Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Standing Committee on Planning and Environment

FROM:

The Director of the Housing Centre

SUBJECT:

Selection of Sponsor for the Bayshore Gardens Non-Market Housing

 

RECOMMENDATION

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 non-market 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 non-market 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 new neighbourhoods allows Council to define non-market housing and approve such housing initiatives as circumstances require.

Council policy is to lease non-market housing sites to non-profit sponsors for 60 years with a prepaid rent equal to 75% of the site's freehold market value.

PURPOSE AND SUMMARY

Bayshore Gardens will be ready to proceed with the condominium tower that includes the non-market housing component in 2003. A proposal call has been undertaken to find a non-profit housing sponsor for the non-market component. Three proposals were received, and
this report seeks Council approval of the sponsor of the non-market housing component of Bayshore Gardens. Selection of the sponsor will begin the process of working out the final design, capital budget, housing affordability and other issues related to the project. Final approval of the project, assuming the necessary funding is in place, would be sought in May or June 2003 when all the issues should be resolved.

BACKGROUND

Bayshore Gardens is a new neighbourhood under development north of Georgia St. between Denman and Cardero Sts. It is zoned for 980 units, of which 230 units must be rental. Of the remaining 750 units, a minimum of 13% must be "provided through government funded programs, targeted for core-need households or through such other non-market housing programs or initiatives as Council may approve". This would equate to 98 units if all 750 condominium units are developed. To date, 165 rental units and 341 condominium units have been completed and 76 condominiums are under construction.

On Sept. 13, 2001, Council approved amendments to the Bayshore Gardens CD-1, By-law No. 7232, 1601-1650 Bayshore Drive (CD-1 # 321), that resulted in a consolidation of the non-market housing component on a site located on the southwest corner of Cardero St. and Bayshore Dr. The location is noted on Appendix A. The non-market housing component consists of an air-space parcel comprising 84,700 gross sq. ft. which would occupy floors 2 through 7 inclusive (6 floors) of a larger project. The larger project consists of:
· underground parking to serve the Bayshore Hotel across Bayshore Drive to the north as well as the retail and residential uses above;
· retail and residential lobbies on the first floor;
· the non-market housing above that;
· a childcare centre on the south half of the 8th floor; and
· a condominium tower on floors 8 through 25 on the north half of the project.

The City holds an 80-year Option to Purchase for the Bayshore Garden's non-market housing component. The Option requires Bayshore Gardens to develop the non-market housing at 93% of the maximum budget that would be allowed under senior government housing programs. The complexity of the project requires that the non-market housing be built at the same time as the rest of the project. To avoid holding up the development of the whole project, and at the same time provide the City with sufficient notice so that a sponsor and viable proposal could be put together for the non-market component, Bayshore Gardensagreed to give the City one years notice of its intent to proceed with the larger condominium plus project. Bayshore Gardens advised the City by a letter dated May 31, 2002, that it wished to proceed with the larger project and asked the City to commence the process of selecting a non-profit sponsor to partner with Bayshore Gardens.

PROPOSAL CALL

A two stage proposal call process was undertaken. In the first stage, letters were sent on July 3, 2002, to twenty-seven non-profit societies asking if they would be interested in partnering in the Bayshore Gardens project, and inviting expressions of interest if they were. Eight non-profit societies responded. Their proposals were evaluated and each was interviewed. In the second stage, on September 3, 2002, four of the eight were invited to submit proposals for the development of the non-market housing with the proposals due on October 3, 2002. Three proposals were received.

The proposal call focussed on two key criteria: funding and program.

Funding

With Bayshore Gardens providing the non-market housing at 93% of the maximum budget allowed under senior government housing programs, substantial equity is being provided. Effectively the site is being provided at a quarter to a third of what its market value would be. For the non-market housing to be viable, however, additional funding is required. With the end of the Province's HOMES BC program early this year, the source of funding for most of the non-market housing developed in the City over the past decade is no longer available.

