Lease Amending and Extension Agreement - The Beaton Group Inc.: 21 Connell Court

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1 REPORT FOR ACTION Lease Amending and Extension Agreement - The Beaton Group Inc.: 21 Connell Court Date: October 30, 2017 To: Board of Directors, Toronto Parking Authority From: Acting President, Toronto Parking Authority Wards: Ward 6 (Etobicoke - Lakeshore) SUMMARY This report seeks the approval of the Toronto Parking Authority ("TPA") Board to amend and extend a lease agreement (the "Lease") with The Beaton Group Inc. (the "Tenant") related to a TPA property at 21 Connell Court (the "Property"). As part of TPA's acquisition of the Property in June 2017, a lease-back provision was negotiated with the Tenant (formerly the owner of the Property). The Lease expires in December 2017 and the Tenant has requested an extension of 2 months and 11 days. City Legal has been engaged to prepare and review the necessary Lease amending and extension document. RECOMMENDATIONS The Acting President, Toronto Parking Authority recommends that: 1. The Board of Directors of the Toronto Parking Authority authorize staff to enter into a Lease Amending and Extension Agreement with The Beaton Group Inc. with respect to 21 Connell Court, in accordance with the terms and conditions as generally outlined in Appendix C: Lease Amending and Extension Agreement of the report (October 30, 2017) from the Acting President, and on such other or amended terms and conditions as may be acceptable to the Acting President and in a form satisfactory to the City Solicitor. FINANCIAL IMPACT The operating and maintenance costs associated with the Property during the extended lease-back period will be paid by the Tenant. Page 1 of 8

2 DECISION HISTORY At its meeting of March 22, 2017 (TPA Board Minute No ), the TPA Board of Directors approved the purchase of 21 Connell Court from The Beaton Group Inc., including all associated additional expenditures related to the transaction. At its meeting of May 24, 2017 (Item GM20.13 of the Government Management Committee), City Council approved the acquisition of the Property. Title of the Property was taken in the name of the City of Toronto and designated for municipal parking purposes and to support ancillary uses in the delivery of parking services, with management assigned to the TPA. On closing, an Agreement to Lease dated June 9, 2017 between the TPA and The Beaton Group Inc. came into effect, expiring on December 20, COMMENTS Background The Property was purchased for the purpose of consolidating TPA facility maintenance and service functions and activities given that TPA's existing maintenance and technical service areas are of a condition, size and physical geometry that cannot be feasibly retrofit to meet current operating standards. As part of the purchase transaction, a lease-back provision was negotiated with the former owner (currently the Tenant) to provide sufficient time for the Tenant to secure alternate space. The rent during the initial term was set at a nominal rate of $1.00 plus HST with the Tenant continuing to be responsible for all costs of operation associated with the Property including property taxes. The Tenant had indicated they were confident that they would be able to secure alternate space in rather short order. The Tenant's ability to source adequate industrial space within the current marketplace, however, has since proven challenging. The Tenant has since requested a short-term extension to assist with their relocation efforts as the term expires during the December holiday season. The TPA's Operations group have confirmed that the Tenant's request can be accommodated. Site Location and Particulars The Property, situated within a primarily designated industrial area which forms part of a neighbourhood known as New Toronto in south Etobicoke, is surrounded by light industrial buildings and benefits from good vehicular and public transportation accessibility (refer to Appendix 'A' - Site Location Map). The Property is improved with a single freestanding single-storey industrial building circa 1955 / 1964 / 1990 with steel frame / masonry construction, composite flat roof and a reinforced concrete slab floor (refer to Appendix B Images of 21 Connell Court). The building offers a 16 foot clear height and a total of 19,270 square feet of interior space including 1,500 square feet of office area. Page 2 of 8

3 Summary of the Lease Amending and Extension Agreement The terms and conditions of the Lease between the TPA and The Beaton Group Inc. will not be changed, except that the Basic Rent will be $7.00 per square foot per annum (total $11, per month) plus HST for the period December 21, 2017 to end on the 3rd day of March 2018 (the "Extended Term") (refer to Appendix 'C' - Lease Amending and Extension Agreement). Table 1.0 below provides a summary of the proposed amendments to the Lease between the TPA and the Tenant: Table Summary of Changes to the Lease Extended Term: Basic Rent: December 21, 2017 to March 3, 2018 (73 days) $7.00 per square foot per annum ($11, per month) plus HST The Tenant continues to retain a right to terminate the Lease at any time upon thirty (30) days' notice in writing to TPA. TPA staff recommend approval of the Lease Amending and Extension Agreement for the following reasons: Extension Term is very short term in nature Basic Rent for the proposed Extension Term is considered fair and reasonable, and in line with a market rate TPA's Facilities Maintenance / Technical Services group is agreeable to the extension as they require additional time to finalize their centralization and consolidation plan; and The Ward Councillor has no objection to the proposed extension. Real Estate Services (RES) have been engaged to assess and review the terms of the lease amending and extension request. They have indicated no concerns in this regard. TPA staff will work with RES to prepare the necessary Delegated Approval Form (DAF) to give effect to the revised Lease terms. CONTACT Gregory Blyskosz, Manager of Real Estate Development and Marketing (416) , gblysko@toronto.ca Page 3 of 8

4 SIGNATURE Andrew Koropeski Acting President, Toronto Parking Authority ATTACHMENTS Appendix 'A' Site Location Map Appendix B Images of 21 Connell Court Appendix 'C' Lease Amending and Extension Agreement Page 4 of 8

5 APPENDIX 'A' SITE LOCATION MAP Page 5 of 8

6 APPENDIX 'B' IMAGES OF 21 CONNELL COURT Page 6 of 8

7 APPENDIX 'C' LEASE AMENDING AND EXTENSION AGREEMENT Summarized below are the terms and conditions of the Lease Amending and Extension Agreement between the TPA (as "Landlord") and The Beaton Group Inc. (as "Tenant"): Tenant: Landlord: Property: Leasable Area: Extended Term: The Beaton Group Inc. Toronto Parking Authority 21 Connell Court, Toronto 19,270 square feet Termination Date: March 3, 2018 Basic Rent: December 21, 2017 to March 3, 2018 (73 days) $7.00 per square foot plus HST Additional Rent: The Tenant will be responsible for all costs of operation associated with the Property during the Term, including but not limited to: Cost of electricity, fuel, heat, ventilating, air conditioning, processed air, water, telephone, gas, sewage disposal and other utilities and services; Costs of operating, maintaining, replacing, modifying and repairing the Property including without limitation such costs incurred by the Tenant in order to comply with Applicable Laws or required by the Tenant's insurance carrier or resulting from normal wear and tear to the Property; Snow and ice removal; and Real property taxes relating to the Property. Termination: Tenant has the option of terminating the Lease prior to the Termination Date upon providing thirty (30) days' prior written notice. Insurance: The Tenant covenants and agrees to maintain during the Term: Valid business interruption insurance; and General liability insurance with a limit of not less than Three Million Dollars ($3,000,000.00) per occurrence, against claims for personal and bodily injury, death or property damage suffered by others arising in connection with or out of the occupation of the Property by the Tenant Page 7 of 8

8 Indemnity: The Tenant covenants to indemnify and save harmless the Landlord and the City of Toronto, including its officers, agents and employees, from and against any and all manner of claims, damages, loss, costs and charges occasioned to, suffered by or imposed upon the Landlord and é or the City of Toronto, either directly or indirectly, in consequence of or in connection with or arising from the Tenant`s occupation of the Property. Page 8 of 8