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Social Purpose Real Estate- Business Plan and Tool kit Bevan, Thomas Nov 30, 2012

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Social  Purpose Real Estate Toolkit July 2012   © Vancity Community Investment Portions of this Guide may be reproduced for educational purposes,  please reference “Thomas Bevan, University of British Columbia”. Production Team Thomas Bevan, Author Mandeep Sidhu, Contributing Author Catherine Ludgate & Thomas Hutton, Project Supervisors 	
  1	
   	
  2	
   Table of Contents 	
   Introduction	
  ............................................................................................................................................	
  3	
   	
   First	
  Stage:	
  Assessing	
  Organizational	
  Readiness	
  .......................................................................	
  4	
   Step	
  1	
  Idea	
  Conception	
  ..................................................................................................................................	
  4	
   Step	
  2	
  Financial	
  Profile	
  .................................................................................................................................	
  6	
   	
   Second	
  Stage:	
  Developing	
  an	
  Organizational	
  Plan	
  ....................................................................	
  8	
   Step	
  3	
  Fundraising	
  Program	
  ........................................................................................................................	
  8	
   Step	
  4	
  Functional	
  Programming	
  ................................................................................................................	
  9	
   Step	
  5	
  Market	
  Analysis	
  ...............................................................................................................................	
  10	
   	
   Third	
  Stage:	
  Physical	
  Space	
  ............................................................................................................	
  12	
   Step	
  6	
  Refining	
  the	
  Idea	
  .............................................................................................................................	
  12	
   Step	
  7	
  Project	
  Financial	
  Viability	
  ............................................................................................................	
  13	
   Step	
  8	
  Offer	
  to	
  Purchase	
  .............................................................................................................................	
  15	
   Step	
  9	
  Environmental	
  Assessment	
  .........................................................................................................	
  17	
   Step	
  10	
  Project	
  Design	
  &	
  Cost	
  Estimating	
  ............................................................................................	
  18	
   Step	
  11	
  Property	
  Appraisal	
  .......................................................................................................................	
  20	
   Step	
  12	
  Planning	
  Approvals	
  ......................................................................................................................	
  21	
   Step	
  13	
  Project	
  Plan	
  ....................................................................................................................................	
  22	
   Step	
  14	
  Secure	
  a	
  Mortgage	
  ........................................................................................................................	
  23	
   	
   Fourth	
  Stage:	
  Ownership	
  and	
  Beyond	
  ........................................................................................	
  25	
   Step	
  15	
  Closing	
  ..............................................................................................................................................	
  25	
   	
   Glossary	
  of	
  Terms	
  ..............................................................................................................................	
  26	
   Further	
  Reading:	
  ................................................................................................................................	
  29	
   	
   	
  3	
   Introduction 	
   Real	
  Estate	
  is	
  about	
  reconfiguring	
  a	
  piece	
  of	
  land	
  to	
  meet	
  the	
  needs	
  of	
  people	
  using	
  it.	
  There	
   can	
  be	
  a	
  lot	
  of	
  players	
  involved	
  and	
  a	
  long-­‐term	
  commitment	
  required	
  for	
  making	
  a	
  real	
  estate	
   idea	
  a	
  reality.	
  	
   	
   This	
  toolkit	
  guides	
  readers	
  from	
  not-­‐for-­‐profit	
  organizations	
  through	
  the	
  process	
  of	
  purchasing	
   real	
  estate	
  –	
  from	
  planting	
  an	
  idea	
  to	
  finalizing	
  the	
  purchase	
  of	
  a	
  property	
  –	
  in	
  fifteen	
  steps.	
   These	
  steps	
  are	
  organized	
  into	
  four	
  key	
  stages	
  of	
  the	
  real	
  estate	
  journey.	
  The	
  process	
  doesn’t	
   stop	
  when	
  the	
  property	
  is	
  bought	
  and	
  it	
  is	
  important	
  to	
  know	
  about	
  managing	
  and	
  maintaining	
   a	
  property.	
  However,	
  these	
  later	
  stages	
  are	
  not	
  a	
  part	
  of	
  this	
  toolkit.	
  	
   	
   The	
  steps	
  covered	
  in	
  the	
  toolkit	
  are	
  most	
  applicable	
  to	
  projects	
  that	
  involve	
  the	
  purchase	
  and	
   renovation	
  of	
  existing	
  buildings,	
  rather	
  than	
  projects	
  involving	
  the	
  construction	
  of	
  new	
   buildings.	
   	
   This	
  toolkit	
  is	
  intended	
  for	
  readers	
  who	
  have	
  little	
  experience	
  with	
  real	
  estate,	
  but	
  who	
  are	
   considering	
  undertaking	
  a	
  project	
  of	
  their	
  own	
  that	
  is	
  relatively	
  small	
  scale	
  (being	
  under	
  $5	
   million).	
  	
  The	
  content	
  of	
  this	
  toolkit	
  is	
  geared	
  towards	
  not-­‐for-­‐profit	
  organizations	
  that	
  are	
   currently	
  leasing	
  space	
  and	
  interested	
  in	
  pursuing	
  social	
  purpose	
  real	
  estate	
  –	
  owning	
  property	
   for	
  the	
  primary	
  benefit	
  of	
  the	
  community.	
  This	
  toolkit	
  looks	
  closely	
  at	
  how	
  to	
  analyse	
  the	
   financial	
  viability	
  of	
  the	
  project.	
   	
   The	
  toolkit	
  should	
  be	
  used	
  as	
  an	
  introduction,	
  helping	
  to	
  provide	
  an	
  idea	
  of	
  what	
  to	
  expect	
   through	
  the	
  real	
  estate	
  journey	
  and	
  whether	
  an	
  organization	
  is	
  ready	
  to	
  embark	
  on	
  it.	
  	
  It	
  is	
  not	
   a	
  substitute	
  for	
  professional	
  guidance	
  (real	
  estate	
  advice,	
  financial	
  planning,	
  legal	
  advice,	
  etc).	
  	
   	
   The	
  process	
  of	
  purchasing	
  real	
  estate	
  is	
  dependent	
  on	
  the	
  local	
  zoning	
  and	
  regulatory	
  context.	
  	
  	
   Different	
  municipalities,	
  cities	
  and	
  regions	
  will	
  have	
  different	
  processes,	
  regulations	
  and	
  bylaws.	
   This	
  toolkit	
  is	
  a	
  guideline	
  based	
  on	
  the	
  Vancouver	
  context;	
  however,	
  it	
  will	
  be	
  generally	
   applicable	
  for	
  people	
  and	
  organizations	
  across	
  Canada	
  and	
  the	
  United	
  States.	
  	
   	
   The	
  real	
  estate	
  process	
  takes	
  time	
  and	
  patience	
  to	
  complete,	
  undertaking	
  the	
  right	
  actions	
  at	
   the	
  right	
  time.	
  The	
  entire	
  process	
  can	
  take	
  between	
  two	
  years	
  and	
  ten	
  years	
  to	
  complete,	
   depending	
  on	
  the	
  scope	
  of	
  the	
  project	
  and	
  the	
  capacity	
  that	
  your	
  organization	
  has	
  to	
  undertake	
   the	
  increased	
  responsibility	
  of	
  becoming	
  an	
  owner	
  of	
  real	
  estate.	
   	
   Lastly,	
  there	
  is	
  a	
  lot	
  of	
  jargon	
  in	
  real	
  estate.	
  At	
  the	
  end	
  of	
  this	
  toolkit	
  is	
  a	
  list	
  of	
  important	
  terms	
   to	
  know,	
  and	
  which	
  will	
  help	
  explain	
  many	
  of	
  the	
  terms	
  used	
  throughout	
  the	
  toolkit.	
   	
   Let’s	
  get	
  started….	
   	
  4	
   First Stage: Assessing Organizational Readiness 	
   This	
  section	
  of	
  the	
  toolkit	
  will	
  help	
  your	
  organization	
  determine	
  its	
  capacity	
  to	
  take	
  on	
  a	
  real	
   estate	
  project,	
  as	
  well	
  as	
  evaluate	
  if	
  owning	
  a	
  real	
  estate	
  asset	
  will	
  be	
  beneficial	
  or	
  detrimental	
   to	
  your	
  mission.	
  	
  While	
  owning	
  a	
  real	
  estate	
  asset	
  can	
  seem	
  exciting	
  and	
  the	
  ‘right	
  thing	
  to	
  do’	
   it	
  is	
  not	
  for	
  everyone	
  –	
  it	
  is	
  necessary	
  to	
  assess	
  your	
  financial	
  and	
  organizational	
  capacity	
  to	
  do	
   so.	
  	
   	
   Step 1 Idea Conception Time	
  to	
  complete:	
  six	
  months	
  to	
  two	
  years	
   	
   A	
  real	
  estate	
  idea	
  is	
  a	
  flexible	
  picture	
  of	
  how	
  a	
  property	
  can	
  become	
  something	
  that	
  helps	
  to	
   accomplish	
  the	
  mission	
  of	
  your	
  organization.	
   	
   Having	
  access	
  to	
  a	
  significant	
  amount	
  of	
  capital	
  (money)	
  is	
  one	
  of	
  the	
  most	
  critical	
  parts	
  to	
   making	
  a	
  real	
  estate	
  idea	
  become	
  a	
  reality.	
  As	
  a	
  not-­‐for-­‐profit	
  organization	
  that	
  is	
  probably	
   already	
  stretched	
  for	
  financial	
  resources	
  to	
  provide	
  programming	
  and	
  service	
  work,	
  this	
  can	
  be	
   very	
  challenging.	
  You	
  probably	
  need	
  to	
  start	
  saving	
  money	
  years,	
  if	
  not	
  decades,	
  in	
  advance	
  in	
   order	
  to	
  accumulate	
  enough	
  liquid	
  cash	
  to	
  purchase	
  and	
  adapt	
  a	
  property	
  to	
  suit	
  your	
  needs.	
   	
   Your	
  first	
  step	
  should	
  be	
  to	
  set	
  up	
  a	
  savings	
  account	
  with	
  a	
  financial	
  institution	
  and	
  start	
  looking	
   for	
  potential	
  sources	
  of	
  money.	
  Over	
  time,	
  these	
  savings	
  will	
  grow	
  into	
  a	
  financial	
  asset	
  that	
  can	
   be	
  leveraged	
  by	
  your	
  organization	
  to	
  undertake	
  a	
  project	
  –	
  it	
  will	
  become	
  your	
  down	
  payment.	
   	
   Owning	
  real	
  estate	
  requires	
  a	
  long-­‐term	
  commitment	
  of	
  significant	
  resources,	
  and	
  will	
  certainly	
   increase	
  your	
  responsibilities.	
  It	
  is	
  important	
  to	
  carefully	
  consider	
  how	
  real	
  estate	
  relates	
  to	
   your	
  organization’s	
  mission	
  and	
  if	
  owning	
  real	
  estate	
  will	
  help	
  or	
  hinder	
  your	
  ability	
  to	
  meet	
   your	
  mission.	
  Mission	
  drift	
  can	
  be	
  a	
  very	
  real	
  possibility	
  if	
  the	
  work	
  of	
  maintaining	
  a	
  real	
  estate	
   asset	
  starts	
  taking	
  you	
  off	
  focus	
  of	
  your	
  main	
  mission.	
   	
   Real	
  estate	
  is	
  an	
  “illiquid”	
  asset.	
  	
  That	
  means,	
  simply,	
  that	
  the	
  property	
  may	
  be	
  worth	
  a	
  large	
   amount	
  of	
  money,	
  but	
  this	
  money	
  is	
  not	
  easily	
  accessible	
  and	
  therefore	
  cannot	
  easily	
  be	
  used	
   for	
  your	
  organization’s	
  various	
  other	
  needs	
  (like	
  program	
  funding	
  or	
  staff	
  salaries,	
  for	
  example).	
  	
  	
  	
   	
   It	
  is	
  important	
  that	
  your	
  organization	
  is	
  financially	
  stable	
  and	
  that	
  it	
  has	
  a	
  strategic	
  vision	
  about	
   future	
  programs	
  before	
  moving	
  ahead	
  with	
  a	
  real	
  estate	
  project.	
   	
   You	
  must	
  evaluate	
  the	
  differences	
  between	
  leasing	
  and	
  owning.	
  Leasing	
  usually	
  allows	
  you	
   more	
  flexibility;	
  for	
  example,	
  if	
  you	
  need	
  to	
  move	
  to	
  gain	
  more	
  space	
  or	
  to	
  downsize	
  if	
  a	
   program	
  ends.	
  Owning,	
  however,	
  can	
  help	
  to	
  shield	
  your	
  organization	
  from	
  increasing	
  rents	
  and	
   provide	
  security	
  of	
  tenancy.	
  The	
  best	
  option	
  depends	
  on	
  the	
  mission	
  of	
  your	
  organization	
  and	
   the	
  way	
  it	
  operates.	
  	
   	
  5	
   Questions	
  to	
  Answer:	
   • Where	
  are	
  the	
  current	
  pitfalls	
  of	
  your	
  leasing	
  or	
  renting	
  situation?	
  How	
  would	
  a	
  real	
   estate	
  investment	
  help	
  to	
  alleviate	
  these	
  issues	
  (or	
  exacerbate	
  them)?	
   • What	
  would	
  owning	
  real	
  estate	
  mean	
  to	
  the	
  organization?	
  What	
  effect	
  would	
   ownership	
  (and	
  the	
  associated	
  new	
  responsibilities)	
  of	
  real	
  estate	
  have	
  on	
  the	
  work	
   done?	
   • How	
  might	
  the	
  organization	
  benefit	
  from	
  owning	
  real	
  estate?	
  How	
  would	
  it	
  constrain	
   the	
  organization?	
  	
   • What	
  are	
  the	
  resources	
  available	
  to	
  the	
  organization	
  in	
  order	
  to	
  undertake	
  a	
  real	
  estate	
   project?	
  For	
  example,	
  do	
  you	
  have	
  some	
  equity	
  for	
  a	
  down	
  payment?	
  Do	
  you	
  have	
  the	
   staff	
  resources	
  and	
  capacity	
  to	
  undertake	
  feasibility	
  planning?	
  Have	
  you	
  connections	
   with	
  real	
  estate	
  professionals?	
  	
  	
   • How	
  can	
  the	
  organization	
  leverage	
  its	
  current	
  resources?	
   • What	
  contributions	
  are	
  other	
  people	
  and	
  organizations	
  prepared	
  to	
  make?	
  For	
  example,	
   cash	
  for	
  a	
  down	
  payment,	
  in-­‐kind	
  assistance	
  (design	
  work,	
  legal	
  fees),	
  mentorship	
  of	
  real	
   estate	
  process.	
  	
   	
   Start	
  mapping	
  out	
  your	
  dream	
  in	
  rough,	
  using	
  your	
  the	
  answers	
  to	
  the	
  above,	
  but	
  at	
  this	
  point,	
   do	
  not	
  get	
  caught	
  up	
  on	
  details.	
  	
  Talk	
  about	
  your	
  dream	
  with	
  others	
  and	
  start	
  looking	
  for	
  people	
   who	
  are	
  interested,	
  and	
  have	
  conversations	
  with	
  people	
  who	
  are	
  doing	
  related	
  work.	
  	
   	
   Most	
  importantly,	
  do	
  not	
  fall	
  in	
  love	
  with	
  a	
  building	
  and	
  try	
  to	
  build	
  a	
  dream	
  around	
  it;	
  this	
  is	
   the	
  most	
  common	
  mistake	
  that	
  other	
  not-­‐for-­‐profits	
  have	
  made	
  in	
  the	
  past.	
  Dreaming	
  is	
  good,	
   but	
  dream	
  about	
  what	
  might	
  be	
  possible,	
  and	
  not	
  about	
  how	
  to	
  fit	
  your	
  vision	
  into	
  a	
  building	
   that	
  happens	
  to	
  be	
  available	
  right	
  now.	
   	
   Idea	
  Conception	
  Checklist:	
   ü Start	
  saving	
  money	
  for	
  a	
  down	
  payment.	
   ü Begin	
  creating	
  a	
  contact	
  list	
  of	
  folks	
  who	
  can	
  help	
  you	
  out	
  and	
  what	
  they	
  can	
  offer	
  to	
  the	
   project.	
  	
   ü Developing	
  a	
  visual	
  mind	
  map	
  is	
  useful	
  for	
  showing	
  how	
  people	
  will	
  be	
  connected.	
  	
   ü Put	
  together	
  a	
  resource	
  list	
  –	
  past	
  research	
  studies,	
  planning	
  documents	
  	
   	
   If	
  you	
  find	
  out	
  that	
  a	
  dream	
  is	
  not	
  possible,	
  then	
  it’s	
  back	
  to	
  the	
  drawing	
  board	
  to	
  think	
  of	
  a	
   new	
  idea.	
  While	
  this	
  can	
  be	
  frustrating,	
  remember	
  that	
  this	
  is	
  the	
  easiest	
  time	
  in	
  the	
  project	
  to	
   reconsider	
  or	
  start	
  over	
  –	
  better	
  now	
  than	
  a	
  couple	
  years	
  down	
  the	
  line	
  with	
  much	
  more	
  money	
   and	
  time	
  invested	
  in	
  a	
  project	
  with	
  no	
  possibility	
  of	
  becoming	
  a	
  reality.	
   	
   	
   	
   	
   	
  6	
   Step 2 Financial Profile Time	
  to	
  complete:	
  one	
  month	
  to	
  three	
  months	
   	
   Owning	
  real	
  estate	
  is	
  a	
  major	
  financial	
  commitment.	
  As	
  an	
  organization,	
  you	
  must	
  be	
  in	
  a	
   financially	
  healthy	
  position	
  before	
  any	
  plans	
  are	
  made	
  to	
  purchase	
  a	
  property.	
   	
   At	
  the	
  same	
  time	
  you	
  are	
  thinking	
  about	
  how	
  real	
  estate	
  will	
  affect	
  your	
  mission,	
  you	
  must	
  be	
   looking	
  into	
  the	
  financial	
  profile	
  of	
  your	
  organization.	
  This	
  usually	
  means	
  working	
  with	
  an	
   accountant	
  to	
  better	
  understand	
  your	
  fiscal	
  circumstances.	
  	
   	
   Questions	
  to	
  Answer:	
   • What	
  are	
  your	
  organization’s	
  revenue	
  sources?	
  How	
  secure	
  are	
  they?	
  	
   • Is	
  your	
  organization	
  a	
  charity?	
  Could	
  it	
  be	
  eligible	
  for	
  charitable	
  status?	
  How	
  could	
  other	
   funds	
  be	
  generated?	
   • What	
  are	
  your	
  organizational	
  expenses?	
  What	
  are	
  fixed	
  costs	
  associated	
  with	
   programming?	
  What	
  are	
  variable	
  costs?	
  Are	
  there	
  opportunities	
  for	
  efficiencies?	
  	
   • What	
  are	
  total	
  rental	
  expenses	
  for	
  the	
  organization?	
  What	
  are	
  the	
  details	
  of	
  your	
   current	
  lease	
  (who	
  pays	
  for	
  space	
  improvements,	
  operating	
  costs,	
  when	
  does	
  the	
  lease	
   expire)?	
   • Will	
  you	
  still	
  be	
  able	
  to	
  cover	
  all	
  current	
  expenses	
  if	
  revenues	
  change?	
   • What	
  are	
  your	
  organization’s	
  assets?	
  Liabilities?	
  	
   • What	
  is	
  the	
  liquidity	
  of	
  assets?	
  Could	
  they	
  be	
  sold	
  and	
  used	
  to	
  pay	
  for	
  something	
  else?	
   	
   By	
  completing	
  this	
  research	
  first,	
  you	
  will	
  better	
  understand	
  what	
  your	
  organization	
  can	
  afford.	
   This	
  financial	
  profile	
  will	
  help	
  you	
  to	
  establish	
  realistic	
  expectations	
  for	
  what	
  could	
  be	
  possible	
   through	
  a	
  real	
  estate	
  project	
  and	
  whether	
  or	
  not	
  real	
  estate	
  acquisition	
  is	
  an	
  appropriate	
   venture.	
  It	
  should	
  be	
  used	
  to	
  underpin	
  all	
  ideas	
  and	
  decision-­‐making	
  throughout	
  the	
  real	
  estate	
   process.	
  	
   	
   It	
  is	
  important	
  to	
  clearly	
  understand	
  what	
  your	
  organization	
  can	
  afford,	
  before	
  you	
  start	
  to	
  even	
   think	
  about	
  potential	
  locations.	
  In	
  the	
  preliminary	
  stages	
  of	
  the	
  real	
  estate	
  process,	
  it	
  is	
   important	
  to	
  keep	
  the	
  vision	
  grounded	
  in	
  the	
  financial	
  realities	
  of	
  the	
  organization.	
  	
   	
   This	
  means	
  working	
  backwards	
  from	
  your	
  financial	
  profile,	
  and	
  using	
  it	
  to	
  inform	
  what	
  could	
  be	
   possible	
  in	
  a	
  real	
  estate	
  project.	
  What	
  are	
  the	
  specific	
  expectations	
  for	
  money	
  coming	
  in	
  and	
   money	
  going	
  out?	
  In	
  accounting	
  terms,	
  this	
  is	
  called	
  a	
  pro	
  forma.	
   	
   A	
  pro	
  forma	
  analysis	
  will	
  help	
  your	
  organization	
  take	
  its	
  financial	
  profile	
  and	
  understand	
  what	
   type	
  of	
  real	
  estate	
  project	
  you	
  could	
  hypothetically	
  afford	
  –	
  without	
  having	
  any	
  specific	
  building	
   in	
  mind.	
   	
