June 11, 1998

 To:Corporate Services Committee

From:Commissioner of Corporate Services

Subject:Old City Hall - Lease Agreement (Ward 24 - Downtown)

Purpose:

To seek direction from City Council relating to the renewal of the lease of Old City Hall as per the attached location and site maps.

Funding Sources, Financial Implications and Impact Statement:

N/A.

Recommendations:

It is recommended that:

(1)the Commissioner of Corporate Services be authorized to commence negotiations with the Ontario Realty Corporation to extend the term of the lease and report to Council on the negotiated terms and conditions; and

(2)the appropriate City officials be authorized and directed to take the necessary actions to give effect thereto.

Council Reference/Background/History:

By the adoption of The Metropolitan Executive Committee Report No. 8, Clause No. 4, on March 1, 1989 and The Parks, Recreation and Property Committee Report No. 16, Clause No. 2 on November 7 and 8, 1990, the former Metropolitan Council authorized the lease of Old City Hall to Her Majesty the Queen in right of Ontario for a term of ten (10) years. The gross square foot rates for the first five (5) years were similar to those rates paid at the time by former Metropolitan Toronto to the former City of Toronto for the tower space in the new City Hall which were set as follows:

April 1, 1989 to December 31, 1989 $24.00 per square foot per annum

January 1, 1990 to December 31, 1990$25.00 per square foot per annum

January 1, 1991 to December 31, 1991$29.50 per square foot per annum

January 1, 1992 to December 31, 1992$32.00 per square foot per annum

January 1, 1993 to December 31, 1993$32.50 per square foot per annum

For the years 6 to 10, the rental rates were adjusted according to the annual Consumer Price Index for Metropolitan Toronto. It was also agreed that the rent will be paid monthly, in advance, on a gross basis, subject to an escalation clause under which the landlord may charge up to the amount of $0.50 per square foot in each and every year of the agreement, payable commencing April 1, 1989, such additional charges being accumulative to cover increases in such operating costs and charges over the base year of 1986.

By further agreement, in the event that the aforementioned escalation provisions were found by Metropolitan Toronto, in any year or years within the lease term, to be insufficient to cover the actual costs of operation of Old City Hall, the Municipality shall provide to the Province a statement of the operating costs and charges actually incurred for the imediately preceding twelve (12) month period and upon presentation to the Province of such statement, the Province shall forthwith pay to The Municipality of Metropolitan Toronto, such deficient amount.

The initial total rentable area of 181,107 square feet and the maintainable area is 206,000 square feet on which any additional escalation charge is applied.

By the adoption of The Corporate Administration Committee Report No. 19, Clause No. 13, the former Metropolitan Council, on June 14, 1995, authorized an amendment to the lease to provide for additional space. Old City Hall which has been absorbed by the Attorney General=s Department as a result of changes to the interior of the building brought about by the recent Life-Safety Upgrade. The net additional area is 3,318 square feet. Therefore, the total rentable area was increased to 184,425 square feet from 181,107 square feet and the total maintainable area is increased to 209,318 square feet from 206,000 square feet. The 1998 rent for the Old City Hall is $6,447,473.00 and Maintenance Adjustment is $1,046,590.00.

By the adoption of Report No. 1, Clause No. 2 of the Special Committee to Review the Final Report of the Toronto Transit Team as amended, the Council of City of Toronto, on February 4, 5, and 6, 1998, approved the following recommendations:

(12)that the Province of Ontario be served notice to vacate Old City Hall at the end of the present lease agreement; however, they be advised that the City of Toronto is prepared to extend the lease for a one-year period at $7.2 million, and that the money be used to offset the renovation at Toronto City Hall; and

(13)that the Province of Ontario be offered the opportunity to lease the former Police Headquarters on Jarvis Street to house the Provincial Courts.

Comments and/or Discussion and/or Justification:

By a letter dated March 12, 1998, the Ontario Realty Corporation has been notified according to the recommendations as adopted by the Council of City of Toronto. Subsequently, the Ontario Realty Corporation has responded by a letter dated March 20, 1998, and indicated the following:

AThe Province is willing to work with you to achieve an orderly transition in vacating the Old City Hall. The logistics involved in relocating such a specialized use make it impossible for us to facilitate the relocation within the time frame that you have proposed. The Courts must continue to operate until new premises are ready for occupancy.

To ensure an orderly transition, we would require a minimum 4-year extension and would prefer for planning purposes, 5 years. We are working diligently to minimize the time frame and intend to vacate as soon as the new premises are ready. During the extension period, the Province would of course pay fair market rental and we would work with you to arrive at a mutually acceptable rate.

The former Police Headquarters, in ORC=s opinion, would not meet our client=s requirement. However, we are prepared to have our technical staff conduct a review of that facility.@

 Subsequently, I was further advised by the Ontario Realty Corporation that the Attorney General=s Department is not interested in the property at 590 Jarvis Street.

Conclusions:

The existing lease will expire on December 31, 1998 and contains no provision to overhold. However, the Ontario Realty Corporation by way of the Province may exercise its authority to remain if not given an appropriate time frame to relocate its Courts function. Our Facilities section has advised that the minimum time required to design, renovate and relocate to this facility for City=s use is approximately 3 years taking into consideration its historical designation and the amount of work to be performed on the building to bring it up to standards.

   In order to expedite the transitional move into Old City Hall it is anticipated that as soon as space is secured by the Province for its use, in whole or in part, an earlier phased move in may be achieved.

 In view of the current use of the Old City Hall and the difficulty of such relocation to another new facility, I am of the opinion that an extension of the lease term is reasonable and should be subject to negotiation all of which when completed will be reported to Council for approval.

 Contact Name:

 Mr. Tony Pittiglio, Manager of Property Services; Telephone No. (416)-392-8155; Fax No.:  (416)392-4828; E-mail Address: anthony_pittiglio@metrodesk.metrotor.on.ca

(Copies of Maps attached to the foregoing report, are on file in the office of the City Clerk.)