AlvinofDiaspar
Moderator
CHEAP RENT
McDonald's enjoys sweet deal with city
DAVID COOPER/TORONTO STAR
McDonald’s on Bloor, near Avenue, pays the city $1,250 a month rent.
Nov 30, 2007 04:30 AM
Paul Moloney
CITY HALL BUREAU
Imagine paying only $1,250 a month in rent for a prime spot on the Bloor St. W. retail strip.
That's exactly what a McDonald's restaurant has been paying for 35 years on land owned by the City of Toronto directly across from the ROM, thanks to a 99-year lease.
The lease, which had no provision for rent increases, came up for renewal after 33 years in 2004. City staff have been in talks since to hike the rent to $16,250 – or $195,000 a year – for another 33 years.
But McDonald's balked at the new rent and instead wants to buy the site, with 40 feet of frontage on Bloor and 150 feet deep, for $3.38 million, said Joe Casali, the city's director of real estate services.
Casali believes that's a fair deal. It does not include the building, which is owned by McDonald's Restaurants of Canada Ltd.
But area Councillor Adam Vaughan isn't impressed.
"The city owns land on Bloor St. in the most expensive stretch of real estate in the country and they're going to sell it for $3 million?" Vaughan said. "This is a one-storey building on Bloor St. but you could build probably a 20-storey condo tower and sell each one for $2 million."
The restaurant is heavily patronized by U of T students and a stone's throw from the museum's new Crystal addition and the upscale Yorkville neighbourhood. Earlier this month, people camped out for more than a week for a chance to buy a condo just down the street, at 1 Bloor St. E.
The 99-year McDonald's lease was negotiated after the former Metro government obtained the site back in December 1960, as part of the land acquisition program needed to build the Bloor-Danforth subway. The current offer is equivalent to about $25 million an acre, higher than other recent transactions, Casali said.
"We think we've done our homework on it. We feel comfortable with it," he said, adding there are 15 other long-term leases along the subway line coming up for renewal. "I think we have enough supporting documentation to say realistically we do have a good value for this transaction."
He said the proposed deal includes a provision that the city will get half of any gain in value if McDonald's sells anytime within the next 10 years.
"I do want to protect the city with any future value generated if McDonald's decided to either sell the property or up-zone the property," he said.
"So we're trying to protect the city where, if they go to flip it in the next 10 years, we'll get 50 per cent of any increased value."
McDonald's does not wish to discuss the matter in the media, said Louis Payette, the company's national media relations manager.
"We're following due process," he said.
"It will be discussed at the meeting next week. Right now, I can't provide more details on this."
Councillor Paul Ainslie, a member of the government management committee studying the matter, said he would prefer to see the city continue to own the property so taxpayers could reap 100 per cent of future gains in value.
"We own it now. It's at Avenue Rd. and Bloor. Ten years from now, if we decided to sell it, we could get 100 per cent of the value. Well, call me stupid, but 100 per cent makes a lot more sense to me."
Vaughan said he also favours continuing to rent the property but he's not convinced $195,000 a year is enough. He plans to press his case for continuing the lease, at much higher rent, at a city council committee meeting on Monday.
He says Metro Council "made a very, very curious decision" back in 1972.
"The issue is we signed a bad deal for the past 33 years – and for the next 33 years, how hard are we bargaining?
``It's 33 years later and we should get smarter," Vaughan said.
"Why isn't there an escalator to cover inflation? It sounds to me like we're not being very aggressive on this piece of property.
``The city's got a financial problem and giving away land like this doesn't solve it, and undercharging for rent isn't going to solve it.
"We should either get better rent, or if they don't want to pay, they can surrender their lease."
Casali said seeking more than $195,000 in annual rent could force the matter to a costly, time-consuming arbitration process.
"The worst-case scenario is we get into arbitration, we spend a lot of money on both sides and we end up at their rent level.
"The best-case scenario is we get into arbitration, we spend a lot of money and we end up at the top of our range.
``But it's not going to be much more than this, I wouldn't think."
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Much rather see the city terminate the lease and sell the land immediately. Why should the McDonalds get a sweet deal for such a prime site? It's in the business for profit, not any form of community service.
