Toronto's city council has agreed to spend $1.2 million to buy the home of Theatre Passe Muraille, a 39-year-old alternative theatre.

The theatre is housed in a designated historical building in downtown Toronto, originally home of the Nasmith Bakery and Stables.

The city deal is a partnership with Artscape, a not-for-profit arts group that builds and develops creative spaces.

Theatre Passe Muraille will lease the space, which it has occupied since 1975, for a nominal $2 a year and pay $20,000 annually toward upkeep.

Purchase of the building will allow it to wipe out a $500,000 deficit.

The theatre has been an incubator for Canadian playwrights and actors, producing shows such as Michael Healey's The Drawer Boy, Timothy Findley's The Stillborn Lover and Trey Anthony's Da Kink in My Hair.

Earlier this year the theatre hired Andy McKim, former associate artistic director at Toronto's Tarragon Theatre, as its artistic director.