Evidence of meeting #53 for Government Operations and Estimates in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was lease.
A recording is available from Parliament.
NDP
Peggy Nash NDP Parkdale—High Park, ON
So once the leasing agreement is in place, the new owner really doesn't have to worry about finding new tenants. They have pretty secure tenants that are going to be in these buildings.
Managing Director, Real Estate Group, RBC Capital Markets
That is correct. That would be an important characteristic of the investment. And when we talk about maximizing value, that is an important part of doing that.
NDP
Peggy Nash NDP Parkdale—High Park, ON
So it would be the whole package.
The figure that's out there is $1.5 billion. Is that what your understanding is?
Managing Director, Real Estate Group, RBC Capital Markets
I really can't comment on value. It's not in the interest of the Canadian taxpayer to have us talking about value.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Just in terms of normal leases—because you're telling us it's confidential what these particular arrangements are--is it normal in this situation that the operating costs and taxes and expenses involved would be borne by the tenants, the party leasing the building? You talked about a roof being fixed, or maybe a furnace or whatever. Are those costs normally borne by the tenants of the building?
Director, Real Estate, BMO Capital Markets
The quick answer is yes. There is a long answer that does stem back to this whole issue, which is, as you probably know, the government has chosen over the years to not carry a number of those costs. That's part of the reason as tenants they've seen certain buildings deteriorate, because there is no ability for landlords to recover--
NDP
Peggy Nash NDP Parkdale—High Park, ON
So the government will still have those costs, except they'll be paying them as a tenant rather than an owner.
Director, Real Estate, BMO Capital Markets
But at the same time, they'll be certain that the repairs and maintenance are being carried out, in which case the building will be maintained to the standards their employees require.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Again, for the owner of the building there is no risk on that, because the costs, the operating and maintenance costs, will all flow through, paid for by the tenants.
Director, Real Estate, BMO Capital Markets
There will be certain risks. I can't be too specific, but the lease does transfer certain building risks to the landlord. That is part of the structure and strategy behind the transaction.
Liberal
Raymond Simard Liberal Saint Boniface, MB
Thank you very much, Madam Chair.
I welcome the witnesses today.
My first question is with regard to the process. You spoke earlier of a $300,000 advisory fee. I'm just wondering if you were hired to provide an analysis of whether or not we should actually sell the buildings or whether you were told we are selling the buildings so please tell us how to do this, advise us how to do it. Because those are two different things.
Managing Director, Real Estate Group, RBC Capital Markets
It was more the former.
Managing Director, Real Estate Group, RBC Capital Markets
It was the former. It wasn't even limited to whether sale and leaseback was a good idea. It was quite open on a variety of different alternatives that we reviewed in the advisory stage. Sale and leaseback was just one of many alternatives. We found it to be suitable for only a small number of the buildings under consideration.
Liberal
Raymond Simard Liberal Saint Boniface, MB
And you made the recommendation that nine of them should be sold.
Liberal
Raymond Simard Liberal Saint Boniface, MB
Could you tell me if there's going to be a reserve bid? It seems to me there is a price under which we wouldn't be willing to sell. Does that normally happen in this kind of huge sale?
