Important Membership Information for P & D Financing Plan Options

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.

Planning and Development Committee - End of June Update

Submitted by Phil Cox on behalf of Planning & Development

We remain in a holding pattern on lease negotiations with the City. Our new key contact there has been talking with colleagues in the Calgary Real Estate and Development Services (REDS) to arrive on a lease calculation for Sunnyhill. Our consultant, Lee, is monitoring developments and keeping our City Councillor Druh Farrell appraised. At some point, it may make sense for Sunnyhill to send a letter to senior administration seeking to understand the hold-up. Now, with the Municipal election looming closer, new limits are to be imposed on communications and decision-making at City Hall that will last until the October vote.

The lease calculation is critical to the whole package. Without it we cannot know the financial viability of the project. It is the missing piece of information that, once in place, will allow us to see clearly our options for retrofitting the two and three-bedroom units and for replacing four of our one-bedroom units with a new build. We have been told that neither CMHC nor FCM will entertain a proposal until we have the lease arrangement worked out with the City.

At this week’s P&D session with our consultant, Lee, members discussed and approved a “work-around” idea. We agreed to calculate the highest lease rate that we could possibly pay the City to stay on the right side of the debt-to-service ratio limit for Sunnyhill. With this “placeholder” number, we are able to complete the pro-forma and other remaining details, proceed with member approval discussions and then be ready to make adjustments once a final lease rate is put forward by the City.

Watch this space for updates on this situation. There was talk of having our membership meeting and vote on the project before the end of June. This is now be postponed until later in the Summer.

In the meantime, you may wish to review the housing project package in its current state. Click here to view the slides that Lee presented in our April 15th General Meeting.

Over the last three years, we have learned that housing cooperatives are not as well understood in Calgary as they are in Canada’s larger cities where they are more prolific. As it happens, Sunnyhill is the only housing coop in Calgary sitting on leased land. This lack of understanding may be a factor contributing to our halting process with the City. By contrast, Vancouver has had a framework in place since 2017 to guide negotiations for end-of-lease situations. In that city there are over 200 sites where City land is on lease to coop or affordable housing projects. This is not to say that everything is rosy for housing coops dealing with Vancouver City Hall. There are issues there too. To catch a glimpse of how housing cooperatives are recognized and dealt with in the City of Vancouver, click here.

Planning and Development Committee - Housing Project Highlights for the Week of May 31st, 2021

Submitted by Phil Cox on behalf of Planning & Development

Over the past weeks, personnel changes at the City have affected the pace of the conversation regarding lease options. This week our consultant Lee briefed our new key contact, Daniel Jay, with a walking tour of Sunnyhill. Daniel has been given a mandate to address the lingering question of how best to assign a value to the land for the purpose of setting a lease rate. Three commonly used approaches are: a) capitalization - assessing return on investment after factoring revenue and expenses, but this is not appropriate for a cooperative structure (an ownership model); b) direct comparison - assessing value based on another property with close to identical characteristics, but Sunnyhill is unique in this market; and c) pattern identification from similar leasing scenarios - looking for patterns in institutional land lease examples (airports, hospitals, other housing entities) across Canada. We are agreed that this is the most plausible valuation approach. Daniel will discuss this approach with colleagues in the days ahead. Early indications are that, using this method, it should be possible to come up with a lease rate that will make our housing project viable.

Having the lease rate established is absolutely critical to our progress. Our original plan was to bring the project to the membership and then make it ready for submission to FCM and CMHC by the end of May. Today, Lee confirmed that the funders will not consider our application for funding unless the pro-forma is complete with a clear signal of the City’s intent regarding lease arrangements. The project write up is mostly ready for presentation to Sunnyhill and then, if approved, submission. We just need the land valuation figure. A Sunnyhill membership meeting is tentatively set for the latter part of June. More details on this shortly.

We have asked Lee to update Councilor Farrell’s office and to ask for clarification on transaction project thresholds that would necessitate a decision by Council (as opposed to a sign-off by City administration). Our hope is to avoid having to go to Council. This scenario is now complicated by the upcoming municipal election.

