Item - 2010.EX46.33

The Executive Committee recommends that:

1.         City Council endorse the concept plan attached as Figure 1 to the report (August 10, 2010) from Deputy City Manager Richard Butts which generally illustrates Hines’ proposal for the development and subdivision of the Bayside Lands, which concept plan will be the subject of a subsequent plan of subdivision process.  For greater certainty, Council endorsement of the concept plan is in no way intended to and does not fetter the City’s planning and municipal rights and responsibilities.

2.         City Council grant authority for the City, as owner of the Bayside Lands, to enter into a Land Development Agreement with Hines (LDA) that includes the disposition of the Bayside Lands  through agreements of purchase and sale (APSs), ground leases (GLs), rights of first offer (ROFOs), rights of first refusal (ROFRs) and may include ancillary agreements such as license, encroachment, easement, closing or other agreements contemplated under the LDA (collectively Ancillary Agreements), substantially on the terms and conditions set out in Attachment 1 in the report (August 10, 2010) from Deputy City Manager Richard Butts, together with such other terms and conditions as may be deemed appropriate by the Deputy City Manager whose responsibilities include Waterfront Revitalization, in consultation with the Chief Corporate Officer and in a form satisfactory to the City Solicitor, subject to Part 4 of this report (August 10, 2010) from Deputy City Manager Richard Butts.

3.         City Council require that prior to the City entering into the LDA:

a.         Council declare surplus the Bayside Lands with the intended manner of disposal by way of a LDA, and that all steps necessary to comply with the City's real estate disposal process, as set out in Chapter 213 of the City of Toronto Municipal Code be taken prior to the City entering into the LDA.

b.         WT and Hines having entered into the Project Agreement (PA) and WT shall have provided an undertaking to the City  that WT will circulate all amendments to the PA and associated agreements and all amendments to any Development Agreements (DA) made between WT and Hines or any development partner of Hines (Site Developer), to the City for input on all matters which materially affect the City’s interest as owner of the Bayside Lands.

c.         Receipt by the City of a written undertaking from WT to monitor the performance of Hines and any Site Developer under the LDA, any APS or GL or other transaction contemplated by the LDA, to take action to enforce such performance, and to perform on behalf of the City any City obligations under such agreements, that the Chief Corporate Officer may require WT to monitor, enforce or perform from time to time, all such WT actions to be taken at no cost to the City, and provided such obligations shall not extend past the winding down of WT at which time such obligations shall revert to the City.

d.         Receipt by the City of a legal opinion in respect of the corporate status, powers and authority of Hines to enter into and perform the obligations under the LDA and PA in form and content satisfactory to the City Solicitor.

e.         WT shall have provided confirmation that it has completed a satisfactory due diligence review of the financial capacity of Hines and its ability to complete its obligations under the LDA and PA to the satisfaction of the Deputy City Manager whose responsibilities include Waterfront Revitalization in consultation with the Chief Corporate Officer.

f.          Receipt by the City of a written undertaking from WT to pay for any realty taxes arising from the LDA or Ancillary Agreements in form and content satisfactory to the City Solicitor.

4.         City Council grant authority for the City, as vendor of the City-owned Sites, currently anticipated to be the sites shown as  R1;  R2;  R3, R4 & W1;  R5;  and R6, R7 & W2 on Figure 1 (collectively the Sale Sites), to enter into APSs with Hines or a Site Developer, together with any Ancillary Agreement, substantially on the terms and conditions set out in Attachment 2 in the report (August 10, 2010) from Deputy City Manager Richard Butts, together with such other terms and conditions as may be deemed appropriate by the Deputy City Manager whose responsibilities include Waterfront Revitalization, in consultation with the Chief Corporate Officer and in a form satisfactory to the City Solicitor, subject to Part 7. of this Report.

5.         City Council grant authority for the City, as lessor of the City-owned Sites currently anticipated to be the sites shown as C1 and C2 on Figure 1 (collectively the Lease Sites), to enter into GLs with Hines or a Site Developer, together with any Ancillary Agreement, substantially on the terms and conditions set out in Attachment 3 in the report (August 10, 2010) from Deputy City Manager Richard Butts together with such other terms and conditions as may be deemed appropriate by the Deputy City Manager whose responsibilities include Waterfront Revitalization in consultation with the Chief Corporate Officer and in a form satisfactory to the City Solicitor, subject to Part 7. of this Report.

