Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Vancouver City Council

FROM:

Director of the Housing Centre

SUBJECT:

Lease Terms and Other Arrangements for Development of a Non-Market Housing Project and a Social Service Centre on the City-Owned 1200 Block Seymour Street Site

 

RECOMMENDATION

GENERAL MANAGER’S COMMENTS

COUNCIL POLICY

Council’s non-market housing priorities are for low and moderate income families with children, seniors, low income singles living in Downtown residential hotels and rooming houses, and people with mental or physical disabilities.

Council’s policy is to maintain, upgrade and increase the stock of low-income housing in the Downtown and to maintain the low-income stock for singles in Downtown South at 1991 levels.

Council’s policy is to acquire land for non-market housing development and to lease it to non-profit community groups for 60 years at a prepaid ground rent of 75% of freehold market value.

PURPOSE

The purpose of this report is to seek Council approval of:

1. Terms of the ground lease to Affordable for the Non-Market Housing Project;
2. Terms of the sublease to Coast for the Social Service Centre;
3. The density bonus for the Social Service Centre;
4. The soils remediation budget for the Site; and,
5. Authority to enter into reciprocal construction easements for the Site and an access easement and footings easement for the neighbour to the north.

BACKGROUND

The City purchased the 1200 Block Seymour Street site in 1996 for $1,705,000. The Site was purchased for the development of a non-market housing project for low-income singles living in residential hotels and rooming houses in Downtown South.

In 1997, Council approved the 1997 City/Provincial Non-Market Housing Partnership which included leasing the Site to a non-profit housing sponsor for 60 years at nominal rent. The Property Endowment Fund (PEF) was to be reimbursed for the forgone prepaid ground rent of $1,278,750 through a transfer from the Downtown South Development Levy Reserve. Forty-five percent (45%) of development levies from Downtown South are designated for replacing low-income housing that may be lost there.

The 1997 report included an outline of the proposed project:

· 100 units ranging in size from 275 to 320 sf. for low-income singles living in Downtown South SRO hotels to be operated by the Affordable Housing Society;
· 15 units designated to Coast Foundation Society for single people with mental health problems;
· 15 units designated to McLaren Housing Society for single people who are HIV positive or suffering from AIDS; and,
· A ground floor social service use.

Since 1991, there has been a net loss of 132 low-income singles housing units in Downtown South. City policy is to replace these loses on a one-for-one basis. The 136 units proposed for this non-market housing project will achieve this target.

THE SITE

The Site is 13,481 square feet in area with a frontage on Seymour Street of 112 feet. Zoned Downtown District, Subarea “L”, the Site can accommodate a maximum density of 5.0 FSR for social housing development. The zoning allows a density bonus for any public, social or recreational facility, if justified.

THE BUILDING

The building is comprised of a Non-Market Housing Project and a Social Service Centre.

The Non-Market Housing Project to be operated by the Affordable Housing Non-Profit Rental Association (“Affordable”), consists of 136 dwelling units in a twelve storey apartment tower. The majority of units (117) are 340 square foot studio dwelling units designed for single person occupancy. Nine of the units are larger 400 square foot studio units designed to accommodate a single person in a wheelchair. And, ten of the units are one-bedroom dwelling units of about 675 square feet designed for couples. Thirty (30) of the units will be allocated to Coast Foundation Society for occupancy by mental health clients supported by Coast. Twenty (20) of the units will be allocated to McLaren Housing Society for occupancy by HIV/AIDS clients supported by McLaren. A total of 2,700 square feet of residential amenity area is provided on the ground, second and twelfth stories of the project. Funding for the Non-Market Housing Project is from B.C. Housing (121 units) and the Vancouver/Richmond Health Board (15 units).

The Social Service Centre to be operated by Coast Foundation Society (1974) (“Coast”) as a drop-in centre for mental health clients living in Downtown South, contains 10,877 square feet on the ground and second floors of the building. The Centre consists of a kitchen and dining room, social lounge, multi-purpose room, library, computer room, games room and arts room. Some office space is provided. Funding for the Centre is from Coast (a capital contribution of at least $500,000) and the Vancouver/Richmond Health Board (an annual operating grant of $122,000 in the first year, to cover the Centre’s share of the building mortgage and common building expenses, for at least 10 years).

