreed to prior to BGDLP finalizing the construction contracts for the Lot V development, and for extras approved through subsequent change orders. On the Closing Date (as hereinafter defined), the purchase price for the Project will be adjusted for the cost of the extras requested by PAL Vancouver and agreed to by BGDLP, and for the reimbursable expenses that BGDLP has agreed to pay PAL Vancouver as set out in the Development Agreement.

Development Agreement

BGDLP will develop and construct the Project for PAL Vancouver on a turn-key basis. BGDLP and PAL Vancouver will enter into a binding Development Agreement that will address the specifications for the Project, and all aspects of its development and construction, including costs, change orders, final inspection and schedule. The Development Agreement will include the drawings and specifications prepared by DA and agreed to by BGDLP and PAL Vancouver for the construction of the Project.

BGDLP will reimburse PAL Vancouver for certain direct costs that it must incur in the development of the Project. These include the fees for the development consultant and solicitor. The Development Agreement will set out the terms under which BGDLP will, on the Closing Date, reimburse PAL Vancouver for such reimbursable costs.

Project Financing

BGDLP will provide the construction financing for the Project. PAL Vancouver is responsible for arranging the take out financing for the Project. BC Housing has agreed to guarantee a mortgage in the amount of $12,000,000 for the Project. PAL Vancouver is solely responsible for satisfying by March 10, 2004, all of the conditions for BC Housing's financing as set out in the December 10, 2003, letter from BC Housing to PAL Vancouver. PAL Vancouver is responsible for providing the remaining approximately $3,393,267 of the purchase price for the Project. This will be provided through fundraising by PAL Vancouver and by PAL Vancouver pre-leasing the 12 2-bedroom units in the Project as life lease units. Deposits equal to $5,000/unit for all 12 life lease units and totaling $60,000 have been secured and are being held in trust by DuMoulin Boskovich. PAL Vancouver has fund raised $506,582 in cash and $378,000 in secured pledges for a total of $884,582 in additional equity of which $125,000 is being held in trust by DuMoulin Boskovich. PAL Vancouver will continue to fund raise through the duration of construction of the Project, as necessary to achieve the levels of affordability to which PAL Vancouver has committed. The total equity that PAL Vancouver has secured as of January 1, 2004, is $4,028,582.

Project Commitment

"Project Commitment" will occur when: BC Housing has provided its Project Commitment for the Project containing only conditions for funding acceptable to BGDLP; once the lender for the take out financing has been secured; the Development Agreement between PAL Vancouver and BGDLP satisfactory to BC Housing has been signed; and agreement has been reached between the relevant parties regarding the terms of the lease between PAL Vancouver and the City and the terms of the operating agreement between PAL Vancouver, the City and BC Housing.

Deposit

At Project Commitment, PAL Vancouver will pay to BGDLP's solicitors in trust as a deposit the sum of $300,000 (Deposit) which is non-refundable except only in the case of a unilateral failure by BGDLP to complete the project in accordance with the Development Agreement and that otherwise will be applied to the purchase price for the Project. The Deposit and accrued interest thereon, shall be deemed to have been paid to BGDLP as liquidated damages in full satisfaction of all claims of BGDLP against PAL Vancouver if the purchase and sale of the Project is not completed by reason of the default of PAL Vancouver under the Development Agreement.

Registration of Parcel

BGDLP is responsible for the subdivision and registration of the Parcel in the Lower Mainland Land Title Office and the preparation of all legal agreements required for its registration. The legal documentation required for the creation and registration of the Parcel will be to the satisfaction of BGDLP, the City, and PAL Vancouver.

Shared Obligations and Costs

BGDLP has prepared a disclosure statement for the sale of the condominiums to be built on Lot V. PAL Vancouver has reviewed the disclosure statement as it relates to the creation, development and operation of the Parcel and the Project.

The agreements for the Parcel will address the mutual obligations between the Lot V air space parcels, including the Parcel, with respect to the operation of the Lot V development including cost sharing related to the operation of the parking, garbage, storage and utility space for the Project that will be provided in the underground parking on Lot V.

