Sale of City-Owned Property Known Municipally

as 197, 197 Rear, 201 Yonge Street and

170 Victoria Street (Ward 24 - Downtown)

The Administration Committee recommends the adoption of the following report (June 7, 1999) from the Commissioner of Corporate Services:

Purpose:

To provide the Administration Committee with information on the offers received for the sale of the City-owned property municipally known as 197, 197 Rear, 201 Yonge Street and 170 Victoria Street and to recommend that the Offer to Purchase submitted by Parasuco Jeans Inc. in the amount of $5,000,000.00 be accepted.

Financial Implications:

The sale of this property for the amount of $5,000,000.00 less real estate commission and GST will result in a net amount of approximately $4,786,000.00. It is noted that in a report approved by City Council on July 8, 9 and 10, 1998, dealing with the Yonge Dundas Redevelopment Project, the sale of this property was identified as a measure to offset the net cost of the Yonge Dundas Project.

Recommendation:

It is recommended that the Offer to Purchase from Parasuco Jeans Inc. to acquire 197, 197 Rear, 201Yonge Street and 170 Victoria Street, in the amount of $5,000,000.00, including a deposit of $500,000.00, be accepted and:

(A)that the City Solicitor be authorized and directed to complete this transaction according to the terms and conditions of the Offer to Purchase and pay any expenses incurred by the City incidental to the closing of the transaction or otherwise;

(B)that the City Surveyor furnish the necessary legal description;

(C)that the other two unsuccessful prospective purchasers be notified that their offers were not accepted; and

(D)that the appropriate City officials be authorized and directed to take the necessary action to give effect hereto.

Background:

Theatre Block:

In October of 1982, City Council designated an area bounded by Yonge, Queen, Victoria and Shuter Streets as a redevelopment area under the Planning Act. This area is known as the "Theatre Block" and contains three major and historical theatre and concert hall facilities (the Elgin and Winter Garden theatres located on Yonge Street and Massey Hall on Shuter Street) and three historical bank structures (173, 197 and 205 Yonge Street). The Revitalization Concept for the Theatre Block, approved in August of 1987, focussed on creating enlivened central public space that would serve as a focal point for the Theatre Block and would also integrate the historical buildings. In its commitment towards this revitalization concept, City Council in October of 1988 adopted a PartII Official Plan for the Theatre Block. The City proceeded to acquire key properties (Nos. 197, 197R, 201 and 205 Yonge Street and 170 Victoria Street) as they became available.

Partial funding for the revitalization concept was to be secured from the sale of surplus density from the City's lands to the owners of the development site proposed at the northeast corner of Queen and Yonge Streets. The development did not proceed and the sale of density was never completed. Due to the lack of funding, redevelopment within the Theatre Block did not proceed as anticipated.

Description of the City's Holdings:

The City is the owner of lands known municipally as 197, 197R, 201 and 205 Yonge Street and described as PARTS 1, 2, 3, 4, 5, 6, 7 and 8 on Reference Plan 66R-15815. The total site area of the City holding is 24,534 square feet. We are not selling 205 Yonge Street and accordingly, the area of the site being offered for sale comprises 20,178 square feet with frontage on Yonge Street of 88.48 feet and 39.00 feet on Victoria Street. It is noted that the Yonge Street frontage is zoned CR T6.0 C4.5 R6.0 H.46.0 and the Victoria Street frontage is zoned CR T7.8 C4.5 R7.8 H61.0.

197 and 197R Yonge Street:

In May 1987, the City acquired 197 Yonge Street and 197R Yonge Street from the Canadian Imperial Bank of Commerce for the sum of $2,695,000.00. The City subsequently entered into an agreement with the Ontario Heritage Foundation, the owner of 189 Yonge Street and 156 Victoria Street, the Elgin Winter Garden Theatre, for an exchange of lands. The City conveyed to the Ontario Heritage Foundation lands to facilitate the backstage addition to the Elgin Winter Garden Theatre and in exchange, the City acquired additional lands fronting on Victoria Street. Existing rights-of-way were extinguished and easements were granted to the Ontario Heritage Foundation and the owner of 193 Yonge Street to facilitate ongoing operations at both locations.