The building includes one-level of shared underground parking which contains 16 stalls. A loading bay is located off the lane. The entrance to the parking garage is also off the lane.
Appendix A, the Letter of Understanding between the City and its development partners, provides details. Appendix B shows an elevation view of the building and a site plan.

LEASE TERMS

The Site will be leased to Affordable in accordance with the terms and conditions agreed to between the City and B.C. Housing for social housing development on City-owned land as set out in Standard Charge Terms ST941002 registered in the Land Title Office, plus other terms and conditions as described in the Letter of Understanding (Appendix A).

General terms for the City’s ground lease to Affordable are:

1. The ground lease will be for a term of 60 years.
2. Ground rent for the 60-year term will be nominal.
3. Affordable will pay rent-in-lieu of taxes.
4. The ground lease will begin on the earlier of the date the lease is executed by all of the parties or 180 days from the date of Council approval of the lease terms.
5. The lease may be terminated if construction has not begun within 6 months, or if construction is not substantially completed within 24 months, from the date of commencement of the lease.
6. Affordable will sublease the Social Service Centre to Coast for a term of 60 years less a day at nominal ground rent for the purpose of operating a drop-in centre for people with mental health problems in Downtown South.

Affordable’s sublease of the Social Service Centre to Coast for operation of a drop-in centre for people with mental health problems in Downtown South, will be in accordance with Affordable’s standard commercial lease, including the following additional or modified terms:

1. Coast’s sublease of the Social Service Centre will commence on the same day that the ground lease to Affordable begins.
2. The term of the sublease will be 60 years less a day.
3. Coast will pay Affordable the Centre’s share of building mortgage and common building expenses, including general building maintenance and rent-in-lieu of taxes.
4. Coast will provide a capital contribution toward construction of the Social Service Centre of at least $500,000.
5. Coast may prepay the Centre’s share of the building mortgage should Coast raise additional capital contributions towards the Centre.
6. Coast may assign or sublease all or part of the Centre to another non-profit society or government agency on the same terms and conditions as its sublease from Affordable, provided that all uses in the Centre are consistent with the social service development permit for the Centre and are compatible with the Non-Market Housing Project above.
7. Should Coast default in its sublease to Affordable in excess of 90 days, Affordable has the right to assign Coast’s sublease to the City and require the City cure all of Coast’s outstanding sublease obligations to Affordable, any time during the 35-year amortization period of the building mortgage.

Point 7 requires elaboration. Affordable has requested the City guarantee that portion of the building mortgage and common building expenses attributable to the Social Service Centre. In the first year of operation, it is estimated that the Centre’s share of the building mortgage ($6,000) and common building expenses ($200) would be about $6,200 per month or about $7.00 per square foot per annum. The Health Board has committed to paying these monthly costs for the Centre for at least 10 years. While this is a major commitment from the Board, the building mortgage is amortized over 35 years, and 25 years will be remaining at the end of the 10th year of Health Board funding. And, common operating expenses will be on-going. But the risk to the City is minimal.

There are several contingencies in place to ensure that, even if Health Board funding is terminated after the first 10 years, the drop-in centre will continue to be used for social service purposes on a non-profit basis. Coast can assign or sublease the drop-in centre to other non-profit organizations or government agencies delivering social services to Downtown South residents. Even if the worst comes to pass, and Affordable requires the City take on the Centre’s share of building mortgage and common building expenses, the Manager of Real Estate Services advises that there are many non-profit organizations and/or government agencies that could afford to rent the space at $7.00 per square foot per annum and cover all of the City’s costs. In short, the chances of the City being assigned the sublease in 10 years are minimal and if, by chance, the sublease is assigned to the City, there is little likelihood that all of the City’s costs would not be covered.