PAL Vancouver will be responsible for paying a proportionate share of the costs of operating the parking garage based on the number of parking stalls allocated to the Project to the total number of parking stalls in the underground parking. PAL Vancouver will be responsible for paying property taxes on the parking stalls allocated to the Project based on the assessed values of such parking stalls and will be responsible for paying a proportionate share of certain other costs relating to the provision of reciprocal easements for access, egress, support, etc., as set out in the reciprocal easements for be registered concurrently with the subdivision and registration of the Parcel in the Land Title Office..

Existing Charges on Title

PAL Vancouver has reviewed the existing charges on title that will be registered against the title for the Parcel.

Purchase of the Parcel

Subject to registration of the Parcel in the Land Title Office, the City of Vancouver will purchase the Parcel in accordance with the Option to Purchase on that business day that is 45 days after issuance of an occupancy permit for the Project (Closing Date). The price the City will pay to BGDLP for the Parcel will be 80,477 sq. ft. x $7.50 per sq. ft. = $603,577.50 plus CPI to the date of payment.

Lease of the Parcel

Concurrently with the City's purchase of the Parcel, the lease of the Parcel from the City to PAL Vancouver will be registered. The lease shall be for a 60 year term and a nominal prepaid rent.

Payment of Project Purchase Price

Subject to registration of the Parcel, PAL Vancouver will pay BGDLP the purchase price for the Project on the Closing Date, less any amounts for work that BGDLP has not completed in accordance with the Development Agreement.

Failure to Receive Project Commitment

If the Project Commitment from BC Housing has not occurred by May 28, 2004, BGDLP may ask the City, to either select by July 20, 2004 an alternative sponsor who is able to proceed with the Project in accordance with the then latest draft (if the Development Agreement has not been executed) or the executed Development Agreement, as the case may be, including the time schedule provided therein, or, failing which, to allow the Parcel to be developed as a market rental residential development in accordance with CD-1 (321), DE407671 and the time schedule contemplated in the Development Agreement. Any payment in lieu to be made by BGDLP to the City in consideration of the City allowing the Parcel to be developed as a market rental residential development shall reflect the offsetting by BGDLP of its reasonable losses, costs and expenses (including interest thereon at the rate set out in the Development Agreement) directly incurred as a result of the Project being cancelled less the amount of the Deposit, if any, retained by BGDLP by reason of the default by PAL Vancouver under the Development Agreement.

Failure to Close

If on the Closing Date, PAL Vancouver does not pay BGDLP the Purchase Price, BGDLP may request the City to either select an alternative sponsor who is able to pay the purchase price for the Project to BGDLP within 60 days of such failure to pay by PAL Vancouver, or, failing which, to allow the Parcel to be developed as a market rental residential development in accordance with CD-1 (321) and within 90 days of such failure by PAL Vancouver. Any payment in lieu to be made by BGDLP to the City in consideration of the City allowing the Parcel to be developed as a market rental residential development shall reflect the offsetting by BGDLP of its reasonable losses, costs and expenses (including interest thereon at the rate set out in the Development Agreement) directly incurred as a result of the Project being cancelled less the amount of the Deposit retained by BGDLP by reason of the default by PAL Vancouver under the Development Agreement.

Schedule

The development schedule proposed for the Project is:

Development Permit December 11, 2003

Report to Council February 24, 2004

Project Commitment March 24, 2004

Construction Start April 2004

Substantial Completion October 2005

Issuance of Occupancy Permit December 2005

Purchase of Parcel February 2006

Once this Memorandum of Understanding has been signed, it will be presented to City Council, to BGDLP's partners, and to PAL Vancouver's Board of Directors. No legal rights or obligations hereunder shall be created or arise until Project Commitment has occurred.

Bayshore Gardens Developments Limited Partnership by its General Partner, Bayshore Gardens Developments Limited

_____________________________________

per: Hiroaki Okamoto

____________________________
date

PAL Vancouver

per: V. Philip Boname

date

  

the City of Vancouver

per: Cameron Gray

date

  

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ag20040309.htm

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© 2002 City of Vancouver