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1. 255 CENTRUM
BOULEVARD - LEASE OF 658.9m2 (7,092
SQUARE FEET) 255, boulevaRd CENTRUM - Location de 658.9m2 (7,092 pieds carrÉs) |
That Council:
1.
Approve
funding in the amount of $820,000 for the capital cost to retrofit the former
Council Chambers / Auditorium area and existing office space located within 255
Centrum Boulevard from the City-wide
Reserve Fund; and
2. Authorize the Director of Real Estate
Partnerships and Development Office to enter into a sublease as outlined in the
body of this report with Public Works and Government Services Canada (PWGSC)
for the establishment of a Passport Canada Office at 255 Centrum Boulevard in
the Orleans/Cumberland area.
RecommandationS du ComitÉ
Que le Conseil :
1.
approuve le financement d’une somme
de 820 000 $, correspondant au coût d’investissement nécessaire à
moderniser l’ancienne salle du Conseil / Auditorium et l’espace à bureaux
existant situé au 255, boulevard Centrum, à partir du fonds de réserve de la
Ville;
2.
autorise le directeur du bureau des partenariats et
développement en immobilier à
sous-louer le 255, boulevard Centrum, dans le secteur Orléans/Cumberland,
auprès de Travaux publics et Services
gouvernementaux Canada (TPSGC), en vue d’aménager un bureau de Passeport
Canada comme le souligne le présent
rapport.
DOCUMENTATION
1. City Manager's report dated 25
August 2010 (ACS2010-CMR-REP-0028).
Corporate Services and Economic Development Committee
Comité des services
organisationnels et du développement économique
and Council / et au
Conseil
25 August 2010 / le 25 août 2010
Submitted by/Soumis par : Kent
Kirkpatrick, City Manager/Directeur municipal
Contact
Person/Personne ressource : Gordon MacNair, Director
Real
Estate Partnerships and Development Office/Directeur, Partenariats et
Développement en
immobilier
(613)
580-2424 x21217, Gordon.MacNair@ottawa.ca
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Ref N°: ACS2010-CMR-REP-0028 |
SUBJECT:
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255
CENTRUM BOULEVARD - LEASE OF 658.9m2 (7,092 SQUARE FEET) |
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OBJET :
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255, boulevaRd CENTRUM - Location de 658.9m2 (7,092 pieds carrÉs) |
That Corporate Services
and Economic Development Committee recommend Council:
1.
Approve
funding in the amount of $820,000 for the capital cost to retrofit the former
Council Chambers / Auditorium area and existing office space located within 255
Centrum Boulevard from the
City-wide Reserve Fund; and
2. Authorize
the Director of Real Estate Partnerships and Development Office to enter into a
sublease as outlined in the body of this report with Public Works and
Government Services Canada (PWGSC) for the establishment of a Passport Canada
Office at 255 Centrum Boulevard in the Orleans/Cumberland area.
Que le Comité des services organisationnels et du
développement économique recommande ce qui suit au Conseil :
1. Approuver le financement d’une somme de
820 000 $, correspondant au coût d’investissement nécessaire à
moderniser l’ancienne salle du Conseil / Auditorium et l’espace à bureaux
existant situé au 255, boulevard Centrum, à partir du fonds de réserve de la
Ville;
2. Autoriser le directeur du bureau des partenariats et
développement en immobilier à
sous-louer le 255, boulevard Centrum, dans le secteur Orléans/Cumberland,
auprès de Travaux publics et Services
gouvernementaux Canada (TPSGC), en vue d’aménager un bureau de Passeport
Canada comme le souligne le présent
rapport.