LEASE PRIOR-TO CONDITIONS

In order to ensure that all necessary arrangements for the development, financing, operation and funding of the Non-Market Housing Project and Social Service Centre proposed for the Site are in place, the following conditions must be met to the satisfaction of the Director of the Housing Centre, prior-to execution of the ground lease to Affordable:

· A loan commitment from B.C. Housing to Affordable to cover the construction cost of the building, less Coast’s capital contribution toward construction of the Social Service Centre, which is estimated to be $11,743,736 if Coast’s capital contribution is $500,000.
· An irrevocable letter of credit, or other similar security to the satisfaction of the Director of the Housing Centre, from Coast in favour of Affordable for at least $500,000 which is Coast’s minimum capital contribution toward the construction cost of the Social Service Centre.
· An executed Homes BC operating agreement between B.C. Housing and Affordable, whereby B.C. Housing undertakes to provide Affordable a monthly subsidy for 121 of the 136 units in the Social Housing Project for 35 years, estimated in the first year of operation to be $361 per unit per month or $524,172 per annum.
· A letter from the Health Board to Affordable whereby the Health Board undertakes to provide Affordable a monthly subsidy for 15 of the 136 units in the Social Housing Project for 35 years, estimated in the first year of operation to be $361 per unit per month or $64,980 per annum.
· A letter from the Health Board to Coast whereby the Health Board undertakes to pay Coast in a timely manner sufficient funds to cover the Centre’s share of the mortgage and common operating expenses for the building, estimated in the first year of operation to be $122,000, for a minimum of 10 consecutive years.

DENSITY BONUS

The Site is located in the Downtown District, Subarea “L”, which allows a maximum FSR of 5.0 where two-thirds of the floor space ratio is comprised of social housing. At an FSR of 5.0, the Site generates a maximum floor area of 67,200 square feet. Almost all of this (99%) is taken up by social housing. In order to allow the Social Service Centre to be built in addition to the social housing, a density bonus of 10,877 sf. or 0.81 FSR was sought under Section 6, II of the Downtown District ODP which states that:

At its meeting of June 29, 1998, the Development Permit Board approved the density bonus required to allow incorporating the Social Service Centre into a portion of the ground and second floors of the Social Housing Project. However, until Council approves the decision of the Board, the development permit for the project cannot be issued. Recommendation “D” seeks this approval.

SOILS REMEDIATION BUDGET

Most downtown development sites have some degree of environmental contamination which requires soils remediation. The 1200 Block Seymour Street site is no exception. The purchaseprice of $1,705,000 ($26 per buildable), anticipated that some remediation costs would be incurred.

After a soils survey has been undertaken and a remediation plan prepared, the City’s environmental consultant now estimates that the actual cost of soils remediation will be in the order of $82,000. This includes soils monitoring during excavation, premium dump fees for contaminated soils, Ministry of Environmental (MOE) Certificate of Compliance fees, plus a 10% contingency.

The Letter of Understanding between the City and its development partners (Appendix A), sets out the business arrangement between the City and B.C. Housing concerning the sharing of soils remediation costs for the project. B.C. Housing will pick up the first $25,000, with the City and B.C. Housing splitting any additional amount on a 50/50 basis. For example, if the maximum amount estimated ($82,000) is actually spent, B.C. Housing cost recoveries would total $53,500, and the net cost to the City for soils remediation would be $28,500. Further, should total costs reach $125,000, the City and B.C. Housing may consider whether to discontinue remediation work and abandon the site.

Since actual soils remediation costs will be known and B.C. Housing recoveries will have been received, by the time prepaid lease rent is due, it is proposed that 75% of soils remediation costs net of B.C. Housing cost recoveries ($21,375), be added to the prepaid lease rent for the Project. Recommendation “E” seeks Council approval of a total budget of $82,000 from the Property Endowment Fund (PEF) for soils remediation work. Recommendation “C” increases the amount of prepaid lease rent that will be transferred to the PEF when the project is completed, by 75% of the net cost of soils remediation ($21,375).