AoD
McDonald's enjoys sweet deal with city
DAVID COOPER/TORONTO STAR
McDonald’s on Bloor, near Avenue, pays the city $1,250 a month rent.
Nov 30, 2007 04:30 AM
Paul Moloney
CITY HALL BUREAU
Imagine paying only $1,250 a month in rent for a prime spot on the Bloor St. W. retail strip.
That's exactly what a McDonald's restaurant has been paying for 35 years on land owned by the City of Toronto directly across from the ROM, thanks to a 99-year lease.
The lease, which had no provision for rent increases, came up for renewal after 33 years in 2004. City staff have been in talks since to hike the rent to $16,250 – or $195,000 a year – for another 33 years.
But McDonald's balked at the new rent and instead wants to buy the site, with 40 feet of frontage on Bloor and 150 feet deep, for $3.38 million, said Joe Casali, the city's director of real estate services.
Casali believes that's a fair deal. It does not include the building, which is owned by McDonald's Restaurants of Canada Ltd.
But area Councillor Adam Vaughan isn't impressed.
"The city owns land on Bloor St. in the most expensive stretch of real estate in the country and they're going to sell it for $3 million?" Vaughan said. "This is a one-storey building on Bloor St. but you could build probably a 20-storey condo tower and sell each one for $2 million."
The restaurant is heavily patronized by U of T students and a stone's throw from the museum's new Crystal addition and the upscale Yorkville neighbourhood. Earlier this month, people camped out for more than a week for a chance to buy a condo just down the street, at 1 Bloor St. E.
The 99-year McDonald's lease was negotiated after the former Metro government obtained the site back in December 1960, as part of the land acquisition program needed to build the Bloor-Danforth subway. The current offer is equivalent to about $25 million an acre, higher than other recent transactions, Casali said.
"We think we've done our homework on it. We feel comfortable with it," he said, adding there are 15 other long-term leases along the subway line coming up for renewal. "I think we have enough supporting documentation to say realistically we do have a good value for this transaction."
He said the proposed deal includes a provision that the city will get half of any gain in value if McDonald's sells anytime within the next 10 years.
"I do want to protect the city with any future value generated if McDonald's decided to either sell the property or up-zone the property," he said.
"So we're trying to protect the city where, if they go to flip it in the next 10 years, we'll get 50 per cent of any increased value."
McDonald's does not wish to discuss the matter in the media, said Louis Payette, the company's national media relations manager.
"We're following due process," he said.
"It will be discussed at the meeting next week. Right now, I can't provide more details on this."
Councillor Paul Ainslie, a member of the government management committee studying the matter, said he would prefer to see the city continue to own the property so taxpayers could reap 100 per cent of future gains in value.
"We own it now. It's at Avenue Rd. and Bloor. Ten years from now, if we decided to sell it, we could get 100 per cent of the value. Well, call me stupid, but 100 per cent makes a lot more sense to me."
Vaughan said he also favours continuing to rent the property but he's not convinced $195,000 a year is enough. He plans to press his case for continuing the lease, at much higher rent, at a city council committee meeting on Monday.
He says Metro Council "made a very, very curious decision" back in 1972.
"The issue is we signed a bad deal for the past 33 years – and for the next 33 years, how hard are we bargaining?
``It's 33 years later and we should get smarter," Vaughan said.
"Why isn't there an escalator to cover inflation? It sounds to me like we're not being very aggressive on this piece of property.
``The city's got a financial problem and giving away land like this doesn't solve it, and undercharging for rent isn't going to solve it.
"We should either get better rent, or if they don't want to pay, they can surrender their lease."
Casali said seeking more than $195,000 in annual rent could force the matter to a costly, time-consuming arbitration process.
"The worst-case scenario is we get into arbitration, we spend a lot of money on both sides and we end up at their rent level.
"The best-case scenario is we get into arbitration, we spend a lot of money and we end up at the top of our range.
``But it's not going to be much more than this, I wouldn't think."
__________________________________________________________________________________________
Much rather see the city terminate the lease and sell the land immediately. Why should the McDonalds get a sweet deal for such a prime site? It's in the business for profit, not any form of community service.
AoD