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ADMINISTRATIVE REPORT
Date: July 4, 1995
Dept. File No. D677
TO: Vancouver City Council
FROM: Manager of the Housing Centre
SUBJECT: Approval of Revised Lease Terms for
The Abbeyfield Project, 8264 Hudson Street
RECOMMENDATION
A. THAT Council approve the lease of the City-owned property at
8264 Hudson Street, legally described as Lots 24 and 25,
Block 9, District Lot 319, Plan 2277, to the Abbeyfield
Houses of Vancouver Society, for the purpose of operating
congregate housing for seniors, in accordance with the terms
and conditions described in this report and other terms to
the satisfaction of the Director of Legal Services;
B. THAT Council instruct the Director of Legal Services to draw
and execute the lease on behalf of the City; and,
C. THAT no legal rights or obligations are hereby created and
none shall arise hereafter except upon execution of the lease
by both parties.
GENERAL MANAGER'S COMMENTS
The General Manager of Community Services notes that the amended
lease terms reduce the amount of monthly rent owing in the short
term but extend the term during which rent will be collected from
25 years so the City achieves the same return on its investment as
originally expected. This will allow the society time to bring the
project to full occupancy and resolve the operational issues.
Staff will report back to Council if, over the next year, the
operational issues have not been resolved. Accordingly, the
General Manager of Community Services RECOMMENDS approval of A, B
and C, above.
COUNCIL POLICY
It is City housing policy to support the provision of congregate housing
for seniors.
Council has encouraged the provision of congregate housing for seniors
through an amendment to the Zoning and Development Bylaw which
designates this use a Special Needs Residential Facility.PURPOSE
This report seeks Council approval of revised lease terms.
BACKGROUND
In February 1990, Council approved purchase of the 8264 Hudson Street
property for development of an 18 unit seniors congregate housing
project to be operated by the Abbeyfield Houses of Vancouver Society.
The project includes 9 units in a renovated Heritage House and an
additional 9 units in a new Coach House to be built at the rear of the
property.
Construction began in the Fall of 1992 and was completed in the Summer
of 1993.
The project opened its doors to the first 7 residents on September 1,
1993.
ORIGINAL LEASE TERMS
The terms approved by Council in May 1992, included monthly lease rent
based on a CHMC Index-Linked Mortgage (ILM) formula. The formula
generated a monthly rent of $9,942 in the first year. Thereafter,
monthly rent increased over 25 years at about the rate of inflation.
Given the magnitude of monthly operating expenses and an average
occupancy rate since rent-up of 60%, the present ILM formula for
calculating rent is not practical.
Further, some flexibility in setting resident fees for the smaller, less
attractive units which have proven difficult to market to date, is
necessary to achieve full occupancy.
REVISED LEASE TERMS
Discussions with the Abbeyfield Board over the past few months, have
successfully concluded in the acceptance of revised lease terms which
are attached as Appendix A.
The revised terms include a provision for calculating the monthly rent
owed the City equal to 85% of project net income. In 1995, at full
occupancy, the revised rent formula would yield a monthly rent of $5,294
or a total of $63,526 annually. Before inflation, this represents a
4.1% return on the City s investment of $1,546,235. Or, a real rate of
return of 1.3% after inflation has been taken into account (2.8% in
April, 1995). Clause 2(a) of Appendix A refers. This is a reduction
from the rent proposed in the original lease terms, but will continue
for as long as required to recover the City's investment rather than
only 25 years.
Revised lease terms also provide Abbeyfield some flexibility in setting
monthly resident fees for the smaller, less attractive units that have
proven difficult to market. Clause 4 of Appendix A refers.
Consistent with City practice in maintaining other City-owned
properties, revised lease terms assume the City will be responsible for
construction deficiencies, exterior maintenance and structural soundness
of the building. All other maintenance will be the responsibility of
Abbeyfield. Clauses 6 and 7 of Appendix A refer.
PAYMENTS TO DATE
Consistent with the revised lease terms, Abbeyfield has paid the City
$27,796 in lease rent and $9,398 in property taxes up to December 31,
1994.
In February 1995, Abbeyfield paid the City $9,966 toward the cost of
light fixtures. This reduces the City s investment in Abbeyfield to
$1,536,269.
NEXT STEPS
During the next 6 months, Tenant Assistance Program (TAP) staff from The
Housing Centre will assist Abbeyfield with its marketing program. This
will ensure that the 8 units currently vacant are filled as soon as
possible.
With this objective in mind, Abbeyfield has set aside $3,000 in its 1995
advertising budget to update and reprint the Abbeyfield brochure, and to
advertise in Vancouver daily and community newspapers.
CONCLUSION
Given the magnitude of monthly operating expenses and an average
occupancy rate since rent-up of 60%, payment of the ILM generated
monthly rent as set out in the original lease terms is not practical.
Revised lease terms include a formula for calculating monthly rent equal
to 85% of project net income. This ensures that Abbeyfield can afford
to pay its monthly lease rent to the City and that the City will receive
a reasonable rate of return on its investment over the 60-year lease
term.
While there is some concern about the 8 units currently vacant, City
staff are confident that a more flexible approach in setting resident
fees, and a more effective marketing program, will improve the situation
in the next few months.
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