HomeMy WebLinkAboutDTS-08-083 - Charles & Benton Parking Structure Business Casedevelopment &
Technical Services
Report To: Finance & Corporate Services Committee
Date of Meeting: June 16, 2008
Submitted By: Rob Browning
Prepared By: Rob Browning, Hans Gross, Dan Chapman, Rod Regier, John
McBride
Wards}Involved: West-Victoria Park Ward (6)
Date of Report: June 11, 2008
Report No.: DTS 08-083
Subject: Charles & Benton Parking Structure Business Case
RECOMMENDATIONS:
That the development of a 500 space above ground parking structure on an existing City
owned surface parking lot at the north west corner of Charles and Benton Streets be
approved; and further,
That the consultant selection process be waived and that the firm of Read Jones
Christoffersen be retained to modify the existing design of a parking structure for this
site; and further,
That ground floor retail be included in the design of this structure on the Benton Street
frontage; and further,
That a Letter of Intent be agreed to by the Province of Ontario and the City of Kitchener
outlining the commitment of each organization to this project, subject to the satisfaction
of the City Solicitor.
EXECUTIVE SUMMARY:
The consolidation of three Provincial court facilities into one development on the block bound by
Frederick Street, Weber Street, Scott Street and Duke Street will result in the development of a
340,000 sq ft court building and bring new employment to the core.
The Province will supply 290 parking spaces on site for staff and have agreed to contribute
$6,475,000 as cash in lieu payment for the 185 remaining spaces required to meet the parking
requirements of the zoning bylaw. The estimated number of spaces have been based on initial
design concepts and will be refined at the site plan submission stage. In addition, approximately
370 existing surface parking spaces will be lost due to the development and a portion of them
will need to be accommodated in a new facility within a reasonable distance.
Construction of the new courthouse will begin at the end of 2009 or early in 2010 and is
contingent on the City being able to assist in accommodating the parking needs of existing and
future customers of this site.
A number of potential parking options were considered to address this demand and the
preferred option is to construct a 500 space above ground structure on a City owned surface
parking lot at the north west corner of Benton Street and Charles Street.
Intensification options were considered, including the provision of ground floor retail along the
Benton Street frontage and allowing for the future development of a residential or office use
above the structure. To assist in determining if greater intensification is feasible, the City's real
estate provider, Coldwell Banker Peter Benninger Realty, was retained to gauge the market for
this type of development. Their analysis indicated that while ground floor retail is reasonable,
the market for residential and office uses above the structure in the future was not strong, and
the cost and risk that the City would need to incur could not be justified.
A functional design and tender package had been prepared in 2002 in anticipation of
constructing this garage at that time. Due to cost overruns as a result of the tender, it was
never built, but the design with minor modifications is still reasonable and can be built within the
time lines required to satisfy the demand for parking from the future courthouse site. The firm of
Read Jones Christoffersen, who were the lead consultants on the original design, are
recommended to continue with this project and that the consultant selection process be waived.
Their intimate knowledge of the design, the availability of drawings and their commitment to
completing a project started a number of years ago will prove to be the most efficient approach.
Funding for this project will be a combination of the cash in lieu payment from the Province
along with a debenture for the remaining costs.
BACKGROUND:
The Province has announced that a new consolidated courthouse will be developed on lands
bounded by Frederick Street, Weber Street, Scott Street and Duke Street in an area that is
currently used for surface parking.
The Province will develop approximately 290 parking spaces underground, but will still require
an additional 185 spaces to meet our Zoning Bylaw parking requirements. They have agreed to
contribute $6,475,000 in cash in lieu payments to offset this parking shortfall.
In addition, approximately 370 existing surface parking spaces will be lost from the development
of the Courthouse, which will need to be accommodated within reasonable proximity.
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REPORT:
Parking Demand
The Province of Ontario has been searching for a suitable site to construct a new Courthouse
which will consolidate three courthouses into one facility. In February, staff were advised that
the preferred site was one currently owned by the CORA Group and was bounded by Frederick
Street, Weber Street, Scott Street and Duke Street. The Ministry of the Attorney General MAG)
wanted the availability of 690 spaces for their staff and clients. Many of these only need to be
hourly parking.
The Province was advised that fora 340,000 square foot office building, they would require
approximately 475 parking spaces to satisfy the City's zoning by-law. Certainly from staff's
perspective, there is room on this site to construct these spaces and probably more. However,
the Province advised that the MAG would construct 290 spaces under the courthouse which
would be utilized only by MAG staff due to security concerns and would be willing to pay cash in
lieu for 185 spaces as per city policy. This payment would only occur if the City can provide the
185 spaces within 300 m of the site. They would also like the city to confirm that there was the
availability of approximately 200 other hourly spaces to achieve the 690 parking space target.
Should the Province decide to increase the floor area for the court house and additional parking
is required as per the zoning by-law, the Province would have to make application for a variance
to reduce the amount of parking required. Staff would support this application. The Province
has stated definitively that they will provide not more than 290 parking spaces on site and their
cash in lieu payment will be $6,475,000. For reference, it should be noted that the Province is
exempt from local regulations. In this circumstance, the Province has been very fair in the
discussions.
The City's cash in lieu policy now sets the rate at $35,000 per space. The Province would pay
the City $6,475,000. Staff have reviewed the parking supply within a 300 m radius of the site
and believe there are 200 other hourly parking spaces available for use to meet their short term
client demand.
Should the City not be able to provide the parking as stated above, then the Province could
move to the next preferred site. Staff are not aware of where that site is, but it is not within
Downtown Kitchener and could result in the closure of both existing court houses and the
movement of the ancillary jobs that support them.
We have also been made aware that there is a condition in the deal between MAG and CORA
that the 370 spaces now utilized on the CORA site need to be supplied elsewhere in the general
area to accommodate their client base.
CORA can accommodate a portion of these spaces within their existing parking facilities, but will
require 200 monthly spaces in the proposed Charles and Benton parking garage to meet their
contractual obligations with existing tenants. They have committed to a 20 year lease for 200
monthly parking spaces at full market value in the proposed structure.
