6. LEASe - ANDY BEARS FOOD SERVICES INC., 110 LAURIER

bail – andy bears food services inc., 110, avenue laurier

COMMITTEE RECOMMENDATION AS AMENDED

That Council approve Option 1 of the staff report - a five (5) year extension to Andy Bears Food Services, Inc., with the inclusion of an arbitration clause to ensure the City receives fair market value.

RECOMMENDATION MODIFIÉE DU COMITÉ

Que le Conseil approuve l’option 1 du rapport du personnel soit la reconduction pour une période de cinq (5) ans du bail conclu avec Andy Bears Food Services Inc., moyennant l’ajout d’une clause d’arbitrage visant à donner à la Ville l’assurance qu’elle obtiendra une juste valeur marchande.

DOCUMENTATION

1. Chief Corporate Services Officer’s report dated 09 May 2006
(ACS2006-CRS-RPM-0038).

2. Extract of Draft Minute, 16 May 2006 will be issued separately prior to the Council meeting of 24 May 2006.

Report to/Rapport au :

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

and Council/et au Conseil

09 May 2006/le 09 mai 2006

Submitted by/Soumis par : Greg Geddes, Chief Corporate Services Officer/

Chef des services généraux

Contact Persons/Personnes-ressources : Gordon MacNair, Acting Manager, Real Estate Services

Real Property Asset Management/Gestionnaire par intérim, Services immobiliers, Gestion des biens immobiliers

(613) 580-2424, ext./poste 21217, Gordon.MacNair@ottawa.ca

Glen T. Ford, Manager, Supply – Supply Management Division/Gestionnaire, Approvisionnement, Division de la gestion de l’approvisionnement

(613) 580-2424, ext./poste 21305, Glen.Ford@ottawa.ca

Somerset (14)

Ref N°: ACS2006-CRS-RPM-0038

SUBJECT:	LEASe - ANDY BEARS FOOD SERVICES INC., 110 LAURIER
OBJET :	bail – andy bears food services inc., 110, avenue laurier

REPORT RECOMMENDATION

That the Corporate Services and Economic Development Committee recommend Council consider a five (5) year extension to Andy Bears Food Services, Inc.

RECOMMANDATION DU RAPPORT

Que le Comité des services organisationnels et du développement économique recommande au Conseil de considérer la reconduction du bail pour une période de cinq (5) ans avec Andy Bears Food Services Inc.

BACKGROUND

The purpose of this report is to provide Corporate Services and Economic Development Committee and Council with options to consider in addressing a request from Andy Bears Food Services Inc. to extend its lease beyond the 30 March 2010 expiry date. Although staff does not support extending the term of the lease for an additional five years, Councillor Jellett has requested that a report be submitted to Committee and Council to allow the tenant the opportunity to present his position in the matter.

On 30 March 1992, the former Regional Municipality of Ottawa-Carleton entered into a lease with Andy Bears Food Services Inc. to fit-up cafeteria space and to provide food and catering services.

The initial term of the lease was eight (8) years, commencing 30 March 1992 and also provided the tenant with the option to renew the lease for two additional five (5) year terms.

In 2000, the tenant confirmed that it wished to exercise its option to renew for a further five (5) years. The Corporate Services and Economic Development Committee approved the first five (5) year renewal on 21 March 2001 at a minimum rent of $21,000 per annum.

The second and final five (5) year renewal term was approved under delegated authority on 8 June 2005, subject to the following terms and conditions:

• Tenant will pay basic rent calculated at 6 % of annual gross sales (excluding sales from Andy Bears outdoor BBQ wagon), with a minimum, basic rent of $21,000 per annum plus GST. Basic rent will include one reserved parking stall at a location to be mutually agreed upon by the parties;

• Tenant will pay all business and other taxes, license fees, rates and assessments against the Premises, or in any way related to the presence of the Tenant's operation, the business operated therein, the improvements made thereto, and the personal property located therein;

• Tenant will not pay municipal realty taxes (including school taxes) and local improvement taxes, rates, and duties if assessed against the Ottawa-Carleton Centre, but will pay any of these tax rates and duties payable by reason only of the presence of the Tenant's operation;

• Tenant will not pay any share of the costs incurred by the Landlord in insuring, operating, and maintaining the Ottawa-Carleton Centre, including costs attributable to the common areas and facilities of the Ottawa-Carleton Centre;

• Tenant will pay cost of all utilities used or consumed in the Premises, subject to there being a maximum monthly charge of $800 for hydro electric services consumed in the premises;

• Tenant will increase its general commercial liability to $2,000,000 and will make amendments to Clauses 8.01 b), 8.01 c), 8.02, and 8.04, under Article 8 – Insurance in the existing lease, to conform with current Regional requirements;

• Tenant shall have the right to cater Council and Committee meetings of the Landlord, provided the Tenant can match the catering services of third party businesses, in terms of both price and quality as determined by the Landlord acting reasonably;

• Tenant shall have the exclusive right to install vending machines within the Ottawa-Carleton Centre, subject to the Landlord determining both the locations and the number of machines, the Landlord acting reasonably.

