4. LEASE RENEWAL – 370 CATHERINE STREET, OTTAWA AND SUB-LEASE RENEWAL – 560 ROCHESTER STREET, OTTAWA

RENOUVELLEMENT DE BAIL – 370, RUE CATHERINE, OTTAWA ET RENOUVELLEMENT DE SOUS-BAIL – 560, RUE ROCHESTER, OTTAWA

COMMITTEE RECOMMENDATIONS

That Council:

1. Approve the renewal of a lease with Oxford Properties Group Inc. for 59,653 rentable square feet of office space at 370 Catherine Street for 10 years commencing 1 November 2006 and terminating on 31 October 2016, at an annualized cost of $ 1,509,056, plus GST.

2. Approve the renewal of a sub-lease with Nortel Networks for 9,076 rentable square feet of office space at 560 Rochester Street for 5 months commencing 1 May 2006 and terminating on 29 September 2006, at a cost of $72,155, plus GST.

3. Upon approval of the lease renewal, designate 370 Catherine Street as a Municipal Capital Facility for the purpose of general administration of Ottawa as permitted under Section 110 of the Municipal Act and as defined in Ontario Regulation 46/94 and that this designation be implemented by way of an Agreement between the City and Oxford Properties Group Inc., and by presenting to Council a by-law, both in accordance with the requirements of the Municipal Act, and this report.

RECOMMENDATIONS DU COMITÉ

Que le Conseil municipal :

1. approuve le renouvellement d’un bail avec Oxford Properties Group Inc. pour une superficie louable de 59 653 pieds carrés d’espace de bureau au 370, rue Catherine, pour une durée de 10 ans commençant le 1^er novembre 2006 et se terminant le 31 octobre 2016, à un coût annualisé de 1 509 056 $, TPS en sus.

2. approuve le renouvellement d’un sous-bail avec Nortel Networks pour une superficie louable de 9 076 pieds carrés d’espace de bureau au 560, rue Rochester, pour une durée de cinq mois commençant le 1^er mai 2006 et se terminant le 29 septembre 2006, à un coût de 72 155 $, TPS en sus.

3. à l’approbation du renouvellement du bail, désigne le 370, rue Catherine, comme immobilisation municipale aux fins de l’administration générale d’Ottawa comme l’autorise l’article 110 de la Loi sur les municipalités et comme le définit le Règlement 46/94 de l’Ontario, et que cette désignation soit mise en œuvre par la voie d’une entente entre la Ville et Oxford Properties Group Inc., et par la présentation au Conseil d’un règlement, conformément aux exigences de la Loi sur les municipalités et au présent rapport.

Documentation

1. Chief Corporate Services Officer’s report dated 20 September 2005
(ACS2005-CRS-RPM-0032).

Report to/Rapport au:

Corporate Services and Economic Development Committee/

Comité des services organisationnels et du développement économique

and Council/et au Conseil

20 September 2005 / le 20 septembre 2005

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

Chef des Services Généraux

Contact Person/Personne ressource : Douglas McCaslin, Manager, Real Estate Services

Real Property Asset Management/Gestion des actifs des biens immobiliers

(613) 580-2424 x22595

Somerset (14)

Ref N°: ACS2005-CRS-RPM-0032

SUBJECT:

OBJET:

LEASE RENEWAL – 370 CATHERINE STREET, OTTAWA AND SUB-LEASE RENEWAL – 560 ROCHESTER STREET, OTTAWA

RENOUVELLEMENT DE BAIL – 370, RUE CATHERINE, OTTAWA ET RENOUVELLEMENT DE SOUS-BAIL – 560, RUE ROCHESTER, OTTAWA

REPORT RECOMMENDATIONS

That the Corporate Services and Economic Development Committee recommend Council:

1. Approve the renewal of a lease with Oxford Properties Group Inc. for 59,653 rentable square feet of office space at 370 Catherine Street for 10 years commencing 1 November 2006 and terminating on 31 October 2016, at an annualized cost of $ 1,509,056, plus GST.