6.         City Council grant authority for the City to give Hines a ROFO and ROFR to develop one or both of the two City-owned Sites shown as A1 and A2 (with W3 as part of either A1 or A2) on Figure 1 (collectively the Affordable Housing Sites) on condition that any proposal which Hines and WT wish to propose shall be subject to Council approval, together with such other terms and conditions as may be deemed appropriate by the Deputy City Manager whose responsibilities include Waterfront Revitalization in consultation with the Chief Corporate Officer and in a form satisfactory to the City Solicitor.

7.         City Council direct that prior to the City entering into any APS, GL, the following matters be completed and provided for to the satisfaction of the Deputy City Manager whose responsibilities include Waterfront Revitalization, in consultation with the City Solicitor and other City officials as appropriate:

a.         Draft plan approval of a plan of subdivision of the Bayside Lands.

b.         WT and Hines or the Site Developer having entered into a DA in respect of the applicable Site substantially in the form attached to the PA.

c.         WT shall have provided an undertaking to the City that funds received from Hines or the Site Developer under the APS or all base rent for the first 33 years of the term of the GL, as the case may be, shall be used for re-investment in the revitalization of the waterfront in accordance with Policy and Finance Committee Report 9, Clause 1, headed “Governance Structure for Toronto Waterfront Revitalization” adopted  by Council at its meeting on November 30, December 1 and 2, 2004.

d.         WT shall have provided an undertaking to the City to pay, on behalf of the City, all costs and expenses payable or incurred by the City under the APS or GL including purchase price adjustments, closing adjustments, rent adjustments, interest charges, costs of surveys and reference plans, registration and closing costs and out of pocket expenses.

e.         Receipt by the City of a legal opinion in respect of the corporate status, powers and authority of the Site Developer to enter into and perform the obligations under the APS or GL and the DA in form and content satisfactory to the City Solicitor.

f.          WT shall have provided confirmation that it has completed a satisfactory due diligence review of the financial capacity, corporate status, powers and authority of the Site Developer and its ability to complete its obligations under the APS or GL and DA, to the satisfaction of the Deputy City Manager whose responsibilities include Waterfront Revitalization in consultation with the Chief Corporate Officer and in a form satisfactory to the City Solicitor.

8.         City Council waive applicable City disposal and leasing policies and practices for City-owned lands including, but not limited to, the City's Housing First Policy, property transactions with single purpose companies, collection of receivables, typical City use clause for leased lands, typical assignment and subletting restrictions, signage and naming rights, and the use of non-disturbance agreements, to the extent that they are inconsistent with, or not included in the terms and conditions of the LDA or any APS or GL, in recognition of WT's role as master developer and lead negotiator of revitalization initiatives in the City's waterfront, including the Bayside Lands.

9.        City Council grant authority for the City to direct Hines and the Site Developers to pay the purchase prices under all APSs and the base rents for the first 33 years of the term of all GLs, the revenues from all Ancillary Agreements, if applicable and all other amounts payable to the City under such transactions to  WT, or as WT may otherwise direct, in form and content satisfactory to the City Solicitor.

10.       City Council direct the Waterfront Project Director that the following amounts shall be recognized as part of the City’s overall contribution to waterfront renewal, and be reported by WT in its quarterly funding reports submitted to the three orders of government as part of the Waterfront Renewal Accounting Protocol:

a.         The purchase price under each APS.

b.         The base rents for the first 33 years of the term under each GL.

c.         The value of the infrastructure contribution as would apply to the Sites.

d.         Any other amounts payable by Hines or a Site Developer to the City for any Ancillary Agreements under the LDA, APS, GL, ROFO, ROFR transactions.

e.         The value of the parkland contribution as would apply to the Sites.

11.       City Council authorize WT to capitalize the base rent for the first 33 years of each GL subject to the proceeds being reinvested in Waterfront Revitalization.