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Parking Options
A number of options have been investigated including:
1. Advise the Province that the City cannot provide the parking that they require
2. Convince the Province to intensify the development and construct more parking
3. Construct a 500 space parking garage at Charles & Benton Streets utilizing the cash in
lieu payment from the Province and seek other private sector investors
4. Construct a 500 space parking garage at Charles & Benton Streets utilizing the cash in
lieu payment from the Province and borrow the balance over a period of time
5. Same as option 4 and construct the structure with enough strength to support office or
residential development in the future on top
6. Sell the property at Charles and Benton Streets to a private developer with covenants
about constructing the parking facility
All options were considered and evaluated and options 4 and 5 were deemed to be worthy of
further consideration.
Intensification Options
Two options were investigated in an attempt to intensify this development with the addition of
uses other than parking for this site. These included the provision for a future office,
commercial or residential component above the parking structure and a retail or commercial
component at grade on the Benton Street frontage of the building.
The provision for additional floors of office or residential uses above the parking structure will
allow the City to maximize the use of the land area, generate future assessment and maintain a
24 hour presence depending on use). This is supportive of our growth strategy to intensify
development in the core and bring residential uses to the Downtown. If built separately, it would
not impact the construction time lines for development of the parking structure.
However this approach is not without risk.
• To add additional "structural support" within the parking structure to accommodate two
floors of residential use and one additional floor of parking which would be constructed in
the future would add approximately a 10% premium to the structure or about
$1,600,000. If additional floors were desired, the premium would be greater.
• Time does not permit the development of commercial or residential designs if we are to
have this structure operational in time to accommodate the development of the
Courthouse site. The City would need to estimate what the future development might
look like and what additional structural elements would be required in order to build the
supporting structure today.
The addition of floors in the future to an existing and operating garage will be disruptive
and result in the temporary loss of spaces.
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• The City will carry the capital cost of overbuilding the parking structure until such time
that a developer is willing to add additional floors. The City would need to recover the
cost of increased structural support (ie $1,600,000) at that time.
• Building code changes that are implemented before an additional use is built could add
costs or even make the structure unsuitable for extra floors.
To address these questions, the City's real estate provider, Coldwell Banker Peter Benninger
Realty, was retained to do a market analysis on the feasibility of providing both ground floor
retail and well as an office, commercial or residential component on top of the structure in the
future.
The results of their analysis have indicated that there is not a strong demand for either office,
commercial or residential development above the parking structure. Given the challenging
commercial market and the abundance of high density residential development opportunities
that exist in downtown Kitchener, it is felt that an investment in enhancing the parking facility at
this point would be largely speculative and highly risky. As such, it is recommended that the
City not proceed with these enhancements at this time.
With regards to the street fronting commercial space on Benton Street, it is felt that the spaces
could be attractive to a wide range of users. It is recognized that creating additional commercial
space in a market that currently contains surplus space raises an element of risk. However, if
marketing of the space were to begin early in the design/construction process, then it is
reasonable to expect the space to be leased when the facility opens.
Engineering Proposal
When the Charles & Benton Garage was designed and tendered in 2002, it came back
considerably over budget and the tender was cancelled. The design of the structure was
carried out by the firms of Read Jones Christoffersen (RJC) and the architect was the firm of
Diamond and Schmitt. Considerable effort went into the design to ensure that it was supportive
of major structures in the core and would aesthetically be compatible with surrounding buildings.
A few elements of the design contributed to the excessive costs and as part of the upgrading of
the design, alternate materials or processes will be chosen to minimize the costs while still
building a functional, but pleasing structure that will enhance this portion of the core.
In determining the budget for this structure, RJC was contacted for input based on their recent
experience with other parking structures. They also contacted one of the firms that had
previously bid on this design, and they both offered the opinion that the funds allocated should
be sufficient to build the structure that was tendered in 2002. Recent City experience with the
Centre Block project also suggests that the garage cost estimates are in line with what has been
budgeted.
RJC has submitted a proposal to complete the work under the same terms and conditions as
had previously been approved in the Nov 8, 2001 contract. The work will include:
Update all drawings and specifications to reflect the 2006 Ontario Building Code. There
have been significant changes to the seismic loading and design provisions for
structures.
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The geotechnical parameters defined in the code have changed and will require an
interpretation based on the previous geotechnical data.
Reconsider those elements of the building that were identified as potential cost saving
measures and incorporate those elements that are deemed appropriate into the design.
Provide tendering and contract administration services as had previously been
negotiated.
Their fee proposal of $309,500 for the above work is based on the same percentage of the
construction budget as had been previously negotiated in the earlier project for those aspects of
the project that had not yet been completed or required reworking because of legislated
changes.
Considerable savings in both time and money will be achieved in using the same engineering
and architectural firms to carry on with this project. Their intimate knowledge of the design, the
availability of drawings and their commitment to completing a project started a number of years
ago will prove to be the most efficient approach.
It is on this basis that staff are recommending that the consultant selection process be waived
and that the firm of Read Jones Christoffersen be retained to modify the existing design of a
parking structure for this site.
Time Constraints
One significant advantage of constructing a parking garage on this site, in addition to partially
accommodating the needs of the Courthouse, is that a garage had previously been identified for
this site and a design and tender had been prepared.
The Province needs to start construction on their new Courthouse by the end of 2009. That is
an extremely tight schedule to permit the City to develop any meaningful parking alternatives to
meet their needs, those of existing parkers displaced by the construction of the courthouse as
well as existing demands in this portion of the Downtown.
Since a design, with relatively minor modifications, is essentially complete and ready to tender,
we anticipate the following time frame for development.
June 2008 -Consultant selection
September 2008 -Tender project
October 2008 -Award tender
November 2008 -Construction begins
November 2009 -Structure completed and operational
This time frame, while tight, is achievable provided that we start immediately. It is also the only
scenario which will permit the construction of a garage to meet the Province's schedule.
Any significant changes to the previously approved design or trying to incorporate additional
uses other than the retail component at the time of construction will jeopardize these time
frames.
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FINANCIAL IMPLICATIONS:
The attached business case fully outlines the anticipated cost of construction along with
projected revenues and expenses. While it is based on the knowledge of both garage
designers and contractors who had previously bid on this structure, until a tender is let, the
exact price will not be known.
Work in support of this development is in addition to the actual construction budget and would
result in the following total budget:
Construction ~ $30,000 per space
Engineering/Architectural fees
Surrounding infrastructure improvements,
Parking equipment
Public art ~ 1%
Project management ~ 1
$15,000,000
$309,500
sidewalks, laneway, lighting $200,000
$190,500
$150,000
$150,000
Total
$16,000,000
Negotiations with the Province have resulted in a commitment to provide $2 Million in funding
upon the Province waiving its conditions (anticipated to be within the next 60 days) in the
Agreement of Purchase and Sale negotiated with the Vendor of the proposed courthouse site.
Should the Province not apply and receive its building permit for this location by December 1,
2009, the Province will remit to the City on semi-annual basis, the amount of carrying charges of
the balance until such time as payment is made.
COMMUNICATIONS:
Time frames to complete this project are very tight. Since this design had previously been
through an extensive public consultation process and approved by Council, it is proposed to
develop a modified design to address a number of issues and present that design to the KDBA
as representative of the Downtown merchants, before bringing forward the final design for
Council approval in early September 2008.
CONCLUSION:
The consolidation of the Provincial Courts within Downtown Kitchener is an important element of
our community for which we recommend support.
While the Province is supplying a portion of their parking needs on site, they are also
contributing in lieu payment towards construction of sufficient parking nearby that will satisfy
their needs as well as the parking needs of others.
Long term parking commitments by landowners whose parking is being displaced for the
development of the Courthouse will ensure a revenue stream over the life of the debenture.
A structure in this location will also partially assist in meeting the demands of other users in the
area.
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A financial contribution by the City will be required to support this development initially, but
increased assessment growth as a result of these developments will help to offset this initial
contribution.
It is on this basis that it is recommended that Council approve the development of a 500 space
above ground parking structure on an existing City owned surface parking lot at the north west
corner of Charles and Benton Streets.
Rob Browning
General Manager,
Development & Technical Services
Hans Gross
Director, Project Administration &
Economic Investment
John McBride
Director of Transportation Planning
Dan Chapman
General Manager,
Financial Services
Rod Regier
Executive Director
Economic Development
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JUNE 11, 2008
Development & Technical Services
Business Case
Charles & Benton Parking Structure
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Template by Project Administration July 2002
Revised July 2007
Table of Contents
Executive Summary .................................................................................................................... 3
Background .................................................................................................................................. 4
Problem l Opportunity ...................................................................................................................................................................................................4
Current Situation ...........................................................................................................................................................................................................4
Project Description ...................................................................................................................... 6
Project Description ........................................................................................................................................................................................................6
Objectives ......................................................................................................................................................................................................................6
Scope ............................................................................................................................................................................................................................. 6
Stakeholders ..................................................................................................................................................................................................................7
Strategic Alignment ..................................................................................................................... 8
Environment Analysis .................................................................................................................. 9
Project Risk Assessment .......................................................................................................... 12
Risk of Project and each Alternative (Not including Status Quo) ..............................................................................................................................12
Risk of Not Proceeding with Project (Status Quo) .....................................................................................................................................................13
CostlBenefit Analysis ................................................................................................................ 14
Quantitative Analysis -Financial Cost &Benefit :......................................................................................................................................................14
Qualitative Analysis -Non-Financial Benefits &Costs :.............................................................................................................................................16
Assumptions ................................................................................................................................................................................................................16
Conclusions .................................................................................................................................................................................... 17
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Charles 8~ Beaton Parking Structure
The consolidation of three provincial court facilities into one development on the block bound by Frederick
Street, Weber Street, Scott Street and Duke Street will result in the development of a 340,000 sq ft court
building and bring new employment to the core.
The Province will supply 290 parking spaces on site for staff and have agreed to contribute $6,475,000 as
cash in lieu payment for the 185 remaining spaces required to meet the parking requirements of the
zoning bylaw. The estimated number of spaces has been based on the initial design concepts and will be
refined at the site plan submission stage. In addition, approximately 370 existing surface parking spaces
will be lost due to the development and a portion of them will need to be accommodated in a new facility
within a reasonable distance of approximately 300 m.
Construction of the new courthouse will begin at the end of 2009 or early in 2010 and is contingent on the
city being able to assist in accommodating the parking needs of existing and future customers of this site.
A number of potential parking options were considered to address this demand and the preferred option is
to construct a 500 space above ground structure on a city owned surface parking lot at the corner of
Benton Street and Charles Street.
Intensification options were considered, including the provision of ground floor retail along the Benton
Street frontage and allowing for the future development of a residential or office use above the structure.
To assist in determining if greater intensification was feasible, the City's real estate provider, Coldwell
Banker Peter Benninger Realty, was retained to gauge the market for this type of development. Their
analysis indicated that while ground floor retail is reasonable, the market for residential and office uses
above the structure in the future is not strong, and the cost and risk that the City would need to incur could
not be justified.
A functional design and tender package had been prepared in 2002 in anticipation of constructing this
garage at that time. Due to cost overruns as a result of the tender, it was never built, but the design, with
minor modifications, is still reasonable and can be built within the time lines required to satisfy the demand
for parking from the future Courthouse site. The firm of Read Jones Christoffersen, who were the lead
consultants on the original design, are recommended to continue with this project and that the consultant
selection process be waived. Their intimate knowledge of the design, the availability of drawings and their
commitment to completing a project started a number of years ago will prove to be the most efficient
approach.
Funding for this project will be a combination of the cash in lieu payment from the Province along with a
debenture for the remaining costs.
3
Charles 8~ Beaton Parking Structure
The Province of Ontario has been searching for a suitable site to construct a new Courthouse which will
consolidate three courthouses into one facility. In February, staff were advised that the preferred site was
one currently owner by the CORA Group and was bounded by Frederick Street, Weber Street, Scott
Street and Duke Street. The Ministry of the Attorney General (MAG) wanted the availability of 690 spaces
for their staff and clients. Many of these only need to be hourly parking.
The Province was advised that fora 340,000 square foot office building, it would require approximately
475 parking spaces to satisfy the City's zoning by-law. Certainly from staff's perspective, there is room on
this site to construct these spaces and probably more. However, the Province advised that the MAG
would construct 290 spaces under the courthouse which would be utilized only by MAG staff and would be
willing to pay cash in lieu for 185 spaces as per city policy. This payment would only occur if the City can
provide the 185 spaces within 300 m of the site. They would also like the city to confirm that there was the
availability of approximately 200 other hourly spaces to achieve the 690 parking space target
In addition to the above, there is also a condition in the deal between the MAG and C4RA that the 370
spaces now utilized on the CORA site need to be accommodated elsewhere in the general area to
accommodate their client base. As staff believes there is a desire to have the new courthouse situated in
the Kitchener downtown, staff have explored options to make this opportunity viable.
Problem /Opportunity
Unless sufficient parking can be developed to accommodate a portion of the Courthouse's need as well as
partially offset the parking lost because of the redevelopment, the Province could move to the next
preferred site. Staff are not aware of where that site is located, but it is not within Downtown Kitchener and
could result in the closure of both existing courthouses and the movement of the ancillary jobs that support
them.
In order to accommodate the parking demands in this portion of the Downtown and secure the
construction of a new Provincial courthouse, a 500 space above ground parking structure is proposed at
the north west corner of Charles and Benton Streets in an area currently occupied by a City surface
parking lot.
Current Situation
The Downtown Kitchener Parking Garage Feasibility Study completed in 2001 recommended the
construction of a 525 space above grade parking structure at the intersection of Charles Street and Benton
Street on the site of a City operated surface parking lot. The recommendation was based on the existing
and projected future parking demands at that time, however the garage was not built due to excessive
costs once the project went to tender. Since that time, there have been considerable changes in the
demand and supply of parking in Downtown Kitchener, as well as the strategic direction in which
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Downtown Kitchener is anticipated to evolve. An update to the original study was completed in 2005
which reflected changes in parking demands in the core and recommended that two structures be built,
one at Charles and Water Streets and the other as part of the Centre Block development.
The Centre Block development will include 250 City operated public parking spaces as part of the design.
The Charles and Water garage has been delayed due to land acquisition issues, remediation challenges
and negotiations with adjacent property owners. It is unlikely that a structure could be built on this site for
approximately two years.
The decision to construct a new Provincial Courthouse on Frederick Street has created an immediate
demand for parking that was unknown in 2005 and that can only be met by the construction of a parking
structure at the Charles and Benton site. The time frame for the start of construction of the Courthouse is
approximately Jan 2010. In order to accommodate the existing parkers displaced during the construction,
alternatives need to be in place by the end of 2009.
Since a parking structure had previously been designed for the Charles and Benton site, it is feasible to
have a garage constructed and operating by the end of 2009, provided that we start immediately.
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Project Description
To address the identified need for parking as well as to partially accommodate the parking requirements of
the Provincial Courthouse, it is proposed to develop a 500 space above ground parking structure at the
north west corner of Charles and Benton Streets on the site of an existing City surface parking lot.
A number of options exist in the design of the structure to intensify the use of the land over and above that
of just a parking structure. The original design included provision for ground floor retail along the Benton
Street frontage of the structure. This provided a number of advantages including: a streetscape presence
to the garage, a rental stream from the successful tenant, increased visibility and security for all users.
The second option that has been investigated is the inclusion of a residential or commercial use on top of
the structure. It is possible to build on top of the parking garage, however there will be an up front
premium of approximately 10% to accommodate three additional floors in the future.
Objectives
The development of a 500 space above ground parking structure by the end of 2009 will allow for the
displacement of some of the parkers on the future courthouse site during the period of construction,
anticipated to start in 2010, as well as meet a portion of the future demand for parking generated by the
Courthouse.
Scope
Upon Council approval to proceed with this project, a consultant will be engaged to update the design and
prepare the tender. This should be completed by Sept 2008. Tendering would take place with an award
by Oct 31, 2008 and construction to start immediately after. It is projected that a full year will be required to
construct the garage with an opening at the end of 2009.
A multidisciplinary team will be formed at various stages to develop, coordinate and oversee the
construction of this garage. Representation will be requested from Facilities Management, Legal,
Engineering, Operations, Building, Planning, Finance, Communications, Economic Development, Project
Administration, Parking and Transportation Planning.
While the construction of a 500 space above ground parking structure is estimated at $15,000,000, there
will be additional work required to complete the project. Allowance should be made for the following:
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Construction ~ $30,000 per space $15,000,000
Engineering/Architectural fees $309,500
Surrounding infrastructure improvements, sidewalks, laneway, lighting $200,000
Parking equipment $190,500
Public art ~ 1 % $150,000
Project management ~ 1 % $150,000
Total $16, 000, 000
Stakeholders
Stakeholders: Overview of Business Requirements
Primary -Internal
Council Continued support for the health, vitality and development of new
and existing businesses in the Downtown
Develo meat and Technical
p Adds to City parking inventory.
Services While garage is fully automated, will put pressure on staff to
accommodate additional servicing demands
Primary -External
Ministr of the Attorne General
y y Full contribution of development costs through cash in lieu
contribution for those spaces they can not develop on site
Parking Customers Provides additional parking in an area of high demand.
Cora A 20 year commitment from Cora for the lease of 200 monthly
parking spaces at full market value.
Secondary -
External
Ability to accommodate some other monthly parking for area
Public and area businesses businesses.
Some short term public parking for Courthouse and other
businesses in the area.
Tax Pa er
y Sufficient and well managed parking spaces with minimal financial
impact
The project aligns with the overall business plan of the corporation that parking functions should operate as an
enterprise and provide a return on investment as well as specific goals of the Corporate Plan, Compass
Kitchener and the Region's Growth Management Strategy.
Level
Goal of Explanation
Impact
We anticipate the needs of Nigh By strategically locating parking structures to meet existing
internal & external and potential development, we support the health and
customers continued development of the core.
We use knowledge of the Medium Through the operation of the majority of public parking in the
Corporation to maximize downtown, demands can be anticipated and proactively
service opportunities addressed.
Public and private Nigh By working with the Province and private landowners, we
partnerships/sponsorships have secured a significant financial contribution for this
project as well as secured long term tenants.
Build vibrant urban spaces Nigh The intensification of use from a surface parking lot to a six
story structure with ground floor retail significantly adds to
the vibrancy of this area of the core.
Greater transportation Nigh Bicycle parking will be included in this structure to offer an
choice alternative to the automobile.
Develop economic health Nigh By providing additional parking in the core, greater density of
and well being redevelopment can be supported. Nigher modal splits to the
downtown means that less parking is required than if these
uses developed in greenfield sites.
It was determined very early in the process that it was in the City's best interest to have the Provincial Courthouse
consolidated in Downtown Kitchener. As part of the analysis for this project, a number of parking options were
considered to determine the optimum solution to meet the demands for this development as well as the needs of other
users in the area. These options are briefly outlined below along with the associated impact.
Option 1
Advise the Province that the City cannot provide the parking they require.
Impact:
• Courthouse is constructed elsewhere, possibly not in the City of Kitchener resulting in the transfer of existing jobs
to the new court house.
• Jobs will not be relocated to downtown Kitchener
• May experience loss of Legal Cluster around existing Courthouse
• Missed opportunity in terms of additional economy to downtown businesses i.e. restaurants
• Missed immediate opportunity for enhanced property tax (PIL) revenue
• The city will continue to experience short term pressure on parking demand which will grow as lots come off-line
for periods of time for redevelopment.
Option 2
Convince the Province and specifically, the Ministry of the Attorney General to intensify the development and
construct more parking
Impact:
• Staff have had intense dialogue with the Provincial representatives about this issue and the MAG is not adjusting
its position around its safety and security needs.
• The impacts would be similar to option 1
• The delay may cause the Province to explore its next priority location.
Option 3
Construct a 500 space parking garage at Charles and Benton for a cost of $16,000,000 by utilizing the cash in lieu
payment from the Province, seeking other private sector capital investors (users of parking). Provide CORA up to
200 parking spaces at market rates.
The cash in lieu payment would be supplemented by private sector partners who would contribute some capital
and commit to long term agreements for a number of parking spaces. The monthly parking rate maybe
discounted according to the level of capital contribution.
In preliminary discussions, it seems private sector players are hesitant to invest the minimum capital which the
City deems necessary and these investors would like a substantial level of control over the design, construction
and operation of the parking garage. They would also require ownership rights for their portion of the garage.
Impact:
• Would allow the City to satisfy a portion of the Provincial and C4RA's parking needs and allow the Province to
finalize this site as the new courthouse site
• Brings new jobs to downtown Kitchener
• Supports the existing legal cluster
• Bolster the downtown economy
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• Increase revenue from property taxes (PIL) for the City
• Minimal impact on the city's operating budget as user fees will cover majority of costs of operation
• Will assist in short term parking pressures as other parking lots are closed for short periods of time for
development (i.e. Centre Block)
• Avoid costs of operating a shuttle in the short term ($500,000 per year for a morning and late afternoon shuttle for
a two year period during times when Forsyth parking would be displaced because of the Centre Block
development)
• There will be issues of control over the ownership, design, construction and operation of the parking garage that
need to be negotiated to each party's satisfaction
• The financial model for this garage may not be applicable to other potential garages and create perceived
inequities
• Potential investors would not contribute the levels of capital required to make it feasible
• Wouldn't meet the Province's schedule
Option 4
Construct a 500 space parking garage at Charles and Benton (with some commercial space) for a cost of
$16,000,000 by utilizing the cash in lieu payment from the Province and borrowing the balance over a period of
time. Enter into a 20 year agreement with CORA for the provision of 200 parking spaces at market rate.
Impacts:
• Would allow the City to satisfy the Provincial and C~RA's parking needs and allow the Province to finalize this site
as the new courthouse site
• Would meet the Province's schedule
• Brings new jobs to downtown Kitchener
• Supports the existing legal cluster
• Bolster the downtown economy
• Increase revenue from property taxes (PIL) for the City
• Moderate impact on the city's operating budget as user fees will cover a significant portion of the costs of
operation
• Avoid costs of operating a shuttle in the short term ($500,000 per year for a morning and late afternoon shuttle for
a two year period during times when Forsyth parking would be displaced because of the Centre Block
development)
• Will assist in short term parking pressures as other parking lots are closed for short periods of time for
development
• City will have full control over the ownership, design, construction and operation of the parking garage
• Will be a moderate impact on the tax levy, but eliminates the need to fund other interim parking solutions
Option 5
Same as Option 4 and construct the structure with enough strength to support office or residential development on
top in the future.
Impacts:
• Same as Option 4
• Allows City to meet parking timelines as required by Province and C4RA
• Would add approximately a 10% premium to the base structure for three additional floors
• Will generate additional tax revenue in the future
• Will require the City to go through a public process to engage a developer to construct the office or residential
space and enter into a form of co-ownership
• Will add to operating budget over a 20 year period to finance additional capital costs - may be offset by developer
contributions or tax assessment in the future
Not currently strong demand for office, commercial or residential development above the parking structure
• Determined to be largely speculative and highly risky
'10
Option 6
Sell the property at Charles and Benton to a private developer with covenants about constructing a parking facility.
Impacts:
• Financial responsibility for construction transferred to new owner
• Some control lost in terms of design
• Parking rates may be higher (or different than city rates
• Approximately $90,000 per year in revenue lost on existing surface lot
• Sale price of property gained by City of Kitchener
• Will not meet timeline requirements of Province and C4RA
• Cost of parking facility may be prohibitive to encourage private sector redevelopment
• Inconsistent with the City's strategic directions for parking, which indicate the City will remain in the parking
business to ensure control
From the options in this report, Option 4 is the one that can be accomplished to meet the Province's planned schedule
for construction. It will permit staff to manage the parking pressures on the downtown in the short term and it is
financially feasible in light of the Province's significant cash-in-lieu contribution.