   Putting	
  together	
  a	
  spreadsheet	
  is	
  the	
  best	
  way	
  to	
  have	
  all	
  of	
  the	
  numbers	
  in	
  the	
  same	
  place	
  and	
   to	
  be	
  able	
  to	
  see	
  how	
  these	
  numbers	
  are	
  interrelated.	
  You	
  will	
  begin	
  by	
  making	
  assumptions	
   	
  7	
   and	
  must	
  provide	
  justification	
  for	
  each	
  of	
  these.	
  For	
  example,	
  Listed	
  below	
  are	
  the	
  numbers	
   that	
  you	
  must	
  provide,	
  as	
  well	
  as	
  justify	
  why	
  you	
  are	
  using	
  them.	
   	
   Proforma	
  Checklist:	
  	
   ü Current rent paid by organization (amount that could be used to make mortgage payments) ü Equity available (down payment) ü Requested Loan Amount ü Mortage Conditions – interest rate, amortization, term, loan to value ratio ü Debt to Credit Ratio (DCR) 	
   From	
  a	
  risk	
  perspective,	
  the	
  DCR	
  is	
  the	
  most	
  important	
  number.	
  It	
  shows	
  the	
  relationship	
   between	
  income	
  and	
  debt.	
  Credit	
  unions	
  and	
  banks	
  will	
  usually	
  lend	
  money	
  at	
  a	
  1.2	
  DCR.	
  The	
   lower	
  this	
  number,	
  the	
  higher	
  the	
  risk	
  that	
  your	
  organization	
  will	
  not	
  have	
  enough	
  money	
  to	
   cover	
  the	
  mortgage	
  payment	
  should	
  circumstances	
  change	
  (interest	
  rates	
  go	
  up	
  for	
  example).	
  	
   	
   With	
  this	
  pro	
  forma,	
  you	
  can	
  analyze	
  the	
  project	
  and	
  find	
  out	
  other	
  key	
  figures.	
   	
  	
   Analysis	
  Checklist:	
  	
   ü Net Operating Income (NOI) ü Maximum Loan the project can support ü Annual Debt Service ü Cash Flow ü Funding Gap 	
   The	
  NOI	
  is	
  the	
  money	
  that	
  you	
  effectively	
  bring	
  in	
  every	
  year	
  from	
  the	
  project.	
  It	
  is	
  all	
  the	
   revenue	
  minus	
  all	
  the	
  expenses	
  –	
  not	
  including	
  mortgage	
  payments.	
   	
   The	
  Cash	
  Flow	
  is	
  the	
  money	
  left	
  over	
  after	
  you	
  pay	
  the	
  Annual	
  Debt	
  Service	
  (mortgage	
   payments).	
  It	
  is	
  your	
  cushion.	
  Cushion	
  is	
  important	
  because	
  circumstances	
  may	
  change	
  and	
  you	
   have	
  to	
  be	
  prepared	
  to	
  pay	
  more	
  than	
  you	
  initially	
  expected.	
  	
  	
  	
  	
   	
   The	
  Funding	
  Gap	
  shows	
  if	
  the	
  income	
  generated	
  by	
  the	
  property	
  is	
  sufficiently	
  high,	
  given	
  the	
   Annual	
  Debt	
  Payments.	
  This	
  number	
  is	
  connected	
  with	
  DCR.	
  The	
  project	
  could	
  have	
  a	
  positive	
   Cash	
  Flow,	
  but	
  still	
  have	
  a	
  Funding	
  Gap	
  because	
  the	
  difference	
  in	
  income	
  and	
  mortgage	
   payments	
  is	
  too	
  low	
  for	
  the	
  lenders	
  comfort.	
  If	
  this	
  is	
  the	
  case,	
  you	
  will	
  need	
  to	
  increase	
  the	
   down	
  payment	
  or	
  negotiate	
  for	
  a	
  second	
  unconventional	
  mortgage	
  –	
  which	
  will	
  have	
  a	
  higher	
   interest	
  rate.	
  	
   	
   Since	
  the	
  real	
  estate	
  process	
  takes	
  a	
  long	
  time	
  to	
  complete	
  and	
  financial	
  circumstances	
  can	
   change	
  suddenly,	
  it	
  is	
  important	
  that	
  you	
  update	
  your	
  financial	
  profile	
  frequently	
  and	
  re-­‐ evaluate	
  how	
  it	
  links	
  back	
  to	
  your	
  real	
  estate	
  vision.	
  	
  	
   	
  8	
   Second Stage: Developing an Organizational Plan 	
   This	
  section	
  will	
  help	
  you	
  determine	
  your	
  organization’s	
  needs	
  now	
  and	
  in	
  the	
  future,	
  and	
  how	
   a	
  new	
  space	
  will	
  help	
  meet	
  those	
  needs.	
  	
  The	
  section	
  also	
  considers	
  all	
  the	
  planning	
  that	
  is	
   required	
  in	
  order	
  to	
  evaluate	
  these	
  needs,	
  including	
  for	
  example	
  architectural	
  programming	
   and	
  fundraising.	
  	
  This	
  stage	
  is	
  essentially	
  about	
  the	
  ‘what’	
  and	
  the	
  ‘how’.	
   	
   Step 3 Fundraising Program Time	
  to	
  complete:	
  six	
  months	
  to	
  six	
  years	
   	
   Your	
  real	
  estate	
  vision	
  will	
  not	
  happen	
  without	
  money	
  up	
  front	
  to	
  purchase	
  the	
  building	
  and	
   undergo	
  needed	
  renovations.	
  Money	
  can	
  come	
  from	
  your	
  organization,	
  government	
  and	
  non-­‐ governmental	
  funding	
  groups,	
  private	
  investors,	
  and	
  lending	
  institutions.	
   	
   Usually,	
  the	
  largest	
  amount	
  will	
  come	
  from	
  a	
  lending	
  institution	
  in	
  the	
  form	
  of	
  a	
  mortgage,	
   which	
  you	
  will	
  have	
  to	
  pay	
  back	
  over	
  time.	
  You	
  will	
  need	
  equity,	
  or	
  a	
  down	
  payment,	
  which	
  is	
   usually	
  25%	
  of	
  the	
  total	
  appraised	
  value	
  of	
  the	
  project.	
  	
   	
   As	
  a	
  not-­‐for-­‐profit,	
  your	
  organization	
  likely	
  does	
  not	
  have	
  large	
  sums	
  of	
  money	
  available	
  or	
  at	
   least	
  easily	
  accessible	
  for	
  a	
  down	
  payment.	
  Therefore,	
  you	
  will	
  need	
  to	
  fundraise	
  the	
  required	
   amount.	
  	
  	
  	
  	
  	
  	
   	
   As	
  already	
  stated,	
  starting	
  to	
  save	
  money	
  and	
  establishing	
  a	
  fundraising	
  program	
  should	
  be	
  one	
   of	
  the	
  first	
  steps	
  you	
  take	
  in	
  the	
  real	
  estate	
  process.	
  You	
  will	
  need	
  to	
  fundraise	
  throughout	
  the	
   entire	
  journey	
  and	
  will	
  likely	
  continue	
  raising	
  money	
  even	
  after	
  the	
  mortgage	
  is	
  secured	
  and	
  the	
   offer	
  to	
  purchase	
  is	
  formally	
  closed.	
   	
   It	
  is	
  a	
  good	
  idea	
  to	
  set	
  up	
  a	
  trust	
  fund	
  or	
  savings	
  account	
  in	
  which	
  you	
  can	
  deposit	
  financial	
   contributions	
  for	
  the	
  project.	
  This	
  should	
  be	
  done	
  at	
  the	
  very	
  beginning	
  of	
  the	
  process,	
  even	
   before	
  the	
  initial	
  real	
  estate	
  idea	
  is	
  worked	
  out.	
  As	
  already	
  stated,	
  the	
  largest	
  barrier	
  to	
  any	
  real	
   estate	
  project	
  is	
  having	
  the	
  required	
  capital	
  available	
  to	
  support	
  the	
  purchase	
  and	
  renovation	
  of	
   a	
  property.	
  The	
  sooner	
  you	
  start	
  saving,	
  the	
  larger	
  the	
  financial	
  resource	
  your	
  organization	
  will	
   have	
  available	
  to	
  finalize	
  and	
  close	
  upon	
  an	
  offer	
  to	
  purchase.	
  	
  	
   	
   Make	
  sure	
  that	
  if	
  your	
  organization	
  has	
  charitable	
  status	
  that	
  you	
  consider	
  ways	
  to	
  use	
  that	
   status	
  to	
  provide	
  tax-­‐creditable	
  receipts	
  to	
  potential	
  donors	
  –	
  there	
  may	
  be	
  opportunities	
   related	
  to	
  the	
  purchase	
  of	
  the	
  building	
  (a	
  tax	
  receipt	
  to	
  the	
  vendor)	
  or	
  some	
  other	
  forms	
  of	
   receipting.	
  	
  Someone	
  with	
  a	
  financial	
  background	
  –	
  perhaps	
  from	
  your	
  lending	
  institution	
  –	
  can	
   help	
  you	
  think	
  of	
  creative	
  structures	
  that	
  might	
  make	
  use	
  of	
  your	
  charitable	
  status.	
   	
   It	
  is	
  important	
  for	
  any	
  organization	
  considering	
  a	
  real	
  estate	
  purchase	
  to	
  understand	
  the	
   implications	
  of	
  accumulating	
  capital	
  (down	
  payment	
  money)	
  on	
  its	
  balance	
  sheet,	
  as	
  there	
  are	
   	
  9	
   current	
  interpretations	
  (Summer	
  2012)	
  by	
  the	
  Revenue	
  Canada	
  Agency	
  that	
  cast	
  concerns	
   about	
  how	
  much	
  savings	
  charitable	
  organizations	
  can	
  accumulate.	
  	
   	
   If	
  you	
  are	
  setting	
  aside	
  funds	
  in	
  a	
  saving	
  account	
  for	
  the	
  future	
  purchase	
  of	
  a	
  building,	
  it	
  will	
  be	
   in	
  your	
  best	
  interest	
  to	
  seek	
  a	
  legal	
  opinion	
  from	
  a	
  charity	
  lawyer	
  about	
  how	
  much	
  to	
  save,	
  and	
   how	
  to	
  describe	
  that	
  savings	
  (i.e.	
  board-­‐restricted	
  building	
  fund)	
  so	
  that	
  you	
  don’t	
  run	
  the	
  risk	
   of	
  losing	
  your	
  status	
  because	
  you	
  have	
  accumulated	
  deemed	
  excessive	
  or	
  non-­‐accidental	
   surpluses.	
   	
   	
   	
   	
   Step 4 Functional Programming Time	
  to	
  complete:	
  three	
  months	
  to	
  one	
  year	
   	
   At	
  this	
  stage,	
  you	
  are	
  narrowing	
  down	
  the	
  information	
  that	
  will	
  help	
  to	
  determine	
  the	
  purpose	
   of	
  the	
  real	
  estate	
  project	
  and	
  where	
  it	
  might	
  be	
  physically	
  located.	
  You	
  should	
  involve	
  staff	
   members	
  and	
  clients	
  from	
  your	
  organization	
  in	
  this	
  process.	
  These	
  people	
  will	
  provide	
  valuable	
   feedback	
  on	
  how	
  they	
  currently	
  use	
  space	
  and	
  how	
  they	
  would	
  like	
  to	
  use	
  space	
  in	
  the	
  future.	
   You	
  should	
  produce	
  a	
  written	
  document	
  that	
  can	
  be	
  shared	
  with	
  professionals	
  and	
  other	
   people	
  who	
  may	
  be	
  involved	
  in	
  later	
  stages	
  of	
  the	
  project.	
  	
  	
   	
   A	
  functional	
  program	
  is	
  different	
  than	
  an	
  architectural	
  program.	
  The	
  latter	
  is	
  focused	
  on	
  specific	
   design	
  details	
  and	
  is	
  completed	
  further	
  down	
  in	
  the	
  real	
  estate	
  process.	
  A	
  functional	
  program	
   attempts	
  to	
  match	
  the	
  needs	
  of	
  the	
  organization	
  with	
  its	
  general	
  needs	
  for	
  space.	
  	
  	
   	
   You	
  must	
  define	
  your	
  property	
  criteria	
  (e.g.	
  target	
  area,	
  size	
  of	
  building,	
  special	
  features).	
  A	
   good	
  functional	
  program	
  will	
  help	
  your	
  organization	
  avoid	
  committing	
  to	
  a	
  building	
  that	
  does	
   not	
  truly	
  meet	
  your	
  needs.	
   	
   Questions	
  to	
  Answer:	
   • Who	
  are	
  you	
  (organization)?	
   • What	
  do	
  you	
  do?	
   • Who	
  are	
  your	
  users/customers?	
   • How	
  do	
  they	
  currently	
  use	
  space?	
   • How	
  would	
  they	
  like	
  to	
  use	
  space?	
    There	
  are	
  professional	
  consultants	
  that	
  can	
  help	
  guide	
  you	
  through	
  this	
  process.	
  Sometimes,	
   grants	
  and	
  loans	
  provided	
  by	
  local	
  foundations	
  or	
  government	
  agencies	
  can	
  help	
  cover	
  the	
   costs	
  of	
  hiring	
  professional	
  consultants.	
  	
    	
  10	
   Functional Program Checklist:	
   ü Community issues ü Site selection criteria ü Building orientation ü Hours of operation ü Peak usage times ü Universal design principles: barrier free ü Special needs ü Cultural diversity ü Sustainability: green design ü Facility management 	
   Changes	
  can	
  be	
  hard	
  for	
  people	
  within	
  your	
  organization	
  even	
  at	
  the	
  early	
  stages	
  of	
  a	
  project,	
   as	
  well	
  as	
  when	
  the	
  move	
  actually	
  occurs.	
  It	
  is	
  important	
  to	
  be	
  sensitive	
  to	
  these	
  concerns	
  and	
   think	
  about	
  how	
  to	
  mitigate	
  stresses	
  that	
  moving	
  may	
  cause	
  for	
  staff	
  and	
  clients.	
  	
  	
   	
   	
   	
   	
   Step 5 Market Analysis Time	
  to	
  complete:	
  one	
  month	
  to	
  three	
  months	
   	
   The	
  objective	
  of	
  this	
  step	
  is	
  to	
  formally	
  prove	
  that	
  a	
  real	
  need	
  for	
  your	
  potential	
  real	
  estate	
   project.	
  You	
  must	
  be	
  able	
  to	
  prove	
  that	
  there	
  is	
  a	
  high	
  demand	
  for	
  this	
  type	
  of	
  space	
  and	
  a	
   short	
  supply.	
  	
   	
   In	
  order	
  to	
  accomplish	
  this,	
  you	
  must	
  clearly	
  describe	
  whom	
  the	
  people	
  are	
  that	
  will	
  occupy	
  this	
   space	
  (define	
  the	
  target	
  market)	
  and	
  the	
  attributes	
  or	
  amenities	
  that	
  make	
  this	
  place	
  unique	
   (define	
  the	
  market	
  area).	
  	
  	
   	
   You	
  must	
  think	
  from	
  a	
  macro	
  and	
  micro	
  perceptive.	
  What’s	
  happening	
  in	
  the	
  country,	
  region	
   and	
  city	
  as	
  a	
  whole?	
  How	
  does	
  this	
  compare	
  to	
  the	
  specific	
  neighbourhood	
  or	
  block	
  that	
  your	
   project	
  is	
  located	
  in?	
  It	
  is	
  important	
  to	
  be	
  using	
  information	
  about	
  the	
  past	
  to	
  think	
  about	
  the	
   future	
  and	
  where	
  the	
  trends	
  are	
  going.	
  More	
  specifically,	
  what	
  is	
  an	
  area	
  going	
  to	
  look	
  like	
  in	
   five,	
  ten	
  and	
  fifteen	
  years?	
  Why	
  are	
  conditions	
  likely	
  to	
  change,	
  or	
  why	
  should	
  they	
  stay	
  the	
   same?	
  	
  	
   	
   There	
  are	
  public	
  data	
  sources	
  available,	
  such	
  as	
  the	
  Statistic	
  Canada	
  Census	
  and	
  CMHC	
  Housing	
   Reports,	
  to	
  find	
  general	
  information,	
  however	
  getting	
  specific	
  details	
  at	
  the	
  neighbourhood	
   level	
  is	
  difficult	
  and	
  will	
  probably	
  cost	
  you	
  money.	
  There	
  are	
  market	
  research	
  consultants	
  that	
   specialize	
  in	
  this	
  type	
  of	
  work	
  and	
  have	
  access	
  to	
  advanced	
  survey	
  software,	
  such	
  as	
  Environics	
   Envision.	
   	
   	
  11	
   Market	
  Demand	
  Checklist:	
  	
   ü total population ü average age ü # of households ü household make up ü marital status ü household income ü # of people working ü key occupations ü key transportation modes ü # of people who rent, who own ü average amount spent on housing per household 	
   You	
  must	
  research	
  the	
  supply	
  of	
  similar	
  space	
  and	
  determine	
  what	
  the	
  competition	
  is.	
  This	
  can	
   be	
  done	
  by	
  looking	
  at	
  comparable	
  properties	
  in	
  the	
  area	
  and	
  finding	
  information	
  on	
  recent	
  sale	
   prices,	
  rental	
  rates	
  and	
  vacancy.	
  You	
  should	
  conduct	
  a	
  rental	
  survey	
  of	
  similar	
  units	
  to	
   determine	
  what	
  people	
  are	
  willing	
  to	
  pay.	
  This	
  means	
  calling	
  property	
  owners	
  or	
  visiting	
   different	
  sites	
  and	
  asking	
  what	
  rent	
  is	
  charged,	
  the	
  sqft/unit,	
  vacancy	
  rates,	
  and	
  operating	
   expenses.	
   	
   Depending	
  on	
  the	
  scope	
  of	
  work	
  you	
  have	
  agreed	
  upon,	
  a	
  lot	
  of	
  this	
  information	
  may	
  already	
   be	
  assembled	
  in	
  the	
  appraiser’s	
  report.	
  This	
  is	
  something	
  that	
  you	
  should	
  negotiate	
  for	
  before	
   you	
  sign	
  a	
  contract	
  with	
  the	
  appraiser.	
  Appraisers	
  have	
  the	
  experience	
  and	
  tools	
  available	
  to	
   complete	
  this	
  work	
  relatively	
  quickly.	
  	
   	
  12	
   Third Stage: Physical Space 	
   This	
  section	
  will	
  look	
  at	
  the	
  things	
  you	
  have	
  to	
  do	
  once	
  you	
  start	
  looking	
  for	
  a	
  physical	
  space	
  or	
   when	
  you’ve	
  already	
  found	
  one.	
  	
  It	
  will	
  look	
  at	
  all	
  the	
  necessary	
  processes	
  and	
  approvals	
  that	
   you’ll	
  need	
  once	
  you	
  find	
  a	
  building	
  that	
  fits	
  your	
  needs.	
  	
  	
   	
   Step 6 Refining the Idea Time	
  to	
  complete:	
  one	
  month	
  to	
  three	
  months	
   	
   Now	
  is	
  the	
  time	
  to	
  start	
  searching	
  for	
  a	
  specific	
  physical	
  site	
  where	
  your	
  real	
  estate	
  dream	
   could	
  materialize.	
  This	
  doesn’t	
  necessarily	
  mean	
  that	
  a	
  property	
  is	
  listed	
  for	
  sale.	
  	
  Most	
   commercial	
  real	
  estate	
  sales	
  happen	
  without	
  the	
  site	
  being	
  listed	
  on	
  the	
  market.	
  Therefore,	
  you	
   cannot	
  depend	
  on	
  browsing	
  local	
  listings	
  to	
  find	
  a	
  potential	
  property.	
  It	
  is	
  up	
  to	
  you	
  to	
  take	
  the	
   initiative	
  –	
  work	
  with	
  a	
  realtor	
  to	
  help	
  you	
  identify	
  a	
  site	
  that	
  works	
  for	
  your	
  organization	
  and	
   then	
  have	
  that	
  realtor	
  approach	
  the	
  owner	
  about	
  his	
  or	
  her	
  interest	
  in	
  selling	
  the	
  potential	
  site.	
  	
  	
   	
   A	
  professional	
  realtor	
  will	
  be	
  very	
  useful	
  to	
  bring	
  at	
  this	
  stage.	
  It	
  will	
  not	
  cost	
  money	
  up	
  front	
   and	
  the	
  realtor	
  can	
  provide	
  expertise	
  that	
  will	
  help	
  guide	
  you	
  through	
  the	
  entire	
  process	
  of	
   buying	
  a	
  property.	
  There	
  will	
  be	
  details	
  on	
  the	
  benefits	
  of	
  a	
  realtor	
  in	
  subsequent	
  sections.	
   	
   Questions	
  to	
  Answer:	
  	
   • Is the site for sale? Listed or unlisted? • What are comparable sites? How much are they selling (sold) for? • Approximately how much will it cost to buy? Does this match comparable properties? • What are the surrounding amenities and how do they link up with project vision (transit, parks, restaurants, libraries)? • Do you need to secure the site to make sure someone else won’t buy it before you complete necessary research? (details in the next section) 	
   You	
  must	
  continue	
  to	
  develop	
  the	
  network	
  of	
  people	
  that	
  will	
  be	
  involved	
  in	
  the	
  project.	
  Talk	
   with	
  prospective	
  tenants,	
  owners,	
  lenders,	
  partners	
  and	
  professionals	
  to	
  see	
  if	
  the	
  dream	
  is	
   realistic.	
  Don’t	
  get	
  caught	
  up	
  on	
  details	
  –	
  they	
  will	
  be	
  flushed	
  out	
  later	
  on	
  –	
  but	
  remember	
  that	
   the	
  earlier	
  you	
  find	
  potential	
  roadblocks,	
  the	
  easier	
  it	
  is	
  to	
  adjust	
  the	
  dream	
  accordingly.	
  	
