May 11, 1998

 To:Corporate Services Committee

 From:Commissioner of Corporate Services

 Subject:Expediting the Disposal of Property and Reduction of Leased Space

  Purpose:

 To describe the various programs underway to expedite the disposal of land and reduction of leases.

 Recommendations:

 It is recommended that:

 (1)the programs described in this report be endorsed;

 (2)the Commissioner of Corporate Services report to the Corporate Services Committee every six months on the implementation of the programs; and

 (3)this report be referred to the Budget Committee for information.

  Funding Sources, Financial Implications and Impact Statement:

 No additional funding is required. A target of $60 million for the sale of properties is proposed for 1998.

  Council Reference/Background/History:

 The Budget Committee, at its meeting of March 3, 1998, requested a series of reports on the disposition of properties both leased and owned, and on the establishment of a disposal unit to expedite the disposal and on the work to be done by external consultants and by staff. The March 25, 1998 report from the Commissioner of Corporate Services to the Budget Committee outlined programs to date. This report provides an update and sets out a framework for expediting the sale of surplus assets.

Comments:

 In 1997, the former municipalities received over $30 million in revenue from the sale of surplus properties. So far in 1998, the sales for 18 properties have closed, with a revenue of $9.86 million. There are 23 sales in progress, which will produce an additional $11.66 million, bringing the revenue for 1998 to $21.52 million. The properties in these two categories are listed in Appendix A.

 (1)Financial targets for 1998

 A target of $60 million for revenues is proposed for 1998. The distribution of the revenue, in millions, is estimated as set out in the table below.

  (2)The 1998 program consists of 7 components, described below.

 (a)Disposing of asset already declared surplus:

 There are now 161 properties already declared surplus by the former Councils, which could bring in up to $20 million in revenue. The properties, also listed in Appendix A to this report, include:

• Spadina Expressway houses - One hundred and twenty properties along the proposed expressway route were declared surplus, including 100 residential buildings. The former Metro Council carried out a program to sell the houses, with the existing tenants given first opportunity to purchase the buildings. In 1997, 37 were sold with to existing tenants and 10 vacant houses were sold through the MLS. Of the remaining houses 59 are tenanted and 14 are vacant. Also surplus are parts of 19 lots acquired for the Spadina Expressway. These could be offered back to the original owners, but this would be costly and time consuming to undertake, and should not be considered a priority at this time.

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• Scarborough Expressway houses - Twenty houses have been declared surplus.

• Vacant land - The 45 parcels are being evaluated for potential revenue and offered for sale, with priority given to those with the highest value and where there is interest in purchasing.

• Other - These include industrial and commercial properties, mainly acquired though tax sales. Priority should be given to the sale of those with the highest potential return and those where there is expressed interest.

 (b) Sale of Cityhome Aproperty houses@:

 These properties acquired for parks purposes in the former City of Toronto but leased to Cityhome for residential use. There are 60 properties with 105 units. As a result of the direction form the Budget Committee, a report (May 11) from Commissioner of Corporate Services, ASale of Property Houses@ recommends that 56 houses be declared surplus and offered for sale. The current value assessment for these houses is over $11 million.

 (c)Sale of tax sale properties:

 From time to time the City acquires properties for tax arrears. These properties should be evaluated prior to acquisition and strategies developed to ensure that they are marketed as soon as possible if not required for a municipal purpose. Tax sale properties are included in the list of surplus properties in Appendix A of this report.

 (d)Properties that are to be sold as part of major corporate initiatives:

 One example is the 78 acre parcel on the east side of the Allen Road which includes the Downsview Subway Station, originally acquired from the Federal Government for a subway yard. Planning staff will be reporting in May to the Urban Development and Environment Committee on a the Downsview area, and consideration has been given to rezoning the area for mixed uses and residential purposes. The disposal strategy is being developed in this context. There much interest in the purchase of this property.

 Another example is the potential sale of large parcels of land acquired for the Scarborough Expressway. Planning staff are working on completing studies which will rezone the City owned properties, resulting in potentially increased revenues once the land is marketed.

 (e)Properties that will be freed up though space rationalization:

 Facilities& Real Estate staff, in conjunction with the program areas, are reviewing future space needs following the current downsizing. Both office space and yard rationalization studies are underway. The results of these studies should be available in the fall, but it may be possible to report in declaring some properties surplus before that. Staff are currently determining whether all office staff will be able to be accommodated in existing space and that the space equal to that in Metro Hall may no longer be needed. There are potential purchasers for some yards and office space. In addition, the purchase of new properties is being delayed to ensure that existing property is used wherever possible. For example, the Chair of the Budget Committee has asked that alternative City owned property be explored for the location of the new 51 Division Police Station.

 (f)Properties that appear to be suitable and will be subject of reports to recommend that they be declared surplus and sold.