12.       City Council acknowledge the Section 37 infrastructure contribution required under the zoning by-law is included in the purchase price for the land and thus is not required to be paid for the Sale Sites.

13.       City Council deem the parkland dedication substantially as shown in Figure 1 in the report (August 10, 2010) from Deputy City Manager Richard Butts, which is consistent with the EBF Precinct Plan and zoning by-law, satisfies all parkland dedication requirements for this development.

14.       City Council authorize the Deputy City Manager whose responsibilities include Waterfront Revitalization, in consultation with the Chief Corporate Officer and City Solicitor, to negotiate the LDA, the APSs, GLs and any Ancillary Agreements contemplated under such transactions, including any amending agreements in relation to such agreements, not materially inconsistent with the major terms and conditions described in Attachments 1, 2 and 3 to the report (August 10, 2010) from Deputy City Manager Richard Butts, as approved by Council.

15.       City Council authorize the Chief Corporate Officer and Deputy City Manager whose responsibilities include Waterfront Revitalization, severally to execute and deliver the LDA, all APSs, GLs and all Ancillary Agreements and documents contemplated under such documentation, on behalf of the City.

16.       City Council grant authority to the Chief Corporate Officer or his successor/designate, in consultation with the Waterfront Project Director, to administer and manage the LDA, APSs, GLs, and all Ancillary Agreements, except to the extent such administration and management has been otherwise directed by the Chief Corporate Officer to WT to undertake, including the provision of any consents (including but not limited to consents to any subleases, assignments, financial charges of any interests in any GL or Leased Site), approvals, waivers, notices (including notices of termination) provided that the Chief Corporate Officer may, at any time, refer consideration of such matters (including their content) to City Council for its determination and direction.

17.       City Council direct that, subject to Part 19. of this report (August 10, 2010) from Deputy City Manager Richard Butts, and with the written consent of WT, the City consent, solely in its capacity as land owner of the Bayside Lands, to any planning and development application by Hines or a Site Developer, except for any plan of subdivision application and except for any environmental applications, in furtherance of the development of the Bayside Lands provided Hines or the Site Developer agrees to assume all obligations including costs and liabilities under such application, provided the applicable LDA, APS or GL and DA have been executed and all requirements and obligations of Hines and the Site Developer therein are in good standing, and subject to such other terms satisfactory to the Deputy City Manager whose responsibilities include Waterfront Revitalization and in form satisfactory to the City Solicitor, or alternatively, that the City itself execute such documentation solely in its capacity as land owner.

18.       City Council direct that subject to Part 19. of this report (August 10, 2010) from Deputy City Manager Richard Butts, the City consent to WT acting as the City’s agent as owner of the Bayside Lands to sign any planning and development, infrastructure, servicing or any other applications and agreements including agreements with Toronto Hydro, Enbridge Gas or any third party utility provider, required for the development of the Bayside Lands, except for any environmental applications or agreements, provided WT agrees to assume all obligations including costs and liabilities under such documentation and subject to such other terms satisfactory to the Deputy City Manager whose responsibilities include Waterfront Revitalization and in form satisfactory to the City Solicitor, or alternatively, that the City itself execute such documentation solely in its capacity as land owner.

19.       City Council direct that all actions described in this report (August 10, 2010) from Deputy City Manager Richard Butts, shall be taken by or on behalf of the City in its capacity as land owner and not in its capacity as a planning authority under the Planning Act, the City of Toronto Act, 2006, or otherwise and such actions are not intended to and do not fetter the City’s planning and municipal rights and responsibilities.

20.       City Council request the Waterfront Project Director report to Executive Committee on any proposal accepted by Waterfront Toronto for the development of Affordable Housing Sites for affordable rental housing or an affordable rental housing pilot project.

21.       City Council request Waterfront Toronto, in consultation with TTC and City staff, be authorized to prepare an addendum to the East Bayfront Transit EA in order to allow a second access point to Bayside from Queens Quay East.

