Government Operations Committee on March 20th, 2007

[Mary Chaput]

And I haven't asked in every case whether this is triple or quadruple net.

[Chris Warkentin, Conservative, Peace River, AB]

My understanding is that a triple net lease would leave the upkeep to the tenants, to ensure it's returned in the same condition as it was leased in.

[Mary Chaput]

Okay.

[Chris Warkentin, Conservative, Peace River, AB]

That's my understanding, but I may be wrong. For the most part, that's the general understanding of a triple net.

If the department decides to do something different or get out of the business of maintaining buildings, I guess they would have to look for other ways to lease buildings. I was wondering if there is any policy to review the option of triple net leasing or any type of other leases. There's no policy discussion at this point?

[Mary Chaput]

No.

[Chris Warkentin, Conservative, Peace River, AB]

In terms of the lease length, you just mentioned in your speaking notes that some programs were only three years or two years long, whatever the case may be. I know the department is also looking to proceed to longer leases. I'm wondering how the different departments approach this if they have this desire to have longer leases, but they have programs that are shorter term. Is there still this desire to have longer leases, with the intent that the lease may be filled by some other department? Has the federal government looked at ways to foresee the possibility of what things may look like down the road so we can sign lower leases, with the advantage of, hopefully, getting something for a lower cost, and take the risk that after three years there would be somebody else to take that space?

[Mary Chaput]

I'm not aware of a conscious decision to pursue longer leases as a matter of course. That said, I know that Public Works negotiates the lease terms and conditions on a case-by-case basis, bearing in mind the client's needs. Now, if a client was only going to be in a building for three years, let's say, Public Works might enter into a longer arrangement with a landowner on the understanding that in the entirety of their portfolio, they have so many puts and takes. In Ottawa, that strategy would work. In the regions, that strategy would be much less practised, because you don't have the same ebb and flow.

[Chris Warkentin, Conservative, Peace River, AB]

Right, and I can appreciate that. Thank you.

[The Chair, Liberal, Diane Marleau]

We'll go to Mr. Turner, and we're down to five minutes.

[Garth Turner, Conservative, Halton, ON]

Yes, thank you.

I want to go back for a bit to these test market buildings, these nine buildings you're talking about, and the RFPs, which the parliamentary secretary reminds me are going to market at once in various markets in various parts of the country. Have we identified these nine buildings?

Okay, great. I'm sorry I'm not quite up to speed, but I have some questions.

So they are going to market at once. Who's marketing the buildings? Have we determined that?

[Mary Chaput]

No, sir.

[Garth Turner, Conservative, Halton, ON]

When is that determination likely to be made?

[Mary Chaput]

PW would have that information. I don't have that information.

[Garth Turner, Conservative, Halton, ON]

But they haven't made that choice. Who is marketing the buildings?

[James Moore, Conservative, Port Moody—Westwood—Port Coquitlam, BC]

The Department of Public Works...[Inaudible--Editor]...real estate. There's a group of real estate people there.

[Garth Turner, Conservative, Halton, ON]

Right. I'm just trying to figure out what commercial group it is. Has that been determined?

[James Moore, Conservative, Port Moody—Westwood—Port Coquitlam, BC]

It hasn't been determined. Each of the buildings will come out individually. It's not like one day all nine will happen. Each one will come up as each one is prepared to enter the market. Each RFP will be slightly different, given local community concerns and current leaseholder concerns within each of the buildings.

[Garth Turner, Conservative, Halton, ON]

So the marketing is done on a local, individual basis, selected by regional companies that are commercial real estate brokers. Is that correct?

[James Moore, Conservative, Port Moody—Westwood—Port Coquitlam, BC]

I can get back to you on that. I don't know.

[Garth Turner, Conservative, Halton, ON]

Okay, I'd be interested in knowing that. I'd also be interested in knowing who's appraising these buildings.

[Mary Chaput]

My understanding is that the banks will do the appraisals, and--

[Garth Turner, Conservative, Halton, ON]

Have the appraisals been done?

[Mary Chaput]

I would assume so, but I don't know.

[Garth Turner, Conservative, Halton, ON]

There was some talk that they were over-appraised. Or was it under-appraised?

Do we have those appraisals? Can we get those appraisals?

[Mary Chaput]

That would be a question for Public Works. I don't know, because I don't hold that documentation. But if I may, coming back to your previous question, the RFP that PW put out asked bidders--and the banks ultimately won the RFP process--to do two tasks: do research on what would be an alternate accommodations strategy or method of managing the accommodation load that PW carries, and then depending on approvals in the system, do follow-on work with PW. That follow-on work, assuming approval flows, will lead up to the bidding process.