In 1990, 197 Yonge Street was designated by by-law to be of architectural value and interest. Attempts, including a proposal call, have been made to lease the building, however, renovation costs, leasehold improvement costs, accessibility and costs to preserve its historical significance proved to be too high to attract a lessee, so that the building has remained vacant. The site has been the source of numerous complaints due to debris, vagrants and illegal street vending at the front of the building and debris and illegal parking at the rear. The City has installed barriers to prevent the vagrancy and illegal street vending.

201 Yonge Street:

In September 1983, Cadillac Fairview conveyed 201 Yonge Street and 170 Victoria Street to the City in exchange for the right to preserve certain density at the Bay/Dundas Street West corner. The Colonial Tavern, located at 201 Yonge Street, was demolished. Certain interim park improvements (known as Jazz Place Park) were undertaken in 1996 which included a low stage, a seating wall and a crushed stone path leading to the parking area at the rear. A plaque placed in the ground commemorates the Colonial Tavern and the history of jazz in Toronto.

Certain of the City lands at 170 Victoria Street (now merged with 201 Yonge Street) are subject to easements in favour of the owners of 193 Yonge Street and 189 Yonge Street for loading and unloading to the rear of their buildings as shown on the attached plan. In addition, the City granted the Corporation of Massey Hall and Roy Thompson Hall a 12 foot temporary right-of-way over the northerly limit of 170 Victoria Street, as shown hatched on the attached plan, that continues to be in use until further notice.

205 Yonge Street:

205 Yonge Street, while not a subject of this report for disposal, was acquired from the Toronto Dominion Bank in 1989 for a purchase price of $3,200,000.00. As a condition of sale, the City entered into a 99 year lease with the Toronto Dominion Bank for the exclusive and continuous occupancy of two automated teller machines (ATMs) at a rental rate of $1.00 per annum. The ATMs are located at the southwest corner of the building and are accessed from the south side of the building. Also located at this corner is a disability access ramp to 205 Yonge Street. This former Bank of Toronto building is designated under the Ontario Heritage Act. Extensive renovations were undertaken in 1992 to accommodate the offices of Heritage Toronto.

Comments:

At its meeting held on July 29, 30 and 31, 1998, City Council adopted Clause No.47 of Report No.11 of The Corporate Services Committee declaring the property surplus and to proceed with the sale of the property on the open market using a real estate Broker at a listing to be determined with the Broker, and to report back to the City Council on the details of the sale.

In addition to receiving a recommendation from the listing Broker regarding the listing price, the City hired an independent appraisal firm to provide an estimate of value for the property. The appraisal firm appraised the property to be within the range of $5 to $5.4 million.

The property was originally listed for $5.6 million on the open market with Avison Young Commercial Real Estate (Ontario) Inc. on October 28, 1998 with an offer submission deadline of 5:00 p.m. on December 15, 1998. Four unacceptable offers were received at that time. The property was re-listed with the same Broker for $5 million on April 7, 1999 with an offer submission deadline of 12:00 noon on June 3, 1999. Three offers were received prior to the deadline and are discussed below.

Offer No. 1:- Recommended Offer:

Purchaser:Parasuco Jeans Inc.

128 Deslauriers Street

Quebec, Canada, H4N 1V8

Purchase Price:$5,000,000.00

Deposit:$500,000.00 (Certified)

Intended Use:Retail Apparel Use

Solicitor:David M Kutner

Minden Gross Grafstein & Greenstein

111 Richmond Street West, Suite 700,

Toronto, Ontario

M5H 2H5

GST. No.:R104719117

Irrevocable Date:Until 4:30 p.m. on the 70 day from June 2, 1999

Due Diligence Date:45 Days from acceptance date by the City

Closing Date:20 Days following "Due Diligence" period

The unamended Offer to Purchase agreement submitted by Parasuco Jeans Inc. was duly executed by the purchaser on June 2, 1999. The transaction involved a co-broker transaction with a $500,000.00 deposit by certified cheque. Apart from the City's "Standard" conditions and clauses shown below, this offer contained no changes or amendments.

