Lease of the Palais Royale - Request for Proposals P-129-99.RFP (High Park) (City Council on July 4, 5 and 6, 2000, adopted this Clause, without amendment.) The Economic Development and Parks Committee recommends the adoption of the following joint report (May 29, 2000) from the Commissioner of Economic Development, Culture and Tourism and the Chief Financial Officer and Treasurer: Purpose: To seek approval for the negotiation and execution of an agreement for the lease of the Palais Royale with the recommended proponent, Shoreline Entertainment Corporation. Financial Implications and Impact Statement: The City is currently covering all operating and maintenance costs for the Palais Royale building through the 2000 Facilities Operating Budget. Adoption of the recommendations included in this report will relieve the City of this expense, provide for an estimated investment of $2 million for restoration and rehabilitation of the building, general enhancement of the site, and will offer an income stream based on a percentage of sales over the term of the lease, with a minimum of $25,000.00 per year. This rent will begin to be fully realized in 2001 and will be reflected in the Parks and Recreation Operating Budget for next year. The Chief Financial Officer and Treasurer has reviewed this report and concurs with the financial impact statement. Recommendations: It is recommended that: (1) the proposal received from Shoreline Entertainment Corporation, the only acceptable proponent, in response to Request for Proposals P-129-99.RFP, for the lease of the Palais Royale, be accepted; (2) staff be authorized to negotiate and execute a lease agreement, in a form acceptable to the City Solicitor, with Shoreline Entertainment Corporation; and (3) the appropriate City officials be authorized and directed to take the necessary action to give effect thereto. Background: The Palais Royale, located at 1601 Lake Shore Boulevard West on the Toronto waterfront, was completed in 1922. Since that time the facility has operated primarily as a dance hall and as a site for special functions. In 1984 the building was designated under the Ontario Heritage Act by Toronto City Council (By-law No. 563-84) on historical and architectural grounds and is one of the two remaining buildings from the original Sunnyside Amusement Park complex. The Palais Royale has operated, for approximately, the past three decades, under a lease between the City (formerly the Corporation of the City of Toronto) and Palais Royale Ballroom Ltd. During this period, the ownership of the actual Palais Royale building was under dispute. On January 15, 2000, the lease with Palais Royale Ballroom Ltd. expired and the City of Toronto obtained clear title to the building. In December 1999, in anticipation of the expiry of the lease with Palais Royale Ballroom Ltd., the City issued a Request for Proposal (RFP) for the lease of the site. The RFP called for the facility to be operated as a “venue for ballroom dancing, as a site for banquets, weddings and other functions, or as an entertainment facility”. In the RFP, there was significant emphasis placed on the need to restore and rehabilitate the Palais Royale, by the successful proponent, at no cost to the City. The RFP was advertised in the Globe and Mail, Novae Res Urbis and on the City’s Web site. Two proposals were received in response to the RFP, however, only the proposal from Shoreline Entertainment met the mandatory criteria under the terms of the proposal call. The proposal from Shoreline Entertainment was reviewed by a panel of staff from the Parks and Recreation Division, and from Heritage Preservation Services of the Culture Division (formerly Heritage Toronto). Staff have had subsequent meetings with Shoreline Entertainment to explore the details of their proposal and discuss the qualifications of the company and their consultants. Comments: Shoreline Entertainment proposes to operate the Palais Royale, for a twenty-year period on the basis of a fixed monthly rent, or a percentage of gross sales, whichever is greater. The minimum annual rent would be $25,000.00. The company plans to build on the Palais Royale’s long history as a venue for ballroom dancing, marketing its availability for this activity on a year round basis. In addition, Shoreline Entertainment wishes to use the facility as a site for activities such as weddings, banquets, seasonal dances/parties, corporate events, performing arts and live music. They are also committed to making the Palais Royale available for community use including fundraising events and community meetings. The principals of Shoreline Entertainment Corporation have long-standing experience with the operation of entertainment venues including “Ye Olde Brunswick House/Albert’s Hall”, food, beverage and entertainment marketing, and event sales and management. They have provided the City with appropriate references in these areas. The proposal from Shoreline Entertainment includes a proposed conservation strategy of period restoration combined with rehabilitation of the Palais Royale. They have been working with qualified architects and other consultants and have presented a plan involving the investment of approximately $2 million in the building and site at no cost to the City. Staff of Heritage Preservation Services have carried out a preliminary review of this proposal and approve of the overall approach in concept. At this point it is proposed that heritage concerns related to the building’s restoration, and maintenance be built into the proposed lease with the proponent. Upon finalisation of the lease, and once the details of the architectural proposal are sufficiently resolved, Shoreline Entertainment will present their plans to the Toronto Preservation Board. The original financial proposal submitted by Shoreline Entertainment was based on an assumption of approximately $1 million of capital work on site. As noted above, subsequent work by consultants hired by the proponent has revealed that the required investment will likely be double the original estimate. Based on this estimated investment, staff and the proponent have agreed to a rent based on a percentage of gross sales of between 2.5 percent and 4 percent. The minimum rent would be 2.5 percent for up to $1 million in annuals sales, or $25,000.00. Upon receipt of approval, staff will proceed to negotiate the details of an agreement with the proponent that will meet the City’s objectives and ensure a commercially viable operation. Staff will also, concurrently, be carrying out due diligence to ascertain that the proponent is capable of implementing the proposal and fulfilling the terms of the lease. Conclusions: The proposal offered by Shoreline Entertainment for the lease of the Palais Royale provides the City, and the many users and admirers of the building with the opportunity for comprehensive improvement of the site, restoration of a highly significant heritage property and appropriate public uses of the building over the long term, at no cost to the taxpayer. In addition, the proposal offers a revenue stream to the City in the form of a percentage rent, with a minimum. The proposal by Shoreline Entertainment provides an opportunity to address such issues as community use of the building and public access to the water’s edge at the site, while providing a viable commercial use of a historic City landmark. While further discussion, negotiation and detailed work are required, staff believe that the proposal submitted by Shoreline Entertainment provides a package which is advantageous to the City. Some preliminary discussion related to this project have been carried out with the Toronto Parking Authority, City Planning and Building along with Parks and Recreation and Heritage Preservation Services. Further consultation, both internal and external will be carried out as discussions continue. Contact Names: Mr. Andy Wickens, Manager, Business Services, Parks and Recreation, Phone: 392-8231, Fax: 392-3355, e-mail: [email protected] Mr. Lou Pagano, P.Eng., Director, Purchasing and Materials Management, Phone: 392-7312, Fax: 392-0801, e-mail: [email protected]. _________ The following persons appeared before the Economic Development and Parks Committee in connection with this matter: - Mr. E.J. Littleford, Toronto Swing Dance Society; and - Councillor Chris Korwin-Kuczynski, High Park..