Submitted by Eric Moschopedis and Bob Bott on behalf of Planning & Development
Planning and Development had an important meeting July 15 with our lead consultant, Lee Prevost of Boundary Design. The result is a plan that could allow us to submit funding applications for redevelopment by August 31 even though we may not have a lease extension proposal from the City by then. The plan would require membership approval before submission.
In early July, the Sunnyhill Board submitted a letter to the City requesting action on our request for a lease extension. Specifically, we need details on a lease rate for an extension of at least 20 years beyond 2039. We asked for a response within two weeks. At the time of writing (July 26) there is still no response from the City.
To avoid continued delays, Lee has prepared two different spreadsheets, known as pro formas, for our project’s possible future financing. One shows a “worst-case” scenario that identifies the maximum amount Sunnyhill could pay annually for a lease and still do the project. This lease figure is based on 10% of appraised land value. Within this scenario, Sunnyhill would pay approximately $250,000 per year. Although this would be far more than our current lease payment, the analysis is extremely important because it tells us that even at this lease rate Sunnyhill could still maintain a 1.10 debt coverage ratio. In other words, we would still be able to undertake the rehabilitation of our existing buildings and develop the new units while remaining affordable.
The second pro forma that Lee developed is based on what expert consultants at Altus believe would be a fairer market rate for a lease. This scenario would be based on 5.5% of appraised land value. It would translate into a lease rate of approximately $115,000 a year and allow us to have a debt coverage ratio of 1.12. The additional .02 percent would enable us to respond to feedback from the funders (for example, if they were to require additional sustainability measures).
In the July 15 meeting, we also discussed the continued lack of a lease proposal from the City. If that continues into August, Lee recommended that Sunnyhill use the worst-case scenario to present to the membership for approval. In that case, we would be voting on the full project with the understanding that there is a maximum lease rate amount we can afford while undertaking the work and remaining affordable. We would then submit our funding applications to CMHC and FCM using the second pro forma as described above, using the annual lease rate of approximately $115,000.
In our funding applications, we would provide logic for the proposed lease rate and affirm that the City would be a partner in the project, as they have told us they would be. After submitting our applications, we would then share them with the City and thus force them to respond. The City might respond favourably and finally provide us with a reasonable lease rate. This strategy is not our preferred approach, but it is an elegant way to sidestep the months-long silence from the City. It allows us to submit our funding applications and at the same time pressure the City to respond.