Date: October 14, 1999

To: Board of Directors

From: Chief Executive Officer

Subject: PROPERTY HOUSES TRANSFER (THC:99091)

RECOMMENDATIONS:

It is recommended that the Board of Directors approve the following recommendations:

(1) that this report be forwarded to the Administration Committee and City Council with the recommendation that Council grant approval of the changes to the transaction outlined in the report (June 21,1999) from the Chief Executive Officer to the Board of Directors as amended by this report, that Council declare all of the Property Houses portfolio surplus in accordance with such changes, and that the appropriate city officials carry out whatever actions are necessary to give effect to Bylaw No. 551-1998;

(2) that the Toronto Housing Company accept a conveyance of the Property House portfolio except for the 18 properties required to be sold as described in this report (the Sale Properties) upon the terms set out in Clause 3 of Corporate Services Report No. 4 as amended by the report (June 21, 1999) from the Chief Executive Officer to the Board of Directors as further amended by this report;

(3) that subject to City Council=s concurrence, the Toronto Housing Company administer the sale of the Sale Properties, on the City=s behalf;

(4) that the sale of the surplus Property Houses properties proceed as outlined in Schedule 1 attached to this report;

(5) that the Toronto Housing Company accept from the City the net proceeds from the sale of the Sale Properties;

(6) that the Toronto Housing Company continue to manage the Sale Properties under the Property House Leases until each Sale Property is sold, respectively; and

(7) the appropriate City and Toronto Housing Company officials be authorized and directed to take the necessary actions to give effect to the foregoing.

BACKGROUND:

Council=s directive to transfer the Property Houses portfolio to the Toronto Housing Company and for the Housing Company to sell 25% of the Property Houses portfolio

On April 13, 1999, Toronto City Council approved Clause 3 of Corporate Services Committee (CSC) Report No. 4, as amended, declaring the City=s Property Houses portfolio surplus and recommending conveyance of the entire portfolio to the Toronto Housing Company. Approval was based upon the Company=s proposal for the Property Houses (A Plan for the Property Houses - Maximizing Housing Opportunities for Low Income Tenants). The THC report proposed a self-financing plan in order to manage the portfolio as affordable rental housing and to be able to provide rent-geared-to-income assistance to as many households as possible. Council approved the sale of 15 properties (sale properties), in order to pay for the retention of 45 properties and its operation as affordable housing.

Objective of the Sale

The goal of the Property Houses Business Plan is to preserve and retain the maximum number of units as affordable rental housing. The Housing Company=s plan balances the requirements to re-structure the portfolio to address the need for affordable rental housing, the financial requirement to create an operating fund to subsidize low-income tenants without additional City funding housing (offering tenants rent-geared-to-income subsidies), and the need to generate a capital replacement reserve in order to properly maintain the houses in a good state of repair. The plan for the retention of the 45 properties is contingent on revenues of a minimum of $3,900,000 from estimated sale proceeds. The revenue generated by the sale is to be used to seed a capital reserve, to create a portfolio RGI operating fund and to pay-down the portfolio mortgage debt. The plan as approved by Council is designed to respond to Council=s question of how many and what type of houses would have to be retained to rent to as many low-income households as possible.

THC seeks changes in authority to proceed with the sale

Subsequent to Council=s approval of Property Houses Plan, the Toronto Housing Company Board of Directors forwarded to the Administration Committee of July 13, 1999, resolutions requesting minor changes to the original authority to the transaction granted by Council. These resolutions recommended approval of some changes to transfer process by which the 15 Sale Properties could be disposed.

First; that the City retain the title of the 15 properties approved for sale to facilitate the severance consent for each individual transaction.

Second, that in keeping with Council=s original intention, that the Toronto Housing Company sell the properties acting on behalf of the City and receive the net proceeds of the sales.

and Third ; that the first right of purchase by tenants be modified to so that in the case of multiple-unit properties that right can be exercised by all interested tenants if a joint offer by all of the tenants is not made.

Administration Committee seeks consideration for tenants that do not wish to move.

The Administration Committee deferred consideration of this matter on July 13 and again at its meeting on September 7, 1999, referring the matter to its meeting on November 2, 1999. The current deferral was requested in order to seek a satisfactory arrangement for current tenants, in the properties to be sold, that do not wish to purchase and wish to remain tenants in the same units. In addition, a request was made for additional information related to the inclusion in the list of properties for sale of 15 Hubbard.