'I 1
Risk of Project and each Viable Alternative (Not including Status Quo)
Project Risk Assessment
Probability Impact
Risk 1 - MAG delays construction after
the City commits to building a parking Low Medium
structure
The City will negotiate progress payments
Risk 1-General Mitigation Strategy from the MAG that are in line with the parking
structure schedule. At a minimum, the MAG
will finance an car in char es.
Risk 2 - CORA does not need all 200 Medium Low
committed month) s aces
Parking demand from the new courthouse as
Risk 2 -General Mitigation Strategy well as other businesses in the area will fill
both the hourly and monthly parking demand
in this structure
Risk 3 - Gara e construction is dela ed Medium Hi h
Timing will be tight and construction must
Risk 3 -General Mitigation Strategy start in the fall of 2008. If delays are incurred,
a temporary shuttle maybe required.
Risk 4 -Tender price comes in higher
Low Medium
than bud et
Risk 4 -General Mitigation Strategy Design features may need to be modified if
over budget
'12
Risk of Not Proceeding with Project (Status Quo)
Project Risk Assessment Status Quo
Probabilit Im act
Risk 1 -Provincial courthouse relocates
to another munici alit
High
High
Risk 1-General Miti ation Strate T to market vacant properties
Risk 2 - No additional parking developed
in the downtown High Medium
Risk 2 -General Mitigation Strategy Parking shortage will continue. Offices will
remain vacant without sufficient parking.
Risk 3 -Loss of surface parking when
Centre Block redevelo s High High
Risk 3 -General Mitigation Strategy Temporary shuttle service will be required at
a cost of approximately $500, 000 per year
'13
Quantitative Analysis -Financial Cost & Benefit:
Financial Implications
The Charles and Benton parking structure would consist of 500 spaces with a total estimated capital cost
of $16,000,000. City anticipates funding $6,475,000 of the capital cost out ofcash-in-lieu of parking
revenues, leaving $9,525,000 to be financed by the City of Kitchener. 4n the next page is the Charles and
Benton Parking Structure Income Statement, showing the net operating impact for the construction year as
well as the five following years. The revenue and expenses are estimated to increase annually by 3.0%,
except for the 20 year annual debenture payment of $774,942 which is based on a projected interest rate
of 5.25% and does not increase annually. The net levy impact is determined to be 0.10% in the
construction year 2009 and 0.40% for 2010, which will vary depending on final construction costs, actual
inflation/rate increases and the debenture interest rate.
Staff have costed the option of constructing the parking structure with an enhanced structural support
system to enable future office or residential development on top of the structure. This would add an
estimated 10% or $1,600,000 to the base structure, which would require the City of Kitchener to pay an
additional $130,174 in annual debenture payments based on the 5.25% interest rate for 20 years. This
option would require the City of Kitchener to go through a public process to engage a developer to
construct the office or residential space and enter into a form of co-ownership, the timing of which will not
align with known parking pressures in the downtown. Due to the time constraints and the additional
$1,600,000 required, staff does not recommend this option. In addition, there is not a strong demand for
office, commercial or residential development above the parking structure from a developer perspective.
Staff recommends constructing the 500 space parking garage for $16,000,000 at Charles and Benton,
utilizing the $6,475,000 from the cash-in-lieu of parking fund and borrowing the $9,525,000 difference over
20 years at 5.25%.
The City of Kitchener has an investment philosophy that ensures that any increases in debt charges from
one year to the next do not exceed assessment growth. As well, the overall contribution from the tax base
through taxes and debt charges will not increase more than assessment growth plus inflation from one
year to the next. This philosophy has ensured that the impact on the taxpayer does not exceed inflation
and that the City must prioritize projects to fit the funding available. The debt payments on this project
would be above and beyond the amounts provided for under the philosophy. However, the City of
Kitchener's capital investment philosophy provides for debt financing for projects which have a business
plan showing revenues generated over a reasonable "pay back period" covering the capital cost and
interest of the project.
This proposal is consistent with the intent of the "exception" provisions outlined above. Although the pro
forma shows a projected annual funding shortfall, this does not include the net assessment increases
facilitated as a result of the development of this structure. In fact, the net annual increase in City tax levy
revenue for the new Courthouse is estimated at $225,000, and the projected additional City taxes
generated on the parking structure amount to $14,000. The net present value of these revenues equates
to $4,078,055 over the 20-year debt period, compared to the net present value of the annual operating
deficit, which amounts to $4,676,390. This does not take into account the additional savings associated
with foregoing interim parking strategies to accommodate downtown parking pressures over the next three
years provided the project proceeds at this time. These interim parking strategy costs are anticipated to be
'14
well in excess of the difference between the net present values identified above. Upon payment of all
outstanding debt, the facility will generate a projected annual net revenue of approximately $400,000.
Charles & Benton Parldr~g Income statement For Courthouse
F~venue
F-burly Partcing
Mthly Parldrx~
Total F~venue
Amual Loan Payrt~t
Taxes
C~erational Cod
Total F~enses
Net FE~rerue
Charles & Benton Ctrn~ent Net F~venue Foregone
~ R~~renue After Charles & Benton IVet Revenue Foregone
Cor~n~ct
Year
2009 2x10 2011 2012 2013 2x14
$ - $ 238,703 $ 245,864 $253,239 $ 260,837 $ 268,662
$ - 437,736 450,868 464,394 478326 X2,676
$ - $ 676,438 $696,731 $ 717,633 $ 739,162 $ ~1,~37
- (774,942) (774,94 (774,942) (774,942) (774,942)
- (97,239) (10,15 (103,161) (10256) (109,444)
- (171,277) (176,416 (181, r~8) (1$7,159) (192,774)
$ - $ (1,03,459) $(1,051,514) $(1,059,812) $(1,358) $(1,077,160)
$ - $ (367,021) $ (354,78 $ (342,178) $ (329,195) $ (315,823)
$ (~,~) $ (~,~) $ (91,~ $ (~,~) $ (96,579) $ 0,476)
$ (85,809) $ (455,404) $ (445,81 ~ $ (435,94) $ (425;774) $ (415,299)
~ Levy Impa~ 0.10% 0.40%
Nees
Er~hanoed De~loprn~t option rec~ires $130,174 in additional annual loan payments over 20 bars at 525% interest to s~porl tl~ $1,60,000 increase in cor~truvtion oohs.