This offer contains the highest offer price and was submitted in an unaltered form with no amendments and full deposit of $500,000.00 by certified cheque. Consequently, this offer is recommended to your Committee for acceptance.

Offer No. 2:

Purchaser:Context Real Estate Inc.

229 Yonge Street, Suite 500

Toronto, Ontario

M5B 1N9

Purchase Price:$4,600,000.00

Deposit:No deposit submitted with offer

The deposit of $460,000.00 will be provided on notification of recommendation to Council.

Intended Use:Residential/Retail Commercial Use

Solicitor:Harris Sheaffer

Phillip J. Draper

4100 Yonge Street, Suite 310,

Toronto, Ontario

M2P 2B5

GST. No.:867902165

Irrevocable Date:Until 4:30 p.m. on the 70 day from June 3, 1999

Due Diligence Date:60 days from acceptance date by the City

Closing Date:90 Days following "Due Diligence" period

The altered and amended Offer to Purchase agreement submitted by Context Real Estate Inc. included conditions including confirmation of the density to be distributed between the front and back zones; confirmation that the back portion of 197 Yonge Street can be demolished while retaining the front "historic" portion in the context of a comprehensive plan for the site, and, "the Vendor, after closing agrees not to object to the processing of the Purchaser's development and zoning plans and this covenant may be pleaded as an estoppel to any such objection and shall be binding on the Vendor's successors and assigns in title and the vendor agrees to extract a similar covenant from any subsequent purchaser of any retained lands abutting the property."

This offer contained a purchase price lower than the offer price offered by Parasuco Jeans Inc; requests a longer "Due Diligence" period; was altered from its original form and contained amendments which are not acceptable. Further, no deposit cheque was submitted with the offer on the submission date. This offer is not recommended.

Offer No. 3:

Purchaser:Elcarim Inc.

27 Ellis Park Road

Toronto, Ontario

M6S 2V4

Purchase Price:$2,500,000.00

Deposit:No deposit submitted with the offer

(5 percent or $125,000.00 to be submitted upon acceptance by City Council)

Intended Use:To restore and preserve the historical heritage significance of the building at 197 Yonge Street and redevelop the balance of the property for retail and residential condominium development.

Solicitor:Robert B. Aaron

Aaron & Aaron

10 King Street East, 14 Floor

Toronto, Ontario

M5C 1C3

GST. No.:892-319088

Irrevocable Date:Until 4:30 p.m. on the 70 day from June 2, 1999

Due Diligence Date:45 days from acceptance date by the City

Closing Date:January 25, 2000

This offer is conditional for a period of 6 months from the date of acceptance by the City upon the Purchaser completing the sale of the Purchaser's property at 1947 Bloor Street West, in the City of Toronto. Failing which the offer shall become null and void and the Purchaser's deposit shall be returned in full without any deductions plus interest.

This offer contained the lowest offer price at $2.5 million; is conditional on the sale of the purchaser's property; has the longest closing date and was submitted with no deposit. This offer is not recommended.

The Offer to Purchase agreement submitted by Parasuco Jeans Inc. for the purchase of this property contains standard conditions including the following more relevant clauses.

Due Diligence:

The Purchaser shall be allowed a period of forty-five (45) days from the Acceptance Date (the "Due Diligence Period") to examine at the Purchaser's own expense the title to the Real Property, and to satisfy itself that:

(a)the title to the Real Property is good and free from all registered restrictions, charges, liens, and encumbrances except as otherwise specifically provided in this Agreement and save and except for: (i) any registered restrictions or covenants that run with the Real Property, provided that such have been complied with; (ii) any registered municipal agreements and agreements with publicly regulated utilities, provided that such have been complied with; (iii) any easements and rights of way, including but not limited to those described on Schedule "A" hereto; (iv) any qualifications, reservations, provisos and limitations imposed by any applicable statute; (v) any discrepancies in title or possession which would be disclosed by an up-to-date survey; and

(b)there are no outstanding orders, deficiency notices or directives issued by any federal, provincial or municipal authority affecting the Real Property.