22.       City Council authorize the City Solicitor to complete any of the transactions contemplated under the LDA on behalf of the City, except to the extent that such obligations have been directed by the Chief Corporate Officer to WT to undertake, including amending closing dates and other dates, and amending and waiving terms and conditions, on such terms as she considers reasonable.

23.       City Council direct that prior to execution of any of the agreements contemplated herein, WT to provide confirmation to the satisfaction of the Deputy City Manager whose responsibilities include Waterfront Revitalization that:

a.         The other orders of government have approved the governance changes required to allow WT to borrow the funds required to meet its infrastructure obligations under the PA.

b.         The required Infrastructure Ontario loan has been secured.

c.         Funding necessary to complete the infrastructure obligations under the PA has been approved by the three orders of government through an update to the Waterfront Toronto Long-Term Funding Plan. 

24.       City Council direct that prior to the City entering into the Land Development Agreement, the following matters shall be completed or provided for to the satisfaction of the Deputy City Manager whose responsibilities include Waterfront Revitalization, in consultation with the City Solicitor and other City officials as appropriate:

a.         Receipt of a legal opinion from WT's lawyers with respect to the potential environmental liabilities of the City in entering into the Bayside transactions being  remote.

b.         Receipt from the insurer under the Pollution and Remediation Legal Liability Policy of an amendment to the Policy to clarify the discretion to be exercised with respect to the provision of on-site coverage.

c.         Analysis and estimation of potential remediation and risk assessment costs for the Bayside Lands, satisfactory protection regarding the completion of such work and confirmation of appropriate liability protection.

25.       City Council authorize the public release of the confidential information in Attachment 5 in the report (August 10, 2010) from Deputy City Manager Richard Butts, upon completion of the development of the publicly-owned lands in EBF as determined by the Deputy City Manager whose responsibilities include Waterfront Revitalization.

26.       City Council authorize and direct the appropriate City officials to take the necessary action to give effect thereto.

The Executive Committee requested Deputy City Manager Richard Butts to arrange a further meeting between the Toronto Transit Commission, Waterfront Toronto and Transportation Services to work on the traffic light(s) issue and submit a report directly to City Council on August 25, 2010.

Toronto Waterfront Revitalization Corporation (WT), as the City’s designated revitalization lead in East Bayfront (EBF), has endorsed the sale and lease of certain City-owned lands known as Bayside to Hines Canada Management Company ULC (Hines), subject to approval of Toronto City Council.  Bayside is the vacant 4.0 hectare (10.0 acre) parcel in the East Bayfront precinct bounded by Sherbourne Common, Queens Quay East, Parliament Slip and the Inner Harbour as shown on the key map.  The development concept put forward by Hines is a mixed-use development consisting of approximately 185,000 m2 (2.0 million sq. ft.) of market residential, affordable rental housing, commercial/office, retail, child care, community and cultural/civic uses (see Figure 1).  

This report summarizes the results of City staff’s review of WT’s proposal and seeks Council authorization to enter into an “umbrella” Land Development Agreement (LDA) and future Agreements of Purchase and Sale (APS) and Ground Leases, with Hines (Development Partner) and/or its Site Developers subject to the recommendations in this report.  The major terms for each of the three prospective types of transactions in which the City will be a party appear in Attachments 1, 2 and 3 respectively. 

The LDA applies to the whole of the Bayside site and sets out the parameters for all future transactions between the City and Hines or its Site Developers.  The future transactions will involve either a conveyance in fee simple for the market residential blocks or a 99 year term following a 3-year construction period for the non-residential blocks.  The affordable housing blocks shown in Figure 1 are not proposed to be disposed of through this report.  Rather, it is proposed that the blocks be reserved for this purpose as part of the transaction and that Hines be given a first right of offer and right of first refusal should WT or the City wish to proceed with an affordable housing project.  The disposition of the affordable housing blocks will be the subject of a future report to Council when a specific proposal materializes. 

Terms relating to the development of the project are set out in a Project Agreement (PA) between WT, as revitalization lead with responsibility for the overall coordination of the project and infrastructure and Hines as development lead.  Although the City is not a party to the PA, many of the waterfront revitalization aspirations to be delivered by WT are secured through this agreement and are addressed in this staff report.  The major terms of the PA between WT and Hines appear in Attachment 4.