The Province is in the process of introducing a new non-market housing program, Supported Living BC, which will primarily fund housing plus support services for the frail elderly. There will be limited Supported Living BC funding available in Vancouver, and competition for what funding is available will be intense. The Bayshore Gardens non-market housing at 100 units is likely too large to be wholly funded through Supported Living BC. Partial funding may be available but the project, if it is to proceed, needs to be viable without Supported Living BC funding. The proposal call sought non-profit sponsors who either had equity to invest in the project or had the capacity to raise the necessary equity, so that the project could proceed with out public funding.

Program

The Bayshore Gardens CD-1 does not designate the non-market housing either for families or for households without children. The 84,700 gross sq. ft. of building allocated to non-market housing can accommodate a mix of unit types that could range from all family to all childless households. The proposal call did not state a preference as to household and dwelling type, and left it up to the proponents to specify their preferred building program.
The proposal call did emphasize the importance of affordability. It acknowledged that in the absence of senior government funding it may not be possible to generate much affordability initially, but that it was important that affordability grow overtime so that the City's objective of accommodating core-need households in Bayshore Gardens was realized. To achieve long term affordability, the proposal call restricted proponents to non-profit housing societies.

A copy of the Sept. 3 proposal call letter is on file with the City Clerk.

SUBMISSIONS

Three non-profit housing societies submitted proposals:
· Water's Edge Seniors Housing Co-operative,
· The Zajac Foundation in partnership with Vancouver Resource Society, and
· Performing Arts Lodge Vancouver.
Copies of the submissions are on file with the City Clerks. The proposals have been reviewed and each proponent interviewed.

Water's Edge Seniors Housing Co-operative

Water's Edge Seniors Housing Co-operative has its roots in the Coal Harbour Housing Co-operative which is a family non-market housing project developed at Hastings and Cardero in 1996. Members from that co-op were active supporters of Bayshore Gardens' non-market housing during the rezoning process that led to the September 2001 amendments to the Bayshore Gardens CD-1. Since then, Water's Edge has grown to include members from beyond the Coal Harbour neighbourhoods.

Water's Edge Seniors Housing Co-operative is proposing to develop 119 units (107 1-bedroom units and 12 2-bedroom units) for independent seniors. To ensure aging in place, the building would be fully accessible and adaptable. Social and cultural activities would be promoted, and off-site support services would be co-ordinated e.g. meals on wheels, homecare, so expensive on-site services could be avoided and low and modest income seniors accommodated. Water's Edge also intends to involve the community throughvolunteers, linkage to the proposed childcare on the roof of the building, and participation in the Co-operative Automobile Network (CAN).

The project would be structured as an equity housing co-operative, with members expected to provide equity through the sale of homes etc. The Co-op proposes to fund raise from all levels of government, the business community, and foundations to reduce the members' equity requirement and thereby generate affordability, for example they would like the City to contribute $1.2 million. In addition, the members' equity would not appreciate, e.g. if a member provided $100,000 in equity when they `purchased' a unit, that member would receive $100,000 when they moved out. The relative value of the equity contribution would decline as the value of the homes increased through inflation, and as a result additional affordability would be created.

Of the $15.6 million capital cost of the project, they would like to raise $11.8 million provided through equity raised through fund raising or provided by members. The minimum equity they would need for the project to be viable would be $3.8 million. Members would share the cost of a mortgage for whatever financing they need beyond the equity they will raise or provide, and share the cost of operating the completed building. The preliminary capital and operating budgets provided indicate that Water's Edge can `sell' the units for 60-65% of the cost of a comparable freehold market unit. The cost of the units would range from $130,000 to $180,000. They believe that they will be able to make available a third of the units to core-need seniors by having higher income residents pay a premium on the cost of their units, and cross subsidizing the core-need units.

The City usually buys non-market housing sites and leases them to non-profit sponsors for 60 years. This would be acceptable to Water's Edge but they would like the City to consider contributing the site to the Co-operative Land Trust, so that it is secured for affordable housing in perpetuity and over time creates equity which the Land Trust can reinvest in affordable housing.