Planning & Development Update- General Meeting August 22, 2020

Submitted by David Broadhead

In 2019 we requested $200,000 to support an evidence based due diligence process to confirm and advance the deep green retro fitting of our exiting townhouses and better understand what work needs to be done to provide accessible, aging in place units.

We contracted Urban Matters to lead us through this process. Urban Matters broke the scope of the work down in to 3 Phases — with each subsequent phase building on the information gathered from the previous — and always with an eye towards becoming shovel ready.

This included in Phase 1

Project initiation – identifying goals, timeline, participants

Engagement with membership

Accessibility analysis of our property as it is

The production of a schematic design concept for our deep energy retrofit by MODA

Identify sustainability opportunities, i.e. green sustainability

Create an asset management plan and identify areas that need on going work and decision making by the membership

And lastly, Provide three primary recommendations: pursue the sustainable deep green retrofit, seek a land purchase agreement from the City of Calgary, and study the possibility of building new accessible, aging in place housing.

These recommendations were approved by the membership in January 2020.

Phase 2 turned our focus to the potential new building, understanding our finances, and continued negotiations with the City.

Phase 2 includes the following Work

Design Work

Project Costing

Stakeholder Engagement 

Site Assessment including Appraisal

Value Engineering

By fall 2020 we will have completed this process. Cost will be within range of our original estimate of $200,0000 with small adjustments in categories. Phase 1 and Phase 2 were funded within the original motion and included a $25,000 preservation Funding Grant from CMHC.

Movements before undertaking work in phase 2, Urban Matters directed us to a new funding opportunity that could offset costs associated with Phase 2 and all future work. The Canadian Federation of Municipalities has created the Green Municipal Fund. This program is designed to complement  CHMC’s funding programs, but requires greater energy efficiency targets to be met. In particular new buildings must be Net Zero ready. The green municipal fund also supports land purchase and provides greater granting levels than CMHC. So you can see why we would have chosen to pursue this funding. It could reduce the overall mortgage amount that SHC needs to borrow.

To accommodate these stricter guidelines and we have had to expand the scope of phase 2 to include a Sustainability Consultant to work alongside MODA - to ensure we are meeting Net Zero Ready targets. And there was an opportunity to further study the exterior accessibility changes that would be necessary for our grounds — in particular the ice build up in the winter and flash flooding in the summer on our pathways.

In May 2020 SHC applied for $116,865 from the Green Municipal Fund to pay for Phase 2, the sustainability consultant, accessibility engineer, and Phase 3. We will be learning the results of this funding by the fall.

If we received this funding it will mean that we have reduced SHC’s contribution to phases 1, 2 and 3 by approximately half. If we don’t get the grant, we still need to undertake this work to continue moving us towards our goal which is preparation for Capital or Development funding.

So, let me break things down like this. To complete the additional tasks in phase 2 that satisfy the Green Municipal Fund, we need

$16,538 for the sustainability consultant

$8269 for the pathway accessibility study

Phase 3 sits within the scope of the original motion, but requires an additional 

$2,000.00 to explore partnership opportunities — This is to cover explorations with potential capital and operating income partners for our project.

and $11,800 for Urban Matters to complete a final recommendation report. The final recommendation report will Present a final redevelopment recommendation that summarizes the most feasible development program and includes next steps related to design, site, planning support, financial analysis and funding opportunities. Include schematic concepts provided by the design consultant. Urban Matters’ goal is to help identify development concepts that are appropriately-sized and financially feasible. 

Although tasks 2 and 3 will be completed in the fall there is new or additional work that needs to be completed in response to the land lease negotiation process, upcoming grant preparation, and ongoing consultation with Urban Matters. 