  	
  	
  	
   	
   It	
  is	
  important	
  to	
  let	
  ideas	
  percolate	
  throughout	
  the	
  entire	
  real	
  estate	
  journey.	
  Don’t	
  rush	
  into	
   anything.	
  See	
  how	
  real	
  estate	
  ideas	
  fit	
  with	
  staff	
  and	
  clients	
  in	
  your	
  organization,	
  as	
  well	
  as	
   other	
  stakeholders	
  in	
  the	
  community.	
  You	
  must	
  provide	
  opportunities	
  for	
  dialogue	
  and	
  input.	
   For	
  example,	
  hold	
  sessions	
  where	
  people	
  can	
  discuss	
  their	
  ideas,	
  concerns	
  and	
  aspirations	
  for	
   the	
  real	
  estate	
  project.	
  You	
  should	
  consider	
  ways	
  of	
  involving	
  different	
  personality	
  types	
  –	
  small	
   group	
  discussions	
  and	
  presentations	
  to	
  a	
  larger	
  audience.	
  The	
  collaboration	
  and	
  involvement	
  of	
   a	
  variety	
  of	
  people	
  is	
  an	
  important	
  resource	
  for	
  your	
  organization	
  to	
  utilize.	
  	
   	
  13	
   Refining	
  the	
  Idea	
  Checklist:	
  	
   ü Keep	
  building	
  your	
  contact	
  list	
   ü Keep	
  building	
  your	
  savings	
  and	
  looking	
  for	
  financial	
  resources	
   ü Go	
  to	
  the	
  mls.ca	
  website	
  to	
  check	
  out	
  properties	
  for	
  sale	
   ü Search	
  for	
  unlisted	
  properties	
  	
   ü Create	
  a	
  list	
  of	
  prospective	
  sites	
  and	
  comparables.	
  	
   	
   If	
  you	
  discover	
  that	
  there	
  is	
  not	
  a	
  suitable	
  site,	
  or	
  another	
  factor	
  that	
  won’t	
  allow	
  the	
  vision	
  to	
   happen,	
  then	
  you	
  may	
  need	
  to	
  go	
  back	
  to	
  the	
  drawing	
  board	
  and	
  think	
  of	
  a	
  new	
  approach.	
  This	
   could	
  mean	
  reconsidering	
  how	
  real	
  estate	
  affects	
  your	
  organization	
  and	
  why	
  owning	
  real	
  estate	
   will	
  help	
  accomplish	
  your	
  mission.	
  It	
  could	
  also	
  mean	
  that	
  even	
  though	
  your	
  idea	
  is	
  on	
  track,	
  the	
   timing	
  is	
  not	
  right.	
  Real	
  estate	
  requires	
  patience	
  and	
  you	
  may	
  need	
  to	
  wait	
  for	
  an	
  appropriate	
   site	
  to	
  present	
  itself	
  or	
  for	
  the	
  market	
  to	
  change.	
   	
   	
   	
   	
   Step 7 Project Financial Viability Time	
  to	
  complete:	
  one	
  month	
  –	
  three	
  months	
  	
   	
   Lenders	
  and	
  investors	
  need	
  to	
  assess	
  if	
  the	
  specific	
  project	
  and	
  building	
  that	
  you	
  are	
   considering	
  purchasing	
  will	
  be	
  self-­‐supporting	
  –	
  when	
  revenue	
  is	
  greater	
  than	
  expenses.	
  	
   	
   At	
  this	
  stage	
  you	
  will	
  need	
  to	
  complete	
  another	
  more	
  detailed	
  pro	
  forma	
  that	
  analyses	
  specifics	
   of	
  the	
  project	
  and	
  site	
  in	
  question.	
  Assumptions	
  will	
  be	
  made,	
  which	
  must	
  be	
  justified	
  by	
   supporting	
  research.	
   	
   Assumption	
  Checklist:	
  	
   ü Sale price ü Building improvement ü Furniture & Fixtures ü Soft costs (design, laywer, apprasial) ü Appraised Value ü Requested Loan Amount ü Mortage Conditions – interest rate, amortization, term, loan to value ratio ü Revenue – rent rates, parking, laundry ü Vacancy & bad debt ü Property taxes ü Management, Insurance, Utilities, Operating, Repairs, and Contingency ü Debt to Credit Ratio (DCR) 	
   	
   	
  14	
   With	
  this	
  pro	
  forma,	
  you	
  can	
  analyze	
  the	
  project	
  and	
  find	
  out	
  other	
  key	
  figures.	
   	
   Analysis	
  Checklist:	
  	
   ü Maximum Loan the project can support ü Net Operating Income (NOI) ü Annual Debt Service ü Cash Flow ü Breakeven Rent ü Safety Margin ü Capitization Rate ü Funding Gap 	
   The	
  Cash	
  Flow	
  is	
  the	
  money	
  left	
  over	
  after	
  you	
  pay	
  the	
  Annual	
  Debt	
  Service	
  (mortgage	
   payments).	
  It	
  is	
  your	
  cushion.	
  Cushion	
  is	
  important	
  because	
  circumstances	
  may	
  change	
  and	
  you	
   have	
  to	
  be	
  prepared	
  to	
  pay	
  more	
  than	
  you	
  initially	
  expected.	
  	
  	
  	
  	
   	
   The	
  Safety	
  Margin	
  summarizes	
  the	
  viability	
  of	
  a	
  project.	
  It	
  shows	
  the	
  percentage	
  that	
  NOI	
  can	
   decrease	
  until	
  NOI	
  and	
  Annual	
  Debt	
  Service	
  are	
  equal	
  to	
  each	
  other.	
  When	
  they	
  are	
  equal,	
  this	
   means	
  there	
  is	
  no	
  cushion.	
   	
   The	
  break-­‐even	
  rent	
  is	
  a	
  similar	
  analysis	
  to	
  the	
  safety	
  margin.	
  It	
  shows	
  what	
  rent	
  must	
  to	
  be	
   charged	
  in	
  order	
  for	
  NOI	
  to	
  equal	
  Annual	
  Debt	
  Service.	
  	
   	
   The	
  Capitalization	
  Rate	
  shows	
  how	
  efficient	
  the	
  property	
  is	
  at	
  generating	
  income,	
  based	
  on	
  how	
   much	
  the	
  property	
  is	
  appraised	
  at.	
  You	
  want	
  this	
  percentage	
  to	
  be	
  as	
  high	
  as	
  possible.	
  	
  	
  	
   	
   The	
  Funding	
  Gap	
  shows	
  if	
  the	
  income	
  generated	
  by	
  the	
  property	
  is	
  sufficiently	
  high,	
  given	
  the	
   Annual	
  Debt	
  Payments.	
  This	
  number	
  is	
  connected	
  with	
  DCR.	
  The	
  project	
  could	
  have	
  a	
  positive	
   Cash	
  Flow,	
  but	
  still	
  have	
  a	
  Funding	
  Gap	
  because	
  the	
  difference	
  in	
  income	
  and	
  mortgage	
   payments	
  is	
  too	
  low	
  for	
  the	
  lenders	
  comfort.	
  If	
  this	
  is	
  the	
  case,	
  you	
  will	
  need	
  to	
  increase	
  the	
   down	
  payment	
  or	
  negotiate	
  for	
  a	
  second	
  unconventional	
  mortgage	
  –	
  which	
  will	
  have	
  a	
  higher	
   interest	
  rate.	
  	
   	
   You	
  will	
  also	
  have	
  to	
  do	
  several	
  sensitivity	
  studies.	
  This	
  involves	
  changing	
  numbers	
  on	
  the	
  pro	
   forma	
  to	
  see	
  how	
  it	
  affects	
  other	
  numbers	
  in	
  the	
  analysis,	
  such	
  as	
  Cash	
  Flow	
  and	
  Safety	
  Margin.	
   Listed	
  below	
  are	
  key	
  sensitivities	
  that	
  you	
  will	
  want	
  to	
  test.	
   	
   Sensitivity	
  Checklist:	
  	
   ü Interest Rate ü Rennovation Costs ü Vacancy Rate ü Rental Rate ü Downpayment 	
  15	
   Step 8 Offer to Purchase Time	
  to	
  complete:	
  two	
  weeks	
  to	
  two	
  months	
   	
   If	
  the	
  vision	
  is	
  sounding	
  realistic	
  and	
  the	
  potential	
  site	
  seems	
  to	
  be	
  appropriate,	
  the	
  property	
   now	
  needs	
  to	
  be	
  “secured.”	
  	
  This	
  simply	
  means	
  locking	
  down	
  the	
  ownership	
  and	
  transfer	
  of	
  title	
   to	
  your	
  organization.	
  You	
  don’t	
  want	
  to	
  spend	
  more	
  resources	
  and	
  conduct	
  expensive	
   professional	
  research,	
  only	
  to	
  find	
  out	
  that	
  someone	
  else	
  has	
  purchased	
  the	
  property.	
  	
   	
   You	
  must	
  make	
  a	
  conditional	
  offer	
  to	
  purchase	
  and	
  provide	
  the	
  seller	
  with	
  a	
  deposit.	
  This	
   means	
  that	
  you	
  are	
  technically	
  agreeing	
  to	
  buy	
  the	
  property	
  at	
  a	
  set	
  price,	
  subject	
  to	
  all	
  of	
  the	
   research	
  and	
  conditions	
  going	
  as	
  expected.	
  	
   	
   Offer	
  to	
  Purchase	
  Conditions	
  Checklist:	
  	
  	
   ü Appraisal	
  supports	
  the	
  purchase	
  price	
  	
   ü No	
  environmental	
  contamination	
  is	
  found	
   ü Mortgage	
  approval	
   ü Planning	
  approval	
   ü Required	
  equity	
  is	
  gathered	
  	
  	
   	
   An	
  offer	
  usually	
  lasts	
  for	
  90	
  to	
  120	
  days,	
  meaning	
  you	
  will	
  have	
  to	
  complete	
  all	
  research	
  within	
   this	
  time	
  period.	
  Ideally,	
  your	
  deposit	
  will	
  be	
  fully	
  refundable,	
  so	
  that	
  if	
  any	
  of	
  the	
  conditions	
   are	
  not	
  met,	
  you’ll	
  get	
  your	
  money	
  back.	
  However,	
  you	
  should	
  be	
  prepared	
  to	
  make	
  a	
  non-­‐ refundable	
  deposit.	
  	
  Make	
  sure	
  you	
  understand	
  the	
  distinction	
  at	
  the	
  time	
  you	
  make	
  the	
   deposit.	
   	
   The	
  deposit	
  should	
  not	
  exceed	
  10%	
  of	
  the	
  purchase	
  price.	
  It	
  must	
  be	
  high	
  enough	
  to	
  let	
  the	
   seller	
  know	
  you	
  are	
  serious,	
  but	
  is	
  still	
  an	
  affordable	
  amount	
  that	
  your	
  organization	
  can	
   realistically	
  access,	
  without	
  compromising	
  it’s	
  day-­‐to-­‐day	
  operations.	
  	
  	
   	
   The	
  seller	
  will	
  typically	
  require	
  you	
  to	
  enter	
  into	
  a	
  purchase	
  agreement	
  before	
  you	
  can	
  have	
   access	
  to	
  the	
  building	
  to	
  perform	
  the	
  necessary	
  research	
  such	
  as	
  environmental	
  assessment,	
   design	
  work,	
  and	
  appraisal.	
   	
   Gathering	
  capital	
  (money)	
  for	
  the	
  deposit	
  to	
  complete	
  this	
  step	
  can	
  be	
  a	
  roadblock.	
  	
   	
   Deposit	
  Options:	
  	
   1. If	
  your	
  relationship	
  with	
  the	
  seller	
  is	
  very	
  good,	
  they	
  may	
  accept	
  a	
  $1	
  deposit,	
  which	
  can	
   be	
  increased	
  once	
  your	
  research	
  is	
  complete	
   2. Liquid	
  money	
  in	
  a	
  savings	
  account	
  or	
  term	
  deposit	
  you	
  may	
  have	
  on	
  hand.	
   3. Capital	
  grant	
  or	
  donation	
  from	
  a	
  third	
  party.	
  Unfortunately,	
  many	
  grants	
  are	
  for	
   upgrading	
  properties	
  that	
  have	
  already	
  been	
  purchased	
  and	
  cannot	
  be	
  used	
  as	
  a	
   deposit.	
  	
   	
  16	
   4. Line	
  of	
  Credit	
  –	
  a	
  financial	
  institution	
  can	
  provide	
  access	
  to	
  a	
  few	
  thousand	
  dollars	
   through	
  a	
  working	
  capital	
  loan	
  (known	
  as	
  a	
  line	
  of	
  credit),	
  however	
  they	
  will	
  charge	
  you	
   interest	
  for	
  this.	
   	
   If	
  you	
  decide	
  to	
  go	
  through	
  with	
  this	
  step	
  and	
  secure	
  the	
  property,	
  you	
  will	
  need	
  to	
  get	
   professional	
  support	
  from	
  a	
  realtor	
  and/or	
  lawyer	
  to	
  make	
  sure	
  that	
  everything	
  is	
  done	
   correctly.	
  	
  	
   	
   The	
  process	
  of	
  purchasing	
  a	
  property	
  is	
  complex,	
  and	
  many	
  people	
  find	
  it	
  easiest	
  to	
  have	
  a	
  real	
   estate	
  agent	
  by	
  their	
  side.	
  There	
  will	
  be	
  lots	
  of	
  paperwork	
  and	
  it	
  is	
  helpful	
  to	
  have	
  someone	
   familiar	
  and	
  professional	
  to	
  help	
  you	
  navigate	
  it.	
  Other	
  parts	
  of	
  the	
  transaction	
  will	
  be	
   happening	
  quickly	
  as	
  well	
  –	
  hiring	
  inspectors,	
  negotiating	
  who	
  pays	
  for	
  needed	
  repairs,	
  and	
   doing	
  a	
  certified	
  appraisal.	
  All	
  of	
  this	
  is	
  second	
  nature	
  to	
  a	
  good	
  agent.	
  Real	
  estate	
  agents	
  have	
   contacts	
  with	
  experienced	
  professionals	
  who	
  can	
  make	
  the	
  process	
  much	
  easier.	
  	
   	
   One	
  of	
  the	
  best	
  reasons	
  to	
  hire	
  a	
  real	
  estate	
  agent	
  is	
  that	
  the	
  seller	
  is	
  likely	
  to	
  use	
  their	
  own	
   agent	
  and	
  you	
  do	
  not	
  want	
  that	
  agent	
  to	
  take	
  over	
  the	
  process.	
  Furthermore,	
  the	
  seller's	
  agent	
   may	
  ask	
  to	
  represent	
  both	
  of	
  you,	
  in	
  a	
  "dual	
  agency"	
  relationship	
  that	
  primarily	
  benefits	
  the	
   seller.	
  	
   	
   As	
  a	
  buyer,	
  you	
  do	
  not	
  have	
  to	
  pay	
  directly	
  for	
  the	
  services	
  of	
  an	
  agent.	
  Realtors	
  get	
  paid	
  from	
   commission	
  on	
  the	
  sale	
  of	
  the	
  property,	
  which	
  is	
  usually	
  3%	
  of	
  the	
  sale	
  price.	
  However,	
  this	
   amount	
  is	
  ultimately	
  passed	
  on	
  to	
  the	
  buyer	
  as	
  part	
  of	
  the	
  sale	
  price.	
   	
   Alternatively,	
  you	
  can	
  set	
  up	
  a	
  purchase	
  agreement	
  using	
  only	
  a	
  real	
  estate	
  lawyer.	
  If	
  both	
  you	
   and	
  the	
  seller	
  are	
  agreeable,	
  separate	
  lawyers	
  that	
  represent	
  the	
  buyer	
  and	
  seller	
  can	
  formalize	
   a	
  conditional	
  offer.	
  This	
  process	
  is	
  more	
  cost	
  effective	
  compared	
  to	
  using	
  real	
  estate	
  agents,	
   however	
  there	
  are	
  more	
  potential	
  headaches.	
   	
   For	
  example,	
  lawyers	
  get	
  paid	
  up	
  front	
  and	
  hourly,	
  whether	
  or	
  not	
  the	
  sale	
  actually	
  goes	
   through.	
  The	
  lawyer	
  is	
  not	
  responsible	
  for	
  ensuring	
  that	
  the	
  entire	
  purchasing	
  process	
  goes	
   smoothly,	
  they	
  only	
  make	
  sure	
  that	
  legal	
  requirements	
  are	
  satisfied.	
  	
   	
   It	
  is	
  wise	
  to	
  learn	
  as	
  much	
  as	
  you	
  can	
  about	
  the	
  purchasing	
  process,	
  regardless	
  of	
  whether	
  you	
   use	
  a	
  real	
  estate	
  agent	
  or	
  lawyer.	
  For	
  example,	
  researching	
  the	
  market	
  value	
  of	
  comparable	
   properties	
  in	
  the	
  area	
  will	
  protect	
  you	
  against	
  pressure	
  to	
  make	
  an	
  unreasonably	
  high	
  offer.	
  	
   	
   If	
  the	
  seller	
  is	
  not	
  willing	
  to	
  accept	
  your	
  conditional	
  offer,	
  or	
  if	
  you	
  cannot	
  gather	
  capital	
  for	
  a	
   deposit	
  then	
  it’s	
  back	
  to	
  the	
  drawing	
  board	
  to	
  think	
  of	
  a	
  new	
  idea,	
  find	
  a	
  new	
  site,	
  or	
  keeping	
   saving	
  money	
  for	
  the	
  deposit.	
   	
   	
   	
  17	
   Step 9 Environmental Assessment Time	
  to	
  complete:	
  one	
  month	
  –	
  two	
  months	
  	
   	
   A	
  professional	
  needs	
  to	
  complete	
  what	
  is	
  known	
  as	
  a	
  “Phase	
  1	
  Environmental	
  Assessment”	
  to	
   determine	
  whether	
  there	
  is	
  contamination	
  or	
  other	
  environmental	
  concerns	
  on	
  the	
  site.	
   Depending	
  on	
  the	
  scope	
  of	
  work	
  this	
  will	
  cost	
  approximately	
  $3,000.	
  This	
  assessment	
  will	
  look	
   into	
  the	
  historic	
  uses	
  of	
  the	
  site,	
  as	
  well	
  other	
  nearby	
  sites	
  to	
  determine	
  the	
  likelihood	
  of	
  sub-­‐ surface	
  contamination.	
  It	
  will	
  also	
  provide	
  a	
  general	
  description	
  of	
  the	
  geophysical	
  features	
  of	
   the	
  site	
  –	
  drainage,	
  topography,	
  and	
  geology.	
   	
   If	
  serious	
  contamination	
  issues	
  are	
  discovered	
  (such	
  as	
  the	
  presence	
  of	
  an	
  old	
  underground	
   storage	
  tank),	
  you	
  will	
  need	
  to	
  complete	
  a	
  more	
  detailed	
  Phase	
  2	
  Environmental	
  Assessment,	
   which	
  is	
  also	
  more	
  expensive.	
   	
   You	
  must	
  check	
  that	
  your	
  potential	
  mortgage	
  provider	
  has	
  listed	
  the	
  assessor	
  you	
  will	
  be	
   working	
  with	
  as	
  a	
  certified	
  professional.	
  	
  Otherwise,	
  you	
  might	
  find	
  yourself	
  going	
  through	
  this	
   process	
  twice.	
   	
   Questions	
  to	
  Answer:	
  	
   • Has there been a previous environmental assessment completed? Depending on the date, you may still have to complete an updated version, but having the prior one available will save a lot of time. 	
   You	
  will	
  need	
  to	
  complete	
  a	
  HAZMAT	
  report,	
  where	
  a	
  professional	
  collects	
  samples	
  from	
  the	
   building	
  and	
  has	
  them	
  tested	
  in	
  a	
  laboratory.	
  Depending	
  on	
  the	
  severity,	
  these	
  hazards	
  will	
   have	
  to	
  be	
  mitigated	
  –	
  more	
  detail	
  in	
  the	
  design	
  section.	
   	
   Hazard	
  Checklist:	
  	
   ü Storage	
  tanks	
   ü Waste	
  management	
  and	
  chemical	
  handling	
   ü Soil	
  fill	
  and	
  land	
  reclamation	
   ü Polychlorinated	
  Biphenyls	
  (PCBs)	
   ü Asbestos-­‐containing	
  materials	
   ü Lead-­‐based	
  paint	
  and	
  lead	
  in	
  drinking	
  water	
   ü Ozone-­‐depleting	
  substances	
   ü Urea	
  Formaldehyde	
  foam	
  insulation	
   ü Mould	
   ü Air	
  Emissions	
   	
   	
   	
  18	
   Step 10 Project Design & Cost Estimating Time	
  to	
  complete:	
  two	
  months	
  –	
  six	
  months	
   	
   At	
  this	
  stage	
  of	
  the	
  process,	
  you	
  are	
  narrowing	
  in	
  on	
  project	
  specifics.	
  A	
  professional	
  architect	
   or	
  space	
  designer	
  must	
  be	
  hired	
  to	
  complete	
  design	
  work	
  that	
  precisely	
  illustrates	
  what	
  the	
   space	
  will	
  become.	
  That	
  professional	
  will	
  listen	
  to	
  what	
  your	
  needs	
  are	
  and	
  incorporate	
  them	
   into	
  drawings	
  that	
  can	
  be	
  used	
  to	
  estimate	
  renovation	
  costs,	
  apply	
  for	
  planning	
  permission,	
  and	
   for	
  contractors	
  to	
  use	
  in	
  construction.	
  	
