Report to/Rapport au:

 

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

 

and Council / et au Conseil

 

4 May 2010 /  le 4 mai 2010

 

Submitted by/Soumis par : Kent Kirkpatrick, City Manager/Directeur des services municipaux

 

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

 

Bay (7)

Ref N°: ACS2010-CMR-REP-0005

 

 

SUBJECT:

3259 Carling Avenue – nepean sailing club -

REVENUE LEASE RENEWAL

 

 

OBJET :

3259, avenue carling – nepean sailing club – renouvellement du bail

 

REPORT RECOMMENDATION

 

That the Corporate Services and Economic Development Committee recommend that Council approve the Lease between the Nepean Sailing Club and the City of Ottawa for the property municipally known as 3259 Carling Avenue for a term of fourteen (14) years and six (6) months commencing on 1 January 2009 and ending 30 June 2023.

 

RECOMMANDATIONS DU RAPPORT

 

Que le Comité des services organisationnels et du développement économique recommande au Conseil d'approuver le bail entre le Nepean Sailing Club et la Ville d’Ottawa en ce qui concerne la propriété dont la désignation est le 325, avenue Carling pour une période de quatorze (14) années et six (6) mois, débutant le 1er janvier 2009 et se terminant le 30 juin 2023.

 

BACKGROUND

 

The original lease agreement evolved from a request made by the Nepean Sailing Club (NSC) to the former City of Nepean’s Park Planning and Development Department to permit NSC to have exclusive use of the harbour and grounds as well as to occupy a new building. Discussion between the parties resulted in the use of lands and the water lot, as well as the construction of a new pavilion, which is used by NSC with accessibility and use by the general public.

As a result of those discussions, in April 1990, the Nepean Sailing Club (the “NSC”) entered into a lease agreement (the “Original Lease”) with the former City of Nepean, now the City of Ottawa, to occupy the property municipally known as 3259 Carling Avenue (the “Property”) in order to operate a sailing club (the “Club”). 

The original lease term was for 15 years with three consecutive options to renew for five years each.  The initial term ended on 1 April 2005. The Club had the option to renew the lease for another three consecutive five-year terms to expire in 2020, on the same terms and conditions, except for the rental rate.

The parties have been negotiating a lease renewal in good faith for the past five years.  Discussions resulted in a significant difference of opinion with regard to the property’s rental value as well as the general relationship between the City as Landlord and the NSC as Tenant, and the commercial terms to be included in the lease renewal.

 

DISCUSSION

 

The original lease was ambiguous on many points and required constant review and interpretation, creating lease and financial management issues for both parties.

After many months of extensive negotiation by City staff, the parties were unable to reach a consensus on the main issue of a rental value and the commercial terms of the lease renewal. As a result, in May 2008, the arbitration clause within the original lease was invoked.  Prior to the arbitration hearing, the parties agreed to attend mediation to have a neutral third party assist in reaching a consensus on a fair rental value.

A full day of mediation took place in February 2009 and was successful in bringing the parties to an agreement on the issue of the property’s rental value. Negotiations continued with the City and NSC with respect to the remaining management issues and a new lease template was drafted under a standard City template.

The NSC is currently paying an annual rent of $63,424 plus GST. The City and the NSC have a separate Loan Agreement (for repayment of funds to the City in relation to the dock infrastructure).  The term of the Loan Agreement expires in 2023. The new lease will extend the term to 30 June 2023 so that the end date of the lease is consistent with the end date of the Loan Agreement.

The new lease is for a term of fourteen (14) years and six (6) months, to be computed retroactively from 1 January 2009 to 30 June 2023. The annual net rental amounts are as follows:

-          2009 - $85,000.00 plus GST;

-          2010 - $110,000.00 plus GST/HST as applicable;

-          2011 - $130,000.00 plus HST;

-          2012 - $130,000.00 with annual CPI increase plus HST;

-          2013-2023 – annual CPI increase to previous year’s rent plus HST.

The original agreement did not address NSC’s request for use of the adjacent grounds. As a result, it was necessary to create a new License of Occupation to recognize NSC’s use of approximately six acres of land used for boat storage and a youth sailing building. The License is for one ($1) dollar recognizing the Municipal Capital Facility status in place on the property.

 

To fulfill the last element of the NSC’s original request, the former City of Nepean entered into a Lease Agreement with the Crown for the use of the water lot. The City has assigned the current rights under the agreement with the Crown to NSC in order to occupy the water lot for mooring purposes. Rent for the water lot rights is set at 20% of gross revenue generated by the use of the Club.

 

ENVIRONMENTAL IMPLICATIONS

 

There are no environmental implications to implementing the recommendations in this report.

 

RURAL IMPLICATIONS

 

There are no rural implications to implementing the recommendations in this report.

 

CONSULTATION

 

Realty Services Branch has worked with Legal Services; Parks and Recreation; and the Parks, Buildings, and Grounds Operations and Maintenance Branch.

 

COMMENTS BY WARD COUNCILLOR

 

The Ward Councillor has received the staff report and supports the recommendation.

 

LEGAL/RISK MANAGEMENT IMPLICATIONS:

 

For the reasons set out below, there are no legal/risk management impediments to implementing any of the recommendations of this report.

 

  1.  The Nepean Sailing Club is a non-for-profit corporation, incorporated by Letters Patent issued April 29th, 1980.   Briefly, the Club’s objects, as set out in the application are to organize and carry on a continuing program of sailing and boating activities so as to encourage recreational and community use of the natural river and lake advantages available in the former city of Nepean; to cooperate with and assist the city of Nepean (now the City of Ottawa) in the development and maintenance of these objects. 
  2. In June of 2000, the Council of the former city of Nepean enacted a By-law declaring a portion of the lands and the structures located thereon as a Municipal Capital Facility.  Council further provided that the city may provide financial or other assistance to the Club at less than fair market value as the facility was to be used for cultural, recreational or tourist purposes, guaranteeing access by the public.
  3. The original lease agreement between the City of Nepean and the Nepean Sailing Club,  provided the Club with an option to renew the lease for three (3) consecutive terms of five (5) years each, to expire in the year 2020.  The parties had spent considerable time attempting to negotiate a new lease; each party held a significant difference of opinion as to the rent and the terms of the lease.
  4. The Club obtained a Court Order obliging the City to attend arbitration to set the terms of the renewals.  As the arbitration hearing was scheduled for 9 months in the future the parties agreed to attend mediation.  At mediation, the parties agreed to market rent, save and except for years 2009 and 2010, to provide the Club with the opportunity to organize their financial position.  In addition, the Club was undertaking certain additional work to the club house, which was to the City’s benefit.
  5. The new lease term expires June 30, 2023 which coincides with the maturity of the Loan Agreement for the dock infrastructure.

 

CITY STRATEGIC PLAN

 

This report supports the key City Strategic Plan Sustainable, Healthy and Active City Priority; and its objectives for the use of City recreation facilities to deliver quality programs and services to enhance the quality of life for citizens and encourage active and healthy lifestyles.

 

TECHNICAL IMPLICATIONS

 

There are no technical implications to implementing the recommendations in this report.

 

FINANCIAL IMPLICATIONS

 

The revenue from this Lease will be deposited to Dick Bell Sailing Park Account #153173.

 

SUPPORTING DOCUMENTATION

 

N/A

 

DISPOSITION

 

Following Council’s approval the Real Estate Partnerships and Development Office and Legal Services Branch will finalize the Agreement.