The Vendor hereby consents to the release by governmental authorities to the Purchaser of details of all outstanding municipal work orders or deficiency notices affecting the Real Property, and the Vendor agrees to execute and deliver to the Purchaser such further authorizations in this regard as the Purchaser may reasonably require.

If, within the Due Diligence Period, the Purchaser notifies the Vendor or the City Solicitor (referred to in Section 10.1) of any valid objection to title or to any outstanding order, deficiency notice or directive and which the Vendor is unable or, in its sole discretion, determines not to remove, remedy or satisfy and which the Purchaser will not waive, this Agreement shall, notwithstanding any intermediate acts or negotiations in respect of any such objection, be at an end and the Deposit shall be dealt with in accordance with the provisions of Section 3.1 and the Vendor shall not be liable for any costs or damages. Save as to any valid objection so made within the Due Diligence Period, and except for any objection going to the root of title, the Purchaser shall be conclusively deemed to have accepted the Vendor's title to the Real Property.

Environmental Matters:

"The Vendor has not undertaken any environmental assessments. The Purchaser agrees to accept the real property in its present condition, except as set out in this clause, and acknowledges that the Vendor makes no warranty or representation to the Purchaser as to the physical and environmental condition of the Real Property, including, but without limitation, the condition of the soil, both surface and subsurface, the existence of any sub-surface installations or the existence of any Hazardous Substance on the site. "Hazardous Substance" in this paragraph means any contaminant, pollutant, dangerous substance, potentially dangerous substance, noxious substance, toxic substance, hazardous waste, flammable material, explosive material, radioactive material, urea-formaldehyde foam insulation, asbestos, PCBs and any other substance or materials declared or defined to be hazardous, toxic, a contaminant, or a pollutant in or pursuant to any applicable federal, provincial or municipal statutes, by-laws, regulations or orders.

During the Due Diligence Period, the Purchaser may, at its own expense and risk and in accordance with the provisions set forth below, conduct its own environmental assessment of the Real Property (the "Assessment") provided, however, that nothing herein contained shall be deemed to authorize or permit the Purchaser to request any governmental inspections of the Real Property. If the Purchaser wishes to conduct the Assessment, then the following provisions shall apply:

(a)The Purchaser shall submit a written proposal outlining the nature, timing and duration of the Assessment and subject to the approval of the Commissioner of Corporate Services of the Vendor, or her designate (the "Commissioner"), conduct the Assessment within the Due Diligence Period. The Purchaser shall repair any damage caused to the Real Property as a result of the Assessment and shall indemnify and save harmless the Vendor from all claims, actions, damages, losses, costs and expenses that the Vendor may pay, suffer or incur as a result of the acts or omissions of the Purchaser or its agents in conducting the Assessment. Prior to entering on to the Real Property to conduct the Assessment, the Purchaser shall deliver to the Vendor evidence that the Purchaser and its agents have obtained a policy of insurance for the conduct of the Assessment on the Real Property in an amount not less than $5,000,000.00, and that the Vendor is a named insured;

(b)The Purchaser shall not undertake the Assessment without the approval of the Commissioner (which approval shall not be unreasonably delayed or withheld). Upon completion, the Purchaser shall promptly deliver a copy of the Assessment to the Vendor;

(c)The Standard (the "Standard") for the purposes of this Agreement is the Industrial/Commercial land use set out in the guideline published by the Ministry of Environment of the Province of Ontario, entitled Guideline for Use at Contaminated Sites in Ontario and revised February 1997. If, before the expiration of the Due Diligence Period, the Purchaser's Assessment reveals that the Real Property does not meet the Standard, then subject to subsection (d) below, the Purchaser shall have the right to terminate this Agreement by written notice to the Vendor prior to expiration of the Due Diligence Period. If the Purchaser fails to deliver such notice to the Vendor within the Due Diligence Period, the Purchaser shall have no further right of termination under the provisions of this Article7 and shall be deemed to have waived or satisfied this condition;