   	
   Architectural	
  work	
  is	
  expensive	
  and	
  charged	
  on	
  an	
  hourly	
  basis,	
  so	
  you	
  need	
  to	
  make	
  sure	
  that	
   the	
  necessary	
  groundwork	
  is	
  finished.	
  This	
  means	
  completing	
  functional	
  programming	
  and	
   ensuring	
  general	
  consensus	
  is	
  met	
  with	
  your	
  staff	
  and	
  board	
  of	
  directors	
  regarding	
  the	
  project	
   vision.	
  You	
  do	
  not	
  want	
  to	
  flip	
  flop	
  on	
  ideas	
  for	
  the	
  space,	
  because	
  making	
  these	
  changes	
  will	
   be	
  expensive.	
  	
  By	
  the	
  time	
  that	
  you	
  start	
  this	
  stage,	
  it	
  is	
  important	
  to	
  have	
  already	
  thought	
   carefully	
  about	
  how	
  well	
  the	
  design	
  fits	
  the	
  project’s	
  objectives.	
  You	
  should	
  also	
  set	
  a	
  change	
   work	
  order	
  process	
  up.	
  This	
  means	
  clearly	
  describing	
  a	
  plan	
  of	
  action	
  on	
  how	
  to	
  move	
  forward	
   if	
  a	
  key	
  individual	
  or	
  partner	
  in	
  the	
  project	
  is	
  unable	
  to	
  continue	
  working	
  on	
  it.	
  Given	
  that	
  real	
   estate	
  projects	
  take	
  a	
  long	
  time	
  to	
  complete,	
  this	
  roadblock	
  is	
  very	
  likely	
  to	
  occur.	
  	
  	
  	
   	
   The	
  architect	
  will	
  need	
  access	
  to	
  drawings	
  of	
  the	
  existing	
  structure	
  and	
  site	
  plans,	
  with	
  precise	
   measurements	
  so	
  that	
  she	
  or	
  he	
  can	
  incorporate	
  them	
  into	
  the	
  new	
  design.	
  All	
  architectural	
   drawings	
  submitted	
  for	
  official	
  building	
  permit	
  applications	
  are	
  kept	
  on	
  record	
  at	
  City	
  Hall.	
  It	
  is	
   quite	
  possible	
  that	
  the	
  City	
  has	
  records	
  of	
  the	
  building	
  you	
  are	
  trying	
  to	
  buy.	
  	
  For	
  a	
  fee,	
  you	
  can	
   get	
  access	
  and	
  make	
  copies	
  of	
  these,	
  which	
  will	
  save	
  time	
  and	
  money	
  required	
  to	
  produce	
   scaled	
  drawings	
  from	
  scratch.	
  	
   	
   The	
  architect	
  will	
  need	
  access	
  to	
  the	
  Environment	
  Phase	
  1	
  and	
  HAZMAT	
  report	
  that	
  you	
  will	
   have	
  completed	
  in	
  the	
  previous	
  Step.	
  	
  These	
  will	
  help	
  to	
  show	
  what	
  hazards	
  will	
  have	
  to	
  be	
   mitigated	
  or	
  designed	
  around.	
  Design	
  considerations	
  may	
  include	
  complete	
  removal	
  of	
  these	
   hazards,	
  which	
  can	
  be	
  very	
  expensive,	
  or	
  isolating	
  hazards,	
  preventing	
  disturbance	
  and	
  building	
   around	
  them.	
  	
   	
   Things	
  to	
  think	
  about:	
  	
   • Have a clear vision for what designs elements are required to achieve the objectives of your organization • Do a site tour with a contractor, architect, and environmental consultant • Ask professionals for a discounted rate for not-for-profits • Check out professionals past work and get references • Get access to all past reports and drawings on buildings and give them to consultants 	
   It	
  is	
  important	
  to	
  establish	
  a	
  development	
  and	
  renovation	
  budget	
  based	
  on	
  projected	
  costs	
  that	
   your	
  architect	
  and	
  construction	
  estimator	
  have	
  provided.	
  The	
  budget	
  should	
  include	
  what	
  are	
   	
  19	
   known	
  as	
  “hard	
  costs”	
  –	
  physical	
  bricks	
  and	
  mortar	
  and	
  “soft	
  costs”	
  –	
  design	
  and	
  consulting	
   work.	
  	
  Your	
  budget	
  must	
  account	
  for	
  both,	
  helping	
  you	
  plan	
  for	
  all	
  of	
  the	
  financial	
  obligations	
  of	
   construction.	
  	
   	
   Real	
  Estate	
  Development	
  Cost	
  Checklist:	
  	
   ü Purchase	
  price	
  of	
  property	
   ü Site	
  and	
  infrastructure	
  upgrades	
  (sidewalks,	
  sewer	
  connection)	
   ü Environmental	
  remediation	
  	
   ü Design	
  fees	
  (architectural,	
  engineering)	
   ü Hard	
  costs	
  (structural	
  upgrades	
  to	
  satisfy	
  building	
  code	
  and	
  cosmetic	
  –labour	
  and	
   materials)	
   ü Permitting	
  costs	
   ü Financing	
  costs	
  (permanent	
  loan	
  commitment	
  fees,	
  construction	
  interest,	
  construction	
   loan	
  fees)	
   ü Marketing	
  costs	
  (promotion,	
  advertising,	
  leasing	
  commissions,	
  brokers	
  fees)	
   ü Preopening	
  operating	
  costs	
   ü Legal	
  fees	
   ü Accounting	
  costs	
   ü Inspection	
  costs	
   ü Overhead	
   ü Contingencies	
   ü Development	
  fees	
   	
   Ideally,	
  each	
  of	
  these	
  estimates	
  will	
  be	
  confirmed	
  by	
  market	
  data.	
  The	
  largest	
  item	
  will	
  be	
  hard	
   costs	
  and	
  these	
  numbers	
  should	
  be	
  confirmed	
  by	
  comparison	
  with	
  the	
  cost	
  of	
  similar	
  projects,	
   costs	
  estimation	
  services,	
  and	
  the	
  prospective	
  general	
  contractor.	
  	
   	
   	
   	
   	
   	
   	
   	
  20	
   Step 11 Property Appraisal Time	
  to	
  complete:	
  one	
  month	
  –	
  two	
  months	
   	
   You	
  will	
  need	
  to	
  get	
  a	
  professional	
  appraisal	
  of	
  the	
  property	
  in	
  order	
  to	
  ensure	
  that	
  it	
  is	
  actually	
   worth	
  the	
  amount	
  that	
  you	
  have	
  agreed	
  to	
  pay.	
  This	
  will	
  cost	
  approximately	
  $3000,	
  depending	
   on	
  the	
  scope	
  of	
  the	
  work.	
  	
   	
   You	
  must	
  check	
  that	
  your	
  potential	
  mortgage	
  provider	
  has	
  included	
  the	
  appraiser	
  on	
  its	
  list	
  of	
   approved	
  and	
  vetted	
  professionals.	
  	
  If	
  it	
  has	
  not,	
  then	
  the	
  findings	
  from	
  the	
  appraisal	
  will	
  not	
  be	
   deemed	
  as	
  reliable.	
  	
   	
   The	
  appraisal	
  is	
  important,	
  because	
  as	
  will	
  be	
  discussed	
  in	
  future	
  sections,	
  a	
  lending	
  institution	
   will	
  not	
  lend	
  money	
  for	
  a	
  building	
  that	
  is	
  worth	
  less	
  than	
  the	
  purchase	
  price,	
  or	
  for	
  renovations	
   that	
  do	
  not	
  increase	
  a	
  building’s	
  market	
  value.	
  	
  	
   	
   An	
  appraiser	
  will	
  value	
  the	
  property	
  using	
  two	
  or	
  three	
  of	
  following	
  techniques:	
   • Income Approach – all potential revenue and expense streams are projected and valued using a capitizalization rate (required rate of return) that is determined by the market. • Comparison Approach – recent sales of properties near to the subject site are averaged based on how well the compared to your property. • Cost Approach – estimates the cost of the material and labour needed to reconstruct the building and adds the tax assessed land value. This is not a commonly used method. 	
   If	
  you	
  are	
  making	
  renovations	
  to	
  the	
  building,	
  you	
  will	
  need	
  to	
  do	
  a	
  second	
  appraisal,	
  where	
  the	
   architects	
  drawings	
  and	
  construction	
  cost	
  estimates	
  are	
  used	
  to	
  revalue	
  the	
  property.	
  Certain	
   renovations	
  could	
  make	
  the	
  building	
  more	
  valuable	
  for	
  your	
  organization	
  specifically,	
  but	
  create	
   little	
  value	
  for	
  other	
  potential	
  occupants	
  -­‐	
  for	
  example,	
  an	
  amazing	
  twirling	
  sign.	
  These	
   improvements	
  would	
  add	
  minimal	
  market	
  value	
  to	
  the	
  building,	
  compared	
  to	
  installing	
  new	
   windows	
  or	
  a	
  watertight	
  roof,	
  which	
  almost	
  all	
  potential	
  occupants	
  would	
  benefit	
  from.	
  	
   	
   Appraisal	
  techniques	
  are	
  different	
  for	
  commercial	
  and	
  residential	
  properties.	
  It	
  is	
  usually	
  more	
   complicated	
  to	
  appraise	
  a	
  commercial	
  property	
  because	
  revenue	
  and	
  expense	
  streams	
  can	
  vary	
   depending	
  on	
  tenant	
  type,	
  and	
  market	
  characteristics	
  	
  (income	
  of	
  population,	
  traffic	
  volume).	
  	
   	
   When	
  a	
  site	
  has	
  both	
  commercial	
  and	
  residential	
  occupants	
  it	
  is	
  called	
  mixed	
  use.	
  Mixed-­‐use	
   appraisals	
  are	
  difficult	
  to	
  do	
  because	
  the	
  site’s	
  different	
  uses	
  influence	
  each	
  other	
  and	
   depending	
  on	
  how	
  they	
  are	
  integrated,	
  it	
  can	
  either	
  add	
  positively	
  or	
  negatively	
  to	
  the	
  property	
   value.	
  The	
  conclusions	
  from	
  these	
  appraisals	
  can	
  be	
  subjective	
  and	
  must	
  be	
  supported	
  by	
   qualitative	
  and	
  quantitative	
  research.	
  	
   	
   Appraisers	
  will	
  usually	
  include	
  a	
  market	
  analysis	
  as	
  part	
  of	
  their	
  report.	
  You	
  should	
  negotiate	
  for	
   them	
  to	
  do	
  specific	
  research	
  for	
  your	
  project	
  –	
  see	
  market	
  analysis	
  section.	
   	
  21	
   Step 12 Planning Approvals Time	
  to	
  complete:	
  three	
  months	
  –	
  two	
  years	
  	
   	
   Planners	
  are	
  important	
  people.	
  They	
  decide	
  what	
  can	
  and	
  can’t	
  be	
  done	
  in	
  a	
  city.	
  As	
  it	
  relates	
  to	
   your	
  real	
  estate	
  vision,	
  planners	
  will	
  help	
  determine	
  whether	
  your	
  project	
  fits	
  within	
  the	
  goals	
   of	
  the	
  area’s	
  Official	
  Community	
  Plan	
  (OCP)	
  and	
  thus	
  allowed	
  to	
  proceed.	
  If	
  it	
  is	
  outside	
  of	
  the	
   OCP,	
  then	
  amendments	
  or	
  a	
  rezoning	
  must	
  be	
  made;	
  this	
  takes	
  time	
  and	
  money.	
  	
   	
   The	
  role	
  of	
  planners	
  is	
  to	
  meet	
  the	
  needs	
  of	
  everyone	
  in	
  the	
  community.	
  Therefore,	
  in	
  order	
  for	
   planners	
  to	
  support	
  a	
  project,	
  you	
  need	
  to	
  get	
  the	
  community	
  to	
  buy	
  into	
  the	
  project.	
  Formally,	
   this	
  means	
  getting	
  signed	
  letters	
  of	
  support.	
  	
   	
   It	
  is	
  important	
  to	
  go	
  deeper	
  than	
  just	
  looking	
  for	
  people’s	
  signatures.	
  A	
  project	
  that	
  the	
   community	
  truly	
  stands	
  behind	
  will	
  engage	
  local	
  stakeholders	
  throughout	
  the	
  process,	
  starting	
   from	
  the	
  very	
  beginning	
  when	
  the	
  real	
  estate	
  idea	
  is	
  being	
  initially	
  crafted	
  (see	
  Step	
  2	
  and	
  Step	
   3).	
  	
   	
   There	
  are	
  many	
  application	
  fees	
  charged	
  by	
  the	
  city	
  on	
  any	
  real	
  estate	
  project.	
  You	
  need	
  to	
   know	
  what	
  these	
  fees	
  are	
  and	
  how	
  much	
  you	
  should	
  expect	
  to	
  pay,	
  for	
  example,	
  on	
   development	
  permits,	
  building	
  permits,	
  water	
  main	
  connections,	
  and	
  licences.	
  	
  	
  	
   	
   A	
  good	
  starting	
  point	
  is	
  to	
  visit	
  the	
  Enquiry	
  Centre	
  at	
  City	
  Hall	
  and	
  ask	
  them	
  to	
  review	
  the	
   specific	
  property	
  you	
  are	
  interested	
  in.	
  They	
  will	
  tell	
  you	
  what	
  the	
  zoning	
  currently	
  is	
  and	
  what	
   local	
  policies,	
  programs	
  and	
  bylaws	
  you	
  will	
  need	
  to	
  follow.	
  	
   	
   If	
  your	
  vision	
  for	
  the	
  property	
  does	
  not	
  align	
  with	
  City	
  mandates,	
  then	
  you	
  will	
  need	
  to	
  apply	
  for	
   a	
  development	
  permit.	
  This	
  can	
  cost	
  several	
  thousand	
  dollars,	
  but	
  not-­‐for-­‐profit	
  organizations	
   are	
  usually	
  eligible	
  for	
  a	
  discounted	
  rate.	
  In	
  order	
  to	
  make	
  this	
  application,	
  you	
  will	
  need	
  to	
   present	
  a	
  site	
  plan,	
  floor	
  plan	
  and	
  a	
  letter	
  describing	
  the	
  operations	
  to	
  be	
  located	
  on	
  the	
  site.	
  If	
   possible,	
  you	
  should	
  apply	
  for	
  a	
  minor	
  amendment	
  to	
  the	
  OCP	
  and	
  not	
  a	
  rezoning.	
  A	
  rezoning	
   takes	
  a	
  long	
  time	
  to	
  go	
  through	
  the	
  necessary	
  bureaucratic	
  process.	
   	
   If	
  you	
  want	
  to	
  make	
  any	
  changes	
  to	
  the	
  building	
  structure	
  you	
  need	
  to	
  apply	
  for	
  a	
  building	
   permit.	
  This	
  process	
  will	
  also	
  cost	
  money,	
  but	
  depending	
  on	
  the	
  scope	
  of	
  work,	
  it	
  will	
  be	
  faster	
   than	
  the	
  development	
  permit.	
  	
  You	
  will	
  need	
  completed	
  architectural	
  drawings	
  of	
  the	
  proposed	
   changes.	
  	
   	
   It	
  is	
  important	
  to	
  have	
  a	
  good	
  relationship	
  with	
  the	
  City	
  and	
  make	
  sure	
  they	
  clearly	
  understand	
   your	
  vision.	
  It	
  is	
  best	
  to	
  approach	
  people	
  at	
  the	
  City	
  early	
  in	
  the	
  process	
  and	
  start	
  a	
   conversation	
  about	
  the	
  project,	
  even	
  if	
  you	
  do	
  not	
  have	
  final	
  drawings	
  and	
  building	
  plans	
  ready	
   to	
  present.	
  	
  	
   	
   	
   	
  22	
   Step 13 Project Plan Time	
  to	
  complete:	
  one	
  month	
  –	
  two	
  months	
   	
   This	
  step	
  is	
  where	
  everything	
  comes	
  together.	
  Your	
  project	
  plan	
  will	
  pull	
  information	
  from	
  all	
   the	
  work	
  you	
  have	
  done	
  and	
  describe	
  what	
  exactly	
  the	
  project	
  is	
  and	
  why	
  it	
  is	
  the	
  right	
  match	
   for	
  your	
  organization.	
  	
   	
   A	
  strong	
  project	
  plan	
  will	
  help	
  convince	
  potential	
  funders	
  and	
  lenders	
  that	
  the	
  project	
  is	
  a	
  good	
   idea	
  and	
  that	
  you	
  have	
  done	
  all	
  the	
  necessary	
  research.	
  	
   	
   General	
  Questions	
  to	
  Answer:	
  	
   • What is it that we are doing? • Where is our capital coming from (investors)? • Who are we doing it for (market)? • Will it succed (do better than okay)? 	
   The	
  project	
  plan	
  should	
  start	
  by	
  profiling	
  the	
  organization	
  and	
  what	
  the	
  real	
  estate	
  vision	
  is.	
  It	
  is	
   important	
  to	
  be	
  as	
  detailed	
  as	
  possible	
  and	
  to	
  clearly	
  articulate	
  the	
  opportunity	
  that	
  this	
  project	
   presents.	
  You	
  will	
  need	
  to	
  support	
  the	
  vision	
  both	
  qualitatively	
  and	
  quantitatively.	
  	
  There	
   should	
  be	
  a	
  plan	
  for	
  raising	
  the	
  necessary	
  capital	
  (down	
  payment)	
  and	
  a	
  schedule	
  for	
  the	
   development	
  (expiry	
  of	
  the	
  offer	
  to	
  purchase,	
  renovation	
  dates,	
  payment	
  of	
  construction	
  costs,	
   occupancy	
  dates).	
  	
   	
   You	
  will	
  need	
  to	
  include	
  pictures	
  of	
  the	
  building,	
  maps	
  of	
  the	
  area	
  and	
  other	
  visuals	
  to	
  break	
  up	
   the	
  text.	
  	
   	
   Project	
  Plan	
  Checklist:	
  	
   ü Executive Summary ü Organization Information ü Project Vision ü Organizations and People Involved ü Neighborhood Background & Amenties ü Description of Site & Structure ü Environmental Assessment ü Design & Rennovations ü Appraisal ü Zoning & Implications ü Market Analysis & Implications & Absorption ü Financial Assumptions & Analysis & Sensitivities ü Funding Options ü Financial Profile of the Organization & ü Development Schedule ü Overal Conclusions 	
  23	
   Step 14 Secure a Mortgage Time	
  to	
  complete:	
  one	
  month	
  –	
  three	
  months	
   	
   Undertaking	
  a	
  real	
  estate	
  project	
  is	
  a	
  risky	
  process.	
  There	
  are	
  a	
  lot	
  of	
  variables	
  that	
  can	
  cause	
  a	
   project	
  to	
  fail,	
  from	
  its	
  marketability	
  and	
  financing,	
  to	
  the	
  experience	
  of	
  the	
  organization	
  and	
   project	
  team.	
  	
   	
   Generally,	
  a	
  project	
  has	
  a	
  greater	
  risk	
  of	
  failure	
  the	
  earlier	
  in	
  the	
  real	
  estate	
  process	
  it	
  is.	
  At	
   these	
  elementary	
  stages,	
  relatively	
  few	
  resources	
  have	
  been	
  committed	
  so	
  failing	
  at	
  this	
  stage	
   has	
  limited	
  consequences.	
  As	
  the	
  project	
  progresses	
  uncertainty	
  and	
  the	
  risk	
  of	
  failure	
  steadily	
   declines.	
  However,	
  by	
  this	
  point,	
  significant	
  resources	
  have	
  been	
  spent	
  and	
  if	
  the	
  project	
  fails,	
   consequences	
  will	
  be	
  much	
  more	
  severe.	
  	
  	
  	
  	
   	
   The	
  primary	
  concern	
  for	
  lending	
  institutions	
  is	
  reducing	
  their	
  risk	
  when	
  you	
  take	
  out	
  a	
  mortgage	
   (they	
  want	
  to	
  know	
  that	
  they	
  will	
  get	
  their	
  money	
  back).	
  Your	
  main	
  objective	
  is	
  to	
  convince	
  the	
   bank	
  that	
  this	
  project	
  has	
  a	
  zero	
  or	
  minimal	
  risk	
  of	
  failing.	
   	
   You	
  will	
  need	
  to	
  present	
  your	
  business	
  plan	
  to	
  the	
  bank,	
  as	
  well	
  as	
  all	
  supporting	
  information	
  in	
   order	
  to	
  be	
  approved	
  for	
  a	
  mortgage.	
  Be	
  prepared	
  to	
  present	
  the	
  following:	
    Organizational Information ü Year to date internally prepared interim financial statements ü Current year’s Approved Budget ü Last 3 years of accountant-prepared financial statements ü Constitution and Bylaws ü Names, positions and length of time for all Board members and key personnel ü Proof of board approval for purchase of the property ü Brief history of organization, programs & services, mission, etc. ü List of other loans held by the organization (cars, line of credit, etc.)  Credit Requirements ü Brief outline of financing needs that would be required from Lender ü Confirmation of which, if any, programs will be moved into the building ü Cost / benefit analysis confirming cash flow is available for repayment of the loan (i.e. savings of rent at another location)  Asset Description: ü Copy of accepted offer to purchase ü Appraisal for the lands, prepared by a professional appraiser ü Environmental assessment for the site, prepared by a professional firm 	
   	
  24	
   It	
  is	
  important	
  to	
  have	
  a	
  good	
  relationship	
  with	
  your	
  lender	
  and	
  make	
  sure	
  that	
  they	
  are	
   involved	
  early	
  in	
  the	
  process.	
  Lenders	
  can	
  provide	
  insights	
  on	
  potential	
  barriers	
  and	
  how	
  to	
   mitigate	
  them.	
  	