RECIPROCAL CONSTRUCTION EASEMENTS

Most Downtown construction projects require the developer to negotiate construction easements with adjacent and nearby property owners. These easements include shoring and underpinning agreements for excavation and foundation work, and overhead crane agreements for above ground construction. Many of these arrangements are reciprocal and no money changes hands. Others involve a combination of reciprocity and cash payment.

In the case of the 1200 Block Seymour Street project, all adjacent owners have agreed to reciprocal construction easements without payment.

However, the owner to the north of the Site also requests an easement for access through Affordable’s underground parking garage should the northerly owner redevelop its property at some time in the future. The Engineering Department supports this easement because the capacity of the neighbour’s underground parking garage would be significantly increased and access to both parking garages would be from a single ramp located off the lane. A knock-out wall would be installed in Affordable’s underground parking garage to facilitate future access. This would not add to Affordable’s construction cost. The northerly owner is only offering to pay its fair share of on-going maintenance costs based on its use of the ramp. The northerly owner also requests an easement for the footings of its existing building (the Canadian Hotel) to the extent that they encroach on the Site. The footings would be removed when the property is redeveloped. Under the circumstances, the northerly owner’s requirements are not unreasonable and accordingly staff recommend they be accepted.

CONCLUSION

This non-market housing project will serve 136 low-income singles now living in residential hotels and rooming houses in Downtown South. This includes about 50 single people who have mental health problems, are HIV-positive or suffering from AIDS, but capable of living independently with adequate and appropriate support provided on an outreach basis. In addition, the project includes a 10,877 sf. drop-in centre which will provide a wide range of social and recreational services to people with mental health problems living in Downtown South.

The site was acquired by the City in 1996. The project has a 1997 conditional allocation from B.C. Housing. Coast has raised $500,000 towards construction of the drop-in centre and may raise more before substantial completion. The Health Board has undertaken to provide a shelter subsidy for 15 units and provide Coast with $122,000 in the first year, for a minimum of 10 years, to cover the Centre’s share of the building mortgage and common building expenses. The development permit and building permit are issuable.

Recently, the Housing Centre’s 1998 Downtown low-income housing survey found that, in the last two years, Downtown South suffered the largest decline in low-income housing stock of all Downtown neighbourhoods. This project is part of the City’s on-going efforts to maintain the low-income housing stock for single people in Downtown South and, when completed, will replace all of the stock lost between 1991 and 1998.

The forgone prepaid ground rent of $1,278,750 is being paid to the Property Endowment Fund out of Downtown South Development Levies, 45% of which are allocated to replacing low-income housing lost in the area. Funds will be transferred 30 days from issuance of the occupancy permit for the project by the City.

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April 1, 1999

Affordable Housing
Suite 211
800 McBride Boulevard
New Westminster, B.C.
V3L 2B8

Attention: Bob Nicklin, General Manager

Dear Housing Partners:

RE: Seymour Street Social Housing Project and Social Service Centre - Letter of Understanding

Preamble

This is a Letter of Understanding (the “Letter”) between the City of Vancouver (the “City”), the B.C. Housing Management Commission (“B.C. Housing”), the Vancouver/Richmond Health Board (the “Health Board”), the Affordable Housing Non-Profit Rental Association (“Affordable”), the Coast Foundation Society (1974) (“Coast”), and the McLaren Housing Society (“McLaren”), collectively referred to as the “Partners”; regarding the development of a 136 unit Social Housing Project and a 11,000 square foot Social Service Centre, together referred to as the “Building”, on a City-owned site at 1221 and 1225 Seymour Street (the “Site”) in the Downtown South neighbourhood of Vancouver.

This Letter describes the Social Housing Project and the Social Service Centre to be built on the Site, and the arrangements between the Partners on constructing, financing, funding and operating the Building. By signing the Letter, the Partners acknowledge that they are aware of their respective roles and responsibilities, as well as the general terms and conditions under which the Building will be developed.

Notwithstanding anything contained in this Letter, the Partners agree that their responsibilities and obligations described herein are subject to acceptance and approval of the terms and conditions of the construction contract, the operating agreement, the ground lease, and the Social Service Centre sublease contemplated in this Letter.

