City of Toronto  
HomeContact UsHow Do I...?Advanced search
Living in TorontoDoing businessVisiting TorontoAccessing City Hall
 
Accessing City Hall
Mayor
Councillors
Meeting Schedules
   
   
  City of Toronto Council and Committees
  All Council and Committee documents are available from the City of Toronto Clerk's office. Please e-mail clerk@city.toronto.on.ca.
   

 

May 11, 1998

  To:Corporate Services Committee

 From:Commissioner of Corporate Services

 Subject:Sale of Property Houses

(Multiple Wards - Former City of Toronto)

 Purpose:

 To secure City Council authority to declare the Aproperty houses@ in the former City of Toronto on attached Appendix I (save and except for those four properties currently leased to community based housing providers and also identified on attached Appendix I) as surplus to the City=s requirements and authorize the sale of these properties on the open market.

  Financial Implications:

 The total of the current value assessment for the 56 property houses recommended to be declared surplus in this report is $11,134,845.00.

  Recommendations:

 It is recommended that:

 (1)subject to the Board of Cityhome passing a resolution to do so, the existing leases between Cityhome and the Corporation of the City of Toronto, for the property houses be terminated in the manner described in this report;

 (2)City Council, by By-Law, declare that, upon the leases having been terminated, the 56 houses owned by the City of Toronto, as set out on the attached Appendix I are surplus;

 (3)notice to the public of the proposed disposition of the lands declared surplus be given in accordance with S.95-5 of the Municipal Code;

(4)prior to offering the properties for sale on the open market, the first right to purchase be given to the previous owners and/or current tenants, on the terms set out in the body of this report;

 (5)the Commissioner, Corporate Services, be authorized to market those properties which the previous owners and/or tenants do not wish to purchase through a real estate broker for a listing price to be determined in consultation with the listing broker;

 (6)the funds from the sale of the houses subject to the 25 year lease be deposited into an account to be used to satisfy the mortgage at maturity;

 (7)the City Surveyor, in consultation with the Director, Development and Support, Parks and Recreation, be directed to prepare a survey of the north portion of 144 Balsam Avenue and that this portion of the property be retained by the City, in fee simple or by way of an easement, and placed under the jurisdiction of the Parks and Recreation Division for parks purposes;

 (8)City Council endorse the tenant relocation plan as outlined in this report;

 (9)the four properties currently being leased to community based housing providers, as identified within this report on Appendix I, be retained by the City to allow the current use of these properties to continue and the Commissioners of Corporate Services and Community and Neighbourhood Services determine the appropriate leasing arrangement for these four properties and report back thereon to the Corporate Services Committee; and,

 (10)the appropriate Civic Officials be authorized to take the necessary action to give effect to the foregoing.

 Background:

 At a Budget Committee meeting held on March 9, 1998, the Community and Neighbourhood Services 1998 Operating Budget was considered. One of the recommendations put forward at this meeting was that:

 the Commissioner of Corporate Services and the Interim Lead for Real Estate report to the Budget Committee for its meeting scheduled to be held on March 31, 1998 submitting recommendations respecting the disposition of the Aproperty houses@ after confirming with the Parks Department that these properties are not required for Parks purposes.

 The Aproperty house@ portfolio consists of 60 properties, comprising 105 units, which were acquired/expropriated between 1930 and 1974 for parks purposes. These properties have never been used for park purposes and, in 1975, an informal arrangement was entered into with Cityhome for the management of the portfolio. In 1992, City Council adopted a business plan which leased these properties to Cityhome. Twenty-two of the properties were leased for a term of 49 years and 38 of the properties were leased for a term of 25 years. The business plan included a $2.5 million rehabilitation program which was funded by a mortgage on the properties leased for 49 years. This business plan also included a process to rationalize the rent structure for these properties and to bring the rents up to low end of market levels by the end of 1997. Provisions were also made to provide rent assistance to eligible households which would otherwise face economic eviction (total of 10 eligible households). The 60 properties, together with a summary of relevant information, are set out on Appendix I.

