Sale of 2 Bloor Street West, North-West Corner of Bloor Street and Yonge Street (Ward 23 - Midtown)

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1 Sale of 2 Bloor Street West, North-West Corner of Bloor Street and Yonge Street (Ward 23 - Midtown) (City Council at its regular meeting held on October 3, 4 and 5, 2000, and its Special Meetings held on October 6, 2000, October 10 and 11, 2000, and October 12, 2000, adopted this Clause, without amendment.) The Administration Committee recommends the adoption of the following report (August 28, 2000) from the Commissioner of Corporate Services: Purpose: To secure authority to sell the property to the lessee. Financial Implications and Impact Statement: Revenue in the amount of $23,000, will be generated from the sale, of which $250, will be allocated to a Section 37 (Planning Act) payment based on Clause No. 1 of Report No. 8 of The Toronto Community Council adopted by City Council on July 8, 9, and 10, Recommendations: It is recommended that: (1) the property at 2 Bloor Street West, located at the north-west corner of Bloor Street West and Yonge Street, and more particularly described in the body of this report, be sold to the lessee at a price of $23,000, based on the terms and conditions set out in the body of this report, together with such other terms and conditions deemed appropriate by the City Solicitor to protect the City s interests, subject to the reservation of any property rights required for the TTC subway and any easements required for municipal services and public utilities; (2) $250, from the sale proceeds be allocated to the payment required under Section 37 of the Planning Act in relation to Clause No. 1 of Report No. 8 of The Toronto Community Council as adopted by City Council at its meeting held on July 8, 9, and 10, 1998; (3) the City solicitor be authorized to complete this transaction on behalf of the City including payment of any necessary expenses and amending the closing date to such other earlier or later date as he considers reasonable; and (4) the appropriate City officials be authorized and directed to take the necessary action to give effect thereto.

2 Background: At its meeting held on August 1, 2, and 3, 2000, City Council adopted Clause No. 16 of Report No. 16 of The Administration Committee thereby declaring the property at 2 Bloor Street West surplus to municipal requirements and authorizing the sale thereof to the lessee. The former Municipality of Metropolitan Toronto originally acquired the subject property for the Bloor-Danforth subway line operated by the TTC. Title to the land is held by the City. By the adoption on September 22, 1970 of Clause No. 32 of Report No. 34 of the Metropolitan Executive Committee, the former Metro Council authorized the leasing of certain Metropolitan owned lands situated between Bay Street and Yonge Street, south of Cumberland Street, to the Canadian Imperial Bank of Commerce. The ground lease provided for a term of 99 years on the basis of an initial term of 33 years commencing on September 1, 1971, at a net rental of $112, per year together with two successive rights of renewal, each for an equal period of 33 years. Throughout the years, several sub-lease agreements have resulted in Hammerson Canada Inc. ( Hammerson ) being in control of the leased lands on a sub-tenancy basis. In December of 1990, the Canadian Imperial Bank of Commerce transferred its interest to the Canadian Imperial Bank of Commerce Development Corporation ( CIBCDC ). Subsequently, there was an assignment from the CIBCDC to Hammerson, as a result of Hammerson s acquisition of the development corporation s interest in the property. Discussions between Hammerson and former Metro staff with respect to Hammerson s potential acquisition of the site were commenced in the mid 1990 s. Hammerson s representatives ultimately indicated that Hammerson was in the process of disposing of its assets in Canada and that, as a result, Hammerson was not in a position to continue the negotiations with the City. Hammerson was then acquired by the Ontario Municipal Employees Retirement Service ( OMERS ) in late The lease assignment from Hammerson to OMERS was approved by City Council pursuant to Clause No. 19 of Report No. 19 of The Corporate Services Committee as adopted by City Council at its meeting held on December 16 and 17, Following the acquisition of Hammerson by OMERS, negotiations were reactivated with OMERS with regards to the proposed sale of the City s property. Comments: As reported previously, negotiations with OMERS have been ongoing and have now resulted in agreement in principle with OMERS regarding the sale of the fee simple interest. The TTC subway requirements would of course be protected. Details of the property to be sold are as follows: Subject Property: 2 Bloor Street West.

3 Description: Approximate Site Area: Improvements: Zoning and Official Plan: The subject property is shown as Parts A and B on the attached sketch (Note: Parts A1 and B1 are not owned by the City), described as part of Lot 21 in Concession 2 from the Bay, Part of Lots 1, 2, 3, 4, and 5 on Registered Plan No. 158, Part of Lot 1 and Part of a 6-foot strip on Registered Plan No. 69, and Part of a 1- foot reserve lying to the north of lands shown on Registered Plan No. 419, and Part of Lots 6, 7 and 8 on Registered Plan No. 158, all subject to confirmation by survey. 60,000 square feet, more or less, subject to survey. The City property, combined with the privately owned land shown as Parts A1 and B1 on the attached sketch, is developed with the 34-storey CIBC commercial-office tower at the north-west corner of Bloor and Yonge Streets, and a connected two-storey and below-grade retail and office mall on the south side of Cumberland Street, known as Cumberland Terrace, built in The subway tunnel extends below this development and is reserved from the leased (subject) lands by a subway right-of-way easement. The Yonge/Bloor Station is not located on this property. The City s Zoning By-law (438-86, as amended) zones the site CR T7.8 C4.5 R7.8. This high density mixed-use zone permits a mixed-use building with a maximum density of 7.8 times coverage. The governing height limit is 61 metres. The Official Plan designation is HDMCRA B. At its meeting held on July 8, 9 and 10, 1998, City Council adopted Clause No. 1 embodied in Report No. 8 of the Toronto Community Council, which authorized the introduction of the necessary bills in Council to approve Zoning and Official Plan amendments. These amendments were approved in contemplation of a proposed redevelopment of Part A (Cumberland Terrace) with a 27-storey mixed-use residential/retail condominium project with 305 dwelling units. The approvals were subject to various conditions which have yet to be fulfilled. The owner is expected to proceed with the proposed development pending satisfaction of the conditions and the acquisition from the City and the transaction herein is conditional on the rezoning being finalized. No redevelopment for Part B is contemplated at this time. The City has complied with the procedures governing disposal of property. Section 193(4) of the Municipal Act requires that, before selling any property, Council must declare the property to be surplus by by-law or resolution passed at a meeting open to the public, give notice to the public