Overview

The City is the owner of the Land and will lease it to Affordable for 60 years at nominal rent for development of the Social Housing Project and the Social Service Centre. B.C. Housing will provide interim financing to Affordable for constructing the Building. Affordable will operate the 136 unit Social Housing Project. A monthly shelter subsidy of $361 per unit per month will come to Affordable from B.C. Housing for 121 of the units. The same subsidy will come to Affordable from the Health Board for the remaining 15 units. Affordable will allocate 30 units to Coast and 20 units to McLaren for housing clients from their waiting lists. As a condition of being allocated units, Coast and McLaren will provide support to their clients living in the Social Housing Project on an outreach basis. Affordable will sublease the Social Service Centre to Coast for 60 years for the purpose of providing community health services to Downtown South residents. Coast will provide a capital contribution of at least $500,000 toward construction of the Centre. The remaining cost, estimated to be $1.2 million, will be rolled into the Building mortgage. Each month, Coast will pay Affordable the Centre’s share of the mortgage and common operating expenses for the Building. The Health Board agrees to pay to a contractor of health services approved by the Health Board, an annual operating grant for 10 consecutive years to cover the costs of the sublease for the Social Service Centre. Costs of the sublease relate to the Centre’s share of the mortgage and common operating expenses for the Building. In the first year, this payment will be made to Coast in an amount not to exceed $122,000. Payments will continue to Coast for the period, not to exceed ten years, in which Coast is the Contractor approved by the Health Board to provide services at this Site.

Purpose

This development has several objectives. The first is to provide replacement accommodation for single people of low income who have lost or are at risk of losing their SRO (Single Room Occupancy) accommodation in Downtown South due to the conversion or demolition of residential hotels and rooming houses in the area. The second objective is to provide support for single low-income people who have mental health problems, are HIV-positive or are suffering from AIDS, in order to enable them to live independently in a non-institutional residential setting. The final objective is to provide a drop-in centre with a wide range of services and amenities for people with mental health problems living in Downtown South.

Description

1. The Site

The Site, legally described as LOT “E”, BLOCK 103, DISTRICT LOT 541, PLAN LMP38156 (PID 024-161-071), is a 13,481 square foot site with a 112 foot frontage located on the West side of the 1200 Block Seymour Street in Downtown South. It was purchased by the City in 1996 at a cost of $1,705,000.

The Downtown District ODP (Official Development Plan) for Subarea “L”, the subarea in which the Site is located, allows a maximum FSR of 5.00 for all uses, provided that social housing comprises more than two-thirds of the site floor space ratio. Further, Section 6, Part II of the Downtown District ODP allows a density bonus for any public, social or recreational facility provided that the need for such a facility is demonstrated to the satisfaction of the Development Permit Board, subject to approval of Council.

2. The Building

The Building is as described in the plans submitted by Davidson Yuen Simpson Architects accompanying development permit application DE403244 stamped received by the City of Vancouver Planning Department, May 13, 1998. The Building is comprised of a residential tower above a two-storey social services centre, with a shared underground parking garage below. The capital cost of the Building, excluding the ground rent forgiven by the City, is estimated to be $12,243,736 (See Attachment 1).

3. The Social Housing Project

The Social Housing Project, to be operated by Affordable, includes the residential tower and the shared underground parking garage. The residential tower contains 136 dwelling units on the third to twelfth floors and 2,692 square feet of residential amenity on the ground, second and twelfth floors, of the Building. A typical dwelling is a studio unit designed for single person occupancy of 340 square feet. Fifty of the dwelling units will be allocated to Coast (30 units) and McLaren (20 units) for housing clients selected from their waiting lists. Eight of the 16 stalls in the shared underground parking garage will be allocated to the Social Housing Project. The construction cost of the Social Housing Project, excluding ground rent, is estimated to be $10,539,392 (See Attachment 1).