In May 2007 the City sold the former Cumberland City Hall at 255 Centrum Boulevard to Forum Equity Properties Group as part of the Public Private Partnership (P3) Agreement, as approved by Council in May 2005 under report number ACS2005-PGM-ECO-0012, to develop the surrounding town centre lands. At the time of sale, the building was occupied by the Client Service Centre, Building Code Services, Ottawa Public Health, Parks, Recreation and Cultural Services, three Ward Councillors’ offices, and the Federal Member of Parliament for Ottawa-Orleans. In addition, several performing arts groups under the Cultural and Heritage Services Branch used the former Council Chambers as an auditorium/stage and the common areas for gallery displays. To maintain service levels in the vicinity, and in support of the business terms in the P3 agreement, the transaction for 255 Centrum included a lease back arrangement in which the City took a head lease on the entire property for twenty five (25) years at $16.12 (net) per square foot, including parking, escalating each year at the rate of inflation.
The completion of the Shenkman Performing Arts Centre in June of 2009 enabled the performing arts groups to relocate from 255 Centrum Boulevard. The relocation effectively released 369.23 m2 (3,873 ft2) of the building area on the ground floor and 129.92 m2 (1,389 ft2) of second floor space that had been functioning as dressing rooms and storage. The total space available for lease was 499.15 m2 (5,262 ft2). Staff reviewed future City programming and operational needs for Orleans and forecast that this space would not be required for internal use in the foreseeable future. Therefore, the disengagement of the arts groups created an external leasing opportunity to offset the City’s accommodation costs for 255 Centrum Blvd.
Though the property is owned by Forum, the cost to convert the above-noted 499.15 m2 (5,262 ft2) to more functional space is the responsibility of the City. As part of the P3 agreement, a fit-up allowance of $225,000 was provided by Forum Equity Properties Group to the City to put toward conversion of the Council Chambers / Auditorium area. Staff are using a portion of these funds to determine the scope of work required to retrofit in anticipation of leasing the space. The existing configuration is shown in Document 1.
DISCUSSION
In September 2009, the Real Estate Partnerships and Development Office (REPDO) responded to a Request for Information from the Federal Government (PWGSC) regarding the establishment of a Passport Canada Office. City staff view this tenancy as complementary to the City Client Service Centre operations. The major requirements of PWGSC were 635 m2 (6,800 ft2) of contiguous space on one level and completion of the entire project prior to 1 September 2011 in order to meet Passport Canada’s defined operational requirement. Given the timelines and the possibility of reconfiguring the first floor and part of the second floor at 255 Centrum Boulevard, staff felt the PWGSC requirements could be met within the specific timelines. In April 2010, City and Federal Government staff convened on site to review the space. Although the space is not currently configured for immediate sublease, PWGSC considers 255 Centrum Boulevard as the preferred location for the passport office given the synergies with the City Client Service Centre.
In order to meet the PWGSC requirement for 635 m2 (6,800 ft2) of contiguous space on one floor, the Ward Councillor Offices (Wards #1-Orleans, #2-Innes and #19-Cumberland) and the Federal MP Constituency Office would require relocation to the second floor in the former theatre dressing room area (Document 2). This would eliminate a common internal hallway and create enough combined contiguous space on the first floor for the Passport Office. City accommodation staff are in discussions with the respective Ward Councillors and the Federal MP who are in general agreement to relocate to the second floor. Preliminary layouts have been presented and are being refined. If Council approves the recommendation, the fit-up construction of the second floor space will commence November 2010 and the relocation of the Ward and MP Offices is anticipated to take place at the end of January 2011. As a result, 658.9 m2 (7,092 ft2) of rentable area would be available on the ground floor, adjacent to the Client Service Centre and this will meet the requirements of Passport Canada (Document 3).
Recommendation 1:
The total cost to relocate the Ward and MP Offices and to reconfigure the ground floor to accommodate the Passport Office to a base building standard is estimated to be $1,045,000 including contingencies (Class D estimate). As noted above, the funds for this project in the amount of $225,000 are available under the P3 Agreement specifically for the fit-up of the Council Chambers/Auditorium area. Therefore, the remaining funding requirement to be approved by Council to complete the base building work to lease the premises to PWGSC is $820,000.
