Evidence of meeting #19 for Public Accounts in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was bonaventure.
A recording is available from Parliament.
12:05 p.m.
Liberal
Borys Wrzesnewskyj Liberal Etobicoke Centre, ON
Thank you, Chair.
Mr. Polachek, I'm looking at the table for the tendering. Your initial gross rental rate at $430 is not quite but almost double what the other gross rental rates were. How confident were you going into the tender that you would be able to maintain this lease?
12:05 p.m.
As an Individual
First of all, as you correctly pointed out, the transaction we ultimately concluded was very different from the one we tendered on.
How confident? We had no special confidence other than that was the pricing we felt was appropriate for this building in its market positioning at the time.
12:05 p.m.
Liberal
Borys Wrzesnewskyj Liberal Etobicoke Centre, ON
Mr. Polachek, you seem to be a pretty savvy businessman. You knew that there were 300 employees there. You know that it's difficult, perhaps even more so, when you get into public servants, because there is a political aspect to it. And moving 300 employees is not an easy process. There are costs involved, and not just financial costs.
When I look at this number of $430, which you initially quoted, it seems so out of line with the other numbers. Did you initially figure that you would cost some of that discomfort into your particular price because you felt pretty confident that you would win the tendering process?
12:05 p.m.
As an Individual
Actually, it was quite the contrary. The tender requested of us and the other bidders positioned our building as if we had no advantage, because we were asked to rip everything out and start all over. In fact, any confidence we may have had was not related to this tender. You could say that we had, in a way, a competitive disadvantage, because the natural advantage of not investing in the fit-up in a renewal situation was not there.
12:05 p.m.
Liberal
Borys Wrzesnewskyj Liberal Etobicoke Centre, ON
During the tendering process, did you endeavour to find other potential tenants for that space? It's a large space.
12:05 p.m.
Liberal
Borys Wrzesnewskyj Liberal Etobicoke Centre, ON
I'm talking about the time of the tendering process and the time leading up to the conclusion of the initial leasing contract.
12:05 p.m.
As an Individual
From memory, the space was expiring at the end of March 2003. We're talking about a period of time in early 2002. Given that this was roughly a 60,000-square-foot tenant, certainly that would be within the window or corridor of when we'd be looking at re-leasing the space if we were not successful here.
To answer, when we initially were notified in early April 2002 that we were not selected, we went to the marketplace to market and advertise this space as being available, the three contiguous floors, specifically to the brokerage community.
12:05 p.m.
Liberal
Borys Wrzesnewskyj Liberal Etobicoke Centre, ON
But prior to being informed that you would not be the landlord going forward, were any efforts made to find potential clients for that space should you not be successful?
March 4th, 2008 / 12:05 p.m.
As an Individual
I can't recollect whether efforts were made at that time, but certainly a year prior to expiry, which dovetailed with that April notice, would have been the time when we would have commenced our efforts to re-lease the space.
12:10 p.m.
Liberal
Borys Wrzesnewskyj Liberal Etobicoke Centre, ON
Yet you have no recollection of any part of that process.
12:10 p.m.
As an Individual
I have a lot of recollection. In fact, I not only recollect it, but I reviewed the correspondence in the file. I spoke to our head of leasing, who remains our head of leasing at the company. And I think I have a fairly good understanding of what happened. I can't specifically comment on the initiatives we took to re-lease the space during what was really a very short period of time, from April 1 or April 2, 2002, until the second, third, or certainly fourth week in April, when we'd already had a meeting with Public Works officials regarding a possible renewal.
12:10 p.m.
Liberal
Borys Wrzesnewskyj Liberal Etobicoke Centre, ON
When the communication arrived that the government was not going to renew this large amount of space, what sorts of emotions went through your head?
12:10 p.m.
As an Individual
You know, it's hard to comment today on emotions relating to the period, but certainly, if that experience happened today, there would be a gulp, and the gulp is that we have an important block of space that we now have to re-lease.
The good news, from our point of view, if you'll permit me, was that this space was among the most prestigious in the building. It is floors 38, 39, and 40.
12:10 p.m.
Liberal
Borys Wrzesnewskyj Liberal Etobicoke Centre, ON
I find it peculiar, because as a businessperson, one would assume that you would take a look at various potentialities and cover off for them, especially when you have 60,000 square feet at risk. The appearance of the numbers seems to indicate a tremendous amount of confidence that you in fact would maintain the lease. You just said that there was a big gulp when the communication came. You hadn't prepared for it. Besides going to the brokerage community, did you have any communication with any elected officials?
12:10 p.m.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
Thank you, Mr. Chairman.
Madam Cochrane, you made a couple of points. One, you said that at no point in time did you ever consider an intervention by the minister an inappropriate intervention. Does that same statement apply to the leasing of Place Victoria, about which you had a letter from the Secretary of State, Mr. Drouin, saying rework the whole thing? Is that not an inappropriate intervention?
12:10 p.m.
As an Individual
That was not how we viewed it. We viewed it as a strong statement of a client's wishes. It was not taken to be direction. Had we not been able to achieve the result we achieved with the lower rent for Place Victoria, we would not have been able to respond favourably.
12:10 p.m.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
By virtue of the fact that it wasn't a direct order to you, you did not consider it an inappropriate intervention?
12:10 p.m.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
Secondly, you said you took this whole revamping of the process as a whole new transaction. You're familiar with the rules of contracting, for getting space, under which, of course, it goes out for competitive bids. For this new transaction, as you describe it, you totally ignored, waived, or abandoned every rule in the book about competitive bidding. Correct?
12:10 p.m.
As an Individual
In fact that's not true, because competitive bidding is not necessarily the presumption if there is an economic advantage to the crown in negotiating an increased lease period in situ. It means that you don't have the cost of moving. It means that you can deal with the issues around lost productivity of work and so forth. It was quite consistent with the leasing principles that were in effect at the time.