   	
   A	
  letter	
  of	
  interest	
  for	
  a	
  mortgage	
  from	
  your	
  mortgage	
  lender	
  is	
  different	
  than	
  their	
  formal	
   commitment	
  to	
  provide	
  you	
  with	
  a	
  mortgage.	
  Early	
  on	
  in	
  the	
  process	
  a	
  lender	
  can	
  guarantee	
   loan	
  conditions	
  (interest	
  rate,	
  term,	
  amortization)	
  for	
  a	
  defined	
  period	
  of	
  time.	
  However,	
  this	
   does	
  not	
  necessarily	
  mean	
  that	
  they	
  will	
  provide	
  you	
  with	
  a	
  mortgage.	
  Risk	
  assessors	
  at	
  the	
   credit	
  union	
  or	
  bank	
  will	
  look	
  closely	
  at	
  the	
  project	
  after	
  required	
  due	
  diligence	
  is	
  complete	
   (environmental	
  assessment,	
  appraisal,	
  etc.)	
  and	
  then	
  decide	
  whether	
  or	
  not	
  to	
  formally	
  commit	
   to	
  providing	
  a	
  mortgage.	
   	
   If	
  you	
  are	
  making	
  significant	
  renovations	
  and	
  need	
  a	
  loan	
  to	
  pay	
  for	
  these,	
  you	
  may	
  want	
  to	
   consider	
  a	
  construction	
  loan.	
  This	
  is	
  a	
  short-­‐term	
  loan	
  that	
  will	
  increase	
  your	
  organization’s	
   interim	
  cash	
  flow.	
  During	
  major	
  renovations,	
  construction	
  bills	
  will	
  be	
  coming	
  in,	
  but	
  the	
   building	
  will	
  not	
  be	
  generating	
  revenue.	
  So	
  the	
  loan	
  can	
  help	
  bridge	
  this	
  gap.	
  	
  Of	
  course,	
  the	
   interest	
  rate	
  will	
  be	
  high	
  (because	
  it	
  is	
  riskier	
  for	
  the	
  credit	
  union	
  or	
  bank)	
  but	
  you	
  could	
  make	
   payments	
  only	
  the	
  interest	
  portion	
  of	
  the	
  loan.	
  	
   	
   Construction	
  loans	
  depend	
  heavily	
  on	
  the	
  creditworthiness	
  of	
  the	
  borrower	
  and	
  are	
  a	
  good	
  idea	
   if	
  you	
  know	
  that	
  your	
  building	
  project,	
  once	
  complete	
  will	
  be	
  generating	
  sufficient	
  revenue	
  to	
   pay	
  your	
  mortgage	
  comfortably.	
  	
   	
   When	
  renovations	
  are	
  complete	
  and	
  the	
  building	
  is	
  fully	
  leased,	
  you	
  will	
  convert	
  the	
   construction	
  loan	
  into	
  a	
  permanent	
  mortgage.	
  This	
  mortgage	
  will	
  have	
  a	
  lower	
  interest	
  rate,	
   but	
  payments	
  will	
  be	
  larger	
  –	
  now	
  including	
  both	
  principal	
  and	
  interest.	
  	
   	
   There	
  are	
  many	
  pre	
  development	
  costs	
  early	
  in	
  the	
  real	
  estate	
  process.	
  These	
  are	
  called	
  start	
   up	
  costs,	
  or	
  soft	
  costs.	
  For	
  example,	
  hiring	
  consultants	
  and	
  professionals	
  to	
  complete	
  due	
   diligence	
  requires	
  money	
  up	
  front.	
  If	
  your	
  organization	
  does	
  not	
  have	
  this	
  money,	
  or	
  cannot	
   access	
  grants	
  supporting	
  this	
  work,	
  it	
  may	
  be	
  possible	
  to	
  take	
  out	
  a	
  line	
  of	
  credit	
  with	
  a	
  lending	
   institution.	
  This	
  type	
  of	
  loan	
  is	
  risky	
  because	
  there	
  are	
  no	
  physical	
  assets	
  supporting	
  the	
  loan	
   that	
  can	
  be	
  resold	
  if	
  your	
  organization	
  is	
  unable	
  to	
  make	
  payments.	
  Therefore,	
  the	
  interest	
  rate	
   will	
  be	
  high.	
  	
  	
  	
   	
   If	
  your	
  project	
  is	
  not	
  approved	
  for	
  a	
  mortgage,	
  it	
  means	
  that	
  the	
  project	
  is	
  too	
  risky	
  and	
   changes	
  have	
  to	
  be	
  made.	
  This	
  means	
  renegotiating	
  the	
  offer	
  to	
  purchase,	
  finding	
  capital	
  to	
   make	
  a	
  larger	
  down	
  payment,	
  finding	
  another	
  site,	
  or	
  changing	
  the	
  project	
  vision.	
  	
   	
   	
   	
  25	
   Fourth Stage: Ownership and Beyond 	
   The	
  real	
  estate	
  process	
  doesn’t	
  stop	
  once	
  you	
  have	
  purchased	
  your	
  building;	
  there	
  are	
   important	
  things	
  to	
  know	
  about	
  managing	
  and	
  maintaining	
  a	
  property.	
  This	
  toolkit	
  doesn’t	
  go	
   into	
  that	
  detail	
  but	
  there	
  are	
  many	
  resources	
  that	
  exist	
  to	
  help	
  you	
  with	
  these	
  later	
  stages	
  of	
   property	
  management.	
  These	
  resources	
  are	
  listed	
  at	
  the	
  end	
  of	
  the	
  toolkit.	
   	
   Step 15 Closing Time	
  to	
  complete:	
  one	
  month	
  –	
  two	
  months	
   	
   If	
  the	
  credit	
  union	
  or	
  bank	
  that	
  you	
  are	
  working	
  with	
  formally	
  accepts	
  your	
  mortgage	
   application	
  and	
  you	
  decide	
  that	
  this	
  property	
  is	
  without	
  any	
  reasonable	
  doubt	
  the	
  right	
  fit	
  for	
   your	
  organization’s	
  needs,	
  it	
  is	
  time	
  to	
  official	
  close	
  on	
  the	
  offer	
  to	
  purchase.	
  This	
  is	
  where	
  legal	
   ownership	
  of	
  the	
  property	
  is	
  actually	
  transferred	
  and	
  money	
  (minus	
  the	
  deposit)	
  is	
  exchanged	
   between	
  the	
  buyer	
  and	
  seller.	
  	
  	
   	
   This	
  step	
  requires	
  the	
  assistance	
  of	
  a	
  real	
  estate	
  attorney	
  to	
  coordinate	
  the	
  closing,	
  ensuring	
   the	
  all	
  of	
  the	
  legal	
  requirements	
  are	
  satisfied.	
  The	
  attorney	
  will	
  make	
  sure	
  that	
  all	
  outstanding	
   issues	
  regarding	
  the	
  property	
  are	
  resolved	
  before	
  you	
  take	
  ownership.	
    Closing Checklist ü Search and clearance for liens on the property ü Copy of your Agreement of Purchase & Sale ü Title check ü Contact details to your real estate agent & mortgage broker/lender ü Closing funds (i.e. money) - certified cheque and mortgage monies represent the funds needed and must be made payable to the attorney for them to hold in trust 	
   Once	
  the	
  offer	
  to	
  purchase	
  has	
  been	
  officially	
  closed,	
  you	
  will	
  begin	
  to	
  incur	
  holding	
  costs	
   (insurance,	
  property	
  taxes,	
  security,	
  board-­‐up	
  if	
  vacant,	
  etc.).	
  It	
  is	
  very	
  important	
  to	
  keep	
  the	
   real	
  estate	
  process	
  moving	
  in	
  order	
  to	
  minimize	
  holding	
  costs	
  and	
  other	
  expenses	
  associated	
   with	
  delays.	
  You	
  should	
  have	
  a	
  development	
  schedule	
  carefully	
  planned	
  before	
  closing	
  is	
   complete.	
  This	
  will	
  give	
  you	
  a	
  good	
  picture	
  of	
  when	
  renovations	
  will	
  be	
  made,	
  when	
   construction	
  bills	
  will	
  be	
  due,	
  and	
  ultimately	
  when	
  tenants	
  will	
  be	
  able	
  to	
  occupy	
  the	
  building.	
  	
   	
   The	
  actual	
  development	
  and	
  renovation	
  of	
  a	
  property	
  after	
  closing	
  is	
  an	
  intricate	
  and	
  detailed	
   process.	
  You	
  should	
  get	
  professional	
  advice,	
  for	
  example	
  from	
  a	
  construction	
  manager,	
  as	
  well	
   as	
  educate	
  yourself	
  about	
  this	
  stage	
  of	
  the	
  real	
  estate	
  process.	
  	
   	
   This	
  is	
  also	
  the	
  point	
  where	
  this	
  toolkit	
  finishes.	
  There	
  is	
  a	
  significant	
  amount	
  of	
  resources	
   online,	
  as	
  well	
  as	
  many	
  books	
  that	
  you	
  can	
  continue	
  to	
  educate	
  yourself	
  with.	
   	
  26	
   Glossary of Terms 	
   Absorption	
  rate:	
  The	
  amount	
  of	
  real	
  estate	
  that	
  will	
  be	
  leased	
  or	
  sold	
  in	
  a	
  given	
  	
   time	
  period.	
   	
   Agent	
  (broker):	
  A	
  person	
  who,	
  for	
  a	
  commission,	
  acts	
  as	
  the	
  agent	
  of	
  another	
  in	
  	
   the	
  process	
  of	
   buying,	
  selling,	
  or	
  managing	
  a	
  property.	
   	
   Amortization:	
  The	
  periodic	
  repayment	
  of	
  debt	
  over	
  a	
  specified	
  time.	
   	
   Anchor	
  tenant:	
  The	
  major	
  tenant	
  who	
  pays	
  the	
  largest	
  dollar	
  amount	
  of	
  rent.	
   	
   Build	
  to	
  suit:	
  Construction	
  according	
  to	
  a	
  tenant	
  or	
  purchaser’s	
  specifications.	
  	
   	
   Buildout:	
  Construction	
  of	
  specific	
  interior	
  finishes	
  to	
  a	
  tenant’s	
  specifications.	
   	
   Capital:	
  Money	
  or	
  property	
  invested	
  in	
  an	
  asset	
  for	
  the	
  creation	
  of	
  wealth.	
   	
   Capitalization	
  (cap)	
  rate:	
  The	
  rate,	
  expressed	
  as	
  a	
  percentage,	
  at	
  which	
  a	
  future	
  flow	
  of	
  income	
   is	
  converted	
  into	
  a	
  present	
  value	
  figure.	
   	
   Capture	
  rate:	
  Percent	
  of	
  total	
  demand	
  within	
  a	
  target	
  market	
  that	
  a	
  project	
  attracts.	
   	
   Comparable:	
  Another	
  property	
  to	
  which	
  a	
  subject	
  property	
  can	
  be	
  compared	
  to	
  	
   reach	
  an	
   estimate	
  of	
  market	
  value.	
   	
   Compound	
  interest:	
  Interest	
  that	
  is	
  earned	
  and	
  immediately	
  added	
  to	
  the	
  principal,	
  thereafter	
   earning	
  interest	
  on	
  itself.	
   	
   Concession:	
  Discount	
  given	
  to	
  a	
  prospective	
  tenant	
  to	
  help	
  get	
  them	
  to	
  sign	
  a	
  lease,	
  typically	
  in	
   the	
  form	
  of	
  free	
  rent	
  or	
  cash	
  for	
  tenant	
  improvements.	
   	
   Construction	
  loan:	
  A	
  loan	
  usually	
  made	
  by	
  a	
  commercial	
  lending	
  institution	
  to	
  be	
  used	
  for	
  the	
   construction	
  of	
  improvements	
  on	
  real	
  estate	
  and	
  usually	
  running	
  six	
  months	
  to	
  two	
  years.	
   	
   Covenant:	
  A	
  restriction	
  on	
  real	
  property	
  that	
  is	
  binding,	
  regardless	
  of	
  changes	
  in	
  	
  ownership,	
   because	
  it	
  is	
  attached	
  to	
  the	
  title.	
  	
  	
   	
   Debt	
  service:	
  Periodic	
  payments	
  on	
  a	
  loan,	
  with	
  a	
  portion	
  of	
  the	
  payment	
  for	
  interest	
  and	
  the	
   balance	
  for	
  repayment	
  of	
  principal.	
   	
   Discounted	
  cash	
  flow:	
  Present	
  Value	
  of	
  monies	
  to	
  be	
  received	
  in	
  the	
  future;	
  determined	
  by	
   multiplying	
  projected	
  cash	
  flows	
  by	
  the	
  discount	
  factor.	
   	
   	
  27	
   Dual	
  agency:	
  An	
  agency	
  representing	
  both	
  the	
  buyer	
  and	
  the	
  seller	
  in	
  a	
  real	
  estate	
  transaction.	
  	
   	
   Due	
  diligence:	
  A	
  candid	
  effort	
  to	
  investigate	
  all	
  reasonable	
  considerations	
  in	
  a	
  timely	
  manner.	
   	
   Equity:	
  That	
  portion	
  of	
  a	
  real	
  estate	
  asset	
  that	
  is	
  owned	
  outright,	
  that	
  is	
  any	
  value	
  greater	
  than	
   the	
  loan	
  or	
  mortgage	
  issued.	
   	
   Floor	
  space	
  ratio	
  (FSR):	
  The	
  ratio	
  of	
  floor	
  area	
  to	
  land	
  area,	
  expressed	
  as	
  a	
  percent	
  or	
  decimal,	
   that	
  is	
  determined	
  by	
  dividing	
  the	
  total	
  floor	
  area	
  of	
  the	
  building	
  by	
  the	
  area	
  of	
  the	
  lot.	
   	
   General	
  contractor:	
  	
  A	
  party	
  to	
  a	
  building	
  contract	
  who	
  contracts	
  directly	
  with	
  the	
  owner	
  and	
   who	
  is	
  charged	
  with	
  total	
  construction	
  of	
  an	
  entire	
  building.	
   	
   Hard	
  Costs:	
  In	
  construction,	
  this	
  includes	
  payments	
  for	
  land,	
  labour,	
  materials,	
  and	
  the	
   contractor’s	
  fee.	
   	
   HAZMAT:	
  A	
  hazardous	
  material	
  report.	
   	
   Holdback:	
  A	
  contingency	
  provision	
  in	
  a	
  loan	
  commitment	
  reducing	
  the	
  amount	
  disbursed	
  if	
   certain	
  conditions	
  are	
  not	
  met.	
   	
   HVAC:	
  	
  A	
  building	
  system	
  supplying	
  heating,	
  ventilation,	
  and	
  air	
  conditioning	
   	
   Lease-­‐up:	
  Time	
  period	
  during	
  which	
  a	
  real	
  estate	
  rental	
  property	
  is	
  marketed,	
  leasing	
   agreements	
  signed	
  and	
  tenants	
  begin	
  to	
  move	
  in.	
   	
   Lien:	
  The	
  right	
  to	
  hold	
  property	
  as	
  security	
  until	
  debut	
  that	
  it	
  secures	
  is	
  paid.	
  A	
  mortgage	
  is	
  one	
   type	
  of	
  lien.	
   	
   Liquid	
  asset:	
  Cash	
  or	
  assets	
  that	
  are	
  immediately	
  convertible	
  to	
  cash,	
  at	
  a	
  predictable	
  price,	
  if	
   sold.	
  	
  	
   	
   Pro	
  forma:	
  A	
  financial	
  statement	
  that	
  projects	
  gross	
  income,	
  operating	
  expenses,	
  and	
  net	
   operating	
  income	
  for	
  a	
  future	
  period	
  based	
  on	
  a	
  set	
  of	
  specific	
  assumptions.	
  	
   	
   Purchase	
  agreement:	
  A	
  sale	
  agreement	
  or	
  contract	
  between	
  a	
  buyer	
  and	
  a	
  seller	
  setting	
  forth,	
   in	
  general,	
  the	
  term	
  of	
  the	
  sale.	
  	
   	
   Market	
  Area:	
  Geographic	
  region	
  from	
  which	
  the	
  majority	
  of	
  demand	
  and	
  the	
  majority	
  of	
   completion	
  are	
  drawn.	
   	
   Market	
  research:	
  A	
  study	
  of	
  the	
  needs	
  of	
  groups	
  of	
  people	
  to	
  develop	
  a	
  product	
  appropriate	
   for	
  an	
  identifiable	
  niche.	
   	
   	
  28	
   Official	
  plan:	
  A	
  program	
  or	
  policy	
  by	
  an	
  official	
  planning	
  body	
  and	
  adopted	
  by	
  a	
  governing	
   entity	
  to	
  designate	
  land	
  use	
  of	
  a	
  particular	
  area.	
  	
   	
   Permanent	
  mortgage:	
  A	
  long-­‐term	
  loan	
  on	
  real	
  estate	
  used	
  to	
  finance	
  a	
  completed	
   development	
  (as	
  opposed	
  to	
  a	
  construction	
  loan).	
   	
   Property	
  manager:	
  An	
  individual	
  or	
  firm	
  responsible	
  for	
  the	
  operation	
  of	
  improved	
  real	
  estate.	
   Management	
  functions	
  include	
  leasing	
  and	
  supervising	
  maintenance.	
   	
   Sensitivity	
  analysis:	
  	
  A	
  cost/benefit	
  examination	
  of	
  the	
  various	
  features	
  and	
  aspects	
  of	
  a	
  real	
   estate	
  development	
  project	
  such	
  as	
  operating	
  costs,	
  amenities,	
  management	
  costs,	
  and	
  the	
   impact	
  of	
  adjustments	
  to	
  them	
  on	
  the	
  value	
  of	
  the	
  project.	
   	
   Soft	
  costs:	
  Outlays	
  for	
  interest,	
  design	
  fees,	
  appraisals,	
  and	
  other	
  third-­‐party	
  charges	
  associated	
   with	
  real	
  estate	
  development.	
   	
   Stabilization:	
  In	
  appraisal,	
  the	
  use	
  of	
  one	
  year’s	
  typical	
  property	
  income	
  and	
  expenses	
  plus	
   annualized	
  capital	
  reserve	
  expenditures	
  to	
  represent	
  each	
  	
  year’s	
  income	
  stream.	
   	
   Title:	
  Evidence	
  of	
  ownership	
  of	
  real	
  property,	
  indicating	
  a	
  person’s	
  right	
  to	
  possess,	
  use,	
  and	
   dispose	
  of	
  property	
   	
   Zoning:	
  Classification	
  and	
  regulation	
  of	
  land	
  by	
  local	
  governments	
  according	
  to	
  use	
  categories	
   (zones);	
  often	
  includes	
  density	
  designations	
  as	
  well.   	
  29	
   Further Reading: 	
   	
   Housing,	
  A	
  Multidisciplinary	
  Dictionary.	
  Kamal	
  S.	
  Sayegh.	
  Academy	
  Book.	
  Ottawa,	
  ON.	
  1987.	
   	
   Real	
  Estate	
  Development	
  Principals	
  and	
  Process.	
  Fourth	
  Edition.	
  M.	
  Miles,	
  G.	
  Berens,	
  M	
  Eppli,	
   	
   M.	
  Weiss.	
  Urban	
  Land	
  Institute.	
  2007.	
   	
   Real	
  Estate	
  Investment	
  Analysis	
  and	
  Advanced	
  Income	
  Appraisal.	
  Sauder	
  School	
  of	
   	
   Business,	
  Real	
  Estate	
  Division.	
  University	
  of	
  British	
  Columbia.	
  2008.	
   	
   Real	
  Estate	
  Market	
  Analysis,	
  A	
  Case	
  Study	
  Approach.	
  A.	
  Schmitz,	
  D.	
  Brett.Urban	
  Land	
   	
   Institute.	
  2007.	
   	
   Sustainable	
  Urban	
  Development	
  Reader.	
  T.	
  Beatley.	
  Routledge	
  Urban	
  Reader	
  Series,	
   	
   Oxford,	
  UK:	
  	
  2004.	
   	