 In response to the Budget Committee=s request, the Commissioner, Community and Neighbourhood Services, in consultation with the Commissioner of Corporate Services, submitted a report dated March 27, 1998 to the Budget Committee. In this report, a number of issues were identified for further consideration. Also contained in that report was a recommendation that the approach taken to dispose of these properties be similar to the one taken by Metro Toronto with respect to the sale of their Spadina corridor properties. This report addresses the identified issues and establishes a disposal process taking into account the process utilized by Metro Toronto respecting the disposal of the Spadina corridor properties.

 Comments:

 The Interim Lead for Real Estate has sought input into the disposal of the property houses from Parks and Recreation, City Legal, Cityhome and Housing Division staff. Comments have been provided as follows:

 Parks and Recreation

 The Director, Development and Support, Parks and Recreation has advised of the following:

 AIn response to your memorandum dated April 23, 1998, regarding the proposed disposal of the sites previously acquired for parks purposes, I have reviewed the subject properties and provide the following comments for your consideration. The 60 locations listed on the summary are related to ten different parks or ravines. A summary identifying the respective properties and the related park or ravine is attached for your information.



 The March 27, 1998 report from the Commissioner, Community and Neighbourhood Services notes that these properties were acquired to expand City parks adjacent to or abutting the subject sites. The conversion of a number of these sites to parks use would be beneficial to the respective parks, unfortunately, this conversion would be at the expense of the available housing stock. It has not been the position of Parks and Recreation to endorse this type of conversion in previous discussions regarding these properties. This approach remains consistent at this time.

 In this regard, with the exception of the request set out below, I advise that I am not opposed to the disposition of these properties at this time on the understanding that the properties will continue to be used for the current purposes. Should they be retained and consideration of future uses be contemplated, I would request that parks purposes be considered as the primary alternative land use for the sites.

 The north edge of the property at 144 Balsam Avenue currently accommodates a public path to Glen Stewart Ravine. Parks and Recreation has constructed a set of stairs to enable the public to access the ravine via this path and stairs. In order to permit the continued existence of this path and provide continued access to the stairs, I request that the City sever and retain ownership of sufficient space along the north boundary of this property for this to occur.@

  Legal Implications

 City Legal staff have provided advice respecting the disposal of the property houses as set out on Appendix III. They have indicated that the City of Toronto and Cityhome are free to negotiate a surrender of the 25 year lease.

 The City of Toronto and Cityhome could also negotiate a surrender of the 49 year lease, however, due to the mortgage, this surrender is significantly more complicated. The mortgage matures on December 1, 1998. It is a closed mortgaged for a principle sum of $2.5M at an interest rate of 8.5%. The mortgagor is Cityhome and the City of Toronto is the guarantor. If Cityhome surrenders the 49 year lease in order to allow the disposal of the 22 properties held as security, the mortgagee may demand repayment of the full principal balance outstanding and can look to Cityhome and the City for repayment. This is likely since the termination of the lease would destroy the security of the mortgage. As an alternative, approval of the sale of the properties by the mortgagee could be sought and the mortgage could be paid down as the properties were sold. It is, however, highly unlikely that the mortgagee would agree to this arrangement without levying a penalty for early payment. The City would be incurring this additional cost. Accordingly, it would be prudent to market these properties with closing dates after the December 1, 1998 maturity date.

 Thirteen of the property houses were acquired by the City through expropriation. Consideration was paid prior to the enactment of the current Expropriations Act in 1968. Therefore, in terms of the requirements of the Expropriations Act, the City would be free to sell any of these properties that were expropriated.

  The request from the Director, Development and Support, Parks and Recreation to sever and retain the north portion of 144 Balsam Avenue, may not be legally possible due to the impact that this could have on the remainder of the parcel of land. If this is the case, and the City cannot retain the fee, it is possible to achieve continued access to the ravine by means of an easement over the portion of land required.

  Social Objectives

 The Commissioner of Community and Neighbourhood Services has identified four of the 60 properties which should be retained by the City. These four properties are currently being leased to community based housing providers. These leases are at market, or slightly below market rates.

