Building History: 2009
February 2009 - Mortgage Obtained
To ensure stability, PEO secured a 10-year fixed mortgage at 4.95 per cent through a complex derivative arrangement designated as a cash flow hedge with BMO. PEO adjusted the amortization period to match mortgage payments to the money generated through the building fund.
March 12, 2009 - Deal Closes
PEO took possession of the 105,000 sf building, all of which was virtually fully leased. PEO’s challenge was to free up enough space, have it renovated and move in by December 31, 2009 to coincide with the termination of the lease at 25 Sheppard.
Consideration was given to remaining at 25 Sheppard until 40 Sheppard had sufficient space for all PEO operations. However, given the length of time and uncertainty of when adequate space would be available and the prohibitive expense of the hold-over provisions (150 per cent of rent or approximately $200,000/month) contained within the 25 Sheppard lease, the decision was made to relocate as much of PEO operations as could be accommodated in the short-term to 40 Sheppard by December 31, 2009. A further consideration in making the decision not to hold-over at 25 Sheppard was that the vacant space at 40 Sheppard would not earn rent while PEO waited to secure enough space and PEO would have to pay its share of the operating expenses at 40 Sheppard on that vacant space even though it didn’t occupy it.