The Zajac Foundation and Vancouver Resource Society

The Zajac Foundation is a well established raiser and provider of funds to charitable causes, and has developed non-market housing projects of its own, in particular the 36 unit Norgate House in North Vancouver which provides housing for seniors and the disabled. Vancouver Resource Society (VRS) is a well established provider of services and housing to the physically disabled. The have developed and manage non-market housing, in particular the 39 unit Blair Court and units in Bloomfield Gardens. They are currently partners in the ownership and operation of the office building in which their offices are co-located.

Zajac and VRS want to develop 119 units (21 studio units, 77 1-bedroom units and 21 2-bedroom units) of supported housing for seniors (congregate housing in terms of the City's Zoning and Development By-law; a text amendment to the Bayshore Gardens CD-1 to include congregate housing as a permitted use may be required). Services would be provided on site e.g. meal service, housekeeping and health care. While the details of the partnership have yet to worked out, the concept is for Zajac to manage the housing and VRS to manage the services.

The services would be provided on a cost-recovery basis and would be optional. Some residents may not want or need any services, others may need a higher level of services. The services provided would evolve over time in response to the changing needs of the residents. Funding through the Vancouver Coastal Health Authority has not been assumed, and the cost of services could range up to $2000/month which would be modest for supported living. The housing would be rented at market ($2/sq. ft./month on average - $1200 for a 1-bedroom apartment). This would generate sufficient positive cash flow so that an estimated 34 (29%) of the units could be initially rented to core-need seniors, and this number would increase over time; 90% of the positive cash flow would be used to reduce the housing costs for the core-need units.

Zajac and VRS would each invest equity in the project. They have advice from mortgage brokers that equity equal to 5% of the $15.1 million estimated cost of the project should be sufficient, because of the equity implied by Bayshore Gardens obligation to build the project at 93% of the maximum allowed budget. They would be willing to provide 10% equity ($1.6 million) through the sale of property they jointly own and from cash on hand to ensure the project's viability. They would be able to have the equity in place by the end of April 2003. Both Zajac and VRS have active fund raising campaigns or other income generating activities (Zajac raised $750,000 in 2002 and VRS $650,000). They would contribute $100,000 annually from their fundraising activities to the project.

Zajac and VRS would like to buy the City's freehold interest in the site, with payments to be made over the 5-7 years following the completion of the project. As well, Zajac has an interest in fostering intergenerational community, and would be interested in developing a relationship with the operator of the childcare centre to be developed on the roof of the non-market housing.

Performing Arts Lodge Vancouver

Performing Arts Lodge Vancouver (PAL) is a non-profit society set up to provide affordable housing to seniors with priority to former workers in the performing arts industry (theatre, TV, movies, etc.). They estimate there are 16,000 employed in the performing arts industry ranging from actors and directors to ushers and set carpenters. Work in the performing artsis often erratic and contractual, so many of those in the industry are without pensions or much in the way of savings. Once retired, many find themselves in financial difficulty. PAL Vancouver is modelled on a 205 unit PAL project developed in Toronto. PAL would give priority to those once or still employed in the performing arts, but the project would be open to all.

PAL proposes to build 111 housing units (99 1-bedroom units, 12 2-bedroom units) for independent seniors. Services would not be provided on site but would be brought in as required to meet the needs of residents aging in place. Substantial amenity space would be provided, as PAL, and an associated non-profit society, Supporting Cast, want to create opportunities to sustain the social and cultural life of the residents.

PAL proposes to raise a substantial amount of equity to ensure that initial affordability is achieved. The total capital cost of the project is estimated at $15.9 million and PAL intends on raising $5.8 million in equity; $2.3 million is required to ensure that the project is viable at market rents, and $3.5 million to reduce the mortgage so that 60 units are affordable to core-need seniors, and so another 30 could pay a low end of market rent ($980/month for a one-bedroom apartment). PAL would initiate an aggressive fund raising campaign using the talents and drawing power of the many successful actors and patrons of the arts that are supporting PAL. PAL believes it can raise $2.5 million in equity by the end of January 2003 and have the remainder in place by the end of April.

