Evidence of meeting #7 for Government Operations and Estimates in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was transaction.
A recording is available from Parliament.
4:15 p.m.
Conservative
Daryl Kramp Conservative Prince Edward—Hastings, ON
Thank you, Madam Chair.
Mr. Minister, if I could, I would just like to clarify what I think is a misunderstanding by Mr. Holland.
It was my understanding that when Mr. Turner, his predecessor on this committee, was here and requested information, it was prior to the closing of the deal. It was information that would obviously conflict with the confidential terms of the RFP. I can recall both you and professional witnesses stating here that obviously the information couldn't be released at the time because it would have put the government in serious jeopardy and conflict.
Now, of course, we have a deal that has been consummated, and information has been requested by this committee. Could you tell us just how long ago your department or your ministry received a request for specific information regarding this file?
4:20 p.m.
Minister of Public Works and Government Services
I'll let Tim or François answer that.
To be fair, it wasn't just Mr. Turner. The last time I came, several of the folks on this side were asking to see the confidential information memo. I indicated at the time that had we disclosed it, given the information about not just.... It wasn't just the information memorandum people wanted; it was the study by RBC and BMO, which obviously had delicate information one wouldn't want to share with the rest of the bidding world. There were valuations and things of that nature that I think people objectively understood we couldn't disclose.
With respect to the specific dates when documents were requested from our office, I'll ask François or Tim to respond.
4:20 p.m.
Deputy Minister, Department of Public Works and Government Services
Madam Chair, my understanding is that we provided a reply to the latest request--essentially the November 26 motion--on December 5. If I set aside what we provided on December 5, you can expect another shipment--I spoke of 2,000 pages--when they're translated. The translation is done on a priority basis; I ensured that myself. When that comes, you will have final delivery of the information the committee requested.
Tim, is that accurate?
4:20 p.m.
Assistant Deputy Minister, Real Property Branch, Department of Public Works and Government Services
That's correct.
4:20 p.m.
Conservative
Daryl Kramp Conservative Prince Edward—Hastings, ON
Thank you for your efficiency to date on this file, then.
Mr. Minister, timing is a crucial element in life so many times--not just on a real estate deal, but in many occurrences in life: family, business, whatever. In particular, I'm concerned as to the marketability of these particular buildings at this particular time.
I'm wondering if you could give us some assessment of the overall real estate market and whether the department felt it would be an opportune time to maximize any potential out of these buildings.
4:20 p.m.
Minister of Public Works and Government Services
Obviously, I said the timing was excellent. I'm not the only one who said this; the Ottawa Citizen said it, the Globe and Mail said it, and everybody who looked at this objectively said it. I'm proud of that.
Obviously I couldn't predict the liquidity crisis. When we considered this transaction, the real estate market was vibrant and dynamic. I've been around these markets before; they don't always stay that way for a very long period of time, and they had been that way for several years already, so I was keen on doing the homework, but also on going to the market as soon as everybody agreed it was something we should be doing--i.e., testing this in an auction. I wanted to go to the market as soon as possible and circle a price with a vendor.
Obviously the liquidity crisis arrived when it arrived, and it arrived a few weeks after we actually signed a memorandum of understanding with Larco.
Don't take my word for it; you can ask experts in this field: if we had run the auction only a month or two months later, we would not have had the proceeds, or at least considered the proceeds, that are on the table right now. That's for sure.
4:20 p.m.
Conservative
Daryl Kramp Conservative Prince Edward—Hastings, ON
Thank you.
Mr. Minister, sitting here with the committee last week, we had...not a one-man band, but a witness advise us of all the ills of this deal. His credentials were, in his mind, impeccable. Of course, he didn't have any formal experience in the real estate field or marketability or financial background for that particular thing, but in his opinion this was not a good deal.
I'd like to know what form of professionalism would have existed and potentially how many people, bodies, agencies, or organizations would be involved in assessing this type of transaction on behalf of the government, whether it was BMO, the bank, the Deutsche Bank report, or the internal staffing. I realize you probably wouldn't have access to those numbers, but would it be fair to say there was a sufficient or a huge amount of professional advice poured into this assessment?
4:25 p.m.
Minister of Public Works and Government Services
Yes, absolutely, and once we had the Bank of Montreal and Royal Bank report, the government agreed to test the marketplace, but at the same time insisted that we get a third-party fairness opinion from somebody who wasn't involved in preparing the first report--somebody who had nothing to gain, whether it was a fair transaction or not. That was Deutsche Bank's role.
There were literally hundreds of people. All these banks have large real estate departments. They do this for a living. From the outside there were hundreds of people. From the inside it wasn't only Public Works; it was the central agencies, the Privy Council, Finance, Treasury Board. All this had the proper scrubbing and vetting, I can assure you, until we finally decided to go ahead and conclude the transaction with Larco.
4:25 p.m.
Liberal
4:25 p.m.
Liberal
Omar Alghabra Liberal Mississauga—Erindale, ON
We wish we could see you every day in the House, but we'll see what the next election brings.
Minister, you probably remember that chapter 7, I think, of the Auditor General's report in 2007 had a critical observation of leasing practices of Public Works. Do you remember that report?
In fact, that report was critical of some leasing contracts. Wasn't it critical? I see you're shaking your head.
4:25 p.m.
Minister of Public Works and Government Services
I'm looking forward to her writing a chapter about us that won't be, but it's going to come; it's going to come.
4:25 p.m.
Liberal
Omar Alghabra Liberal Mississauga—Erindale, ON
She was critical first about the coordination between various departments. Also, sometimes the department signed leases and contracts when it made more sense for the department to purchase the building than to lease it for such long-term contracts.
What I'm seeing here is exactly the reverse. In fact, we're perpetuating that pattern that I felt the Auditor General was very critical of.
Can you answer this question first? Is this transaction for property management's sake, or is it for liquidating our assets?
4:25 p.m.
Minister of Public Works and Government Services
It's to basically transfer the ownership risk to the private sector, where it should reside in this type of industry.
With respect to the Auditor General, I would ask you to go back and find a sentence in there that says the government should own all of its real estate. That's not what she said. She identified one or two; they were one-offs.
I agree with you, it was critical. She identified one or two situations in which, if you looked at the behaviour of the department over several years.... That was long before I showed up, and I'm not being partisan here; it's just the reality.
She put all the numbers together, looked at the type of deal we got as a lessee, went into the market, looked at how this building had transacted in the marketplace, compared both, and said, “You know what? You'd be better off owning it.”
But we don't want to own. You don't want to own more bricks and mortar. Those were one-offs. She used specific data points with respect to those transactions when she felt the leases that had been signed were not favourable to the taxpayer.
4:25 p.m.
Liberal
Omar Alghabra Liberal Mississauga—Erindale, ON
Thank you.
You would agree that the public sector has the responsibility towards its constituents to behave sometimes differently from the private sector, and you would agree that the reason any investment company would purchase this property from the federal government is that they're going to make money off it, right?