4. The Social Service Centre

The Social Service Centre is comprised of an entrance lobby and sitting room, kitchen and dining room, laundry and thrift shop on the ground floor; and, a games room, multi-purpose room and art room, as well as library and computer room, and offices on the second floor. In total, the Social Service Centre contains 10,877 square feet on the ground and second floors of the Building. The other eight of the 16 stalls in the underground parking garage will be allocated to the Social Service Centre. The construction cost of the Social Service Centre, excluding ground rent, is estimated to be $1,704,344 (See Attachment 1).

Terms and Conditions

1. Ground Lease to Affordable

The City will forgive Affordable the 60-year prepaid ground rent for the Site of $1,275,000.

In addition to being responsible for all of the operating expenses of the Social Housing Project, Affordable will be responsible for paying the mortgage and common operating expenses for the Building, including general maintenance and rent-in-lieu of taxes to the City.

The lease document will be Standard Charge Terms ST941002 registered in the Land Title Office, as well as additional or modified terms described in “Form E” appended to the Standard Charge Terms.

The term of the ground lease to Affordable will commence on the earlier of the date, the lease has been executed by all of the parties, or 180 days from the date of Council approval of lease terms, provided that, in either case, all of the prerequisite conditions described in this Letter have been met.

2. Social Service Centre Sublease to Coast

Affordable will pass on to Coast the benefit of the City’s forgiveness of ground rent for the Site, estimated on a prorata basis for the Social Service Centre to be worth $173,553.

Affordable will sublease the Social Service Centre, including exclusive use of eight stalls in the underground parking garage, to Coast for 60 years less a day for the purpose of delivering community health services to Downtown South residents. The sublease will be to the satisfaction of the City, B.C. Housing and the Health Board.

Affordable will charge Coast monthly for the Centre’s share of the Building mortgage. Coast’s share will be equal to the monthly principal and interest payment attributable to the construction cost of the Social Service Centre, including the cost of constructing the eight parking stalls, less Coast’s capital contribution (a minimum of $500,000). The net mortgage amount will be calculated when the final mortgage amount is determined and is estimated to be $1,204,344 (Attachment 1).

Coast may choose, prior to determination of the final mortgage amount, to increase its initial contribution toward the construction cost of the Centre, beyond the minimum $500,000 committed. Further, after determination of the final mortgage amount, Coast may choose to prepay all or a part of its share of the Building mortgage, at which time Coast’s share of the monthly Building mortgage payment will be reduced accordingly. When Coast’s share of the Building mortgage has been paid in full, either as a result of prepayment(s) or at the end of the 35-year amortization period, its share of the monthly Building mortgage payment will be zero.

Coast will pay Affordable monthly the Centre’s share of the common operating expenses for the Building. Common operating expenses will include general maintenance costs and rent-in-lieu of taxes to the City.

Affordable has requested the right to assign Coast’s sublease to the City, should Coast default in its sublease obligations to pay the Centre’s share of the mortgage and common operating expenses for the Building. Consequently, if Coast is in default of its sublease obligations in excess of 90 days, Affordable may assign Coast’s sublease to the City and require the City make good all of Coast’s outstanding sublease obligations to Affordable. Should the sublease be assigned to the City, Coast will have no claim against either Affordable or the City for repayment of Coast’s capital contributions toward the Centre. If the City takes the sublease, the City will explore every opportunity to ensure that the Centre continues to be used as a community service facility for Downtown South residents. Should this prove impossible to achieve, the City may rezone the Centre to allow commercial use of the space, subject to consultation with Affordable on compatibility of the proposed use with the Social Housing Project.

Alternatively, should Affordable for any reason default in its lease obligations to the City and, as a consequence, Affordable’s ground lease with the City be terminated, the City guarantees Coast’s sublease of the Social Service Centre.

While the Social Service Centre will be used initially for Coast’s Drop-In Centre for people with mental health problems living in Downtown South, it is recognized that the needs of local residents and the community services required to address their needs may change over time. Thus, the terms of the sublease should be flexible enough to respond to such changes.

Coast may assign or sublease all or part of the Centre to another non-profit society or government agency, on the same terms and conditions as its sublease, provided that all uses within the Centre are consistent with the social service centre zoning currently in place, and Affordable agrees that the uses proposed are compatible with the Social Housing Project.