Notwithstanding the focus of staff’s review on the details of the transaction, certain elements of the transaction have necessitated a concurrent City review of related issues.   The first item concerns the proposal for access roads to the site from Queens Quay East.  Under the recently-approved East Bayfront Transit Environmental Assessment, only one road access located central to the site is planned.  Council’s direction at the time of the EA endorsement was that any additional access points to Queens Quay East will require the approval of City Transportation and TTC, and should not result in any material delays to transit through this corridor.  TTC staff do not support the introduction of a second access road. After careful review, detailed more fully in this report, City Planning and Transportation staff have advised that the introduction of a second access will have no material impact on transit service through the corridor. It is recommended that City Council authorized WT to prepare an addendum to the East Bayfront Transit EA in order to allow a second access point to Bayside from Queens Quay East.

The second item involves WT’s capacity to commit to the estimated $120 M of infrastructure, much of which is necessary to service the Bayside lands.  At the present time, this infrastructure is unfunded in the Waterfront Long Term Funding Plan.  Through positive discussions with the City and other government partners, WT is proposing to secure this funding through a combination of borrowing from Infrastructure Ontario (IO), reallocations within its budget, and matching Bayside infrastructure needs with its cash flow from revenues. As part of this process, WT was requested to ensure that funding for transit to service Bayside, a critical underpinning of the transaction, is secured. In response, WT confirms that it is reviewing recommending that the government partners dedicate more direct funding, as opposed to revenues, to transit. Funding for East Bayfront transit remains intact at $150 M. Staff recommend that funding is confirmed to the City’s satisfaction.

The limitations on WT’s cash flow availability have resulted in the deferral of the lake-based stormwater management tank system in East Bayfront.  Under WT’s funding plan, construction will now take place in 2017 and 2018.  In the interim, WT will install an oil grit separator to manage stormwater quality in Bayside pending the construction of the permanent system. WT and Toronto Water are in discussion regarding this matter and the implications relating to the operations of the Sherbourne Common UV system.

As lead for waterfront revitalization, WT has been created to effectively compete in the residential and commercial marketplace, notwithstanding public ownership of the majority of the lands. In the case of those Bayside blocks designated for commercial development, the City has elected to enter into long-term ground leases.  Under such circumstances, the City would typically employ its standard ground lease.  However, in order to attract investment partners and tenants, some of the terms and conditions typically included in City leases are not contained in the proposed Ground Lease.  Instead, the transaction provides the proponent the flexibility needed in regard to financing without City approval, and to providing security for future tenants, in order for such investors and/or tenants to invest significant funds in the premises. 

The proposed transaction represents the culmination of a 2-year process which has engaged the private sector and achieves the City’s and WT’s objectives for Bayside. Along with the other projects underway in EBF, the Hines proposal represents a significant opportunity to realize the transformation of East Bayfront

The sale and lease transactions proposed by WT for the future development blocks in Bayside will not result in a financial impact on the City. All of the funds required for the approval and implementation of this development are to be borne by WT or the Development Partner and its Site Developers. In order for WT to cover its obligations in the Bayside transaction agreements, it is in the process of securing a loan from Infrastructure Ontario (IO) as discussed in the Comment section of this report.

Any need for adjustments within the Waterfront Toronto Long Term Funding Plan in order for WT to fulfill its obligations related to the provision of transit, infrastructure and public realm improvements at Bayside will be addressed in the proposed 2011 Waterfront Capital Budget.

In accordance with procedure for waterfront land revenues outlined in Policy and Finance Committee Report 9, Clause 1, headed “Governance Structure for Toronto Waterfront Revitalization” adopted by Council at its meeting of November 30, December 1 and 2, 2004, the revenues derived from the sale or lease of City-owned lands in Bayside will be reinvested in waterfront revitalization through WT.

WT intends to capitalize the rental revenue from the first 33 years of any 99-year ground leases for the commercial/office components of Bayside. The rental revenue from the remainder of the said terms will flow to the City.

The Deputy City Manager and Chief Financial Officer has reviewed this report and agrees with the financial impact information.