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Opening comments:  More at the end.

Globe & Mail July 5 2000, Wed. - by John Barber

Numbers don't add up as land-deal suit ends

TORONTO -- The lawsuit that kicked off the Ontario Realty Corporation scandal ended late last week when the Crown corporation capitulated to developers who had accused it of allowing political favouritism to overrule fair play in the sale of a landmark downtown property.

The event occurred last Thursday when ORC president Tony Miele personally transferred title to The Keg Mansion on Jarvis Street and three adjacent buildings to a firm controlled by Cityscape Development Corporation.

Cityscape sued the ORC in February, 1999, a month after Mr. Miele abruptly cancelled its pending purchase of the property. The Crown corporation denied that politics played any part in the cancellation and, in court documents, it asserted that it had no legal obligation whatsoever to sell the property to Cityscape.

But last week it did just that, selling the property for $3.05-million $360,000 less than Cityscape had agreed to pay a year and a half ago. In addition, the Crown corporation agreed to take back a $2.4- million mortgage on the property, interest-free for the first two years of its five-year term. The cost to taxpayers of the foregone interest is $336,000, bringing the total discount to almost $700,000 -- not including legal fees or the costs associated with carrying the buildings for an extra year.

Another clause in the mortgage stipulates that it applies solely to the four historic buildings on the site, thereby giving the developer clear title to about a hectare of vacant land included in the property.

Beyond the information in the deed and mortgage, the exact terms of the settlement are subject to a confidentiality agreement and remain unclear. That hasn't prevented both sides from presenting sharply different views as to what happened, however.

A statement issued by the ORC yesterday said that Cityscape paid $3.4-million for the property, even though the deed clearly states the property was transferred for $3,050,000.

ORC representative Judith Baird said the two numbers differ because Cityscape agreed to pay for a $350,000 roof repair. The condition of the roof was not mentioned in any earlier reports about negotiations over the sale of the property, however.

The statement also said that the ORC agreed to provide the mortgage interest-free for two years if Cityscape would enter into a heritage agreement "to preserve the architectural and historical integrity of the buildings." None of the registered documents mentions such an arrangement, however.

The ORC statement is "misleading and factually incorrect," according to Cityscape president John Berman.

"The purchase price was $3.05 - million, not $3.4 -million," he said, adding that his company had always intended to retain the four historic buildings on the site. "The settlement with ORC does not oblige us to enter into a heritage agreement, nor is the interest-free period dependent on Cityscape entering into such an agreement."

Thus a messy end to a messy story.

It can only be good news for the city's heritage community. Cityscape made its intention to preserve the historic buildings clear when it began negotiating to buy them in late 1998, developing plans that showed them incorporated into a modest townhouse development. Rival bidder Renoir Building Corporation, clearly favoured by Mr. Miele until last week, had given no such assurances.

As for the embattled ORC, the reasons for its capitulation -- after having dismissed Cityscape's original claim for redress -- can only be guessed. Ms. Baird declined to discuss the issue. And Mr. Berman, when asked whether he viewed the settlement as a tacit endorsement of his earlier claim -- that the Keg saga reflected "political corruption at the highest level" -- refused to comment.

Clearly the end of this one lawsuit will never be enough to settle allegations of political influence over sales of government land in Ontario. The ORC is defending about two dozen other lawsuits, many of which are based on similar allegations of unfairness in the disposal of land.

And dozens of ORC deals are still under active investigation by outside auditors hired by a nervous government.


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