The annual report also provided greater information as to the Madison Project. Although only three questions were brought up during the Q & A session, the questions did shed light on the investments ETCU are making in the due diligence process related to Madison.
One question had to do with Member Relations and an expenditure of $271,355 in 2017 versus $112,614 in 2016. At the podium ETCU President Anita Saar explained that many elements such as advertising, marketing campaigns and other similar activities are included in the expense. This past year Member Relations also included funds dedicated toward the Letter of Intent between Build Toronto and the “3 Orgs” (ETCU, Tartu College and Estonian Foundation of Canada) in regard to 9 Madison. By email, Pr. Saar confirmed that the portion of the Member Relations related to the Estonian Centre Project was $202,730.
The subject of another question was related to the value of assets held by the ETCU, such as: land, buildings, furniture and equipment, computer equipment, leasehold improvements and so on. In 2017 ETCU’s assets grew by $61,857 to $1,248,958 versus $1,187,101 in 2016. Note # 9 also included “Building Under Construction” identified as being for ETCU’s property at #11 Madison. At the annual meeting it was explained that “construction” may have been a strong description for the minor renovation process undertaken to support income opportunities. Renovations were to patch leaks in the roof, holes created by animals as well as other small improvements which added value to the asset.
The first question posed, which became the third to be answered, had to do with the original reason for purchasing #11 Madison Ave in 2014 and its zoning designation. The property has a long and storied history. At the time ETCU announced #11 Madison served "(the) Credit Union’s risk management to secure facilities for continuity of service and operations for its members in preparation for the anticipated re-development of the Estonian House." In the interim, ETCU looked for alternate revenue options and in June 2016 ETCU hired Kongats Architects to manage the conversion of 11 Madison to a student residence with “10 dwelling rooms.” (See 1401a -11 Madison Ave Past Use of Building, letter June 2, 2016 attached). That option was never implemented.
At the annual meeting ETCU Director Mihkel Liik explained: “Whether we were going to redevelop here, whether we were going to need some spring space. Any number of things. It (#11 Madison) was also an opportunistic purchase for the bank.” Hr. Liik continued: “In terms of the zoning, it’s currently zoned commercial. It’s not that difficult to get a minor variance for commercial zoning to allow a financial institution.” Whether Estonian House is redeveloped or the ETCU permanently relocates, the City’s zoning designation is only now being addressed. The “3 Orgs” recent application to the City acknowledges the impact By-Law 438-86 clause 12(2)219(A) has on ETCU operations as well as other services or facilities proposed for Madison:
"Exception 12(2)219(A), which applies only to 11 Madison Avenue, prohibits various non-residential uses on any lot in that portion of the Annex located north of Bloor Street West between Spadina Road and Bedford Road. The prohibited uses include a branch of a bank or financial institution, a restaurant, a take-out restaurant, a retail store, and a real estate sales office, among others, but do not include an office or a place of assembly." (From Page 6)
While ETCU recognizes that #11 Madison’s usage model needs to be consistent with the City’s zoning, if the application to have a “minor variance” granted for appropriate changes to both properties is not granted, it could affect ETCU’s proposed operations as well as other revenue streams intended for the location, such as: a restaurant, take-out restaurant (i.e. café), a retail store or other similar uses. According to ETCU’s financial statements the location has not generated any revenue from operations but, most certainly, has appreciated in value based on market trends since 2014.
In a related note, a source close to the “4 Orgs” confirms that expenses pertaining to the due diligence process have breached the $750,000 budget passed in the April 2017 resolution of Estonian House Limited.
Allan Meiusi
EWR Contributor
Related:
Toronto Eesti Maja tulevik
Madison Project “Due Diligence” Part 1
Madison Project “Due Diligence” Part 2
Madison Project “Due Diligence” Part 3 – School Season Neighbours
Part 4 - "Déjà vu all over again"
Part 5 – "Cash out, but will it cash in?”
Part 6 – "11 Madison: Check the box.”
Part 7 – "Tired, but still solid.”
Part 8 - "Whose House Is It Anyway?"
Part 9 - "Double Duty"
Part 10 – "Actual versus Perceived"
Part 11 - "Lament For A House"
Part 12 - "When $656K equals $16 million"
Part 13 - "Due Diligence Extended"