Initially, the sublease will be cast as an option to sublease. Later, when construction has advanced sufficiently to allow it, the Social Service Centre will be surveyed and the sublease will reference the Survey Plan.

The sublease will commence on the date of commencement of the ground lease to Affordable. The sublease will terminate 60 years less one day from its date of commencement.

3. Operating Agreement with Coast and McLaren

Coast and McLaren will enter into separate operating agreements with Affordable on the management and operation of the 50 supported independent living units in the Social Housing Project allocated to Coast (30 units) and to McLaren (20 units). These arrangements will include, but not be limited to, tenant selection procedures and criteria, as well as the kind of support services which will be available to maintain their clients who are resident in the Project. These arrangements will be to the satisfaction of the City, B.C. Housing and the Health Board.

Funding Commitments

1. B.C. Housing

Soils Remediation. The B.C. Housing Project Capital Budget includes an allowance for soils remediation of $25,000. Over and above this amount, the soils remediation cost will be funded by B.C. Housing and the City on a 50/50 basis, but if the soils remediation cost exceeds $125,000, B.C. Housing and the City may consider whether to terminate remediation work and abandon the Site.

Loan Commitment. B.C. Housing will provide a loan commitment of up to $11,743,736 to Affordable to finance construction of the Building. This includes the construction cost of the Social Housing Project ($10,539,392) and the Social Service Centre ($1,204,344) net of Coast’s minimum capital contribution of $500,000.

Operating Agreement. B.C. Housing will enter into a Homes BC operating agreement with Affordable, whereby B.C. Housing will provide monthly subsidy payments to Affordable sufficient to ensure that Affordable can operate the 121 of the 136 units in the Housing Project on a breakeven basis for 60 years. B.C. Housing’s subsidy payments in the first year of operation are estimated to be approximately $361 per unit per month or $524,172 per year. This figure may be adjusted upwards or downwards depending on a final costing of the building at IAD.

2. Health Board

Supported Independent Living Units. The Health Board will pay Affordable or another non-profit society with an operating agreement with B.C. Housing on this Site, a monthly shelter subsidy for 15 of the 30 supported independent living units in the Social Housing Project allocated to Coast’s clients. In the initial year, this subsidy is estimated to be $361 per unit per month or a total annual subsidy payment of $64,980 per year. The Health Board agrees to pay Affordable or another non-profit society with an operating agreement with B.C. Housing on this Site, this shelter subsidy each month for a period not to exceed 35 years in total.

Social Service Centre. The Health Board agrees to pay to a contractor of health services approved by the Health Board, an annual operating grant for 10 consecutive years to cover the costs of the sublease for the Social Service Centre. Costs of the sublease relate to the Centre’s share of the mortgage and common operating expenses for the Building. In the first year, this payment will be made to Coast in an amount not to exceed $122,000. Payments will continue to Coast for the period, not to exceed ten years, in which Coast is the Contractor approved by the Health Board to provide services at this Site.

3. Coast

Capital Contribution. Coast undertakes to provide a minimum capital contribution of $500,000 towards the cost of constructing the Social Service Centre. Prior to the City’s execution of the ground lease to Affordable, Coast undertakes to provide an irrevocable letter of credit or other similar security in favour of Affordable and in a form acceptable to Affordable in the amount of at least $500,000.

Lease Rent and Common Building Expenses. Coast will pay Affordable each month the Centre’s share of the mortgage and common operating expenses for the Building.

Construction

1. Financing

Affordable will mortgage its leasehold interest in the land to B.C. Housing as security for an interim construction loan insured pursuant to the National Housing Act (the”Loan”). The Loan will equal the capital cost of the Social Housing Project ($10,539,392) and the net capital cost of the Social Service Centre less Coast’s minimum capital contribution of $500,000 ($1,204,344), as set out in the Preliminary Capital Cost Budget (Attachment 1).

2. Contract

Affordable will enter into a fixed-price contract with Van Maren Construction to construct the Building which includes both the Social Housing Project and the Social Service Centre. The contract will be in a form and for an amount approved by B.C. Housing.