 As the balance of the property houses are offered for sale, Housing Division staff will determine the suitability of each property for use by identified community groups and, should any of the properties be deemed suitable, a report on the acquisition for this purpose will be submitted to Corporate Services Committee.

  Proposed Tenant Relocation Program

 The process which will be followed in the disposition of the properties will be similar to the process which was approved by the Council of the former Municipality of Metropolitan Toronto relative to the disposition of the Spadina Corridor properties and also includes the steps requested by the Commissioner of Community and Neighbourhood Services.

 (1)should the original owner of any of the properties within the portfolio presently be a tenant in one of the property house, then this original owner shall have the first right

to purchase the property, at the appraised market value, which they originally owned, notification of intention to exercise said right to be given to the City within 30 days, purchase to be concluded 60 days after notification by the original owner

 (2)subject to (1), above, the existing tenant in any of the property houses, shall have the first right to purchase their property which they occupy at the appraised market value, notification of intention to exercise the said right to be given to the City within 30 days, purchase to be concluded 60 days after notification by the tenant of intention to purchase;

 (3)in the event that the property in question is a multi-family dwelling (i.e., the duplexes on Hubbard Blvd.) and both tenants are interested in purchasing, the first right will be granted to the tenant with the longest tenure. If the right is not exercised the right will be then be granted to the tenant with the second longest tenure and so on. A tenant, if any, that desires to purchase and is unable as a result of length of tenure, will be offered another vacant unit from the portfolio.

 (4)in the event that the tenants elect not to acquire the property, then the property would be offered for sale through a real estate broker in accordance with the broker selection process also before your Committee today;

 (5)in cases where existing tenants would not have the economic means to purchase the property, the General Manager of the Toronto Housing Company will be requested to assist those tenants in finding alternate housing, either market housing or assisted housing, depending on the specific requirements of the households and the eligibility criteria which applies to households seeking RGI assistance.

 (6)those tenants which moved into the houses after 1992 are already paying a Alow end of market rent@ but they would not be eligible for RGI assistance. The General Manager of the Toronto Housing Company will, however, provide information to these tenants on available market units in developments managed by the Housing Company and assist these tenants in finding suitable accommodation;

 (7)in order to minimize the level of uncertainty which may be created for tenants living in these units a notice such as the one in Appendix VI to this report, outlining the available options will be sent to all tenants and, in addition, a Tenant Relations Officer within Cityhome has been assigned to work closely with the tenants to answer their questions and to facilitate a smooth transition; and,

 (8)once the surplus properties and the time line for the disposition of the properties has been established, the General Manager of Cityhome and the Real Estate staff will work closely to co-ordinate the relocation plan for the specific units which will be affected.

  Marketing Strategy

The property houses should be marketed as they become vacant and the marketing program will be carried out in close association with the tenant relocation program. If it becomes apparent that any given property will not become vacant within a reasonable time, then marketing will commence on the basis that sale will be subject to existing tenancies.

 With respect to the issue of the mortgage, in order to avoid any penalty associated with prepaying the mortgage (assuming that approval could be obtained from the mortgagee) it is recommended that the properties under the 25 year lease be marketed immediately with the proceeds deposited into an account to be used to satisfy the mortgage at maturity. Those properties which are subject to a mortgage should be marketed later in the year with closing dates to occur after the mortgage matures. The timing of the marketing of both groups of properties will be determined by occupancy status, as set out above.

 In addition, consideration should be given to the possibility that the City may flood the market on any particular street. For instance, 16 of the properties are located on Crawford Street. Placing all of these properties on the market at the same time will result in lowering the selling price that may be achieved. It would not serve the City=s interest to offer all of these properties at one time.