 Facilities & Real Estate staff have identified over 160 properties that could be sold in the near future, many of them vacant land. A detailed list will be submitted to the next Corporate Services Committee. In the meantime, property disposition reports continue to be submitted for each agenda of the Corporate Services Committee. In addition, staff are undertaking a comprehensive review of City properties to ensure they are still needed for the purpose for which they were acquired, and will report on those recommended to be declared surplus.

 (g) Reduction in lease payments

 Facilities & Real Estate staff have reviewed 225 existing lease arrangements, including 69 leases for office space, which generate the greatest costs. The office list forms Appendix B. To date, ten office leases are in the process of being collapsed, and these will generate savings of about $2 million in 1999. In addition, options are being explored to either eliminate or renegotiate the lease for the Metro Housing Corporation at York Mills and Yonge, which is for $1 million a year. Staff have also been renegotiating other leases to reduce costs to the City.

 While the objective is to relocate functions such as day care, public health and welfare offices into City owned buildings wherever possible, additional space may be needed because of the downloading of Provincial programs, such as Provincial Offences and additional case loads to service sole support parents.

 (3)Expediting the sale of properties

 (a)Staff teams

 Two Facilities & Real Estate staff teams have been established. The first is a staff disposal unit, focusing on the sale of properties already declared surplus, is headed by a Director of Real Estate of a former municipality and includes a team of 4 appraiser/negotiators, with support staff , as well as assigned legal staff. A Manager of Leasing heads the second, a lease rationalization team. Assistance from other service areas, such as Planning and Economic Development is being provided as required. The teams will be evaluated after a year for future needs.

 (b)External brokers

 To assist in accelerating the disposal program, the report (May 11) from the Commissioner of Corporate Services to the Corporate Services Committee for its meeting of May 25, entitled AAcquisition and Disposal of Real Property,@ recommends that outside brokers be hired to expedite the sale processes for scattered houses and for large and more complex properties, such as industrial and high density residential. Staff will coordinate and monitor the work to be done to ensure the disposal program that meets the needs of the Corporation. The cost of brokers= services and the commission is normally deducted from the sale price, so no additional budget is needed.

 (c)Portfolio consultants

 Additional expertise will be required to assist in the sale of the large complex properties. A proposal call is currently being prepared to obtain the services of appropriate consultants, who have special expertise and are too costly to be normally part of real estate groups in large organizations like the City. Publicly owned land is sometimes difficult to sell as it contains a wide range of property types, such as public buildings, contaminated properties acquired from tax sales, and governments are reluctant to be perceived as forcing people to leave their homes. Therefore special strategies may be needed. Some governments, as well as private companies, have adopted a bundling approach, whereby attractive properties are sold in a group with problem properties.

 The external search process, now underway to locate potential candidates for the position of Executive Director of Facilities & Real Estate, will also include the search for a potential head of a comprehensive disposal unit, dealing with both properties already declared surplus as well as potential properties.

(d)Clarification of processes

 The reports, AAcquisition and Disposal of Real Property@ and ASurplus ASpadina Corridor@ and AScarborough Transportation Corridor A Houses@ set out approval processes so that the sales of properties will occur in the most expeditious way, and also meet corporate objectives such as supporting affordable housing. Additional reports will be submitted from time to time as needed to assist with expediting the programs.

  (4)Need for a comprehensive process

 The processes for the sale of City owned properties is undertaken by primarily by the Facilities & Real Estate Division, including sales for the TTC and the Police, but other parts of the organization, such as Toronto Hydro and the Library Board operate separately. In order to effectively plan for the orderly review and disposal program for all properties, the Division should take responsibility for coordination, including possibly, in time, doing the work for all, including the ABC=s. Establishment of a senior level staff committee, similar in function to the former Metro Land Management Committee, and also including representatives of the ABC=s, will ensure that decisions regarding property are coordinated and strategic. As well, a centralized and shared information system, including a comprehensive tracking system must be provided to ensure that there is one list of affected properties, to track their sales and the revenues generated, and where these revenues go. This facilitates the ability of all involved to effectively plan and coordinate the declaration of surplus property and disposals.

 (5) Progress reports

 The Budget Committee has requested reports every six months on progress. The first report will be submitted to the Budget Committee through the Corporate Services Committee in October. These reports will ensure that the programs remain high priority, that effective progress is being made and that issues are being dealt with in expediting disposals.

 Conclusions:

 This report sets out the framework for a comprehensive approach to the expeditious disposal of property assets, through processes, program, and teams of staff in the Facilities & Real Estate Division, working with other parts of the Corporation. The disposals will net considerable revenue in the longer term.

 Contact:

 Cathie Macdonald, Interim Lead, Facilities & Real Estate: phone 392-0449, fax 392-0029, email cmacdona@city.toronto.on.ca (bc98005 / cs98027)

    Commissioner of Corporate Services

    APPENDIX A

 LISTS OF PROPERTIES

Key for Property Type

 PROPERTIES SOLD AFTER JANUARY 1, 1998

  SALES IN PROGRESS PROPERTIES - AS OF JANUARY 1, 1998

 DECLARED SURPLUS PROPERTIES TO BE SOLD