community hubs

Private sector gains allure for community hubs

Ontario government pursuing faster sales of its surplus property
Thursday, January 17, 2019
By Barbara Carss

Prospective developers of community hubs will no longer get extra time to negotiate the purchase of surplus properties the Ontario government is selling. A revised policy for the disposition of provincial realty, announced in early December, ends the special consideration given to broader public sector, not-for-profit and Indigenous organizations proposing to use surplus properties for community-based projects that deliver housing, health care, employment and training, education, poverty reduction or other services for children, seniors and Indigenous communities.

“Circulation time to external third parties (e.g., other levels of government) will be reduced, consistent with previous practices,” states a backgrounder released to outline a streamlined process for getting idle sites back into productive use.

This reverses the previous government’s surplus property transition initiative (SPTI), introduced in 2017, which allowed qualifying groups to place a hold on properties for up to 18 months while they worked through the details of the deal. Instead, the new government pledges to evaluate surplus properties for suitability for affordable housing or long-term care purposes, but stresses the need to reduce red tape and the government’s carrying costs.

“Ontario currently has hundreds of vacant surplus properties across the province, costing the government millions of tax dollars a year to maintain,” observes Bill Walker, the Minister of Government and Consumer Services. The government estimates the sale of 243 properties now listed as surplus on the Infrastructure Ontario website could garner $105 to $135 million in net revenue and remove $9.6 million in annual operating costs from the provincial books.

None of the listed properties are school sites — the sale/leasing of which is governed through a regulation under the Education Act — but vacant school properties were the venue for four community hub projects that gained SPTI approval last year. Project proponents in Hamilton, Ottawa, Owen Sound and North Bay received funding, referred to as holding costs, to cover the operation and maintenance of the properties for up to 18 months until they were in a position to assume ownership.

“It allowed more time for not-for-profits or other types of organizations participating in a community hub to get their financing and legal and other types of agreements in place,” says Brennan Carroll, a partner practicing commercial real estate law with Borden Ladner Gervais LLP. “Now the Province is indicating it wants a more expeditious process.”

As part of its program to foster community hubs, the former provincial government imposed new criteria in 2016 for school boards leasing out or selling vacant school properties. This expanded the list of prospective purchasers to be notified prior to making properties available to the market, and doubled the allowable time period, from 90 to 180 days, for these designated entities to submit expressions of interest and purchase offers.

Those parameters still apply. “As per the Education Act, school boards continue to be subject to all the requirements included in Ontario Regulation 444/98 when they adopt a resolution to sell, lease or dispose of surplus property,” affirms Heather Irwin, a senior media relations coordinator for the Ministry of Education.

However, capital funding remains a challenge. With fewer special considerations for bidding on surplus public properties, private sector developers may see burgeoning interest from potential not-for-profit partners. Mixed-use developments, for example, might accommodate community space that could be a benefit and a draw for residents and commercial tenants.

“There is certainly no reason why community hubs have to be on public or formerly public land. I’ve been trying to encourage organizations to engage with the private sector and I think the private sector could benefit from these types of developments as well,” Carroll reflects.

“In terms of the provincial government being a real catalyst for community hubs, we are probably taking a step back,” he adds. “But, in terms of community hubs being a) a good use of real estate, and b) a good concept for the communities they serve, I think everybody is still very much on board with that.”

Meanwhile, the Ontario government promises the new sales process for surplus properties will include zoning reviews to ensure the vendor enjoys the full potential value and measures to protect heritage buildings.

“Our government is committed to creating more affordable housing and long-term care spaces and through this new process we will identify suitable properties to help us deliver on this commitment,” maintains Steve Clark, the Minister of Municipal Affairs and Housing. “By putting properties back into productive use, our plan will also help local communities across the province see benefits in economic development and jobs.”

Barbara Carss is editor-in-chief of Canadian Property Management.

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