PAL wants to buy the City's freehold interest in the site, and would raise additional equity to do that prior to construction. PAL believes that freehold will make it easier to raise funds. They are also interested in buying the 5,000 sq. ft. retail component on the ground floor from Bayshore Gardens to create a small cultural precinct of galleries, art shops and similar enterprises, and also want to develop a performing arts relationship with the roof top childcare, or if the childcare was no longer a City priority, converting it to a senior centre with a cultural focus. PAL would only pursue these larger ambitions once the necessary equity has been raised for the non-market housing.

EVALUATION

All three proposals have merit. The Water's Edge Seniors Housing Co-operative is the most community based. It has the flexibility that it could proceed whether or not it is successful in raising funds through donations, grants or other sources. If it cannot raise the necessary equity through fundraising etc., they can raise it by selling prepaid leases of units in the building. Of the three proposals, however, it has the least capacity to raise funds other than through the sale of prepaid leases. Public funding for the project is not readily available (a $1.2 million grant from the City is unlikely given competing demands on the City'sAffordable Housing Fund). Hence, co-op members are likely going to have to bring substantial equity to the project, which will result in a project that is more affordable home ownership than non-profit rental.

The Zajac/VRS partnership is an established partnership of two societies who have experience in the development and operation of non-market housing and the ability to raise capital. Of the three proponents, they have the most cash and collateral immediately available. However, of the three proposals they would invest the least amount of equity initially. All the proponents noted that the equity implicit in Bayshore Gardens' obligation to develop the project at 93% of the allowable maximum budgets and the high rents achievable in Coal Harbour means that financing might be possible with little or no additional equity, though little affordability would be achieved initially. However, lenders' requirements increase if less equity is being provided, and the 10% equity that Zajac/VRS propose may result in requirements with which the City is not comfortable e.g. the non-market housing status of the project could be at risk if there is a default. As well, the Zajac/VRS equity depends on the sale of property and may not be in place until the end of April.

The affordability proposed by Zajac/VRS is focussed on the housing, with the rent for 29% of the units set at levels affordable to core-need households. Subsidies are not available for the services (meal service, housekeeping, health) proposed, and the result may be that the rent is affordable to core-need households but the services are not, even if they are provided on a cost recovery basis. The Zajac/VRS proposal combines on-site services and housing which would allow the greatest potential for aging in place but does mean that affordability must be provided on both the housing and service dimensions which will be difficult in the current fiscal climate.

The PAL proposal is the most ambitious in the equity it proposes to invest and the affordability it proposes to achieve. It proposes to raise almost $6 million in equity and to provide over half the units to core-need households. PAL has no assets or reserves to draw on and must raise all the equity through fund raising, grants, etc. It has, however, put together a board of directors and supporting patrons with the capacity to raise substantial funds, and PAL has committed that they can raise the necessary funds to ensure financing for the project, $2.5 million by the end of January 2003 and a total $5 million by the end of April. The City would know by the end of January 2003 if PAL was capable of proceeding with the project, so would have time to consider alternatives if PAL was not successful in its fund raising. These are ambitious commitments, but PAL believes they are achievable. These commitments, however, are dependent on PAL acquiring the City's freehold interest in the site.