PROPOSED MODIFICATIONS:

The Toronto Housing Company has reviewed the process for sale of properties based on consultations with tenants and other concerned parties. The Toronto Housing Company is recommending a number of modifications to the sale process as approved by Council (Clause 3 of Corporate Services Committee (CSC) Report No. 4, as amended). These changes are outlined in Schedule 1, attached to this report.

The modifications proposed do not alter the basis of the original plan to provide a maximum number of affordable rental housing units. The adoption of these modifications will result in a phased sale process:

the sale of 4 single family properties as directed by Council will proceed as planned

# the sale of 5 fourplex properties in the Beach neighbourhood will proceed in phases.

These properties will be sold as duplexes, based on the desire of current tenants to purchase their units or where there are vacancies. Current tenants will be offered a relocation within the fourplexes where they do not wish to purchase the unit or will have their tenancy maintained until such time as they choose to terminate their lease. At this point the sale of the unit will proceed.

It is proposed to remove 15 Hubbard Boulevard (apartment building with 17 bachelor units) from the sales list. To compensate for the loss of revenues from the removal of 15 Hubbard from the sale list, 4 (four) properties will be added to the sale list (all currently or to be vacant at time of sale).

The sale of the 5 fourplexes is proposed to occur only when the units are vacant or when the current tenants have agreed to purchase or to relocate. In order to facilitate sales to tenants it is proposed to sever these four unit buildings into two duplexes; the duplexing of these buildings will occur gradually and will be synchronized with the property sales.

Phasing the sale of the Property Houses will result in a delay in the generation of the $3,900,000 required to implement the Toronto Housing Company plan as approved by Council. It is estimated that $1,500,000 in revenue can be realized in a six month time frame from sales as proposed above. This assumes that all of the single family properties would be sold within the first six months of 2000 (8 Wineva Avenue and 125 Roxborough Ave West (vacant properties), 213 and 217 Crawford St and 13 Hubbard. Blvd.). Any additional sales of the fourplex properties will be subject to the individual intentions of tenants to purchase their unit or to relocate within or outside the Toronto Housing Company portfolio.

In order to balance the sales revenue shortfall we propose to add to the sales list 4 additional properties: 114 Havelock St. and 187, 195 and 225 Crawford.St. As these properties are currently vacant they can be listed for public sale immediately with estimated gross sale revenue of $1,100,000.

There have been efforts by some of the tenants at 15 Hubbard Boulevard to incorporate as a non-profit cooperative and to acquire the building collectively. This activity is still at a preliminary stage, rather than prejudge the outcome, the Toronto Housing Company will report back to the Board on the on the status of these organizational efforts at a later date. In the meantime, it is proposed that 15 Hubbard Blvd. be retained in the THC portfolio rather than be sold. The Housing Company will develop plans to manage the property including the completion of the substantial capital repairs required. The rents will be adjusted to reflect market conditions for the area and the investment of funds in these repairs.

As revenue from sales is realized it will first be applied to retiring the portfolio debt and second to the creation of the capital reserve. The phasing of sales to accommodate tenants wishing to stay in their current units will delay the creation of the RGI subsidy fund.

REASONS FOR RECOMMENDATIONS:

Recommendations No. 1,3,5 and 6

The revisions to the original Council approval to the Property Houses Disposal that were requested by the Board of Directors of the Toronto Housing Company on June 24, 1999 as set out in the report to the Board dated June 21, 1999 have not been dealt with by the Administration Committee and City Council. Recommendations 1,3,5 and 6 restate the recommendations contained in earlier Board Report.

Recommendation No. 2

The original Council authority for the Property Houses transaction approved the transfer of the title of the entire Property Houses portfolio to the Toronto Housing Company and the sale by the Housing Company of 15 of the properties as designated by Council (the "Sale Properties"). The current recommendation has the City retain title to all of the Sale Properties until the closing of property sales and transfer title to the purchaser at that time. It is also proposed to change the list of Sale Properties by deleting the property located at 15 Hubbard Boulevard and adding four vacant single family houses on Havelock and Crawford Streets.

The revised Sale Properties list is as follows: