219 Dufferin Street, Sale of Surplus City-Owned
Property - (Ward 20 - Trinity-Niagara)
(City Council on July 29, 30and 31, 1998, amended this Clause to provide that:
(1)the purchaser, 1245686 Ontario Inc., be required to complete the transaction based
upon a purchase price of $2,460,000.00 and that all the other provisions set out in the
report dated July 14, 1998, from the Commissioner of Corporate Services continue to apply;
and the Commissioner of Corporate Services be instructed to complete the transaction on
the foregoing basis; and
(2)should the purchaser not agree to complete this transaction in accordance with the
foregoing recommendation, that the Commissioner of Corporate Services be instructed to
re-market the property on the basis that the City is only prepared to consider clean,
unconditional, cash offers which would not provide a purchaser with an opportunity to
conduct an environmental inspection and a purchaser must complete the transaction
expeditiously and accept the property on a totally "as is" basis.)
(Council subsequently re-opened this Clause and deferred consideration to its next
regular meeting to be held on October 1, 1998.)
--------
(Clause No. 45 of Report No. 11 of The Corporate Services Committee)
The Corporate Services Committee recommends the adoption of the following report
(July14, 1998) from the Commissioner of Corporate Services:
Purpose:
The purpose of this report is to secure City Council's approval to complete the sale of
219Dufferin Street to Core Construction Corporation by:
(a)informing City Council of the status of this real estate transaction;
(b)addressing the mercury and mercury vapour found in the building and the resulting
impact on the proposed selling price for 219 Dufferin Street; and
(c)requesting City Council's approval to amend the sale transaction to reduce the sale price
for 219 Dufferin Street from $2,460,000.00 to $2,100,000.00, to require the purchaser to
create a trust fund to ensure the building is remediated and extend the closing date to August
27, 1998.
Financial Implications:
The completion of this sale will provide revenue of $2,100,000.00, less the real estate
commission in the amount of $89,880.00 inclusive of G.S.T.
Recommendations:
It is recommended that City Council:
(1)approve an amendment to the Agreement of Purchase and Sale between the City of
Toronto and Core Construction Corporation (Purchaser) and 1245686 Ontario Inc.
(Assignee) for the sale of 219 Dufferin Street to incorporate the terms and conditions as set
out in the body of this report;
(2)authorize the City Solicitor to complete this transaction as revised, including the
preparation of the required documentation in a form satisfactory to him;
(3)request the City Solicitor to report to the Corporate Services Committee, in Camera, on
what legal rights the City of Toronto has, if any, to recover the amount of the reduction in
the sale price from Canadian General Electric Corporation; and
(4)authorize the appropriate City officials to take the necessary action to give effect to the
foregoing.
Background:
Property Description:
219 Dufferin Street, a large industrial property, located a short distance south of King Street
West at the southeast corner of Liberty Street and Dufferin Street, contains a site area of
approximately 2.44 acres. This property has a frontage on the east side of Dufferin Street of
355 feet, a flankage on the south side of Liberty Street of 300 feet and secondary access
from Mowat Avenue.
The property is improved with three primary connected buildings containing an approximate
building area of 179,150 square feet. In addition, there are several auxiliary buildings.
The lands are zoned IC D3 N1.5.
Site History:
Canadian General Electric Corporation ("CGE") operated a manufacturing plant at this
location from the turn of the century to approximately 1983, at which time it ceased
operations at this location. I have been verbally advised that prior to CGE selling the
property in December, 1985, CGE undertook a remediation plan for the buildings. The
former City of Toronto acquired 219 Dufferin Street under the provisions of the Tax Sales
Act in July 1996. As no interest was shown in the retention of this property for municipal
purposes, City Council, in February 1997 declared by by-law the property surplus to the
City's requirements and authorized its disposal through a public offering. Several major real
estate brokers having expertise in the sale of large industrial properties were approached by
the City to submit a proposal to market 219 Dufferin Street. CB Commercial Real Estate
Group Canada was subsequently retained for this purpose.
Resulting from this public offering, fifteen Offers to Purchase and one Expression of Interest
were received. The highest offer was rejected due to unacceptable conditions. The second
highest offer from Core Construction Corporation was recommended to City Council for
acceptance.
City Council approved the sale of 219 Dufferin Street to Core Construction Corporation at a
sale price of $2,460,000.00, including a deposit of $246,000.00, subject to a due diligence
period.
By an Assignment of Agreement of Purchase and Sale dated December 16, 1997, Core
Construction has assigned its interest to 1245686 Ontario Inc. It has jointly and severally
covenanted with 1245686 Ontario Inc. to perform all of the Purchaser's obligations.
Environmental Issues:
During the due diligence period, Core Constructionretained the services of environmental
consultants and advised the City of various environmental concerns including stored PCBs
and chemicals, asbestos wrapped heating pipes and boilers, an underground storage tank in
the courtyard, mercury contaminated soil and the possible presence of mercury or mercury
vapour in certain areas of the buildings. After some discussion, Core Construction advised
they were prepared to accept title subject to all other environmental conditions except the
presence of mercury in the building. It is noted that all other offers received for this
property, except for the lowest offer in the amount of $900,000.00, included a due diligence
clause which afforded the prospective purchasers with the same opportunity as Core
Construction to investigate the environmental integrity of the property. The indication of
mercury presence in the building was discussed with staff of Public Health. Resulting from
this, staff of Facilities and Real Estate met representatives of CGE to discuss the buildings
and its previous manufacturing uses. Staff were advised that CGE had undertaken a
remediation of the said buildings. As mercury can affect human health, an environmental
consultant, Agra Earth and Environmental, was retained by the City to undertake an
environmental study of the buildings. The consultant confirmed to the City the presence of
mercury vapour in various areas of the buildings and identified the mercury levels in each of
these areas.