   	
    	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  Business	
  Plan	
    1  Thrive@635 Business Plan  September 2012   © Watari Research Association 303-877 East Hastings Street Vancouver, BC V6A 3Y1 http://www.watari.org/ Portions of this Guide may be reproduced for educational purposes,  please reference “Thomas Bevan, University of British Columbia”. Production Team Thomas Bevan, Author Michelle Fortin, Contributing Author, Project Manager Catherine Ludgate & Thomas Hutton, Project Supervisors    2 Table of Contents  ACKNOWLEDGEMENTS	
  ..............................................................................................................................................	
  3	
  EXECUTIVE	
  SUMMARY	
  ...............................................................................................................................................	
  4	
  ORGANIZATIONAL	
  PROFILE	
  ......................................................................................................................................	
  6	
  PROJECT	
  VISION	
  ..........................................................................................................................................................	
  7	
  NEIGHBORHOOD	
  BACKGROUND	
  ...........................................................................................................................	
  11	
  NEIGHBORHOOD	
  AMENTIES	
  ..................................................................................................................................	
  12	
  DESCRIPTION	
  OF	
  SITE	
  .............................................................................................................................................	
  13	
  PROJECT	
  MAP	
  ...........................................................................................................................................................	
  13	
  DESCRIPTION	
  OF	
  STRUCTURE	
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  ENVIRONMENTAL	
  ASSESSMENT	
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  APPRAISAL	
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  ZONING	
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  ZONING	
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  MARKET	
  ANALYSIS	
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  MARKET	
  IMPLICATIONS	
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  THRIVE@635	
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  ABSORPTION	
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  FINANCIAL	
  ASSUMPTIONS	
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  BASE	
  CASE	
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  FINANCIAL	
  ANALYSIS	
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  BASE	
  CASE	
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  SENSITIVITY	
  1	
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  SENSITIVITY	
  2	
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  SENSITIVITY	
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  FUND	
  DEVELOPMENT	
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  POTENTIAL	
  FUNDERS	
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  CONCLUSIONS	
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  REFERENCES	
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  APPENDICES	
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    EXHIBIT 1 -- WATARI BOARD OF DIRECTORS 2012-2013	
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   EXHIBIT 2 -- RENTAL SURVEYS	
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   EXHIBIT 3 -- FINANCIAL ANALYSIS BASE CASE	
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   EXHIBIT 4 -- FINANCIAL ANALYSIS SENSITIVITY 1	
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   EXHIBIT 5 -- FINANCIAL ANALYSIS SENSITIVITY 2	
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   EXHIBIT 6 -- FINANCIAL ANALYSIS SENSITIVITY 3	
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   EXHIBIT 7 -- NPV OF WATARI’S CURRENT LEASE	
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   EXHIBIT 8 -- FUNDRAISING DETAILS	
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     3  Acknowledgements  This project was made possible through the support from the following partner organizations:          4 Executive Summary  Watari is a not-for-profit organization located in Vancouver, British Columbia. This organization provides counseling and support services to vulnerable members of the local community.  The purchase of 635-37 East Hasting Street, a mixed-use single room occupancy hotel, and renovation of this property into Thrive@635 presents a good investment opportunity for Watari, which aligns with its organizational mission and is financially self-supporting.  	
   Given that commercial rental rates in Vancouver’s Downtown Eastside (DTES) are increasing, owning a real estate asset will enable Watari to secure financial independence. Purchasing a property will also assist Watari to leverage its resources to better provide programming and increase the scope of the organization’s work. Watari view’s this project as a long-term investment that will provide stability in projected operating costs over the next 10-20 years.  This project will also provide much needed affordable housing options for workers in the local area, who are making less then $15 per hour and who are at risk of homelessness. By creating strong, resilient, and satisfied workers, these people are better equipped to positively impact the organizations they are employed by over an extended time period.  The DTES is a good location for real estate investment given that there is pent up consumer demand for affordable space in the area, especially further west in the neighboring Gastown community. This demand and relatively fixed supply will cause real estate prices in the area to continue to increase.  All research undertaken indicates that 635-37 East Hastings Street is in good condition and is a healthy investment property. There is no major environmental remediation required; a certified appraisal supports the asking price; municipal zoning policies support the project vision; there is strong consumer demand for this type of space in the market area; and projected revenue streams will support all projected building expenses under variable economic conditions.  Fund development for the project is currently underway and efforts are being made through traditional foundations and grants, as well as reaching out to private, individual donors. There is strong interest in the vision for Thrive@635 amongst potential funders. Given that these efforts are successful, Watari will be able to generate the equity required for a mortgage on 635-37 East Hastings.  Watari is in a healthy financial position to take on the fiscal responsibilities of holding a mortgage. The organization’s revenue sources are secure, and apart from rental costs, expenses will be stable throughout the foreseeable future.   5   6 Organizational Profile  Watari has been in operation since June 1986, delivering counseling, education, support and referral services to community members struggling with issues of poverty, substance use, mental health, homelessness and isolation.  Watari works with populations from cradle to grave, from two sites in Mount Pleasant and the Downtown Eastside (DTES) and has 50-70 clients per day that come into these offices for service.  Watari has a diversified funding base with long-term relationships with the City of Vancouver, Vancouver Coastal Health, Ministry of Solicitor General and Public Safety, Vancouver Aboriginal Child and Family Services Society, Law Foundation, Vancouver Foundation, and Sanctuary for Kids Foundation.  There are 22 full time staff and an additional 15-20 contractors – serving over 7000 individuals each year. The staffing group consists of counselors, youth workers, therapists and administrative staff, many of whom have been with the organization for more than five years. Currently, 7 of the full time staff are working towards masters degrees or specific counselor certification. This reflects the organization’s investment in creating opportunities for staff to grow within the organization. There are four senior staff members that provide management, accounting and clinical supervision services to the agency staff.  They have been with the agency an average of 6 years.  Watari’s staffing mix represents the diversity of the community through cultural background, ethnicity, gender and sexual orientation.  Diversity and inclusion continue within the make up of the organization’s board of directors, which include a retired  physician who is Spanish speaking, a masters student who started with the organization as a volunteer, a lawyer, accountant, retired Vancouver Police Officer, entrepreneur, Rehabilitation therapist, branding specialist and retired researcher.  The board and staff participate in strategic planning bi-annually and engage yearly at a community celebration. See Exhibit 1 in appendices for Board of Directors list.  Watari is currently occupying 5000sqft of non-purpose built space in 301-304 877 East Hastings. As the organization has grown, they have had to expand into neighboring units of the same building. This has meant knocking down walls and adapting the use of spaces, which were not originally intended for use by a single tenant.  As an employer, Watari strives to create an environment that supports employee life/work balance.  A large part of this is a commitment to clinical support and supervision that recognizes resilience and strength. The culture of the organization is of caring and competence, with an expectation that employees are always accessing education/training and support to help improve themselves and their practice.  Watari has received an Excellence in BC Healthcare award for workplace innovation. The organization provides, and has an expectation of working with a clinical supervisor at least once a month for all employees who are employed with the agency – including administrative staff.  This provides a safe container to debrief situations that can be challenging. The goal is to be preventative and proactive, as opposed to reacting to events after they happen.   7 Project Vision  Watari’s mission has been the guide in all projects and programs delivered by the organization: “Facilitating positive change in at risk individuals and communities through the design and delivery of innovative service.” The board and senior management view the purchase of the Shamrock Hotel at 635 E Hastings Street and its ground floor health care space at 637 E Hastings as fitting well within this mission.  The scope of this project is twofold: to provide the office space required for Watari’s current DTES site activities to continue and, to provide below market housing options for lower income social service workers in the DTES of Vancouver BC, who have had an experience of homelessness or are at risk of becoming homeless.  Office Space Watari would move in its community counseling team, Eastside Integrated Youth Team and administrative staff, into the ground floor and basement space (3000 square feet each). There are hopes to use the basement space for a possible social enterprise, as well as storage for community food banks, staff bike room, archival files and donations. By Watari moving two blocks east of its current location, it will allow outreach staff to be closer to the youth and adults they work with and increase visibility by being at street level (Watari’s current location is a third floor unit).  The organization’s commitment to existing community kitchen programs and community meeting space will remain and there are plans that these be reflected in the renovation of the space. Tenant improvements will also allow the organization to have wheelchair accessible washrooms, an open and safe reception area, sound proof counseling offices, and flexible meeting space that will be available to others in the community. Watari is working with Gair Williamson Architects who specialize in renovations and design in heritage buildings in the local area. They will work with Watari to understand the needs of the staff and people the organization supports in the hope that both are reflected in the finished, intentional space.  Watari’s youth programming in the community is primarily in an outreach capacity with some drop-in support at Vancouver Native Health for their youth clinic in the 400 block of East Hastings. Thrive@635 does not intend to open up the space to provide youth drop-in and should anything like that be created, it would be with full consultation with the community to ensure location, funding and staffing is in place for safety purposes.    8 Residential Space The second component of the project is creating supported housing through intentional living, for front line workers in the DTES who have experienced homelessness or who are precariously housed. There are currently close to 1700 workers that come in and out of the DTES daily, many of whom earn less than $15 per hour. This group is more thoroughly identified in the market analysis section of this plan. The majority of these frontline workers come from two distinct groups: young, eager new workers who may require significant resources for training and connection to clients, and workers who bring an experiential background to a position, often not far disconnected from the struggles of the people they are now charged with supporting.  The job life expectancy for these front line employees is between 8 and 18 months. This time is short because people become mental and emotionally exhausted due to high stress environments and issues of vicarious trauma that are a reality of working with such wounded populations.  Many organizations in the community are cognizant that building rapport with the client population on the DTES can be enhanced when peer worker models are in place.  These workers are at even greater risk for experiencing vicarious trauma based on their own backgrounds and triggers held within the daily work of supporting their peers in the community.  Watari, as an organization is very invested in the health and wellbeing of its employees. Their practices of clinical support and supervision for all staff, the application of ‘care days’ that can be used proactively, on-going agency training, as well as individual training and development plans for each employee, has allowed us to become an employer of choice in the field. Watari staffs maintain positive attitudes and positive mental health through years in the work. This housing project would not house any Watari workers, as they are both healthy and paid a living wage at minimum.  The vision for the residential component of Thrive@635 is to create 22 rooms that will continue to be Single Room Occupancy units (SROs). This physical bricks and mortar will be accompanied by a programming piece to provide clinical support and supervision for people living there. There will be no increase in density on the site and rental rates will be $425-475. The change of rooms – from 29 to 22 – is based on a need to increase the amenity space and improve the bathrooms with additional showers and laundry to aid in creating a healthy living environment. This space will be adapted to be inclusive and welcoming, meditative and relaxing. It should also be noted that, the current owner has never rented to people in the community, choosing instead to bring in foreign language students at rates above income assistance levels.  The proposed model is similar to housing situations in university dormitories, but with the addition of intentional, support components.  The criteria that prospective residential tenants will have to meet in order to occupy the space are: that they currently work in the DTES; and make under $15 per hour. Tenants will agree to 1 or 2 years leases. Resident’s length of stay will be a 2-year maximum. The idea is to create a certain amount of resilience in someone and then help him or her find other accommodations. Watari will deliver the program to residents  9 of Thrive@635 by providing group supervision in the meeting space on the ground floor, ensuring that the ‘work’ does not happen in people’s living space. Watari will also engage with the residents to bring in alternative health resources such as acupuncture, energy healers and mindfulness practitioners.  There will be one person designated as a “connector” on each of the two floors. They will not pay rent. This is based on a model of the Centre for Social Innovation (CSI) in Toronto, where a dedicated position on each floor of the shared space is in place to simply identify opportunities for individuals to collaborate based on similar interests or nurture the process by creating weekly events.  In the CSI model, these events might be salad Fridays, where the greens are provided and everyone else is encouraged to bring a topping. The connector will be a social convener of sorts, supported to identify commonalities and possible alliances among residents, as well as ensure that safety and comfort are respected. Support for this person will be structured and on- going. These two individuals will be chosen based on their natural ability to connect and engage with their peers and will be provided accommodation and individual clinical supervision pro bono.  Evaluation of the supported housing component is tantamount to success. Measuring impacts on residents’ lives across social determinants that include basic data such as sick days and Workers Compensation Board claims will be balanced with interviews and assessments that include hopefulness scales, community engagement and mental health/wellness state. Watari will engage an external evaluator to provide feedback to adapt the program and identify scalability issues etc.  10   11 Neighborhood Background  635-37 East Hastings is located on the north side of East Hastings, between Princess and Heatley in the Oppenheimer District of the Downtown Eastside. The DTES is on the unceded Coast Salish territories of Musqueum, Tsleil-Waututh and Squamish lands. The area is accessible to the inner core of Vancouver, close to transport interchanges, civic facilities, commercial and public opportunities.  It is bounded by the neighborhoods of Gastown on the west, Strathcona and Chinatown on the south, Heatley on the east, and the industrial waterfront on the north. There are many historic buildings and a wide mix of land uses.  The Strathcona District is Vancouver’s oldest residential neighborhood. Since 1947, this area has been comprised of a large Chinese ethic demographic. The Chinatown commercial district is centered on the 100 and 200 blocks of East Pender, a few blocks southwest of the subject property.  Gastown, which is six blocks west of the subject property, was where the town site of Vancouver originated. The majority of development here took place from 1898 to 1913. Retail businesses lined Hastings Street, with the anchor being the Woodwards store. After the 1920’s the central business district shifted towards Burrard Street. Following WWII, the DTES generally experienced a decline in investment. Since the new millennium, there has been an increase in activity, with several redevelopments, including the Woodwards building. This has been a cause for concern for lower income residents, with fears of real estate price increases and displacement.  The area immediately surrounding the property is developed with medium density multi-family rental developments and social housing projects, with retail uses on the Hastings street front. There are a number of older SRO hotels that provide a lower cost housing stock. There are several churches and social service agencies that provide assistance to the local residents. Adjacent to the subject property are two one-storey retail buildings, which are both currently being used as Laundromats.  12 Neighborhood Amenties Bike%Shops% 0.16km'Citybiker.ca' 0.53km'Group'Bicycle' 0.56km'VanCycle'Mobile' 0.63km'je='grrl'Bike' 0.63km'Super'Champion' Books% 0.06km'Chinese'Library' 0.1km'VPL' 0.11km'Spartacus'Books' 1.58km'Britannia'Centre' '' Shopping% 0.43km'Vancouver'Seed' 0.09km'The'Healing'Tree' 0.42km'First'United' ThriNStore' ' ' Groceries% 0.09km'Quick'Pick'Food' 0.19km'JS'Convenience' 0.32km'Pak'Food' 0.47km'Chua'A'Asia' Market' 0.48km'Tai'Hing'Co'Ltd' 0.51km'Sunrise'Market' Parks% 0.28km'Oppenheimer'Park' 0.33km'MacLean'Park' 0.65km'Strathcona'Park' 0.69km'Wendy'Poole'Park' 0.87km'Sun'YatVSen' Coffee% 0.07km'Uncle'Henry'Cafe' 0.45km'JJ'Bean'' 0.52km'Lunchbox' 0.53km'OvalYne'Cafe' 0.55km'Hogan's'Alley'Cafe' Post%Offices%&%Banks% 0.58km'Chinatown'Post' office' 0.33km'G'&'F'Financial' 0.51km'Bank'of'Nova'ScoYa' 0.51km'ScoYabank' 0.58km'TD'Bank' Schools% 0.13km'Lord'Strathcona' 0.46km'Saint'James'Music' 1.31km'Vancouver'Film'School' 1.53km'SFU'Vancouver' ' ''  13 Description of Site  Site Description  Site comprises a single legal lot, rectangular in shape, with 25ft of frontage on East Hastings Street. The site depth is 122ft and the total site area is 3,050 ft2.  Topography  The lot slopes down to the north such that the basement of the building is at grade at the rear of the site.  Services    East Hastings Street is a four-lane arterial road with on street parking, curbs, sidewalks, street lighting, and storm sewer. Rear access is available to the site via a 20ft wide paved lane. All standard services are connected to the site, including water, electricity, gas, telephone, & sanitary sewer.    Project Map      14 Description of Structure  Type Three-storey and basement, masonry structure, heritage brick facade. Age • Built in 1912 with an estimated age of approximately 100 years. • Economic life of building estimated at 25+ years. Building Size/Layout Basement 3000sqft           1 – Storage space Ground Floor  3000sqft   1 - Retail store      3 - one room residential units Second Floor  3000sqft 8 - one room residential units      1 – two room residential unit      1 – common kitchen      1 – two room self-contained unit Third Floor  3000sqft 10 – one room residential units      2 – two room residential units Total   9000sqft 29 units + 1 retail store + storage  There is a full basement finished with a concrete slab floor and concrete perimeter wall. Access is via front and rear stairs from the main floor along with grade level access up to the rear lane.  The main floor layout provides a front street-front retail area, central open area and rear living quarters. There is a two-piece washroom and kitchen.  The upper two residential floors are finished with 29 SRO type suites. Each floor has two 2-piece washrooms & one bath with shower. Strengths • The building appears to be in good and serviceable condition. • This is no visible mold or odor. • Current owner has been proactive with maintenance and repairs. • All windows replaced and the foundation upgraded in the past 5 years. • Separate entrance to residential units, ground floor and basement. • No residential neighbors – lower possibility for infestations and cross contamination. Constraints • Building footprint is same as width (buffer right against neighboring buildings, which are both laundries) • Old fire escape • Small rear entrance • Little communal living space on residential floors • Ground floor has poor natural lighting • Limited parking availability  15   16 Environmental Assessment  Stage 1 Preliminary Site Investigation On May 9th, 2012 D. Kelly Environmental Consulting Ltd. completed a Stage 1 assessment of 635-37 East Hastings Street. The scope of the investigation included: collecting and reviewing historical data; conducting a site visit to record observations; conducting interviews with individuals associated with the site; and producing a report of findings, with recommendations.  Information gathered from various sources indicated that the subject property was first developed for a single family dwelling in 1901. The subject property was redeveloped to the existing configuration in 1912. The surrounding area was initially developed for single-family dwellings, dating back to the late 1800s. Present land use in the locality of the subject property is a mix of commercial and residential.  Historical land use, as evidenced by city directory, Fire Insurance plan and aerial photograph review, indicated no suspected sources of past sub-surface contamination originating at the subject property. On the basis of information gathered during the historical review and the site survey, potential for environmental concerns on the subject property are low.  Based on local land use, and taking physical factors such as local topography and redevelopment into account, the potential for sub-surface environmental impact at the subject property from surrounding land use was also considered low.  Building-related issues reviewed included: asbestos-containing materials; polychlorinated biphenyls (PCBs); lead-based paint; waste management and chemicals handling; ozone depleting substances; and air emissions. There were generally no anticipated environmental concerns with these building-related issues; although, the following items highlighted within this report should be addressed as applicable: • Fluorescent light fixtures taken out of service and removed should be examined to confirm the status of the ballasts, with respect to PCBs. Any ballast found to be PCB-containing should be disposed of in accordance with the requirements of the BC Ministry of Environment. • Prior to any future disturbance of suspected asbestos-containing materials (e.g., during maintenance/renovations or other major works), representative samples of building materials should be collected for confirmatory analysis. Any removal and disposal of asbestos containing materials should be carried out in accordance with the guidelines and regulations of WorkSafeBC and the BCMoE.  In the professional opinion of D. Kelly Environmental Consulting Ltd, no additional environmental investigative work is required.   17 Appraisal  Stage 1 – Current Value On May 3rd, 2012 Colliers International completed an appraisal of 635-37 East Hasting Street. The scope of the valuation included: an inspection of the property; review of available data regarding the local market; verification of current land use and zoning regulations; review of the rent roll provided by the owner and property information assembled by Watari; review of sales and listing data on comparable properties; interviews with market participants.  The final value of the property in its current condition was determined to be $1,820,000. This value is based on an exposure time of 3 to 6 months. The value per residential unit is $60,667 (based upon 29 residential and 1 commercial unit).  This appraisal is based on the following extraordinary assumptions: the property is fully leased at market rates, the building is structurally sound and conforming to City of Vancouver permits; there are no environmental issues concerning the land or structures.  The building is currently underperforming and has extraordinarily high vacancy. This is due to the current owners management limitations and decision to rent only a small number of residential units to exclusively Korean exchange students.  