June 1, 1998

 To:Corporate Services Committee

From:Commissioner of Corporate Services

Subject:Lease Renewal of Space at 1900 Dundas Street West- Social Services Division, Community and Neighbourhood Services Department (Ward 19 - High Park)

Purpose:

To renew the lease with Nestle Canada Inc. at 1900 Dundas Street West, as per the attached location and site maps.

Funding Sources, Financial Implications and Impact Statement:

Funds to cover the expenditures identified in this report are part of the 1998 Social Services Operating Budget estimates. The Commissioner of Finance, in accordance with Provincial regulations, has certified that financing for the expenditure in the amount of $1,089,336.00 is within the Updated Financial Debt and Obligation Limit.

As a result of the renewal, the estimated reduction in annual basic net rent payable is approximately $175,908.00 or a total of $527,724.00 over the three years of the renewal.

 Recommendations:

 It is recommended that:

(1)financing in the amount of $1,089,336.00 be approved;

(2)the City of Toronto enter into a three-year lease renewal with Nestle Canada Inc. on the terms and conditions outlined in this report and in a form acceptable to the City Solicitor;

(3)the Commissioner of Corporate Services be authorized to give Notice to Terminate the lease, if required, in accordance to the terms and conditions and to pay the penalty as contained herein; and

(4)the appropriate City of Toronto officials be authorized and directed to take the necessary action to give effect thereto.

Council Reference/Background/History:

By the adoption of Clause 11 of Report No. 3 of the Management Committee on January 6, 1993, the former Metropolitan Council authorized a five-year lease expiring August 31, 1998, with Nestle Canada Inc. for a two-storey, 25,680 square foot building at an annual net rental rate of $12.75 per square foot plus a proportionate share of taxes and operating costs. This office building housed the Head Office of Nestle and has a municipal address of 1900 Dundas Street West.

Comments and/or Discussion and/or Justification:

The original lease had a renewal clause for a further five years and in a letter dated February 6, 1998, Vincent Scott, Director, Operational Support, requested that the lease be renewed for only three years to allow some flexibility in possibly moving to a City-owned building.

A Space Rationalization Team is currently dealing with various buildings brought into amalgamation and is in the process of identifying if there is any space available in these facilities that can accommodate various City of Toronto Departments that are currently occupying leased premises as tenants. As a result, a canvass has been conducted based on the criteria and catchment area established by the Community and Neighbourhood Services Department. The survey revealed no suitable City-owned space to accommodate this operation at this time.

Consequently, negotiations were commenced with Mr. Jon R. Cheevers of Colliers Macaulay Nicholls (Ontario) Inc., Nestle=s Representative, and an agreement was reached on the following basis. The five-year renewal period will be collapsed into three years and the minimum rent of $12.75 per square foot, net, reduced to $5.90 per square foot, net, which will result in a yearly savings of $175,908.00 per annum. There has been an ongoing problem of water discolouration due to a faulty check-valve which resulted in Nestle providing bottled water to the building. Nestle=s engineers have now repaired their system but if the discolouration problem reoccurs, Nestle will supply bottled water to the tenants= satisfaction. As well, realty taxes will be allocated to the site at approximately $32,150.00 ($1.25 per square foot) per annum, which is a reasonable figure. Further it was agreed that the City of Toronto will have a one time option to terminate the lease during the Renewal Term by providing written notice to the landlord within sixty (60) days prior to the first anniversary of the Renewal Term. The Termination shall be effective twelve (12) months after the first anniversary of the Renewal Term, i.e. August 31, 2000, subject to a penalty payment of one (1) month=s net rent on the date of the Termination Notice. All other terms of the lease will remain the same or similar to the existing lease.

Conclusions:

In my opinion, these terms and conditions are fair and reasonable and I have been advised that they are acceptable to Community and Neighbourhood Services Department. Another search for suitable City-owned space will be conducted prior to the expiry of the renewal term.

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.)