Saskatchewan Liquor and Gaming (SLGA) and NORAD Enterprises Ltd. (NORAD) have leased the subject property for several years with the most recent lease expiring on October 30, 2021 and they would like to continue to lease this space.
When considering the lease of City-owned property, standard procedure for Administration is to ensure that the property is made publicly available and leased at market value. In this case, the space is being provided without a public offering and at less than fair market value, which requires City Council approval. Administration is asking City Council to approve the terms and conditions of the proposed lease agreement with SLGA and NORAD for this space.
Financial Impacts
The estimated market value of the lease area is approximately $30,575 annually. The proposed agreement will have a starting rate of $26,010 for the first year and have an annual 2 per cent increase in order to gradually bring the rate closer to market value. This gradual increase is proposed due to the current pandemic and the very recent lifting of restrictions that previously hampered the ability for SLGA and NORAD to operate at full capacity. Upon each renewal of the lease, the rate will be reviewed, and a new market rate will be mutually agreed to. SLGA and NORAD are also responsible for all their own operating costs as well as property tax of approximately $8,600 annually.
Environmental Impacts
City Council set a community goal for the City of achieving net zero emissions and sourcing of net zero renewable energy by 2050. In support of this goal, City Council asked Administration to provide energy and greenhouse gas implications of recommendations so that City Council can evaluate the climate impacts of its decisions. The recommendations in this report have limited direct impacts on energy consumption and greenhouse gas emissions.
City Council could choose not to provide the lease to SLGA and NORAD. This is not recommended as this property is necessary for the operation of both businesses as well as access to delivery bays on the SLGA building. The area required for an access bay should be twice the length of the delivery truck. A typical 5-ton tandem delivery truck is 10m long requiring 20m of access from the bays. SLGA’s property line is approximately 14m from their delivery bay, therefore not providing the recommended area for access to the bay.
Public notice is required for City Council to approve the lease of City-owned property without public offering and below market value. Notice regarding this proposal has been advertised in accordance with public notice requirements.
SLGA and NORAD will be informed of any decisions of the Executive Committee and City Council.
SLGA has leased the subject property since 1976. During a renewal of the lease in 2007, SLGA indicated that the adjacent property owners (NORAD) tenants have enjoyed the benefit of using the same lands for their customer parking. At that time, it was agreed to enter into a tri-party agreement between the City, SLGA and NORAD that provided equal responsibility for all costs associated with the lease and operating expenses to the two lessees.
SLGA and NORAD leased the property from 2007 until October 31, 2010 and then a subsequent agreement from November 1, 2010 to October 31, 2020. In 2020 the City agreed to a one-year lease due to the impacts of the COVID-19 pandemic.
The subject area is approximately 17,158 square feet and is outlined in the attached Appendix A. The subject property is encumbered by a water line running diagonally along the length of the property and is considered undevelopable as a stand-alone lot. The property is utilized as a parking lot that services both lessee’s adjacent businesses, as well as provides access to necessary loading bays. The lease of this property to any other entity other than the two proposed lessees would negatively impact the lessee’s ability to operate their adjacent businesses.
The proposed lease is for an initial term of five years commencing on November 1, 2021. The lease will also provide for two options to renew for an additional five years each. The proposed rate is below market value as the lessee’s continue to be impacted financially by the pandemic. The proposed agreement will have a starting rate of $26,010 for the first year and have an annual 2 per cent increase in order to gradually bring the rate closer to market value. Upon each renewal of the lease, the rate will be reviewed, and a new market rate will be mutually agreed to.
The recommendations in this report require Council approval.
Respectfully Submitted, Respectfully Submitted,
{Signature}
Prepared by: {ResUserUser1:First Last, Title}