June 26, 1999

To:The Policy and Finance Committee

City of Toronto

From:Dianne Young

Interim General Manager

Subject:IHL Proposal for Coliseum Building, National Trade Centre Complex

At its meeting of Friday, June 25, 1999 The Board of Governors of Exhibition Place unanimously approved recommendations 1, 2, 3, 4, 5 and 6 listed below with the following amendments:

a)that at all times, the upkeep by CRC of the Coliseum and equipment should be to the satisfaction of the Board of Governors;

b)the Sub-Committee established by the Board pursuant to recommendation 5 below should negotiate with CRC for a minimum guaranteed revenue to the Board from parking fees; and

c)in the event that construction of the Coliseum costs less than $32 million the Sub-Committee of the Board established pursuant to recommendation 5 below should reconsider the lease terms including increases to the base rent to same proportion as the decrease in construction costs; and if the final cost of construction is substantially less than $32 million, the Board may at its sole option, decide not to proceed with the project.

Recommendations:

It is recommended that subject to the approval of the City of Toronto Council, the Board:

1)Accept a conditional Offer to Lease with Coliseum Renovation Corporation ("CRC") for the Coliseum and Hall E (West Annex) (together referred to herein as "Coliseum") on the terms and conditions set out in the Appendix I attached which is a proposal from Ron Taylor, Managing Director, O&Y/SMG Canada (the "Proposal");

2)Authorize and direct the appropriate Board officials to enter into the conditional Offer to Lease with CRC in the form and substance as set out in Schedule "A" attached to the Proposal and such other terms and conditions satisfactory to the Interim General Manager and the City Solicitor;

3)Request City Council to:

(a)declare surplus the lands and buildings known as the Coliseum located at Exhibition Place;

(b)approve of the intended method of disposal of the Coliseum by way of a 49-year lease to CRC;

(c)authorize and direct that all steps necessary to comply with By-law No. 551-1998 be taken; and

(d)provide authorization for the proposed lessee to take all steps necessary to undertake its due diligence inquiries.

1)Direct the Interim General Manager of Exhibition Place, once notice has been given under By-law No. 551- 1998, to report back to the Policy and Finance Committee and City Council at its meeting of September 28, 1999, seeking the City's acceptance of the Offer to Lease and final approval of a grant of a leasehold interest for 49 years to CRC;

2)Establish a subcommittee of the Board composed of the Chair, Vice-Chair and any members of the Board the Chair deems necessary, to provide guidance to staff in further negotiations with CRC and other related matters; and,

3)Direct O&Y/SMG Canada, as manager of the National Trade Centre Complex and the Interim General Manager of Exhibition Place, in consultation with the subcommittee of the Board referred to in Recommendation 5, to conduct the necessary investigations during the Due Diligence period, negotiate the terms and conditions of lease agreement with CRC and oversee the development of the design, plans and schedule for the renovations of the Coliseum, all subject to the satisfaction of the City Solicitor as required.

Background:

At its meeting of July 3 and 4, 1996, the former Metropolitan Toronto Council approved the Board entering into an agreement with O&Y/SMG Canada for the management of the National Trade Centre Complex which Complex includes the Coliseum.

At its meeting of June 19, 1998, the Board approved and adopted the Exhibition Place Program and Development Plan that identified strategic directions for future development at Exhibition Place and included stimulating year-round activities and reinforcing recreational aspects of the grounds.

Discussion:

Attached as Appendix I to this report is a proposal from Mr. Ron Taylor, Managing Director, O&Y/SMG Canada and Arlene Campbell, Interim General Manager, NTC, O&Y/SMG Canada, outlining in detail the Proposal for the development of the Coliseum space in the NTC by CRC to transform this venue into the new home of the International Hockey League ("IHL") franchise formerly known as the "Phoenix Roadrunners".

Discussions with CRC have been ongoing for several months and CRC has continued to demonstrate its commitment to the project and has moved forward with PCL Constructors Canada Inc. to present initial design concepts for the substantial renovations of the Coliseum. One of the major challenges to be addressed during these discussions has been the requirement that CRC be responsible for the entire capital costs of renovating the Coliseum to allow it to be an adequate venue for the IHL. There are no other precedents within the IHL and no other cities where an IHL team is located that has required the franchise team to be fully responsible for all such costs. Generally, unlike NHL hockey franchises, ones in the IHL do not command the value or financial investment power to construct and own arenas to be used by the teams.

Despite this major challenge, terms of an Offer to Lease have been reached and agreed to by CRC. It is my opinion that the terms and conditions of this Proposal and the total financial benefits received by the Board are in keeping with other lease arrangements on the grounds and represent fair market value. In addition, as detailed in Appendix I, this Proposal meets many of the development objectives for the grounds as established by the Board. However, if the Board approves of this report, I will be consulting with the City of Toronto Real Estate Department to ensure that this Proposal meets any requirements of the City and if necessary, obtain additional information or appraisals necessary for the City purposes. It is also necessary during the Due Diligence period to consult with the City Planning officials with respect to any planning implications of this development. The CRC proposal provides for a deposit of $25,000 from CRC and the payment of any costs incurred by the Board with respect to the project including costs for any consultants or legal and expert advice.

The City Solicitor has been consulted and provided comments with respect to the terms and conditions of this Offer to Lease. However, given CRC's offer is to lease the Coliseum for a period of 49 years, the Municipal Act requires that City Council declare the lands surplus and provide notice of the manner of the sale. For the purposes of the Municipal Act, "sale" includes the lease of land for 21 years or greater. The City Solicitor advises that pursuant to the City of Toronto By-Law No. 551-1998, Disposal of Surplus Property, this matter must be brought forward to City Council first for an initial declaration that the lands are surplus and approval as to the manner of disposal, in this instance by a lease to CRC of 49 years. The timetable proposed below indicates that this initial declaration would take place at the City Council meeting of July 27, 28 and 29, 1999. Once notice of the declaration of surplus lands has been given as required under the Municipal Act and the By-Law, the matter must then be brought back to City Council for approval of the transaction. This final approval could be before City Council at its meeting of September 28, 1999, which is the next meeting after July 27, 1999. The City Solicitor has advised that it would be possible for the Board, subject to the initial approval of Council, to accept this Offer to Lease which is irrevocable until its expiry on October 31, 1999. This would allow the Due Diligence period to commence with the required final approval of City Council in September, 1999, being one of the issues to be resolved during that time.

Accordingly, the proposed timetable for proceeding with this project as set out in the Offer to Lease attached is as follows:

Action

Target Timeframe

Target Completion Date

Business Development Committee

June 25, 1999

Board of Governors of Exhibition Place

June 25, 1999

Policy and Finance Committee, City of Toronto

July 20, 1999

City of Toronto Council

July 27, 28 & 29, 1999

Acceptance of Conditional Offer to Lease by Board & CRC & Payment of Deposit by CRC

August 4, 1999

City of Toronto Council - approval of "sale" of surplus lands

September 28, 1999

Due Diligence Period

240 days

April 1, 2000

Pre-Construction Period

8 months

November 30, 2000

Construction Period

10 months subject to force majeure

October 1, 2001

Opening Date

October 1, 2001

Conclusion:

This report recommends approval by the Board of the Proposal put forward by O&Y/SMG Canada with respect to redevelopment of the Coliseum on the terms and conditions set out therein and subject to approval of City of Toronto Council.

Dianne Young

Interim General Manager