2. Approve the renewal of a sub-lease with Nortel Networks for 9,076 rentable square feet of office space at 560 Rochester Street for 5 months commencing 1 May 2006 and terminating on 29 September 2006, at a cost of $72,155, plus GST.

RECOMMANDATIONS DU RAPPORT

Que le Comité des services organisationnels et du développement économique recommande au Conseil :

1. d’approuver le renouvellement d’un bail avec Oxford Properties Group Inc. pour une superficie louable de 59 653 pieds carrés d’espace de bureau au 370, rue Catherine, pour une durée de 10 ans commençant le 1^er novembre 2006 et se terminant le 31 octobre 2016, à un coût annualisé de 1 509 056 $, TPS en sus.

2. d’approuver le renouvellement d’un sous-bail avec Nortel Networks pour une superficie louable de 9 076 pieds carrés d’espace de bureau au 560, rue Rochester, pour une durée de cinq mois commençant le 1^er mai 2006 et se terminant le 29 septembre 2006, à un coût de 72 155 $, TPS en sus.

3. à l’approbation du renouvellement du bail, de désigner le 370, rue Catherine, comme immobilisation municipale aux fins de l’administration générale d’Ottawa comme l’autorise l’article 110 de la Loi sur les municipalités et comme le définit le Règlement 46/94 de l’Ontario, et que cette désignation soit mise en œuvre par la voie d’une entente entre la Ville et Oxford Properties Group Inc., et par la présentation au Conseil d’un règlement, conformément aux exigences de la Loi sur les municipalités et au présent rapport.

BACKGROUND

On 14 June 2000, Regional Council received a confidential report that outlined the Employment and Financial Assistance (EFA) Branch’s strategy for its Employment and Financial Assistance Centres (EFAC). A subsequent report covering specific recommendations for 370 Catherine Street was approved on 09 August 2000.

The Branch’s strategy was to decrease from nine (9) to four (4) Employment and Financial Assistance Centres located in close proximity to the transitway throughout the City, that offered a range of financial and employment services and programs (one point of service). The strategy was approved in 2001.

The East, West and South EFA Centres have already undergone consolidation and redesign. Once the lease at 370 Catherine Street has been renewed, the Branch’s strategic direction of providing a fully integrated, employment focused service delivery model will be completed.

The Employment and Community Programs Division of the EFA Branch, is currently located at 560 Rochester Street. This space was recently leased to accommodate the introduction of the Ontario Works application and screening function (City Council 25 May 2005, Agenda 34, HRSS Item 3). The staff from 560 Rochester will move to the Catherine location thereby finalizing the consolidation.

DISCUSSION

The lease proposal for 370 Catherine is for a 10-year term, which is to commence 1 November 2006. However, as a condition of the current lease, the City must notify the Landlord of its intention to renew by 31 October 2005.

The lease proposal is for an annualized rent of $1,509,056, ($14.00/sq.ft. plus operating costs and taxes) for the first five years. The rent increases to $1,601,007, ($16.00/sq.ft. plus operating costs and taxes), in the second five-year term. The particulars of the lease proposal are outlined on Annex “A” of this report.

As part of the lease proposal the Landlord will be responsible for completing significant work to the building. This work includes replacing all the windows and mounting systems, replacing the heating and cooling system, modifying the duct system, replacement or modification of the elevator, and numerous other items. The estimated cost of this work is $1.4M. The Landlord is also providing an allowance of $600,000 to complete the necessary tenant fit-up. The lease provides the City an option to extend occupancy for an additional term of either 5 or 10 years.

The Landlord will also be providing swing space, at its cost, during the November 2005 to August 2006 construction period.

An independent report of market base rental rates, additional rent (i.e. operating costs and taxes), parking arrangements and tenant inducements for comparable floor space was completed. This report confirms that the lease proposal is reasonable and within market rates for this type of property.

A review of available lease space within the search area was conducted. As a result, the renewal of the existing lease is the recommended option.

