May 9, 2017
This backgrounder provides highlights of the City-wide Real Estate Transformation staff report being considered by Executive Committee on May 16, 2017. Pending decisions at Executive Committee this report will go to City Council for consideration at its meeting on May 24, 2017.
- In June 2016, following a third-party review of the City's real estate delivery model, City Council approved, in principle, the direction to move to a centralized service delivery model for real estate.
- Real estate is a shared civic resource that needs to be effectively planned, coordinated, and optimized to bring the greatest value to the City.
- The City of Toronto owns one of the most expansive, diverse and valuable real estate portfolios in North America (8,446 properties and over 106.3 million square feet), with significant operational ($1.1 billion) and capital ($1 billion) expenditures per year, and an estimated assessed value of $27 billion.
- There are currently over 24 entities (divisions, agencies, and corporations) involved in real estate activities with varying governance structures, program objectives, investment plans, processes, data and technology, skill and expertise.
- The review concluded that the current model did not provide the most effective framework to unlock potential and ensure the strategic use of real estate assets.
- The current real estate portfolio has significant potential and considerable opportunity to advance to the next step in its real estate maturity.
Proposed City-wide Real Estate Service Delivery Model
- Following June 2016, the City Manager assembled a transition team, who in partnership with key stakeholders and partners, analyzed centralization options and developed a proposed real estate service delivery model.
- The proposed City-wide real estate service delivery model will centralize all real estate and facilities management activities, allow the City to take a "whole of government” approach, and apply a city-wide lens to ensure the effective use of real estate assets.
- The model's new mandate will focus on enabling city-building, program-focused service and real estate stewardship.
- The new model will include direct collaboration with City programs (divisions, agencies, and corporations) through a client relationship management function, proactive engagement with stakeholders, and core pillars focused on real estate strategy, portfolio planning and effective execution.
- The proposed model will be comprised of:
- The Real Estate Services and Facilities Management divisions under the current Chief Corporate Office, with an expanded city-wide scope and mandate to execute and coordinate day-to-day real estate transactions and facilities management; and
- A new realty agency to manage the City’s real estate portfolio, develop City buildings and lands for municipal purposes and deliver client-focused real estate solutions to City divisions, agencies and corporations.
- The key benefits of the proposed model include:
- Coordinated stewardship of the City's real estate assets, and the ability to execute a mandate focused on supporting programs and enabling city-building;
- A strong accountability and governance structure with the necessary Council oversight, and built in flexibility to operate in the changing marketplace;
- Real estate expertise to modernize and harmonize operations, and to drive service delivery to programs and local communities across the City
- Opportunities to maximize real estate value in pursuit of social, economic, environmental, and program benefits, while achieving value for the City; and
- The ability to evolve over time and adjust as required to meet the City’s changing and complex needs.
- Once fully implemented, the model will produce opportunities for the City through operating and capital cost savings and new revenues, which can be further invested into other City priorities. These savings include:
- Operating cost savings: Approximately 5 to 10 per cent of total operating costs ($36-72 million) through opportunities such as operational lease reduction and improving building efficiencies.
- Capital cost savings: Approximately $30-60 million through opportunities such as coordinating city-wide capital projects and driving co-location solutions.
- New revenues: potential to unlock greater value on approximately 20 per cent of the total real estate portfolio through further development of underutilized City properties.
- If approved, the transition team will work directly with involved divisions, agencies, corporations in Q3 and Q4 of 2017 to support transition, change management, and set-up activities.
- The City Manager will report to the appropriate Committee and City Council in Q4 2017 on transition details, such as recommendations on amendments to delegated authorities, a transition plan for divisions, agencies and corporations, financial processes, a formal name for the new agency, and the appointment of the new agency's Board of Directors.
- The new model will launch on January 1, 2018. The full transformation will be phased over a three-year period and will be evaluated to ensure it is working effectively and delivering value for the City.
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