The lease with Andy Bears Food Services Inc. expires on 30 March 2010, with no further extension options.

DISCUSSION

A request to extend the lease beyond the 30 March 2010 expiry date was received in 2005. The tenant’s solicitor was advised in writing that in light of the City’s Purchasing By-law; the City was not in a position to consider the request for an additional five (5) year option. A copy of this letter is attached as Annex “A”.

Although staff does not support extending the lease, in order to implement the tenant’s request for a five-year extension to its lease, the following are options that may be considered.

Option 1

Five (5) year Extension:

A five-year extension of the current lease would leave all terms and conditions of the original lease unchanged, save and except the provision to renew the lease for two additional five-year terms.

Staff does not support an extension of the current lease without a competitive procurement because of the following:

• Does not comply with the City’s Purchasing By-law;
• Several inquiries have been received from other cafeteria service providers as to when the City would be in a position to consider bids;
• Loss of opportunity to update a lease and improve level of service.

It is our understanding that Mr. Norris, owner and operator of Andy Bears Food Services Inc. has sold his business subject to obtaining an additional five (5) year option extension.

Option 2

Open Negotiations with new Proponent:

Negotiations with a new proponent would be founded on a completely different arrangement that now exists with the current Lessee. Rather than attempting to capture the City’s operational requirements in a lease agreement, staff would negotiate a Management Service Agreement that would provide a framework to address a broad range of requirements specific to cafeteria uses.

Staff does not support entering into negotiations with a potential buyer without a competitive procurement because of the following:

• Does not comply with the City’s Purchasing By-law;
• City would be open to criticism from other proponents interested in submitting a bid to lease the space.

CONSULTATION

This is an internal administrative matter. Therefore, public consultation was not considered necessary.

ENVIRONMENTAL IMPLICATIONS

There are no environmental implications with respect to this Lease.

FINANCIAL IMPLICATIONS

There are no financial implications as a result of this report.

SUPPORTING DOCUMENTATION

Annex “A”, letter dated 27 June 2005 to John Piazza, solicitor for Andy Bears.

DISPOSITION

Real Property Asset Management, Supply Management Division and Legal Services Branches will undertake the necessary action arising from Council’s disposition.

ANNEX “A”

27 June 2005

Mr. John Piazza
Piazza Brooks
309 Cooper Street, Suite 202
Ottawa, ON K2P 0G5

Dear Sir:

Re: City Hall Cafeteria Space - Andy Bear's Lease
Your File: 29272

Thank you for your letter dated 30 May 2005.

The leasing of municipal facilities, which includes the cafeteria space at City Hall, is the responsibility of the City’s Real Estate Services Division. In that respect, any and all lease negotiations and subsequent recommendations to Committee and Council and its Delegated Authority, are undertaken exclusively by Real Estate Services.

We have reviewed this matter with our Legal Services Branch and it is our collective opinion that in light of the City’s purchasing by-law, we are not in a position to consider your client’s request for the additional five-year option.

In addition to the City’s purchasing by-law, it is our responsibility to ensure that all transactions involving Municipal Real Estate are conducted in a manner that is fair, open, equal and transparent.

At the expiration of Andy Bears’ Lease, your client will have occupied municipal space for a period of eighteen years that began with the Region of Ottawa-Carleton and extended post-amalgamation to the City of Ottawa. Prior to the expiration of the last 5-year renewal and provided that the space is not required for City purposes, Real Estate Services will make the space and possible business opportunity known to public through a competitive process.

I trust you will appreciate my position in this matter.

Yours truly,

original signed by Douglas McCaslin

D.H. McCaslin
Manager, Real Estate Services

cc:	S. Finnamore, Director, RPAM Les Nalezinski, Program Manager, RESD Carey Thomson, Legal Janet Mitchell, Legal Glen Ford, Supply Management Phil Andrews, Supply Management