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8. 100 CONSTELLATION CRESCENT - WAIVER OF
DEVELOPMENT PENALTY 100, CROISSANT
CONSTELLATION – RENONCIATION À LA PÉNALITÉ D’AMÉNAGEMENT |
That Council waive the
development penalty set out in an agreement dated 12 October 2000 and
registered on title as Instrument #1323324, regarding the property known
municipally as 100 Constellation Crescent as described in this report.
Recommandation du ComitÉ
Que Conseil renonce à la pénalité d’aménagement établie dans l’entente
en date du 12 octobre 2000 et enregistrée officiellement comme Instrument no 1323324,
concernant la propriété dont l’adresse est le 100, croissant Constellation,
comme il est décrit dans le présent rapport.
DOCUMENTATION
1.
City Manager’s report dated 30 July 2010 (ACS2010-CMR-REP-0041).
Corporate Services and Economic Development Committee
Comité des services organisationnels et du développement économique
and Council / et au Conseil
30 July 2010 / le 30 juillet 2010
Submitted by/Soumis par: Kent Kirkpatrick,
City Manager / Directeur municipal
Contact
Person/Personne ressource : Gordon MacNair, Director, Real Estate Partnerships and
Development Office/Directeur, Partenariats et Développement en immobilier
(613)
580-2424 x 21217, Gordon.MacNair@Ottawa.ca
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Ref N°: ACS2010-CMR-REP-0041 |
SUBJECT:
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100 Constellation Crescent - Waiver of
DevelopMent penalty |
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OBJET :
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100, croissant constellation –
renonciation à la pénalité d’aménagement |
REPORT RECOMMENDATION
That the Corporate Services and Economic
Development Committee recommend that Council waive the
development penalty set out in an agreement dated 12 October 2000 and
registered on title as Instrument #1323324, regarding the property known
municipally as 100 Constellation Crescent as described in this report.
RECOMMANDATION DU RAPPORT
Que le Comité des
services organisationnels et du développement économique recommande au Conseil de
renoncer à la pénalité d’aménagement établie dans l’entente en date du 12
octobre 2000 et enregistrée officiellement comme Instrument no 1323324,
concernant la propriété dont l’adresse est le 100, croissant Constellation,
comme il est décrit dans le présent rapport.
In the spring of 1999 Arnon Corporation (“Arnon”) approached the former Regional Municipality of Ottawa-Carleton (the “RMOC”) and expressed an interest in acquiring from the RMOC two blocks of vacant land located adjacent to the Baseline Transitway Station with an area of approximately 8.86 acres. Arnon indicated a need for these lands to provide surface parking to accommodate the additional office requirements of Nortel Networks Ltd. (“Nortel”) who would be occupying the next phase of Arnon’s office campus on Constellation Crescent by February 2001.
As a result, in 2000 the former RMOC sold to Arnon Corporation these two vacant land parcels legally described as part of Lots 34 and 35, Concession 2, in the City of Nepean, shown as Parts 1,2,5,6,7,8,9,10,11 and 12, on Plan 4R-15845 (the “RMOC Lands”).
In completing
the sale, the RMOC and Arnon entered into a memorandum of agreement dated 12 October
2000, which is registered on title as Instrument #1323324 (the “Agreement”) to
deal with the terms of sale and the RMOC’s concerns about ensuring that the
ultimate development of the Constellation office campus would be to a higher
density and more transit oriented in accordance with the objectives of the
former City of Nepean’s (Nepean’s) Woodroffe-Baseline Secondary Plan
(“Secondary Plan”).
The Agreement includes provisions, among others, setting out the following:
1. Arnon providing a plan illustrating how they will eventually meet the floor square index (FSI) required in the Secondary Plan on their Constellation office campus lands, including the RMOC lands;
2. For a period of ten (10) years, there being a condition surviving closing requiring the payment of a penalty in the amount of $1,300,000 (the “Development Penalty”) to be paid by Arnon to the RMOC if within the ten (10) year period, Arnon and/or it’s successors/assigns, have not initiated construction of such additional buildings as may be necessary to raise the overall FSI on Arnon’s Constellation office campus lands, including the RMOC lands, to meet the Secondary Plan requirements. If Arnon does initiate a building program raising the FSI as required to meet the objectives of the Secondary Plan, the penalty payable on the block(s) will be waived;
3. Any proposal to increase the FSI on the lands must include plans indicating how the ultimate FSI of 1.0 will be met upon completion of the development; and
4. In the event all or any part of the penalty is paid by Arnon to the Region, the money will be reinvested for transit purposes only, as directed by Council of the day.