3. Progress Draws

During construction of the Building, Affordable will pay construction draws toVan Maren and other creditors by drawing advances from the Loan. Coast’s portion of any progress draw is deemed to be equal to the amount of the progress draw multiplied by the capital cost of the Social Service Centre ($1,704,344) and divided by the capital cost of the Building ($12,243,736), or about 14% of each draw. After the portion of the Loan allocated to the Social Service Centre ($1,204,344) has been fully advanced, the remaining progress payments for the Social Service Centre, up to a maximum of $500,000, will be paid by Coast directly within 10 days of receiving a request for payment from Affordable. If Affordable does not receive payment within the time provided, Affordable may make a claim against Coast’s $500,000 irrevocable Letter of Credit.

Prior-to Conditions

Before executing the ground lease with Affordable, the City will require execution of Coast’s sublease of the Social Service Centre from Affordable and confirmation that all construction, financing, operating and funding arrangements necessary to ensure the successful completion and operation of the Building are in place. These include:

1. A loan commitment from B.C. Housing to Affordable to cover the construction cost of the Building up to a maximum of $11,743,736. This excludes the City’s forgiven 60-year prepaid ground rent for the Land and Coast’s minimum capital contribution of $500,000 toward the construction cost of the Social Service Centre.

2. An irrevocable letter of credit, or other similar security from Coast in favour of Affordable for at least $500,000 which is Coast’s minimum contribution toward construction of the Social Service Centre, to the satisfaction of Affordable, the City and B.C. Housing.
3. An executed Homes BC operating agreement between B.C. Housing and Affordable whereby B.C. Housing undertakes to provide Affordable a monthly subsidy estimated in the initial year of operation to be $361 per unit per month or $524,172 per annum for 121 of the 136 units in the Housing Project for 35 years. This undertaking to be to be satisfaction of the City.

4. A letter from the Health Board to Affordable whereby the Health Board undertakes to provide a monthly subsidy to Affordable or another non-profit society which has an operating agreement with B.C. Housing on the Site, for a period not to exceed 35 years. Themonthly subsidy is estimated in the initial year of operation to be $361 per unit per month or $64,980 per annum for 15 of the 136 units in the Social Housing Project. This undertaking to be to the satisfaction of B.C. Housing and the City.

5. A letter from the Health Board to the Partners whereby the Health Board undertakes to pay the contractor approved by the Health Board to deliver health services from the Social Service Centre on the Site, sufficient funds to cover the Centre’s share of the mortgage and common operating expenses for the Building, for a minimum of ten consecutive years. In the first year, the Health Board will pay Coast up to $122,000 for this purpose and will continue to pay Coast for the period, not to exceed 10 years, during which Coast is the Contractor approved by the Health Board to provide health services at the Site.

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If you agree with the terms and conditions of the Letter which apply to your role and responsibility as a Partner in developing, financing, operating or funding the project, please sign all six copies of the Letter and pass them on to the next Partner who has not yet signed. When all Partners have signed, the last Partner to sign the Letter will pass all six fully executed copies back to the City. The City will keep one copy of the Letter to append to the Council report and send each of the remaining five copies to the other Partners for their records.

All of the Partners acknowledge and understand that no legal rights or obligations are hereby created and none shall arise hereafter except upon execution of all legal documents by all of the Partners.

City of Vancouver: British Columbia Housing

_________________________ ___________________________
Cameron Gray, Peter Robinson,
Director of the Housing Centre Acting General Manager

Date:_____________________ Date:_______________________

Vancouver/Richmond Health Board: Affordable Housing

_________________________ ________________________
John Heath, Vice President, Bob Nicklin, General Manager

Corporate Services and Chief Date:____________________

Financial Officer

Date:_____________________

Coast Foundation Society (1974) McLaren Housing Society:

_____________________________ ___________________________
Darrell Burnham, Executive Director Ian McEown, Executive Director

Date:_________________________ Date:_______________________

Revised: April 1, 1999

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ag990504.htm

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