It is recommended that PAL Vancouver be approved as the sponsor of the Bayshore Gardens non-market housing component on condition:
· that PAL Vancouver raise $2.5 million in equity by the end of January 2003;
· that PAL Vancouver raise a total of $5 million in equity by the end of April 2003;
· that the City of Vancouver reserves the right to replace PAL as the sponsor of the project if they have not achieved these equity targets;
· that the City of Vancouver is not expected to contribute any equity to the project, but if it chooses to, the City's equity will be in addition to the equity commitments that PAL must achieve by the end of January 2003 and the end of April 2003;
· that the Director of the Housing Centre, PAL Vancouver, and Bayshore Gardens Development Limited Partnership negotiate a Memorandum of Understanding setting out the program for the non-market housing component of Bayshore Gardens, the capital cost of the non-market housing component, payment structure, legal arrangements and the other details related to the development of the non-market housing component for report back to Council in May or June 2003;
· that the Director of the Housing Centre and PAL Vancouver negotiate a Memorandum of Understanding which will set out the terms of the Housing Agreement to be placed on title for the non-market housing component to secure the City's affordabilty objectives for the Bayshore Gardens non-market housing including income mix, determination of rents, the criteria for selecting residents, the services to be provided, etc., for report back to Council in May or June 2003; and
· that no legal rights or obligations will arise or be created for the City of Vancouver, Bayshore Gardens Development Limited Partnership or PAL Vancouver until City Council gives final approval for the project and all legal documentation is prepared and fully executed on terms and conditions to the satisfaction of the City's Director of Legal Services.

PROCESS

At this stage, all that is proposed is the selection of a sponsor to partner with the City and Bayshore Gardens Development Limited Partnership in the development of the non-market housing component of Bayshore Gardens. Fund raising may be PAL's primary focus for the next few months, but there are many other issues to be worked out before final approval of the project can be considered. These include the detailed design of the project, the capital budget for the project, the operating budget for the project, the review of existing legal charges, putting the financing in place, the terms of the Housing Agreement to secure the City's affordability objectives, the potential roles of BC Housing and CMHC in the financing of the project and its development, developing the resident selection criteria, relationship to the childcare and retail, etc.

The selection of the non-profit society is just the first of many steps that must be taken before the project can proceed. The intent of all parties is to address these issues by the summer of 2003 so that Council can consider the full package and give final approval to the project. PAL Vancouver and Bayshore Gardens will be expending funds throughout this period, so it is expected that as long as the project delivers PAL's commitments of sufficient equity to achieve the required affordability, that the project will proceed. It is, however, subject to report back to Council and to Council's final approval.

CITY'S FREEHOLD INTEREST

PAL Vancouver, like the other proponents, would like to acquire the City's freehold interest in the property. Under the City's Option to Purchase, the City would pay 25% of the option price, $30/buildable sq. ft. inflated by the Vancouver CPI, for the site, currently approximately $780,000. Bayshore Gardens would receive the remaining 75%, or what portion of that they can achieve, from the 93% of the maximum allowable capital budget for the project. The site would be leased to the non-profit housing sponsor and after 60 years the project would revert to the City.

It is recommended that the City allow PAL Vancouver to buy the City's interest in the freehold, by taking over the City's obligation to pay 25% of the option price. The Bayshore Gardens' non-market housing component consists of an air-space parcel locked into a much larger building. The larger building should last much longer than the standard 60-year lease for non-market housing, and the only use for the air-space parcel is to continue as housing, and under the current zoning for non-market housing. This site does not provide the City with the opportunity provided by other free-standing non-market buildings to achieve multiple City objectives when the 60-year lease expires. As the site's long term future is restricted to housing, the City can secure its housing objectives, in particular its affordability objectives, and realize on the value implicit in the site's designation for non-market housing, through a Housing Agreement to be registered on title. The terms of the Housing Agreement will be reported to Council in May or June 2003 once PAL Vancouver has raised its necessary equity, has its financing in place, and seeks final Council approval for the project.

CONCLUSION

A non-profit housing society to sponsor the development of the non-market housing component in Bayshore Gardens needs to be selected as the larger project of which the non-market housing is a part will be ready to proceed next year. A proposal call has been undertaken to find a sponsor capable of providing or generating the necessary equity to develop the non-market housing without public funding, which is not likely to be available, and achieve the City's affordable housing objectives for Bayshore Gardens. Three submissions were received, and it is recommended that Performing Arts Lodge (PAL)Vancouver be selected as sponsor. Much work needs to be done before Council can consider final approval for the project. Assuming PAL Vancouver can raise the necessary equity in the time frame proposed, staff would report to Council on the details of the project and to seek final approval in May or June 2003.

 

APPENDIX A

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PE021107.htm

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