ADMINISTRATIVE REPORT
Date: June 10, 2003
Author/Local: C. Gray/7207
RTS No. 03301
CC File No. 5104/1203
Meeting Date: June 24, 2003
TO: |
Vancouver City Council |
FROM: |
Director of the Housing Centre |
SUBJECT: |
Lease Amendment for Jubilee House: 508 Helmcken Street |
RECOMMENDATION
THAT the lease with the 127 Society for Housing for Jubilee House (508 Helmcken St.) be amended to increase the term from 41 to 61 years, with payment for the additional 20 years to be due on year 46 of the lease either as a prepayment for the 20 years or as annual payments paid in monthly installments, and
THAT the Director of Legal Services be authorized to execute the necessary documentation on the City's behalf on terms and conditions to her satisfaction.
GENERAL MANAGER'S COMMENTS
The General Manager of Community Services RECOMMENDS approval of the foregoing.
COUNCIL POLICY
The City purchases and leases sites for non-market housing, with the market value of a 60 year lease deemed to equal 75% of a site's freehold value, and the market value of a 40 year lease deemed to equal 50% of its freehold value.
The City's affordable housing policy for Downtown South is to replace any low-income housing that may be lost to redevelopment or conversion.
PURPOSE
This report seeks Council approval to amend the lease for Jubilee House to extend the term from 41 to 61 years, and to require payment of the additional 20 year term on year 46 of the amended lease term.
BACKGROUND
Jubilee House is an 87 unit non-market housing project built in 1986. It is located at Helmcken and Richards (508 Helmcken St. as noted on Figure 1). The 15,000 sq. ft. site was purchased by the City for $1,200,000 in May 1984 and leased to the 127 Society for Housing for 41 years commencing August 20, 1986, with a prepaid rent of $520,000. The City provided a grant from the Affordable Housing Fund of $380,000. The project's operations are subsidized by CMHC and the project primarily accommodates low-income singles.
The legal description of the site is:
· PID: 015-482-073, Lot 34, Block 94, District Lot 541,
· PID: 015-482-081, Lot 35, Block 94, District Lot 541,
· PID: 015-482-138, Lot 36, Block 94, District Lot 541,
· PID: 015-482-162, Lot 37, Block 94, District Lot 541, and
· PID: 015-482-260, Lot 38, Block 94, District Lot 541.
Figure 1
LEASE AMENDMENTS
The 127 Society for Housing and CMHC have asked that the lease be amended to extend the term from the current 41 years to 61 years. The lease for Jubilee House includes an option to renew for 20 years which can be exercised when the current lease term expires in 2026, but CMHC and the 127 Society for Housing are asking that the lease be extended now.
Jubilee House is suffering from water damage due to water pipe leaks and envelope failure. The total cost of the repairs is $1,500,000. The work to stabilize the building has been completed, but additional work to sustain it is required. CMHC funds repairs to non-market housing suffering from leaks and envelope failure through a second mortgage which is payable once the current mortgage expires in 2021. A ten year term is required to pay off the second mortgage, which cannot be accommodated within the current lease term which expires in 2026.
Jubilee House accommodates low-income singles, most whom pay the shelter component of welfare or the basic old age security. It accommodates a much higher percentage of core-need singles than the minimum required by the CMHC program under which it was funded, and the project is not generating excess revenues over operating costs. The rents expected from Jubilee House in 2026 would probably not be sufficient to cover both the payments for CMHC's second mortgage and the payments required to the City for the additional lease term.
It is proposed that the rent for the additional 20 years be due and payable on the 46th anniversary of the extended lease term (2031), by which time the CMHC's second mortgage will have been paid off. The full amount could be prepaid at that time or paid annually in monthly installments. The value of the 20 year extension will be valued as of the 46th anniversary. It would be based on the market value of the land as occupied by a building of 4,184 M², which is the size of Jubilee House but assuming a further 20 (not 15) years of occupancy. This is the same basis set out in the option to renew contained in the lease now. The proposed lease amendments would generate the same return to the City as the current option to renew.
The renovation work that has or will be done should extend the useful life of the building beyond the current lease term, and an extension is reasonable. Jubilee House accommodates low income singles and is an important affordable housing resource in Downtown South.
If Council approves the amendments to the lease:
· the Option to Renew (Article 28) will be deleted from the lease,
· the lease would terminate in 2046 instead of 2026,
· the Basic Rent (Article 2.01) will be amended to require that payment for the 20 years of additional lease term (2026 to 2046) to be paid in 2031, either in full or annually through monthly installments, as the lessee may choose, and
· the ground rent for 2026 to 2046 will be based on the market value of the site in 2031 with a potential for 4,184 M² of residential floor space.
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