 Bearing these factors in mind, it is recommended that the following steps be taken relative to the disposal of the property houses:

 (1)surrender of the 25 year lease by Cityhome to the City, together with a commitment from Cityhome that it will also surrender the 49 year lease upon discharge of the mortgage and, that Cityhome will continue to assume day to day management of the property house portfolio until such time as each property is sold;

 (2)retention of an outside appraisal firm to provide appraisals of the market value of properties as required as a component of the disposal process, as well as for establishing listing price and/or sale price with the original owners and/or tenants who may elect to purchase, with the cost of the appraisals being charged against the proceeds of sale;

 (3)implementation of the Tenant Relocation Program as outlined in this report;

 (4)retention of real estate brokers to market the properties and assist in the development of a marketing plan which takes into consideration the timing requirements vis a vis the properties which secure the mortgage, as well as ways that will ensure that the City does not flood the market on any particular street;

 (5)an appropriate portion of the proceeds from sale be placed in an account designated to satisfy the mortgage financing;

 (6)discharge mortgage on maturity; and,

 (7)surrender of the 49 year lease.

   Conclusions:

 The property houses were purchased for the purpose of expanding existing parks. They have been in the City=s ownership for a number of years and will not be used for their intended purpose. As such, with the exception of four of the properties which are currently leased to community housing providers at market rates, these properties should be declared surplus and sold on the open market.

The marketing strategy should take into account the occupancy status of each property and will be carried out in close association with the tenant relocation program as set out in this report.

  Contact Name:

 Bonnie G. Duncan

Tel:416-392-1861

Fax:416-392-1880

Emailbduncan.www.city.toronto.on.ca (cs98072)

     Margaret Rodrigues

Commissioner, Corporate Services

     APPENDIX III

 The following comments have been received from City Legal staff.

 AI am replying to your memo of April 23, 1998 in which you requested my reply to the questions therein by April 29.

 The legal implications associated with the sale of the property houses have been addressed as they apply to the mortgaged and the unmortgaged properties, respectively. The following comments/opinions are rendered based on the assumption that the properties would be sold by the City unencumbered by the Cityhome leases since the properties are presumably unmarketable when encumbered by these non-revenue producing leases.

 The property houses may be divided into two groups; those held by Cityhome under 25 year leases from the City and unencumbered by mortgaging and those held under 49 year leases from the City and subject to a mortgage with a maturity date of December, 1998.

 

  1. a)Unmortgaged properties - The City and Cityhome are free to reach an understanding for the surrender by Cityhome of its 25 year lease to the City. The City would then be free to sell the unmortgaged

portfolio. However, the purchasers of this portfolio would be acquiring the properties subject to existing residential leases and the terms therein. Residential tenants are legally entitled to security of tenure.

 Furthermore, such purchasers may be subject to greater restrictions in dealing with residential tenants (eg. rent increases) than Cityhome or the City. The program which has been implemented to raise the rents to market levels is something that non-governmental landlords may be prohibited from continuing, if rent increases exceed those permitted to private sector landlords.

 b) Mortgaged Properties - The above comments relating to the surrender of the 25 year unmortgaged leases apply as well to the surrender of the 49 year mortgaged leases. However, there are additional, more serious, legal and financial factors restricting the ability of Cityhome to surrender the mortgaged lease and for the City to accept such a surrender. This is set out in point No. 2 below.

 2. The leasehold mortgage provides that the mortgagee may, at its option, demand repayment of the full principal balance outstanding if Cityhome surrenders the lease without the prior written consent of the mortgagee. Furthermore, the City is a guarantor of the mortgage loan. If the mortgage becomes due and payable, the mortgagee will likely look to the City as well as to Cityhome for payment. Even if the mortgagee permitted the sale of the property, the City=s guarantee would remain in effect, a situation which would be unfeasible from both a financial and legal point of view. The legal difficulty arises out of the fact that the City may not guarantee the financial obligation of a commercial enterprise.

 3. Thirteen of the property houses were acquired by the City through expropriation. Consideration was paid prior to the enactment of the current Expropriations Act in 1968. Therefore, in terms of the requirements of the Expropriations Act, the City would be free to sell any of these properties that were expropriated.@

 

   
Please note that council and committee documents are provided electronically for information only and do not retain the exact structure of the original versions. For example, charts, images and tables may be difficult to read. As such, readers should verify information before acting on it. All council documents are available from the City Clerk's office. Please e-mail clerk@city.toronto.on.ca.

 

City maps | Get involved | Toronto links
© City of Toronto 1998-2001