July 3, 1998
To:Corporate Services Committee
From:President, Toronto Parking Authority
Subject:536 St. Clair Avenue West - Establishment of a 25-Space Surface Carpark
Purpose:
To lease the above-noted property for the purpose of establishing a 25-space surface parking
facility in order to service the parking demand of the Bathurst/St. Clair area.
Funding Sources, Financial Implications and Impact Statement:
Funds in the amount of $400,000 were identified in the Authority's Capital Budget as
approved for this project. A portion of these funds will be used to develop and construct the
surface carpark.
Recommendations:
It is recommended that:
- City Council approve an agreement with Merkur Realty (1993) Ltd. to lease 536 St. Clair
Avenue West for the purpose of establishing a 25-space surface carpark.
- To authorize the appropriate City Officials to take whatever action is necessary to give
effect thereto.
Council Reference/Background History:
At its meeting of June 22, 1998, the Board of Directors of the Toronto Parking Authority
adopted a motion to request that Council approve a lease agreement with Merkur Realty
(1993) Ltd. to lease 536 St. Clair Avenue West for the purpose of establishing a 25-space
carpark. The Bathurst/St. Clair Avenue area has a shortfall of parking of approximately50
spaces. The Parking Authority has been looking for parking in this area for a number of
years. The Parking Authority has no surface carparks in the immediate area of Bathurst/St.
Clair and believe that a properly located facility would be heavily utilized.
Comments and/or Discussion and/or Justification:
A number of potential properties have been examined in the area. Recently, the property
located at 536 St. Clair Avenue West has become vacant. The former tenant at this location
had gone out of business and as a result, the owner is leasing the property. The Parking
Authority had approached the owner attempting to purchase the property, however, he was
not interested in such a proposal. He will only consider a lease arrangement.
Meetings have been held with both local business operators and Councillors and all parties
are supportive of the Toronto Parking Authority creating a public parking lot in this area.
The local business operators are very concerned that there is no public parking in the area
except for on-street meters and in their opinion, the lease of this surface parking lot is critical
to the economic survival of their businesses.
Summary of Lease Agreement
Summarized below are the basic terms and conditions that are incorporated in the lease
agreement.
- Term:The initial term of the lease would be five (5) years. The Parking Authority will
have an option to renew the lease for three (3) additional terms of five years each and the
option will be exercised 12 months before the commencement of the renewal term.
- Rent:Years 1-5:$69,600
First Renewal Term Rent (Years 6-10):$79,600
The Second and Third Renewal Term Rent
(Years 11-15 and Years 16-20) would be calculated as follows:
- The annual Minimum Rent during the second and third renewal term
will be the greater of the sum of $84,000 or;
- An amount that would be adjusted and fixed annually being an
amount determined and being the product of multiplying $69,600 x
the Consumer Price Index for the month of August of each year of
the renewal term with respect to which the calculation is being made
and
divided by the Consumer Price Index for the month of August 1998 (i.e. $69,600 x CPI of
August of each year of the renewal term ) CPI for August 1998).
- Rent Free Period:The Parking Authority is to be given the opportunity to obtain required
permits and build its carpark, therefore Minimum Rent and Additional Rent shall
commence three months after possession.
- Net Lease:The Parking Authority will be responsible for all operating costs and taxes
related to the property.
Staff have determined that a Benefiting Assessment with respect to the subject property will
be required. We have estimated that the annual payment would be $61,000. The Authority
has approached local businesses and they appear to be supportive of this arrangement.
Financial Analysis
We have prepared a financial analysis which indicates that the property will earn an annual
net operating profit of $28,000. The annual charge over 10 years for estimated demolition
and construction costs is $23,700. Therefore, the net return before rent will average about
$8,000 over the term of the agreement. Assuming the property has been leased at the
owner's proposed rent for a 10 year period, the net present value of the unrecoverable
portion of the rent payment will result in a shortfall of $430,000 which would need to be
recovered by way of Benefiting Assessment. The annual assessment would be
approximately $61,000. The Authority approached local businesses with this proposed lease
arrangement and Benefitting Assessment calculation. They are interested in this
arrangement. Construction of the carpark is estimated to cost $185,000.
Parking Demand
A parking study was undertaken in this area in 1990. The results of this study indicated that
a parking shortfall of approximately 50 spaces existed within 600 feet of the intersection of
St. Clair Avenue West and Raglan Avenue. This lot will serve half of the identified shortfall.
Recent parking utilization counts have confirmed that the shortfall continues to exist.
Conclusions:
The Parking Authority has been searching for a suitable site in this area for a lengthy period
of time. Our studies have indicated that there is a parking shortfall and that a surface carpark
in this area would help meet the needs of the local retail area. Despite the parking demand,
the combination of the construction of the carpark and the required rental payments put this
carpark in a negative cashflow position. Therefore, the financing of the surface carpark will
require Benefitting Assessment. On April 15, 1998, a public meeting was held with local
businesses to determine their interest in supporting Benefitting Assessment. A poll
conducted at that meeting indicated support for the establishment of this carpark by way of
Benefitting Assessment.
Before granting this approval Council should be aware of the possible risks of entering into
such an arrangement.
- The negotiated rental rates are above market rental rates in the area. We have spoken with
the local agent and with other real estate agents to determine a type of rent that this site
could support. It appears that the market rental rate for the area for this sized premises
would range between $50,000 to $60,000 per year. We have notified the local businesses
that this arrangement is above market levels, however, they are still supportive of creating
the lot, and accept the need to proceed by way of Benefitting Assessment.
- Although the community is supportive of Benefitting Assessment, if there is any
opposition, this matter will go to the Ontario Municipal Board. Section 207(56)(f)(iv) of
the Municipal Act reads "the Municipal Board shall not approve the by-law if a petition
objecting to the level of capital cost against the defined area, signed by at least two-thirds
of the assessed owners representing at least one-half of the assessed value of the land in
the area, is filed at or prior to the hearing of the application". In practical terms, it would
be quite difficult for the affected owners to meet this onerous condition. However, there
is a risk that this condition could be met and we will not obtain approval for the
Benefitting Assessment. If this occurred, the Parking Authority would be obligated to
continue to lease the property for five years.
In order to protect the Parking Authority's interest, we will operate the existing facility in an
as-is condition until the OMB approval is obtained. There is an existing building with
perimeter parking which can accommodate approximately 10 spaces. Construction of the
carpark which is estimated to be approximately $185,000 will not proceed until we have
received final approval of the Benefitting Assessment. This approach will minimize the
financial risk to the Authority and the City. In the event that Benefitting Assessment is not
approved the Authority will have the option to sublet the property thereby limiting our
exposure.
We recommend that the City Council authorize the Parking Authority to finalize
negotiations of a lease agreement based on the terms and conditions outlined above subject
to some minor changes if required.
Contact Names:
Maurice J. Anderson
President
Telephone:(416)393-7276
Facsimile:(416)393-7352
Lorne Persiko
Director, Real Estate & Development
Telephone:(416)393-7294
Facsimile:(416)393-7352
Maurice J. Anderson, President