'15
Qualitative Analysis -Non-Financial Benefits & Costs:
Qualitative Description Stakeholders) Impacted
Summary
Benefits:
Additional employees Consolidation of courthouses in Su orts ancillar uses
pp y
brought to the downtown Kitchener will add net employees
Retains le al cluster and
g haw firms that have located close to the Creates ex anded market
p
supportive businesses courthouse will remain and new for law practices
businesses will relocate in the area
Assumptions
1. The construction cost of $30,000 per space has been based on input from the architect and
engineer who designed the Charles & Benton structure, one of the companies that had previously
bid on the project as well as a comparison of development costs related to the Centre Block
proposal.
2. Work in support of this development is in addition to the actual construction budget. Allowance
has been made for the following:
Construction ~ $30,000 per space
Engineering/Architectural fees
Surrounding infrastructure improvements, sidewalks, laneway, lighting
Parking equipment
Public art ~ 1
Project management ~ 1
$15, 000, 000
$309,500
$200,000
$190,500
$150,000
$150,000
Total $16, 000, 000
Conclusions
In order to retain the Provincial Courthouse in downtown Kitchener, sufficient parking must be developed
to accommodate the parking demand generated by the Court as well as offset a portion of those spaces
displaced by the development.
A cash in lieu contribution of $6,475,000 by the Province for those spaces that can not build on site to
meet their parking requirement will provide a significant and sufficient financial contribution to allow the net
revenues from other users of this facility to pay the operating and the majority of the development costs.
The annual deficit is manageable and will be partially offset by increased assessment from this
development and the Courthouse.
The inclusion of street fronting retail on the Benton Street side of the structure will contribute to increased
activity, surveillance and use of the site. While additional commercial, office and residential uses were
investigated for inclusion on top of the structure, the analysis indicated that there wasn't sufficient market in
this location for the foreseeable future.
As a result, it is recommended that a 500 space above ground parking structure be developed on the City
owned surface parking lot at Charles and Benton Streets.
In order to meet the timelines for development of the Courthouse, design and tendering must start
immediately with construction commencing in the fall of 2008 with completion by December 2009.
2
~~ a
~c~
May 22, 2008
Mr. Robert Morgan
Capital Investment Advisor
City of Kitchener
200 King Street West
6th Floor
PO Box 1118
Kitchener, Ontario
N2G 4G7
Dear Rob:
Re: Charles/Benton Parking Structure -Development Analysis
COLDWELL BANKER COMMERCIAL
PETER BENNINGER REALTY
508 RIVERBEND DRIVE
KITCHENER, ONTARIO N2K 3S2
BUS (519) 743-5211
FAX (519) 743-8009
www.coldwellbankerpbr.com/commercial
Thank you for asking Coldwell Banker Peter Benninger Realty (CBPBR) to provide advice and
analysis regarding the feasibility of including a) street fronting retail/commercial space on the
Benton Street facade of the proposed Benton/Charles parking facility and/or b)
commercial/residential space above the proposed facility, sometime in the future.
Background
The City of Kitchener is planning to design and construct a 500 space parking structure at the
northwest corner of Benton Street and Charles Street. The City is contemplating the following:
a) two separate retaillcommercial spaces on the ground and 2nd floors of the Benton Street
building facade. The first space, at the intersection of BentonlCharles, would be 2
storeys - 642 sf on the ground floor and 535 sf on the second floor. The second space
would be on the Benton StreetlHall's Lane corner, and would include 746 sf of space on
the ground floor only. Both spaces are currently designed to be accessible only from
Benton Street, with no pedestrian connections to the parking garage. The main Benton
Street pedestrian access to/from the parking garage would be situated between these
two spaces.
b) Making provision in the parking facility now that would allow the addition of commercial
or residential space on floors above the parking facility, at some point in the future. The
City could increase the structural strength of the facility, and incorporate necessary
changes to the stairwells, elevators, etc. Although these changes have not yet been
designed, it is estimated that they could cost an additional $1 million to $1.5 million
dollars. Also, if additional space were added in the future, then the developers would
also have to add the required parking, as the existing 500 spaces are allocated to users.
Each Office Is An Independently Owned & Operated Brokerage.
Market Analysis -Retail/Commercial Space
The main retail area of downtown Kitchener is focused on King Street, with secondary retail
areas along the side streets leading to/from King Street. The small spaces proposed for the
parking facility would be very unique in nature, and could be attractive to users such as small
professional services companies (legal, insurance, marketing, etc.) or more destination oriented
retail users that can benefit from some walk in traffic (travel agencies, hair dressers, etc.).
A good comparable to this site is the commercial space on King Street at the Kitchener market.
This is a relatively new facility and is attracting a wide variety of users, who are typically paying
between $13/sf and $161sf. There have been some challenges to leasing this space, however,
as vacancies continue to exist.
Given the location, unique nature of the opportunity and size of the space it is reasonable to
expect net lease rates in the range of $12 to $14 per sf, slightly lower than the Market space
given its side street location. A tenant would pay the additional costs of maintenance, taxes and
utilities. They would also be expected to pay leasehold improvement costs, although the City as
landlord may incur some of these expenses, depending upon negotiations and specific
circumstances.
It is reasonable to expect that if marketing of this space begins concurrently with the final design
and construction of the parking facility, that the space could be leased and active when the
parking facility opens. This could provide the opportunity to tailor the space somewhat to a
specific user if one is found early in the process.
These commercial spaces can provide the added benefit of "activating" the street front based on
increased activity in and around the parking facility.