On 24 July 2002,
City Council approved the Corporate Accommodations Master Plan for
administrative space (CAMP) so that the amalgamated City of Ottawa could reduce
the total amount of administrative space it occupies by 25%, dispose of surplus
properties, including former city halls, improve service delivery to residents
and achieve permanent operational savings from both the consolidation of space
and the co-location of staff into fewer sites. It was expected that achieving
these benefits through CAMP would require a capital investment of $38 million
and be achieved by the end of the 2005 budget year.
In February
2003, the City discovered a potential opportunity to achieve CAMP objectives
much sooner through the use of the office building at 100 Constellation
Crescent owned by Arnon which, although leased to Nortel, was then vacant. As a
result, staff were authorized by Council to negotiate with Arnon and Nortel
regarding the acquisition of the 100 Constellation Cresecent property based on
meeting the City’s objectives described above.
As a
result of successfully completing the negotiations with Arnon and Nortel on 14
May 2003, Council authorized staff to execute closing documents and, in
particular, an Assignment of Lease Agreement with Nortel Networks Limited and
an Amendment of Lease Agreement with Arnon Corporation in accordance with the
terms and conditions set out in the Letter of Intent Agreement dated 14 March
2003 between Arnon, Nortel, and Ottawa.
At that time, Council also directed staff to prepare a plan for the future
development of the 100 Constellation property in conjunction with the City-owned
properties in and around Ben Franklin Place.
On 1 July 2003, the City entered into an Assignment and Amendment of Lease Agreement with Nortel Networks Limited and Arnon Corporation with respect to the office building municipally known as 100 Constellation Crescent which provides for the City to lease the building until 28 February 2026 and for the City to have an option to purchase the building at the end of the lease term for a purchase price that will be significantly less than the estimated market value.
The City also has the right to develop the 100 Constellation lands during the term of the lease subject to the ownership of any improvements on these lands reverting to Arnon if the City does not exercise the Option. However, the amended lease was structured for Arnon to provide the City with a reduced base rent over the last ten (10) years of the term that should allow the City to set aside the annual savings funds to pay the purchase price at the end of the term without increasing the City’s operating costs to do so.
As result of entering into this lease in 2003 the City was able to reduce the City’s base office accommodation budget by $3.5M annually and to avoid the further estimated capital expenditure of $38M previously identified to satisfy the City’s office accommodation needs. By exercising the Option to Purchase in 2026, the City will, from that time forward, save over $6M annually in the office accommodation budget as a result of no longer having to pay a base rent for the 100 Constellation space.
However, as a result of the City assuming the Nortel lease for 100 Constellation, the City has also assumed Nortel’s obligation to pay the Development Penalty, if required in October 2010.
In 2006-2007, through a series of five public workshops with the community and stakeholders, a development concept plan was established for the Centrepointe Town Centre (the “CTC”), being the area in the vicinity of 100 Constellation and Ben Franklin Place as a prerequisite to achieving the objectives of the Secondary Plan.
On 28 November 2008, City Council approved the implementation of the first phases of the CTC Concept Plan including associated transitway improvements and, as a result, significant development related projects with a total value of over $200M are now under construction or in some cases completed. These projects include as follows:
· Algonquin College Centre for Construction Excellence;
· City Archives and Technical Services building; and
· Expansion of Centrepointe Theatre.
Given that the City is now the tenant of 100 Constellation Crescent and
would, under the terms of the lease, be required to pay the Development Penalty
if required by the City, and given that the City has also initiated
implementation of the CTC Plan including the relocation of the Baseline Transit
Station onto the RMOC lands in order to achieve the objectives of the Secondary
Plan as described in this report; it is now being recommended that the
Development Penalty be waived on the basis that the intent for applying this
penalty has been met by preparing and implementing the CTC Concept Plan.
There are no environmental implications to implementing the
recommendation in this report.
There are no rural implications resulting from the recommendation in this report.
Arnon Corporation has been advised that staff will be recommending the Development Penalty be waived by Council.
HOUSING
FIRST POLICY
The Official Plan policy directs that the City make land available for affordable housing and give priority for the sale or lease of surplus City-owned property for this purpose. The recommendation in this report does not relate to the sale or leasing of surplus property.
Councillor Chiarelli has been advised as to
the recommendation in this report.
N/A
There are no
legal/risk management implications associated with this report.
Implementing the
recommendation of this report will not result in any additional cost or loss of
revenue to the City.
N/A
Subject to Committee and Council approval, staff will
implement the recommendation outlined in the report.