The five-month lease extension at 560 Rochester will accommodate staff until the Landlord completes the tenant fit-up at 370 Catherine. The extension is based on a gross rental rate of $19.08/sq.ft. for the 9,076 sq. ft. of space (total rent $72,155).

In order to minimize cost to the City, it will be necessary to ensure that 370 Catherine is treated as a Municipal Capital Facility as set out in Section 110 of the Municipal Act and as defined in Ontario Regulation 46/94 for property tax purposes.

CONSULTATION

A lease search was conducted with realtors and owners of commercial properties that resulted in this recommendation.

The local Ward Councilor has been consulted in this matter.

FINANCIAL IMPLICATIONS

Funds for the 2006 portion (November and December) of the Amending Lease Agreement associated with 370 Catherine Street and the lease renewal at 560 Rochester Street are available within the existing EFA budget and will not add additional budget pressures. In 2007, the annualized impact of and rent increases will be absorbed through savings arising from future branch initiatives and partnerships.

The tenant fit-up work to be completed will be funded from the Landlord allowance of $600,000 and $1.4 million from the Council approved 2005 Budget - Capital Project Relocation District Office – Central.

DISPOSITION

Corporate Services Department - Legal Services Branch to finalize the lease renewal.

Annex “A”

Rent (years 1 to 5)	Area (ft.²)	Rental Rate	Annual Cost
1^st, 2^nd & 3^rd floor	44846	$14.00¹	$ 627,844.00
Lower level	14807	$ 6.00²	$ 88,842.00

Operating Expenses and Property Taxes:		$11.02	$ 662,770.00


Parking:	Stalls	Rate (monthly)	Annual Cost
370 Catherine	44	$60.00³	$ 31,680.00
350-360 Catherine	96	$85.00⁴	$ 97,920.00

Total Annualized Lease Cost:			$ 1,509,056.00⁵

Concessions from Landlord:
Tenant allowance for fit-up	$ 600,000.00
Landlord work (estimate)	$ 1,400,000.00
Moving allowance	$ 30,000.00

Other:
A further lease extension of 5 years or 10 years is available

¹ rent increases to $16.00/ ft.² for second 5-year term

² rent increases to $ 6.50/ ft.²for second 5-year term

³ rent increases to $65.00 per month for second 5-year term

⁴ rent increases to $95.00 per month for second 5-year term

⁵ increases to $1,726,000.00 per year for second 5-year term (3% inflation factor applied)

That Council:

1. Approve the renewal of a lease with Oxford Properties Group Inc. for 59,653 rentable square feet of office space at 370 Catherine Street for 10 years commencing 1 November 2006 and terminating on 31 October 2016, at an annualized cost of $ 1,509,056, plus GST.

2. Approve the renewal of a sub-lease with Nortel Networks for 9,076 rentable square feet of office space at 560 Rochester Street for 5 months commencing 1 May 2006 and terminating on 29 September 2006, at a cost of $72,155, plus GST.

20 September 2005 / le 20 septembre 2005

LEASE RENEWAL – 370 CATHERINE STREET, OTTAWA AND SUB-LEASE RENEWAL – 560 ROCHESTER STREET, OTTAWA

REPORT RECOMMENDATIONS

That the Corporate Services and Economic Development Committee recommend Council:

1. Approve the renewal of a lease with Oxford Properties Group Inc. for 59,653 rentable square feet of office space at 370 Catherine Street for 10 years commencing 1 November 2006 and terminating on 31 October 2016, at an annualized cost of $ 1,509,056, plus GST.

2. Approve the renewal of a sub-lease with Nortel Networks for 9,076 rentable square feet of office space at 560 Rochester Street for 5 months commencing 1 May 2006 and terminating on 29 September 2006, at a cost of $72,155, plus GST.

BACKGROUND

DISCUSSION

An independent report of market base rental rates, additional rent (i.e. operating costs and taxes), parking arrangements and tenant inducements for comparable floor space was completed. This report confirms that the lease proposal is reasonable and within market rates for this type of property.

Rental Rate

Annual Cost

Stalls

Annual Cost