Market Analysis -Residential
Policy and market shifts have accelerated demand for higher density residential accommodation
in downtown Kitchener in the last number of years. This demand can be summarized as
follows:
• 1,602 net new residents since 2001
• 1,136 net new residential units since 2001
• $111,079,422 residential construction value since 2001
• Growth exemplified by high density developments such as the Regency at 57 Queen
Street N. (168 units), Victoria Park Place at 205 Victoria Street (260 unties} and
Kaufmann Lofts at 404-410 King Street West (270 units)
Approximately 160 new residential units have been created per year since 2001 in downtown
Kitchener.
It is felt that this rate of growth is sustainable, and could be surpassed, in the near future, given
the following:
• The completion of the UW Health Sciences Campus, which will increase the student
population in downtown by close to 600 students.
GOI DWEI~.I.,
CQ
The further implementation of the Regional and City Growth Management Strategies,
which will strengthen policies encouraging intensification.
• The possible implementation of the Light Rapid Transit System.
• The City's Economic Development Fund, which continues to act as a catalyst for
downtown development and redevelopment.
• Sale and re-sale values of new high rise condominium units in downtown are reaching
levels that are attractive to developers wanting to undertake new developments. A
recent survey undertaken by CBPBR indicates that Kaufmann Loft units are re-selling at
a rate of approximately $2801sf, a 38% increase over the original selling prices. A recent
Toronto Star article profiling downtown Kitchener quoted the vice president of sales and
marketing for Andrin Homes as saying that the company needed to keep prices of the
proposed Centre Block development at $3001sf in order to meet market requirements.
There are currently numerous residential projects under construction or planned, such as:
• 560 Queen Street South (217 units under construction)
• 90 Woodside (130 units under construction)
• Le Marche residences (68 units under construction)
• Centre Block (approx. 410 units planned)
• Icon Condominiums (approx 100 units planned)
• The Arrow Lofts (318 units planned)
According to City of Kitchener statistics, there are a total of 1,086 new residential units that are
at various stages of the planning process. This represents a 7 year supply, if average
absorption rates of the past 7 years are achieved. CBPBR is confident that considering past
trends and the contemplated future activities, that this level of absorption will likely increase.
Market Analysis -Commercial
The office market in downtown Kitchener has been challenged over the past several years.
Vacancy rates have ranged between 10% and 15% and the majority of new construction has
been related to the re-tenanting of existing space. A great deal of new supply is being
constructed or proposed in the Deer Ridge/Sportsworld area of Kitchener, and in Uptown
Waterloo, the University of Waterloo Research Park and adjacent Philip/Albert corridor. These
new projects are leasing space for approximately $15/sf net, whereas current "A" Office Space
in downtown Kitchener is typically being leased for less. For example, according to MLS data,
leases completed in JunelJuly 2007 at 55 King Street and 30 Duke Street indicate a net lease
rate of $101sf.
As long as vacancy rates remain high in downtown, and leasing rates remain lower than other
prime office areas in the Region, there will be very little incentive for developers to construct
new office developments downtown.
GOI DWEI~.I.,
CQ
Anal sis
The City of Kitchener is considering making a fairly substantial investment in enhancements to
the Benton/Charles parking facility in order to potentially attract a residential or commercial
development sometime in the future.
This developmentwould require its own parking spaces, to be built above the existing 6 storey
parking facility, requiring residents or office users todrive up/down 7, 8 or more storeys of
parking to reach their destination. Industry standard for parking facilities, according to City of
Kitchener staff is typically 6 storeys, in part due to the inconvenience and time required todrive
higher. This would definitely impact the marketability of this project.
Constructing new parking and floor space above the existing facility would include construction
challenges which would likely result in higher construction costs, and temporary operating
disruptions during construction.
A developer would have to enter into a fairly complicated agreement with the City of Kitchener
to create amulti-use, multi-ownership facility.
The points raised above are all issues that a developerwould assess when considering this
location, and comparing it to other opportunities in downtown Kitchener.
The office commercial market in downtown Kitchener has experienced challenges, as
evidenced by fairly high vacancy rates compared to other areas of the City. Areas such as the
University of Waterloo, Uptown Waterloo and the Deer Ridge/Sportsworld district are
experiencing growth, bringing new product on the market and achieving higher lease rates than
similar buildings downtown. Owner occupied office users have options in the market, both
downtown and throughout the Region, that would be less challenging and therefore more
attractive from an ownership perspective} than the Benton/Charles site.
The residential market in downtown Kitchener is strong, as evidenced by substantial growth
over the past 7 years. Numerous projects are planned for the next 5 to 10 years, and all factors
indicate that these projects will be successful and residential growth will continue downtown at
current rates, or better, as focus increases on the downtown through public policy and market
shifts.
However, as demand increases in downtown, so do the opportunities. In addition to the projects
that are in the planning stages, which represent a 5 to 10 year supply, there exist a number of
other opportunities that would compete with the BentonlCharles site. Areas such as
ParklVictoria, Benton/Courtland, King Street east of Cedar Street, the Canada Post site, etc. are
all areas that are candidates for reurbanization, and property consolidation is beginning.
Owners will weigh the development factors of these areas versus the Benton/Charles site when
making their investment decisions.
Given the challenging commercial market and the abundance of high density residential
development opportunities that exist in downtown Kitchener, it is felt that an investment in
enhancing the parking facility at this point would be largely speculative and highly risky. As
such, it is recommended that the City not proceed with these enhancements at this time.
GOI DWEI~.I.,
CQ
With regards to the street fronting commercial space on Benton Street, it is felt that the space
could lease for $12 to $14 per sf net and could be attractive to a wide range of users.
Construction and operating costs of this space are unknown to CBPBR at this time, so it will
need to be determined if this leasing rate provides an adequate return on investment. It is also
recognized that creating additional commercial space in a market that currently contains surplus
space raises an element of risk. However, if marketing of the space were to begin early in the
designlconstruction process, then it is reasonable to expect the space to be leased when the
facility opens.
Best Regards,
~`~'.~_.7.-~ `' ~ rte.,
Peter Benninger
Broker of Record, President
Coldwell Banker Peter Benninger Realty, Brokerage
519-743-5211 x3000
GOI DWEI~.I.,
CQ