This information was provided to Core Construction Corporation, who requested their
environmental consultant, Conor Pacific Environmental Technologies, to review the
material and submit a remediation plan. Conor Pacific has submitted a remediation plan to
the purchaser, including a cost to remediate at $479,000.00. This cost has been confirmed by
Agra, the City's consultant.
Comments:
Core Construction Corporation indicated that it would still like to complete the transaction
but has requested that the sale price be reduced to take into consideration the unforeseen
building mercury remediation costs. Negotiations were conducted in consultation with Agra
and staff of Public Health and the Legal Services Division. Mr. Abe Gitalis, President, Core
Construction Corporation, in a letter dated July 2, 1998 advised that he is agreeable to
amend the Agreement of Purchase and Sale as follows:
(1)The Purchase Price to be reduced from $2,460,000.00 to $2,100,000.00;
(2)As a guarantee that mercury remediation in the buildings will be completed by the
Purchaser, on the closing of the sale, the Purchaser will deposit an additional $500,000.00 in
an interest bearing trust account, to be released to the Purchaser in stages on account of
mercury remediation work as such work is being carried out. Advances from the
$500,000.00 trust account will be paid from time to time in proportion to the area then
remediated (to a level not exceeding one microgram per cubic metre in air as determined by
the appropriate NIOSH method or equivalent) calculated in relation to the total area
requiring mercury remediation, as identified in the report of Agra Earth and Environmental
dated January 8, 1998 and, will be backed by "progress certificates" issued by the
Purchaser's environmental consultants. Existing tenanted space will be given first priority.
In the event that the mercury remediation work is not completed by December 1, 2000, at
the City's option, the balance held in the trust account plus accrued interest less holdbacks
pursuant to the Construction Lien Act, shall be payable to the City of Toronto.
Upon the issuing of a "Certificate of Substantial Completion" by the Purchaser's
environmental consultants, the balance of the funds held in trust account together with
accrued interest shall be paid to the Purchaser.
(3)Article 6.6 and Schedule "B" contained in the Offer to Purchase for the property
specifying that the Purchaser "shall indemnify and save harmless the Vendor from and
against any and all claims, damages, liability, orders and expenses arising out of or related to
Environmental Matters" shall not apply to mercury contamination in the buildings, except
for the requirement to remediate the property as set out herein and future standards
developed or put in place by any future legislation.
(4)Closing will be set for August 27, 1998.
(5)1245686 Ontario Inc. will not exercise its rights under Paragraph 6.1(f) of the Agreement
of Purchase and Sale with respect to environmental matters pending receipt of confirmation
on or before August 5, 1998 that City Council has accepted the terms of this letter. Upon
receipt of such confirmation 1245686 Ontario Inc. will automatically have waived its rights
under Paragraph 6.1(f) of the Agreement of Purchase and Sale.
(6)There is to be an amendment to the Agreement of Purchase and Sale and the following
paragraph is to be included:
The City of Toronto and 1245686 Ontario Inc. will enter into an agreement to reflect the
terms of this letter and the terms are to be agreed upon before Corporate Services Committee
meets on this matter on July 20, 1998.
The Medical Officer of Health has reviewed this matter and is satisfied that the holdback of
the $500,000.00 trust fund provides sufficient safeguards to ensure the mercury
contamination in the buildings would be adequately addressed and that the proposal is
acceptable.
The resolution of this matter on the foregoing basis is considered fair and reasonable and
will permit the City to finalize this transaction.
If City Council approves a reduction of the sale price it may be appropriate for the City
Solicitor to report to the Corporate Services Committee, in Camera on what legal rights the
City of Toronto has, if any, to recover the amount of reduction in the sale price from
Canadian General Electric Corporation.
Conclusion:
The request from the Purchaser for a reduction of the sale price from $2,460,000.00 to
$2,100,000.00 together with the other amendments set out above is considered to be
reasonable. In addition, the establishment of a $500,000.00 trust fund would ensure the
remediation of mercury within the buildings is completed in a timely manner.
Contact Name:
Ron Banfield, 392-1859, Fax 392-1880, rbanfiel@city.toronto.on.ca.
(A copy of the map attached to the foregoing report was forwarded to all Members of
Council with the July 20, 1998, agenda of the Corporate Services Committee, and a copy
thereof is also on file in the office of the City Clerk.)
(City Council on July 29, 30 and 31, 1998, had before it, during consideration of the
foregoing Clause, a communication (July28, 1998) from Ms. C. Moynihan, Artistic
Producer, and Mr.G.Harley, President, Board of Directors, Equity Showcase Theatre,
submitting comments with respect to the purchase price of the building located at 219
Dufferin Street, as well as the possible presence of mercury contamination in such building.)
Respectfully submitted,
COUNCILLOR DICK O'BRIEN,
Chair
Toronto, July 20, 1998
Patsy Morris
Tel. (416) 392-9151