536 St. Clair Avenue West -
Establishment of a 25-Space Surface Carpark
The Corporate Services Committee recommends the adoption of the following report (July3, 1998) from the
President, Toronto Parking Authority:
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 $400,000.00 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:
(1)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; and
(2)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
approximately 50 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.
(1)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.
(2)Rent:Years 1-5:$69,600.00
First Renewal Term Rent (Years 6-10):$79,600.00
The Second and Third Renewal Term Rent
(Years 11-15 and Years 16-20) would be calculated as follows:
(a)The annual Minimum Rent during the second and third renewal term will be the greater of the sum of $84,000.00
or;
(b)An amount that would be adjusted and fixed annually being an amount determined and being the product of
multiplying $69,600.00 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., $69,600.00 x CPI of August of each year of the renewal term ) CPI for August 1998).
(3)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.
(4)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 $61,000.00. 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
$28,000.00. The annual charge over 10 years for estimated demolition and construction costs is $23,700.00. Therefore,
the net return before rent will average about $8,000.00 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 $430,000.00 which would need to be recovered by way of Benefiting Assessment.
The annual assessment would be approximately $61,000.00. 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 $185,000.00
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.
(1)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 $50,000.00 to $60,000.00 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.
(2)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 and Development
Telephone:(416)393-7294
Facsimile:(416)393-7352