The value of the property was determined using the income approach and the direct comparison approach. The stabilized Net Operating Income was determined to be $118,205, with student type occupancy. The capitalization rate used was 6.5%. This is higher than the 4.46% average for comparable buildings in the area, given the risk associated with student type occupancy, which is typically on shorter terms.  Comparable properties range from $43,300 to $190,251 per unit. Based on the relationship between income per unit and price per unit, a mid range estimate between $55,000 and $65,000 per unit was adopted for the subject property.  Highest and Best Use As is – continued use as a commercial/residential property until redevelopment is feasible  As is vacant – as a vacant site the property is suited to mixed-use commercial/residential based on the DEOD (sub-Area 1 Main/ Hastings) Zoning guidelines. The area planning encourages mixed use with non-market housing that may, as feasible, be the highest and best use.    18 Zoning  Official Development Plan 635-37 East Hastings is classified under Sub-area 1 Main/Hastings in the Downtown Eastside Oppenheimer District (DEOD).  The DEOD area is classified as a Comprehensive Development District. This allows the City of Vancouver full discretion over development in this area. By-Law No. 5529 states: No development permit shall be issued for any development unless such permit shall have received the approval of the Development Permit Board, unless otherwise approved by the Director of Planning. Section 4.1 of the DEOD development plan states the intent for the area: Should further establish its importance as a gateway to the Downtown. This area is intended to be a high-density, mixed commercial and residential area, appropriate for a mix of office, retail, local social services, and other similar uses. Section 4.4 emphasizes retail continuity, however in Section 4.4A of the plan states the exception is: Development Permit Board or Director of Planning may permit social service center, general office, or health care office uses on the ground floors of buildings having street frontages on Hastings Street  Floor Space Ratio (FSR)  1.0 except with social housing component up to a Max 3.0 resident, Max. 5.0 with mixed residential and non-residential Height  Max. 30m Yards No setbacks  Conformity The subject building does not conform to zoning regulations regarding density. The current FSR on the site is 2.78 while the maximum permitted for new construction would be 1.0. This is considered to be a non-conforming and legal land use because the building was constructed before the regulations were established. However, if the building were disassembled, density on the site would have to return to 1.0 FSR.  Licensing The Vancouver Licensing Office has licensed the building for 28 residential rooms and a retail store. There are actually 29 rooms and a retail store, however three rooms have been combined to create double room suites. Additionally, two of the rental rooms are being used for an Internet room and common kitchen.    19 SRA By-law No 8733 635 East Hastings is listed under Schedule A of the City of Vancouver SRA By-law No 8733. This by-law was passed on June 15th, 2010 in order to preserve the stock of Single Room Accommodation (SRA) units in the downtown core, which provide some of the lowest cost housing options in the city.  Under this by-law, any building owner in Schedule A must receive approval from the City in order to convert or demolish SRA units in their building.  However, Section 4.13 states: The definition of “conversion” or “convert” in section 1.2 does not include the provision of accessory or amenity space in the following circumstances and subject to the following conditions: • Amenity space is solely for the use or benefit of the permanent residents of the building • Owner executes and delivers to the city a section 219 covenant • Number of rooms used, or renovated for use, for such purpose does not exceed 10% of all designated rooms in the building.  Heritage The subject building is registered on the Federal list of National Historic Places, as well as listed as Class B heritage on the Vancouver Heritage Register. These designations indicate that the City may encourage building retention by relaxing zoning requirements.  Local Area Planning Program On March 29th, 2012, Vancouver City Council adopted the DTES Local Area Planning Program (LAPP). Appendix A of the council report describes that the aim of LAPP: Is to undertake planning work at the same time as facilitating timely action on pressing social issues, community development or cultural activities and other ‘action’ opportunities that may emerge. The LAPP interim rezoning policy puts any previous planning policies on hold. It stipulates the only conditions that will permit a rezoning by the City over the next year. Appendix B of the council report outlines 8 policies that are to be followed. Key points to new developments are: • Need to provide benefits for the community (particularly for low-income residents) • Need 60% or more social housing, operated by a non-profit • Minor amendments to zoning bylaws for increasing amount of office space • Heritage retention is apart of the development • Creating local jobs  Affordable Housing Task Force The Task Force is focusing its efforts on addressing affordability for low to middle income households in Vancouver with household incomes between $21,500 and $86,500.  A list of Quick Start Actions, as described in the March 12, 2012 Progress Report: Fast track applications can be used to build affordable rental or owned housing for those with low to middle incomes through an inter-departmental City staff team with the ability to ensure these applications jump the queue.  20 Zoning Implications for Thrive@635  The LAPP is both positive and negative for the Thrive@635 project. • Positive is that there is a forum looking for innovative projects which can then be used to inform policy. The City can use this opportunity to embed key learning outcomes to ongoing land use policy. • The negative is that the timing of LAPP will not be congruent with the timing of this real estate project.  Opportunities may be found with the Affordable housing task force or the implementation of the DTES Housing Plan, which is apart of the LAPP. However, these are not going to be clear in the short term. The best assumption is to work within the existing policy context of the Official Development Plan.  The Heritage Density Transfer program is on hold. Generating value on this site through rezoning is unlikely, unless Watari is prepared to redevelop the entire site. However, it is a 25 foot lot, which does not present a lot of redevelopment potential.  SRO’s are governed under the Landlord Tenancy Act, but because of the programming component, this project will be considered transitional housing and not subject to limitations of the act.  An issue may be rezoning the site for office space on the ground floor from its current commercial use. The planning policy states that retail continuity is not required, but is it encouraged.  In order to receive approval, Watari needs to show support from the community for social support and office use in the space. This would be in the form of letters written by community members and associations.  Watari should apply for a minor amendment and not a full rezoning, since the scope of changes is relatively small. This will help to expedite the approval process.  The key concerns of the community that Watari will have to mitigate are: • Pressure to secure low-income housing at welfare rates in the community – $375 per month. • Role that the social enterprise in the basement has to play in the revitalization of the neighborhood – is not contributing to gentrification. • There have been previous applications to convert retail space to office space in the DTES that have been met with resistance.   21 Market Analysis  Vancouver CMA The Fall 2011 Canada Mortgage and Housing Corporation (CMHC) Rental Market Report highlights the following trends in the Vancouver Census Metropolitan Area (CMA). • Vacancy rates went down from 1.9 in October 2010 to 1.4 per cent in October 2011 for purpose-built rental apartments. • The average rate of rent increase between October 2010 and October 2011 was 2.3 per cent, similar to the rate of inflation.  More specifically, a growing population and employment base in the Vancouver CMA helped to lower vacancy rates.  Rental availability rates for purpose-built rental units have declined due to only moderate increases in rental rates, combined with lower homeownership rates. A balance between increased demand for rental housing and a larger stock of rental units kept the increase in average rental rate near the rate of inflation. Given the higher renter demand for housing within the city core, purpose-built rental units in these areas have had slightly stronger rental rate growth.  The average rent for a purpose-built rental unit in a 6 to 19 unit building was $984.  CMHC forecasts the Vancouver rental market to remain stable in the next year. People moving to the region, the aging of the population, and general economic and housing conditions are expected to support rental housing demand. Rental vacancy rates are anticipated to remain low.  Vancouver housing prices have increased over 10% per year over the past 4 years. However, changes in the rental index have been disconnected from this growth. Long-term rental rates have grown at a relatively stable and slower pace compared to housing prices.  Housing Need in City of Vancouver “Core housing need” is an approach to housing needs developed by CMHC. In addition to considering housing affordability, it includes “suitability” and physical “adequacy”. Households that spend more than 30% of income yet, who cannot afford adequate, suitable housing in their community, are considered to be in core housing need.  Within the City of Vancouver, 20.6% of households were in core housing need in 2006, far in excess of the rate for Canada (12.7%), and the reference areas of the rest of the Vancouver CMA (15.5%) and the province of British Columbia (14.6%). (City of Vancouver, Rental Housing Study 1)  Renters comprise 52% of the households in the city and 35% across the region. (City of Vancouver, Rental Housing Study 1)  22 1,000 to 1,500 additional rental units/year would be needed in the city to meet on-going  demand over the next ten to fifteen years.  Vancouver faces significant and on-going affordability pressures including a shortage of housing that is affordable for households with low and low-to-moderate incomes.  Lack of rental supply is a key issue in the city’s rental market, reflected in high rent levels and vacancy rates that have averaged 0.9% over the last thirty years. (City of Vancouver, Rental Housing Study 1)  Purpose-Built Rental The market for existing purpose-built rental buildings is strong. Selling prices of existing purpose-built rental buildings have increased from an average price per unit of $100,000 in 1998 to approximately $200,000 in 2009. Capitalization rates currently range from 3.0% to 5.5%, and this low yield is indicative of a high investor demand for these properties. (CHMC 2011)  Prices of rental apartment buildings have increased at a more stable rate than detached housing prices in Vancouver. (CHMC 2011)  The economics of building new rental units (under current interest rates and construction costs and renting at current market rents) will not support the purchase of land at current multi- family land prices. Under current market conditions, a new construction rental project can only afford to pay 14% of the market value for a site, (City of Vancouver, Rental Housing Study 2)  The existing purpose-built rental housing stock is at risk of redevelopment to market condominium developments. Such redevelopment would have a serious adverse effect on Vancouver’s rental housing market.  About 8,000 purpose-built rental units were lost over the past 11 years through the redevelopment of older purpose-built rental buildings. P48  Currently, 4,600 purpose-built rental units (7%) are at risk of redevelopment now and 14,400 (21%)  will be at risk over the next 10 years. (City of Vancouver, Rental Housing Study 2)   23 Market Trade Area Profile The following data was gathered using Environics Envision software on March 20th, 2012 and applies to estimates of 2010 figures. A 2km ring around 635 East Hastings has been used to define the market trade area, which encompasses all of the DTES. The Vancouver CMA has been used as the index for comparison.  The total population of the area was 46,178 people. By 2015, the population is expected to grow to 50,621 (9.6% increase). This is higher than the index, which is expected to grow 6.3%.  There are estimated to be 27,498 households, which are expected to grow to 31,338 (13.9%), compared with a growth rate of 8.2% for the index.  There are approximately 15,974 one-person households in the area (58% of all households). This compares to 28% for the index.  60% of people’s marital status is single.  25,510 people are in the labor force. There is a 64% participation rate. This compares to 69% for the index.  The average household income was $45,981. This is expected to grow to 59,609 by 2015 (3.0%). Median household income for the area was $26,582. The average income for households in the Vancouver CMA was $86,587.  3,897 people earn $20,000 – $29,999 per year (20% of base population). This is expected to increase to 4,305 people by 2015.  Key occupations include: • 2,636 people employed in social science, education, government service & religion (10% of base) • 2,635 people employed in art, culture, recreation and sport (10% of base) • 6,665 people employed sales and service (26% of base)  31% of people take public transit to work, 21% walk, and 6% bicycle.  There are 19,717 occupied rental dwellings in the area, accounting for 71% of all available dwellings). This is expected to grow to 21,926 by 2015 (11% increase).  47% of all dwellings in this area are in low-rise structures of less than 5 floors.  24% of all dwellings in this area were constructed before 1946.  Households spent an average of $10,720 on shelter allowances.   24 Market Implications for Thrive@635  There is a clear demand for affordable housing options in the Vancouver real estate market and more specifically in the 2km area immediately surrounding 635-37 East Hastings.  The Vancouver housing market has been performing exceptionally well in the past 4 years and CHMC predicts that growth will continue. Despite this forecast, rapid growth is a concern for new buyers entering the market, such as Watari, because of the risk that the market is over inflated and that there will be a decline in prices in the short term.  However, the rental market in Vancouver presents significant opportunity. Rental rates have grown at a slower pace than real estate prices of single-family dwellings and low vacancy rates indicate that there is a pent up demand that will quickly absorb new units in the market.  Low capitalization rates on purchase shows that rental properties are in high demand by investors, who are aiming to take advantage of the current market conditions.  The median income of $26,500 made by households (predominately 1 person) in the immediate area around 635 East Hastings would be able to afford a monthly rent of $660, according to CMHC standards. There is target market base of 3,900 people that could potentially occupy residential units at 635 East Hastings.  The site is close to several post secondary institutions such as: SFU’s Vancouver Campus; Vancouver Community College; and Vancouver Film School. This presents a need for student housing, which further increases the demand for rental units in the area.  Demand for office space in the area is growing. Several buildings near the 800 block of Powell Street have been recently renovated and converted to start up technology & creative industry space. This is a reflection of similar trends in the Gastown area, especially surrounding the new Woodwards building.  Small business participants of a study by BC Housing in 2011, which researched commercial space in the DTES, uniformly agreed that the area is changing quickly, most notability along the blocks between Cambie St. and Abbott St. The study found that young entrepreneurs are relocating to the DTES in order to take advantage of lower rental rates. Participants described that this increase in demand, coupled with relatively little new supply, is causing overall rental rates in the area to increase and is making the viability of their operations more difficult. (BC Housing Research and Corporate Services, 2011)  It is reasonable to assume that the increase in demand for commercial space in the DTES will continue, since the area is one of the last parts of Vancouver’s downtown to be redeveloped. Watari must plan for these changes, and anticipate how higher rental costs will affect the services the organization offers. Owning the space that Watari occupies would help mitigate the risk of escalating rents, as well as enable the organization to capitalize on market changes to expand services.  25 Absorption  A rental survey of comparable properties in the project area has found market rates in the trade area to be: • $500-550/unit/mth for a 150sqft residential unit in a SRO building. • $17-19 gross/sqft/year for ground floor commercial – office/retail space. • $6-7 gross/sqft/year for basement commercial – workshop space  Based on high demand for lower cost housing in the area, it is reasonable to expect that the market will quickly absorb 24 renovated SRO units rented at $475/mth – below market rates. However, Watari will want to prolong the tenant selection process in order to find people most appropriate for the programming component of the project. Colliers International estimated that Watari should plan to fully lease up residential units in 30-45 days. This process could be completed during renovation, so that residential units are fully leased up immediately after work is finished.  Currently, ground floor commercial space in the Oppenheimer area is in lower demand, compared to the Gastown area, close to Woodwards, where premium rents are obtainable. In the longer term, as rents in Gastown continue to increase, demand for lower cost space in the Oppenheimer area will rise as well. Potential tenants could be retail stores, artist studios, and social service space. However, in the short term, absorption for 3000sqft of ground floor commercial space priced at $19 gross/sqft/year would be slow. Colliers International estimates that it would take 6-12 months to fully lease this space in the market.  The area to the north east of the site has a strong demand for industrial and workshop space. Potential tenants for the basement of 635 East Hastings could be woodworking, machine shop, and other artisan studios. Absorption of 3000 sqft of clean, well-ventilated space, with a walk out entrance and kitchen, priced at $7 gross/sqft/year would be moderate. Potential challenges would be obtaining permission from the City of Vancouver for this use of space. Colliers International estimates that it would take 3-4 months to lease.  A challenge for this project will be generating sufficient cash flow to cover operating and mortgage payments in the interim, while the entire building is fully leased up. The residential component alone will not generate sufficient funds to pay all expenses. See financial analysis section for more details.  A key advantage for this project is that Watari plans to occupy the entire ground floor and basement space (6000sqft in total). Watari will effectively be paying themselves $6,500 per month in rent. Under this circumstance, the ground and basement floors will be absorbed immediately after renovations are complete with zero percent vacancy from then on after. This factor makes Watari’s proposal unique and competitive compared to other conventional private investors, who would purchase the property have to wait for the space to be absorbed at market levels.   26 Financial Assumptions – Base Case  Sale Price • $1,700,000. Building Improvements  • Design professionals and construction estimators have toured the building and worked with Watari on functional programming. • Renovations are expected to be $400,000. • In 2008, The City of Vancouver anticipated spending $300,000 to upgrade this building to their standards. Furniture & Fixtures • All rooms will be furnished with a bed, dresser, desk and chair. It is anticipated that many of these items will be donated. $50,000 provides $2,083 budget for each of the 24 residential rooms. Soft Costs • Soft costs will be provided in kind by organizations such as Boffo Properties. Combined with this, 12.5% of renovation costs – $50,000 has been budgeted for charges. Appraised Value • $2,200,000 with improvements, Requested Loan Amount  • Watari will need a mortgage of $1,650,000. This amount will be 75% of the appraised value of the building with renovations. Required Equity  • Watari will raise $550,000 of capital. See fundraising section for details. Mortgage Conditions  • Lenders at Vancouver City Credit Union (Vancity) have conditionally agreed upon a 4% fixed interest rate for a conventional 75% Loan to Value mortgage, with a 5 year term and 25 year amortization. • This rate is higher than prime because SRO’s in the DTES are considered riskier assets, with greater potential liabilities. • Lenders at BC Housing have agreed to the same mortgage conditions. Revenue & Rents • $475/mth/unit residential; $19 gross/sqft/year ground floor; $7 gross/sqft/year basement See absorption section for details. Vacancy & Bad Debt • 2% of Gross Potential Income. This is above the market average of 1.4% set by CMHC. This number is reasonable, given that the residential rents are below market and that Watari is an anchor commercial tenant. Property Taxes • BC Assessment has projected that property taxes in 2012 will $9,000/yr. Insur, Utili. & Repairs • Numbers based on BC Housing’s SRO standards per unit per month. Debt to Credit Ratio • Vancity & BC Housing have conditionally agreed to a 1.2 DCR.  27 Financial Analysis – Base Case  Max Loan @ DCR  • $1,660,128 is that largest loan that anticipated cash flows of the building could support, given the required DCR. Net Operating Income • $125,750 is the expected NOI Revenue Break Down • 64% SRO units; 27% ground floor office; 9% basement space is the distribution of rental income sources. Annual Debt Service • $104,152/yr will be the mortgage payments for the requested loan amount with assumed mortgage conditions. Cash flow  • $21,598/yr will be generated from this building, after all expenses and mortgage payments are made. Breakeven Rent  • $417/mth SRO units; $16.71/sqft/yr ground floor; $6.16/sqft/yr basement will cover all expenses and mortgage payments. Safety Margin • 21% is the amount that NOI can decline before mortgage payments are at risk. Capitalization Rate  • 5.72% is the overall cap rate of the building, given the NOI and appraised value with improvements. Funding Gap  • The loan requested is less than the maximum mortgage allowed, therefore no additional funding is required   Under base case assumptions, this building would be a financially viable and self-sustaining project. The project is an efficient use of capital because it will yield positive cash flow for Watari in perpetuity. This money should be set aside and used for contingencies – for example preparing for interest rate changes and mortgage payment increases.  In 25 years, when the mortgage has been fully paid off, cash flows will increase substantially – it is reasonable to assume that Watari could utilize a large portion of this NOI to support other programming or future investments.  From a market perspective, a private investor may be hesitant to undertake this project. Taxes have not been included in the analysis, because Watari is a not-for-profit and does not pay tax. If income taxes on positive cash flows were deducted, this would decrease the project’s After Tax Cash Flow by up to 45%. Additionally, this analysis has not taken Net Present Value into account, because Watari does not require a return on equity invested and Watari is not intending to sell the building in the future.  See Exhibit 3 in appendices for details.  28 Sensitivity 1  In this case, minimal renovations will be made to the building. Rents will be on average 14% lower than the base case. However, there will more residential units – retaining the existing 29. Equity required will be lower – for example if fundraising attempts do not fully materialize – and the loan requested will be smaller.  Assumption Changes • 29 residential units @ $425/mth • 3000sqft Ground @ $16 gross/year • 3000sqft Basement @ $6 gross/year • $1,700,000 Sale Price • $200,000 improvements + furniture and soft costs • $1,900,000 Appraised value • 1.2 DCR • $1,400,000 Loan Requested • $475,000 Equity Required Analysis Changes • $113,020 Net Operating Income decline from base • $88,371 Annual debt service improved from base • $24,648 Annual cash flow improved from base • $1,492,721 Max Loan @ DCR decline from base • 74% LTV ratio improved from base • 28% Safety Margin improved from base • No funding gap required  The project will be viable under these new circumstances, where the building is effectively kept “as is”. Residential units will be easily occupied at $425, even though significant renovations have not been made1. It will be more difficult for Watari to occupy the ground floor and basement if the space has not been purpose built for their uses2. However, it is reasonable to assume that minor renovations could be made to the space and also that Watari could modify their program delivery to match physical restrictions. Under these circumstances, the project will have a larger cash flow than the base case. This surplus money could be saved over several years and used at a later date to make major renovations to the building.  See Exhibit 4 in appendices for details.    1 The building is in good condition compared to other SRO’s in the area and is currently being rented for $450-500/unit/mth. 2 Private soundproof rooms are needed for Watari’s counseling services.  29 Sensitivity 2  In this case, interest rates increase to 6% and amortization is extended to 30 years. Rental rates for all tenants will increase an average of 5%.  Assumption Changes • 6% Interest; 5yr term; 30 year amortization • 24 residential units @ $500/mth • 3000sqft Ground @ $20 gross/year • 3000sqft Basement @ $7 gross/year • $500,000 improvements + furniture and soft costs • $1,650,000 Loan Requested • $550,000 Equity Required  Analysis Changes • $137,392 Net Operating Income improved from base • $117,775 Annual debt service decline from base • $21,060 Annual cash flow decline from base • $1,604,024 Max Loan @ DCR decline from base • $45,976 financing shortfall decline from base • 75% LTV ratio same as base • 17% Safety Margin decline from base  The project will still be viable if interest rates rise to 6%. However, margins will be tighter. Amortization would need to be extended to 30 years. Rental rates of commercial and residential space will have to increase to compensate for higher mortgage payments. Given the strong demand for this type of housing, an increase in residential rental rates would be viable. However, finding commercial tenants that would pay increased rates for ground floor or basement space would be more difficult. A solution to this problem is still for Watari to occupy both spaces, where all 6000sqft would be occupied with zero percent vacancy.  