(d)The Purchaser may terminate this Agreement pursuant to subsection (c) only if the Assessment discloses that the Real Property does not meet the Standard. The Purchaser's right to terminate this agreement is conditional on the Purchaser providing to the Vendor prior to the termination, a copy of the Assessment and an estimate of the cost of restoring the Real Property to meet the Standard to the Vendor, together with such other evidence as the Vendor may reasonably require, confirming that the Assessment does not meet the Standard; and

(e)Upon any termination of this Agreement without completion: (i) the Purchaser shall forthwith return all copies of environmental assessments, if any, provided to the Purchaser by the Vendor; and (ii) the Purchaser shall keep strictly confidential the provisions of the Vendor's environmental assessments and any Assessment that the Purchaser has obtained and shall not use the information contained therein for any purpose whatsoever.

Schedule 'A' Conditions:

The Property is being sold subject to the following easements:

(1)over Parts 1 and 4 on Plan 63R-3426 and Parts 4, 6 and 7 on Plan 66R-15815, as set out in Instrument Nos. C468591 and CT948092 registered on May 12, 1988, in favour of the Ontario Heritage Foundation;

(2)over Parts 1 and 4 on Plan 63R-3426 and Parts 4, 6 and 7 on Plan 66R-15815, as set out in Instrument Nos. C468596 and CT948093 registered on May 12, 1988, in favour of Olympia & York Developments Limited;

(3)over Part 8 on Plan 66R-15815, as set out in Instrument Nos. 89860 and 89861 registered on June26, 1913, in favour of the Heinzman Building (193 Yonge Street) and the Ontario Heritage Foundation (Elgin Theatre Property); and

(4)to be created in favour of the Vendor, over the northerly limit of 201 Yonge Street, having a proposed width of approximately 13.50 feet and a length of approximately 122 feet, to preserve an existing concrete accessibility ramp and enclosed stairwell.

The Property is being sold subject to the following encroachments:

Relating to Parts 1 and 2 on Plan 66R-15192, as set out in Instrument No. CT948094 registered on May 12, 1998, the northerly wall of the building at 193 Yonge Street encroaches onto the southerly limit of 197 Yonge Street. The particularized list of the encroachments is set out in Schedule "C" of Instrument No. CT948094.

The Property is being sold subject to the following Heritage Agreement:

The Property is being sold subject to a Heritage Easement to be entered into between the Vendor and the Purchaser, to preserve the historical significance of the building at No. 197 Yonge Street. The form of such heritage easement shall be at the discretion of the Vendor but shall be similar in form to heritage easements entered into by the Vendor in similar circumstances."

Schedule 'B'

(Amendments to Offer to Purchase)

The Purchaser agrees to obtain and pay for a reference plan (the "Reference Plan") required to illustrate and describe the easement to be reserved in favour of the Vendor as more particularly set out in Article (4) of Schedule "A" to the Agreement. Prior to registering the Reference Plan, the Purchaser shall obtain the consent of the Vendor to the Reference Plan which consent shall not be unreasonably withheld.

The City's real estate Broker has provided its recommendations, a copy of which is attached to this report. The Broker recommends the offer submitted by Parasuco Jeans Inc. Further, the offer price submitted by Parasuco Jeans Inc. in the amount of $5,000,000.00 is within the range of value estimated by the City's fee appraiser. It is noted that there is also a report before your Committee on an encroachment request over 197 Yonge Street from the owner of the neighbouring property to the south. This encroachment request does not impact on the sale of this property.

Conclusion:

I am of the opinion that the Offer to Purchase received from Parasuco Jeans Inc. in the amount of $5,000,000 is acceptable. The other offers received should be declined.

Contact Name:

Peter Aziz, 392-1856, Fax: 392-1880, paziz@toronto.ca.

(A copy of the Site Plan "197, 197 Rear, 201 Yonge Street and 170 Victoria Street", and the communication (June4, 1999) from Avison Young Commercial Real Estate (Ontario) attached to the foregoing report was forwarded to all Members of Council with the June15, 1999, agenda of the Administration Committee and a copy thereof is also on file in the office of the City Clerk.)