4 of the proposed sale and obtain at least one appraisal of the market value of the property, unless exempted by regulations passed under the legislation. Protracted negotiations have now resulted in OMERS submitting their final offer of $23,000,000.00, to be incorporated into an Agreement of Purchase and Sale, subject to approval by the OMERS Board. This offer is inclusive of a $250, payment required pursuant to Section 37 of the Planning Act in relation to Clause No.1 of Report No. 8 of the Toronto Community Council as adopted by City Council at its meeting held on July 8, 9, and 10, A current valuation review provided by Johnston Donald Associates Inc. on August 22, 2000, which takes into account the leasehold advantage resulting from the existing long term land lease, the negative impacts on the property as a result of reserving out the subway infrastructure easement, the added costs related to building over the subway and for the buildings the substantial costs of reconfiguring the mechanical and electrical services for the buildings estimated at $2,160,000.00, indicates a current market value in the range of $23,000, It is noted that the negotiated price is based on all the available density pursuant to the July 8, 9 and 10, 1998 zoning report. The sale would include the following terms and conditions, together with such other terms and conditions deemed appropriate by the City solicitor to protect the City s interests: (1) Vendor: City of Toronto ( City ). (2) Purchaser: OMERS Realty Management Corporation ( ORMC ) or OMERS Realty Corporation and/or one or more wholly-owned subsidiary of OMERS Realty Corporation (the Purchaser ). (3) Purchase Price: $23,000,000.00, exclusive of GST, but inclusive of any Section 37 payment (as it relates to the enactment of zoning by-law to give effect to Clause 1 of the Toronto Community Council Report No. 8, as adopted by the Council of the City of Toronto on July 8, 9 and 10, 1998) required by the City, payable as follows; (i) (ii) (iii) An initial deposit of $5,000, shall be paid on the execution of a binding Agreement of Purchase and Sale which must be completed and executed with sixty (60) days of City Council approval or the transaction terminates; additional deposit of $5,000, shall be paid upon written waiver of Purchaser s conditions defined in Paragraph 5 herein; and the balance of the purchase price, subject to appropriate adjustments, shall be paid on closing by certified cheque or money order.

5 (4) Possession: The Purchaser acknowledges that it has inspected the Property and is purchasing the Property on an as-is basis and that no warranty is expressed or can be implied as to title, description, fitness for purpose, quantity or quality thereof, and the Purchaser further acknowledges that the Property will be subject to TTC subway requirements. (5) Purchaser s Conditions: The Agreement of Purchase and Sale will be conditional upon the following (the Purchaser s Conditions ): (i) the Purchaser being satisfied, in its sole discretion, within 45 days of execution of the Agreement of Purchase and Sale with title to and environmental condition of the property, provided however that the Purchaser acknowledges that ORMC has previously investigated title (but not the environmental matters) to the Property as ORMC recently acquired the leasehold interest in the Property and the Purchaser will therefore restrict its investigation of title matters to those matters arising since the time ORMC became the owner of the leasehold interest; (ii) the Purchaser being satisfied, in its sole discretion, within 6 months of Council approval of this transaction with the interests to be reserved by the City in connection with the operation of the TTC subway system beneath it; (iii) (iv) Council enactment of zoning by-laws for the Property to give effect to Clause 1 of Toronto Community Council Report No. 8 as adopted by the Council of the City of Toronto on July 8, 9 and 10, 1998, within six months of Council approval of this transaction, in form acceptable to the Purchaser, acting reasonably (which will, for greater certainty, continue to permit existing uses). It is further provided that Council s discretion as an approving authority for the proposed zoning by-laws shall not be fettered in any way by the Agreement of Purchase and Sale; Approval of the OMERS Realty Corporation s Board of Directors within 30 days of execution of this letter agreement. The above-noted conditions are for the benefit of the Purchaser and may be waived in writing, in whole or in part, at any time. The

6 Agreement of Purchase and Sale will reflect the Purchaser s commitment to use reasonable and diligent efforts to accelerate its satisfaction of the Purchaser s Conditions. Deposits will be immediately returned without deduction or set off and with accrued interest if this Agreement is terminated because any of the Purchaser s conditions are not satisfied. (6) Closing Date: One month following the waiver or satisfaction of all the Purchaser s Conditions or seven months from the date of City Council approval of this transaction, whichever is lesser. At closing, the Purchaser shall have the right to separate deeds for Parcel A and Parcel B as shown on the schedule hereto or as it may direct. Conclusions: Completion of this transaction detailed above is considered fair and reasonable and reflective of market value. Contact: Name: Frank G. Bedard Position: Manager of Policy and Projects Telephone: Fax: fgbedard@city.toronto.on.ca List of Attachments Location Map Site Sketch (A copy of the Location Map and Site Sketch referred to in the foregoing report was forwarded to all Members of Council with the September 12, 2000, agenda of the Administration Committee and a copy thereof is also on file in the office of the City Clerk.)