The mortgage would not satisfy a DCR of 1.2, therefore additional funding would be required, which would likely be at an even higher interest rate.  The project still would have a strong positive cash flow. This could be put into a contingency fund that could be used for mortgage payment security – given there are no major repairs.  In summary, an increase in interest rates considerably raises the financial risks associated with this project. In order to determine if these risks would be appropriate for Watari, more analysis is needed on the overall financial health of the organization.  See Exhibit 5 in appendices for details.   30 Sensitivity 3  In this example, a best case scenario, property taxes would be waved by the City and property management costs would be reduced to 2% of NOI. Management fees would be lower since Watari is running the building themselves and not adding a profit margin. The mortgage provider would also cover a loan for the property’s maximum DCR and equity required would decrease correspondingly.  Assumption Changes • 33% of NOI operating expenses • $1,862, 317 Loan Requested • $337,683 Equity Required  Analysis Changes • $141,065 Net Operating Income improved from base • $117,553 Annual debt service decline from base • $23,510 Annual cash flow same as base • $1,862,317 Max Loan @ DCR improved from base • 84.7% LTV ratio decline from base • 20% Safety Margin decline from base  The project will viable under these circumstances. Watari will be leveraged higher, therefore interest expenses will increase over the life of the project. However, in this model capital fundraising requirements are less, which means that Watari will be able to act quicker to purchase and secure the building. After the property in secure, Watari can continue fundraising efforts in hopes of increasing equity and lowering interest expenses over the longer term.  Interest rates for this higher LTV mortgage could also increase. However, after conversations with Vancity’s Community Foundation, it is reasonable to assume that Watari could secure a low interest low as a type of bridge financing.  See Exhibit 6 in appendices for details.   31 Fund Development  Watari needs capital assistance from external sources to support the purchase and renovation of 635-37 East Hastings.  Watari has started a fundraising program, with the goal of raising $550,000 by October 2012. A savings account has been set up in Watari’s name that grants can be amalgamated into.  Fundraising efforts are targeting charitable foundations, public organizations, private businesses, and individuals. The central message for potential funders is that this project provides an opportunity to invest in social sustainability through real estate, empowering frontline workers to spread wellness in the DTES community and securing space for not-for- profit organizations.  In exchange for their support Watari will offer funders the following:  • As part of the building’s renovations, local artists will design and paint 24 doors to residential rooms and 4 doors to common areas.  In return for their support, major funders will be able to name the room, as well as have input into the door design. • For smaller contributions, bricks on the exposed ground floor wall will be etched and named.  In kind contributions will make up a piece of renovation funding. Boffo Properties have committed to partnering with Watari and will provide their construction management expertise. Watari has made an application to Home Depot for their renovation assistance program. Colliers International has completed an appraisal of the building for a reduced cost. Vancity has provided pre development assistance and business planning advice. D. Kelly Environmental Consulting Ltd. have completed the environmental assessment at a reduced cost.  Gair Williamson Architects have agreed to complete design work at a discounted rate.  See Exhibit 8 -– Fundraising Details in appendices for details.  32 Potential Funders      Thrive@635 Funding Sources  33 Financial Profile of Watari  Annual audited financial statements of the organization indicate that Watari has sound fiscal practices that continue to improve as Watari’s budget has grown. The organization currently has 15 separate programs running with diversified funding sources to support these projects. Each funding stream is financial self-supporting. Any surplus is directed to administration accounts, where it can be used towards capital projects or underfunded projects.  Watari does not have any long-term liabilities, aside from a $25,000 low interest loan from Van City Credit Union towards supporting a new social propose real estate project. Otherwise, the organization has monthly liabilities in the way of staff and contractor obligations. Bi-monthly payroll is approximately $41,000 and subsequent CRA remittance is $12,000. On a monthly basis, the organization pays out approximately $14,500 to contracted workers, which is paid back upon month end invoicing. Rental obligations are approximately $8,000 per month for two locations, and our phone and utilities and security cost $2,000 per month. Watari also pays out $5,000 per month in subsidies for rental costs to help support the transition of independent clients.  Watari leaves a financial footprint that reflects the values that are a fundamental in the field of community support. All staff members are paid fairly, and the benefits provided reflect a commitment to the whole person and a belief in their commitment to their own well-being. The Latin American Outreach Program feeds their membership twice weekly with homemade group meals, which are supported by the organizations vegetable garden and donations from Discovery Organics and the Vancouver Food Bank.  Watari’s commitment to fiscal frugality demonstrates that any funds received by the organization are directed to the places they can be most effective.  Revenue model Watari follows the deferral method for accounting for contributions, such as charitable donations. Under this method restricted contributions are recognized in the year the corresponding expenditure is incurred and unrestricted contributions are recognized in the year they are pledged if they are deemed to be reasonably collectible.  The amortization of capital contributions is on the same basis as the capital assets to which it relates.  Watari relies on funding from a variety of government and non-government organizations. The largest funder is Vancouver Coastal Health Authority (VCH), making up approximately 50-60% of annual revenues. The funding from VCH is expected to continue into the foreseeable future.  Watari’s total funding revenues in 2011 were $1.59 million (2010 - $1.86 million). In 2012, revenues are expected to increase significantly over 2011, back to near the 2010 levels. Funding fluctuations on a year-to-year basis are normal in this industry as small sponsorships  34 change or funding opportunities present themselves. Watari expects to have a small surplus of revenues over expenditures for the 2012 year.  The organization also receives donations of gifts-in-kind. Contributions in kind for goods and services are recognized when fair values can be reasonably estimated and when the goods and services are used in the normal course of the Society’s operations and would otherwise have been purchased. Because of the difficulty in determining their fair value, services contributed by volunteers are not recognized in the financial statements.  Current Lease at 877 East Hastings Watari currently leases 4650 sqft of space at 877 East Hastings. As of July 1st, 2012 the rate charged is $10.50/sqft base rent + additional rent of $4.95/sqft + HST. The organization’s total monthly rental expense calculates out to be $6,735/month.  $1,961,719 is the net present value of this lease if continued over the next 25 years3. See Exhibit 7 in appendices for details.  Watari has renegotiated this lease with Copula House International Enterprises Inc. in March 2012. As part of this agreement, Watari has a option to terminate their lease with 3 months notice.  Balance sheet Watari generally holds cash to cover current operating expenditures, and when excess cash exists it is normally placed in short-term GICs or other similar investments. At each balance sheet date, Watari usually holds a small amount of accounts receivable from various funders. Accounts receivable are generally collected within 60 days. Watari capitalizes purchases on the balance sheet in accordance with the board’s capitalization policy, and at the 2011 balance sheet date had just under $50,000 in capital assets consisting mainly of vehicles, office equipment and computer equipment. As is common with many charities, Watari usually does not have a large operating surplus or deficit carried over to the balance sheet due to expenditure requirements based on revenues each year.  Financial ratios Debt ratio – In 2011, Watari maintained a debt ratio at year-end of 2.01 (2010 – 1.79)  Defensive interval – Defensive interval in 2011 was 1.92 months.     3 3% per year increase in total rental expense and a required return equal to 3%, or inflation.   35 Conclusions  Overall, Thrive@635 presents a strong opportunity for Watari to enter the real estate market and will help to ensure the sustainability of the organization.  635-37 East Hastings is an ideal property to purchase, primarily because of the centralized location to clients and frontline workers in the DTES, the good condition of the structure, and the lower than market sale price.  The building is underperforming in its existing state because of management limitations of the current owners. With a more directed management approach, the building will be able to capture full market potential.  The City of Vancouver Planning Department is in support of mixed used projects with a social housing component in the DTES. Amendments will have to be made to the Official Plan to allow for the ground floor to be converted to an office use.  Vancouver’s DTES is a neighborhood that is quickly changing, with stronger demand for commercial and residential space. This makes for a good investment case for Watari to switch from a leasing to ownership structure. More specifically, it will help protect the organization from escalating rents, as well as expand Watari’s ability to capitalize on market growth to build available resources.  Market research has proven that there is sufficient demand in the current market to support projected rental revenue of the building from commercial and residential tenants.  Financial analysis has shown that, under supported assumptions, the project will be financial viable and self-supporting.  If circumstances change, sensitivity studies have demonstrated that the project will still be viable if capital contributions are lower or if interest rates are higher.  Cash flow for the project may be an issue in the short term. Watari will need to make mortgage payments, pay for renovations and continue to pay rent at their existing location. During this time there will be no income produced by the property. Watari will need to secure a construction loan or line of credit during this period.  The fundraising program is anticipated to generate the required down payment. Financial contributions from external sources will continue to be made throughout the construction and lease up period.  Watari is current in a healthy financial position are adequately suited to take on increased debt as an organization. Revenues are expected to increase and expenditures are expected to remain constant   36 References 1. BC	
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  9th,	
  2012	
     37 Appendices  Exhibit 1 -- Watari Board of Directors 2012-2013   Mike Matheson – Police Officer (retired) 3448 Robinson Road North Vancouver, BC V7J 3E9 Mike.matheson@gov.bc.ca 778 840 4170   Claire Benson-Mandl  - Chair Rehabilitation Consultant 6420 Wellington Av West Vancouver BC V7W 2H6 604-290-2190 © 604-913-7766 cbenson.mandl@gmail.com  Sukhraj Sihota - Member Masters Student 265 E 23rd Avenue, Vancouver BC V5V 1X4 604-318-2231 sks10@sfu.ca  Gail Mountain - Member- Entrepreneur 1823 Graveley Street Vancouver, BC  V5L 3B2 604-254-0394 (h) 604-876-2880 (w) gmountain@indigonaturalproducts.com  Odie Geiger – Vice Chair – 5 Research & Science Manager (retired) 2851 Alma Street Vancouver BC V6R 3S5 604- 222-0650 ogeiger@telus.net  German Blanco Leyva - Member - Physician (retired) 303-1255 W14th Ave Vancouver, BC V6H 1P8 604-212-2486 (H) 604-719-4484 (C) germanblancoleyva@yahoo.com   Cassia Kantrow - Treasurer – Certified Management Accountant 1-3274 Findlay Street Vancouver, BC  V5N 4E7 604-253-9757 (H) 604-765-7714 (C) cassia@dlcma.ca   Martin Mayer – Member Creative Design Consultant 604-376-4098 martin@martinmayer.com  Ruth Long - Secretary - Lawyer 3204 Robinson Road North Vancouver, BC V7J 3E9 604-988-9504 (h)/ 604-929-6801 (f) rlong@lsbc.org   38 Exhibit 2 -- Rental Surveys    39 Exhibit 3 -- Financial Analysis Base Case  Base Case Building Name: Shamrock Hotel Location: 635-37 East Hastings Required Debt Coverage Ratio: 1.2 Required Loan Amount: $1,650,000 Effective  Rate Funding Gap Underwriting Interest Rate: 4.000% 0.33059% Financing Shortfall $0 Term: 5  Interest Rate 4.00% Amortization: 25 Amortization: 25 Annual Debt Service: $104,152 Debt Service: $0 REVENUE Percent of Gross Income Yearly Income Units (number or sqft) Rate  (per unit or sqft) Monthly Rent SRO Units 64% 136,800.00$                24 475.00$ Ground Floor Office 27% 57,000.00$                  3000 19.00$                              4,750.00$ Basement Commercial - 10% 21,000.00$                  3000 7.00$                                1,750.00$ Total Number of Units: 26 6,500.00$ GROSS POTENTIAL INCOME 214,800.00$        Less:  Vacancy & Bad Debt Allowance 4,296.00$                    2.00% EFFECTIVE GROSS INCOME 210,504.00$ OPERATING EXPENSES  % of EGI Suite/Year Property Taxes ($28 pupm) *based on $9000 pa 9,000.00$                    4.28% 336.00$ Insurance ($12pupm) 3,744.00$                    1.78% 144.00$ Utilities - Water & Sewer,  Electricity & Hot Water ($80 pupm) 24,960.00$                  11.86% 960.00$ Repairs & Maintenance (Salaries & Service Contracts) ($90 pupm) 26,000.00$                  12.35% 1,000.00$ Administration -(Salaries, office overhead, audit) 10,525.20$                  5.00% 480.00$ Replacement Reserve 10,525.20$                  5.00% 720.00$ TOTAL EXPENSES 84,754.40$                  40.26% 3,259.78$ NET OPERATING INCOME 125,749.60$                59.74% 4,836.52$ PURCHASE DETAILS Sale Price 1,700,000.00$ Building Improvements 400,000.00$ Furniture & Fixtures 50,000.00$ Soft costs 50,000.00$ TOTAL COST 2,200,000.00$             84,615.38$ MAX. LOAN @ 100% OF COST 2,200,000.00$             84,615.38$  3.97 DCR @ MAX. LOAN @ DCR REQUIREMENT $1,660,128.00 1.2 63,851.08$  REQUESTED LOAN AMOUNT 1,650,000.00$ REQUIRED EQUITY 550,000.00$ MAX. LOAN CASHFLOW SUPPORTS 1,650,000.00$      Annual Debt Service: 104,152.00$      DCR on Max. Available Loan: 1.21      Loan-to-Value Ratio: 75%      Cashflow 21,597.60$      Breakeven Rent 188,906.40$                Per Suite Residental SRO 120,309.10$                417.74$ Ground Floor Office 50,128.79$                  16.71$ Basement Commercial 18,468.50$                  6.16$      Safety Margin 21%      Overall Capitalization Rate 5.72%  Funding Gap      Financing Shortfall -$ Additional Debt Service required: -$  TOTAL FINANCING      Total Loan: 1,650,000.00$      Total Debt Service Ratio: 1.21      Total Loan-to-Value Ratio: 0.75      Cash Flow After All Debt: 21,597.60$  40 Exhibit 4 -- Financial Analysis Sensitivity 1  Sensitivity 1 Building Name: Shamrock Hotel Location 635-37 East Hastings Required Debt Coverage Ratio: 1.2 Required Loan Amount: $1,400,000 Effective  Rate Funding Gap Underwriting Interest Rate: 4.000% 0.33059% Financing Shortfall $0 Term: 5  Interest Rate 4.00% Amortization: 25 Amortization: 25 Annual Debt Service: $88,371 Debt Service: $0 REVENUE Percent of Gross Income Yearly Income Units (number or sqft) Rate  (per unit or sqft SRO Units 69% 147,900.00$                29 425.00$ Ground Floor Office 22% 48,000.00$                  3000 16.00$ Basement Commercial - 8% 18,000.00$                  3000 6.00$ Total Number of Units: 31 GROSS POTENTIAL INCOME 213,900.00$        Less:  Vacancy & Bad Debt Allowance 4,278.00$                    2.00% EFFECTIVE GROSS INCOME 209,622.00$ OPERATING EXPENSES  % of EGI Suite/Year Property Taxes ($28 pupm) *based on $9000 pa 10,416.00$                  4.97% 336.00$ Insurance ($12pupm) 4,464.00$                    2.13% 144.00$ Utilities - Water & Sewer,  Electricity & Hot Water ($80 pupm) 29,760.00$                  14.20% 960.00$ Repairs & Maintenance (Salaries & Service Contracts) ($90 pupm) 31,000.00$                  14.79% 1,000.00$ Administration -(Salaries, office overhead, audit) 10,481.10$                  5.00% 480.00$ Replacement Reserve 10,481.10$                  5.00% 720.00$ TOTAL EXPENSES 96,602.20$                  46.08% 3,116.20$ NET OPERATING INCOME 113,019.80$                53.92% 3,645.80$ PURCHASE DETAILS Sale Price 1,700,000.00$ Building Improvements 100,000.00$ Furniture & Fixtures 50,000.00$ Soft costs 50,000.00$ TOTAL COST 1,900,000.00$             61,290.32$ MAX. LOAN @ 100% OF COST 1,900,000.00$             61,290.32$  3.97 DCR @ MAX. LOAN @ DCR REQUIREMENT $1,492,071.00 1.2 48,131.32$  REQUESTED LOAN AMOUNT 1,400,000.00$ REQUIRED EQUITY 500,000.00$ MAX. LOAN CASHFLOW SUPPORTS 1,400,000.00$      Annual Debt Service: 88,371.39$      DCR on Max. Available Loan: 1.28      Loan-to-Value Ratio: 74%      Cashflow 24,648.41$      Breakeven Rent 184,973.59$                Per Suite Residental SRO 127,898.99$                444.09$ Ground Floor Office 41,508.80$                  13.84$ Basement Commercial 15,565.80$                  5.19$      Safety Margin 28%      Overall Capitalization Rate 5.95%  Funding Gap      Financing Shortfall -$ Additional Debt Service required: -$  TOTAL FINANCING      Total Loan: 1,400,000.00$      Total Debt Service Ratio: 1.28      Total Loan-to-Value Ratio: 0.74      Cash Flow After All Debt: 24,648.41$  41 Exhibit 5 -- Financial Analysis Sensitivity 2	
    Sensitivity 2 Building Name: Shamrock Hotel Location 635-37 East Hastings Required Debt Coverage Ratio: 1.2 Required Loan Amount: $1,650,000 Effective  Rate Funding Gap Underwriting Interest Rate: 6.000% 0.49386% Financing Shortfall $45,976 Term: 5  Interest Rate 6.00% Amortization: 30 Amortization: 30 Annual Debt Service: $117,775 Debt Service: $1,533 REVENUE Percent of Gross Income Yearly Income Units (number or sqft) Rate  (per unit or sqft SRO Units 63% 144,000.00$                24 500.00$ Ground Floor Office 26% 60,000.00$                  3000 20.00$ Basement Commercial - 11% 24,000.00$                  3000 8.00$ Total Number of Units: 26 GROSS POTENTIAL INCOME 228,000.00$        Less:  Vacancy & Bad Debt Allowance 4,560.00$                    2.00% EFFECTIVE GROSS INCOME 223,440.00$ OPERATING EXPENSES  % of EGI Suite/Year Property Taxes ($28 pupm) *based on $9000 pa 9,000.00$                    4.03% 336.00$ Insurance ($12pupm) 3,744.00$                    1.68% 144.00$ Utilities - Water & Sewer,  Electricity & Hot Water ($80 pupm) 24,960.00$                  11.17% 960.00$ Repairs & Maintenance (Salaries & Service Contracts) ($90 pupm) 26,000.00$                  11.64% 1,000.00$ Administration -(Salaries, office overhead, audit) 11,172.00$                  5.00% 480.00$ Replacement Reserve 11,172.00$                  5.00% 720.00$ TOTAL EXPENSES 86,048.00$                  38.51% 3,309.54$ NET OPERATING INCOME 137,392.00$                61.49% 5,284.31$ PURCHASE DETAILS Sale Price 1,700,000.00$ Building Improvements 400,000.00$ Furniture & Fixtures 50,000.00$ Soft costs 50,000.00$ TOTAL COST 2,200,000.00$             84,615.38$ MAX. LOAN @ 100% OF COST 2,200,000.00$             84,615.38$  5.93 DCR @ MAX. LOAN @ DCR REQUIREMENT 1,604,024.00$             1.2 61,693.23$  REQUESTED LOAN AMOUNT 1,650,000.00$ REQUIRED EQUITY 550,000.00$ MAX. LOAN CASHFLOW SUPPORTS 1,604,024.00$      Annual Debt Service: 114,493.33$      DCR on Max. Available Loan: 1.20      Loan-to-Value Ratio: 73%      Cashflow 22,898.67$      Breakeven Rent 200,541.33$                Per Suite Residental SRO 126,657.68$                439.78$ Ground Floor Office 52,774.03$                  17.59$ Basement Commercial 21,109.61$                  7.04$      Safety Margin 20%      Overall Capitalization Rate 6.25%  Funding Gap      Financing Shortfall 45,976.00$ Additional Debt Service required: 1,532.53$  TOTAL FINANCING      Total Loan: 1,650,000.00$      Total Debt Service Ratio: 1.18      Total Loan-to-Value Ratio: 0.75      Cash Flow After All Debt: 21,366.14$  42 Exhibit 6 -- Financial Analysis Sensitivity 3  Sensitivity 3 Building Name: Shamrock Hotel Location: 635-37 East Hastings Required Debt Coverage Ratio: 1.2 Required Loan Amount: $1,862,317 Effective  Rate Funding Gap Underwriting Interest Rate: 4.000% 0.33059% Financing Shortfall $0 Term: 5  Interest Rate 4.00% Amortization: 25 Amortization: 25 Annual Debt Service: $117,554 Debt Service: $0 REVENUE Percent of Gross Income Yearly Income Units (number or sqft) Rate  (per unit or sqft) Monthly Rent SRO Units 64% 136,800.00$                 24 475.00$ Ground Floor Office 27% 57,000.00$                   3000 19.00$                               4,750.00$ Basement Commercial - 10% 21,000.00$                   3000 7.00$                                 1,750.00$ Total Number of Units: 26 6,500.00$ GROSS POTENTIAL INCOME 214,800.00$        Less:  Vacancy & Bad Debt Allowance 4,296.00$                     2.00% EFFECTIVE GROSS INCOME 210,504.00$ OPERATING EXPENSES  % of EGI Suite/Year Property Taxes ($28 pupm) *based on $9000 pa -$                             0.00% 336.00$ Insurance ($12pupm) 3,744.00$                     1.78% 144.00$ Utilities - Water & Sewer,  Electricity & Hot Water ($80 pupm) 24,960.00$                   11.86% 960.00$ Repairs & Maintenance (Salaries & Service Contracts) ($90 pupm) 26,000.00$                   12.35% 1,000.00$ Administration -(Salaries, office overhead, audit) 4,210.08$                     2.00% 480.00$ Replacement Reserve 10,525.20$                   5.00% 720.00$ TOTAL EXPENSES 69,439.28$                   32.99% 2,670.74$ NET OPERATING INCOME 141,064.72$                 67.01% 5,425.57$ PURCHASE DETAILS Sale Price 1,700,000.00$ Building Improvements 400,000.00$ Furniture & Fixtures 50,000.00$ Soft costs 50,000.00$ TOTAL COST 2,200,000.00$              84,615.38$ MAX. LOAN @ 100% OF COST 2,200,000.00$              84,615.38$  3.97 DCR @ MAX. LOAN @ DCR REQUIREMENT $1,862,317.00 1.2 71,627.58$  REQUESTED LOAN AMOUNT 1,862,317.00$ REQUIRED EQUITY 337,683.00$ MAX. LOAN CASHFLOW SUPPORTS 1,862,317.00$      Annual Debt Service: 117,553.96$      DCR on Max. Available Loan: 1.20      Loan-to-Value Ratio: 85%      Cashflow 23,510.76$      Breakeven Rent 186,993.24$                 Per Suite Residental SRO 119,090.67$                 413.51$ Ground Floor Office 49,621.11$                   16.54$ Basement Commercial 18,281.46$                   6.09$      Safety Margin 20%      Overall Capitalization Rate 6.41%  Funding Gap      Financing Shortfall -$ Additional Debt Service required: -$  TOTAL FINANCING      Total Loan: 1,862,317.00$      Total Debt Service Ratio: 1.20      Total Loan-to-Value Ratio: 0.85      Cash Flow After All Debt: 23,510.76$  43 Exhibit 7 -- NPV of Watari’s Current Lease              44 Exhibit 8 -- Fundraising Details                                              Organization Contact,Person Ask, Confirmed Type,of,Funding North&Growth&Foundation Patrica&North 50,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& YES Capital BCGEU Anite&Zaenker 40,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& YES Capital CUPE Mike&McGahey 40,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& YES Capital Vancity&Community&Investment Catherine&Ludgate 25,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& YES Pre&Development City&of&Vancouver Dennis&Carr 200,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Streets&to&Home Dick&Volett 150,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Rohit&Properties Damien&&Murphy 150,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital BC&Housing Candace&Koo 150,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Worksafe&BC Terri&Holziki 50,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Vancity&Community&&Foundation Liz&Green 50,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital& Loyality&Foundation Geg&Kerfoot 50,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Audain&Foundation Michael&Audain 50,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Access&Foundation Robert&Bentall 50,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital The&1988&Foundation Peter&Arbuckle 50,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Vancouver&Foundation& 45,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Post&Project Armstrong&Foundation Peter&Armstrong 40,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Chan&Sisters&Foundation Tung&Wai&Wong 40,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Central&City&Foundation Jennifer&Johnstone 30,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Programming CMHC Debra&Yip 30,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Pre&Development The&Highbury&Foundation Charles&Allard 25,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Hawthorne&Foundation Kathleen&Bentall& 25,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital The&Wolrige&Foundation Alan&Wolrige& 25,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital ZLC&Foundation Douglas&Christopher 25,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Willow&Grove&Foundation& Andrew&Wright 25,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital The&Stanjean&Foundation Stan&Hrescak 25,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Schein&Foundation Allison&Schein 25,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital The&Howard&Foundation& David&Howard 20,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Cob&Foundation Eric&Wilson 20,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital The&Chin[Wei&Foundation Scott&Shaw& 20,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Rina&Biden&Foundation Rina&Honderich 15,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital More&than&a&Roof&Foundation Marie&Louise&Stolz 15,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Sze&Cheung&Foundation Shiu&King&Cheung 15,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital Vancouver&Executive&Foundation 7,000$&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& No Capital TOTALS 1,577,000$,,,,,,,,,,,,,,,,,,,,,,,,, Fundraising,Details                                             © Watari Research Association 2012 

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