The building is managed by Brookfield Lepage-Johnson Controls (BLJC) who is a party to the P3 agreement and are responsible for managing and delivering all building renovation projects on behalf of the building owner. The City retained BLJC to deliver the above-noted base building Class D cost estimate and to complete the future construction. The major cost elements of this estimate include levelling of the auditorium floor, removal of the stage area and associated seating, the removal of wall partitions, new lighting, flooring, walls, ceilings, and heating, ventilation and cooling systems. PWGSC will also work with BLJC and will be responsible for the costs of their specific tenant fit-up requirements above the base building standard. At the end of the PWGSC sub-lease term, the City will retain all improvements to the property.
Recommendation 2:
PWGSC has provided a Letter of Intent which outlines their interest to lease the space contingent upon the respective parties agreeing to all the terms and conditions of the sublease and subject to Council approval of this report. To date, PWGSC have offered to lease 658.9 m2 (7,092 ft2) at $14.00 per square foot (net) of rentable area ($99,288 per annum) for five (5) years with an option to renew for an additional five (5) years. The City and PWGSC have completed individual market rent studies that support the rent as within the current market rent range. The offer excludes employee parking and there is a future opportunity to generate additional revenues from leasing the on-site parking directly to Passport Canada staff.
In addition to the base rent, PWGSC will pay its proportionate share (19%) of the operating costs of the building. The operating recovery income is estimated to be approximately $93,000 in year one. An operating cost recovery baseline will be established using year one actual costs then indexed for the remainder of the term.
Summary
The City is expected to recover over the five (5) year term $496,440 in base rent and approximately $481,200 worth of operating costs (adjusted for actually expenses). The total gross rent estimate over the term of the lease is estimated at $977,640. The City will recover its $820,000 investment into the building early in the fifth year of the term. If PWGSC exercises its option to renew for a second term of five (5) years, the City will generate approximately $1,000,000 in additional gross revenue. Should PWGSC decide not to renew for a further five (5) years, the useable office space will be available to sublease out for the remaining term of the City head-lease or alternatively be used by the City should the need arise.
RURAL IMPLICATIONS
N/A
No public consultation has occurred. The Landlord has been consulted and the P3 agreement terms and conditions have been reviewed.
The Councillor's Offices for Ward 1 (Orleans), 2 (Innes) and 19 (Cumberland) have been consulted on the project and have informed PWS Accommodations of their requirements to expedite the process.
A preliminary floor layout has been agreed to in principal and it is anticipated that the fit-up and relocation would be completed during Q4-2010.
The Member of Parliament has been consulted and has agreed to relocate and continue subleasing available space on the second floor.
City stakeholders at the facility have been consulted and no City Operations will be affected.
Councillors in Ward 1, Bob Monette; Ward 2, Rainer Bloess; and Ward 19, Rob Jellett have been consulted and support the recommendations within this report.
There are no legal/risk management impediments to implementing any of the recommendations in this report.
Borden Ladner Gervais LLP, the City’s external legal advisor for such matters, has reviewed the City head lease agreement and property management agreement in conjunction with the PWGSC “Offer to Sublease and Specimen Lease template” to determine any conflicts/exposures. All major exposures/conflicts have been identified and satisfactorily dealt with and will not jeopardize the City from entering into a sublease.
N/A
There are no environmental implications with respect to implementing the recommendations set out in this report.
There are no technical implications with respect to implementing the recommendations set out in this report.
Funds are available in the City Wide Reserve Fund with the approval of the recommendations in this report.
Document 1 – Existing Floor Plan Layout
Document 2 - Proposed Floor Plan – 2nd Floor – Conceptual ward & MP offices
Document 3 - Proposed Floor Plan – 1st Floor – Proposed Passport Canada occupation
Following Council’s approval the Real Estate Partnerships and Development Office and Legal Services Branch will finalize the sublease transaction and the corresponding base building retrofit.
Document 1
Floor 1 – Existing Layout
Document 2
Floor 2 –New Ward and MP Offices (Conceptual)
Document 3
Floor 1 – Proposed Passport Canada Occupation