Negotiations with the City for the purchase of our land are moving slowly and will require additional work from SHC and Urban Matters to reach our goals. Specifically, our lease states that we have the option to purchase the land at Market Value. That is what SHC agreed to 42 years ago. This means the city needs to understand what market value for the land is as its starting position. They have determined it is valued at 20 million dollars. We know, and the City knows, that this is not feasible for SHC. But the city had to come up with this number to dot their “i”s and cross their “t”s.

We now need to work with Affordable Housing to push internally to bring this cost in line with SHC’s capacity. We are all still aiming for book value, which we understand is approximately 5.5 million.

So this new body of work functions as a phase 3.5 with the emphasis of getting us to a full phase 4 process.

The money required for the next bit of work is not tied to any granting program. So it is money that we need to spend as a Co-op. 

The tasks and funding required are as follows:

Land purchase proposal and negotiations $6,300.00

Value Engineering and Financial Refinement $5,500.00 - meaning continuing to work our operating budget and pro forma in relation to proposed costs of the land. (The goal here is to prove to the city definitely what we can afford while still remaining affordable).

In addition to these specific amounts we request approval of up to $10,000.00 for General Consulting fees from now until December 31.

Given that our budget for 2021 will not be approved for sometime we also request approval of up to $10,000 for General Consulting Fees for January through June 2021.

We are distributing a new proposal from Urban Matters explaining this stage of our project in greater detail.

Lease Discussion Update

Submitted by Eric on behalf of Planning and Development

Planning and Development received and email from Janet Maccubbin from the City of Calgary (Senior Sales Agent – Affordable Housing | Real Estate and Development Services). Janet has asked us to formally request to purchase the land according to Article 19 of our lease agreement. This will be done via a letter from the Board that Planning and Development is currently drafting.

As many of you know the lease says that we have the option to purchase the land at “fair market value,” which is different than the “book value” discussions we have been having. Janet confirmed that we are still discussing book value of $4.5 - $5.5 million (unfortunately Janet didn’t have the exact information at her finger tips, because she was working from home). However, this is the first time that we have heard a price from the City and it is very much what we have had in mind. Let’s hope it is on the lower end!

As a point of reference: the million dollars that we could have paid for the land in 1978 is now, in today’s dollars, valued at approximately $3.9 million. Meaning, we are clearly paying $1+ million more now than if we had purchased the land 42 years ago, but all the more reason to secure a sale now and not later in time.

Lease Update

Submitted by Herta and Eric

While all seemed quiet on the surface for Planning and Development, lots of important things were happening in the background thanks to Lee Prevost’s efforts on behalf of our co-op.

Lee met with the City’s Real Estate & Development (REDS) business unit and discussed two options regarding our lease. OPTION 1 focused on re-skinning the building envelope and improving the visitability of some of the units through accessibility improvements (for instance, door hardware, potentially better access to the office, and some limited grounds/landscaping changes). OPTION 2 proposes to proceed with the re-skinning of the building envelope and add an additional 16 fully accessible age-in-place units. These new units would likely go in the area currently occupied by the one-bedroom units.

Lee reported that City likes the two options and are gravitating toward two very different scenarios:

• a 40 year lease extension in support of OPTION 1 - regeneration-only

• a sale at book value in support of OPTION 2 that includes development of new units

In conclusion Urban Matters is leaning towards recommending OPTION 2. While significantly more complex, OPTION 2 addresses one of the membership’s key concern about the ability to age-in-place; is a much stronger narrative at a time when there is a lot of competition for funding; and it also seems like the option most compelling to the City in support of a sale at book value.

Lee will be presenting a full report to the membership mid-December.

June 14, 2019 - Planning and Development Presentation

Submitted by Eric Moschopedis

Hello friends,

This is a video of the Planning and Development presentation that was given to the membership at the June 14th General Meeting. The video runs for about an hour and provides a strong overview, updates, and next steps regarding the lease negotiations with the City, the rehabilitation of our buildings, aging in place, and financing. It is important that those who did not attend the meeting take the time to familiarize themselves with the information as it will be the foundation for future discussions.

You will need to use this password to access the video: Andreaintheoffice