HomeMy WebLinkAboutCAO-16-016 - Animating 44 Gaukel 2nd Floor for Startups and the Arts
REPORT TO: Finance and Corporate Services Committee
DATE OF MEETING: Monday May 2, 2016
SUBMITTED BY: Brian Bennett, Manager Business Development, Economic
Development, 519-741-2200ext 7230
PREPARED BY: Thom Ryan, Sr. Business Development Officer, Economic
Development, 519-741-2200ext 7826; Emily Robson, Program
Coordinator, Arts and Culture, Economic Development, 519-741-2200
ext 7084
WARD (S) INVOLVED: Ward 9
DATE OF REPORT: April 26, 2016
REPORT NO.: CAO-16-016
Animating 44 Gaukel 2nd floor for startups and arts and culture
SUBJECT:
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RECOMMENDATION: That the Mayor and Clerk be authorized to sign an agreement for
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the City of Kitchener to lease the 2 floor of 44 Gaukel Street to the Accelerator Centre
and ArtsBuild Ontario, to create a shared tech startup and arts and culture space, with
the terms of the lease satisfactory to the City Solicitor.
BACKGROUND:
The 2nd floor of the City-owned building located at 44 Gaukel Street (10,243 square feet), has
been vacant for more than a year following the bankruptcy of Everest College. A building
assessment is to be completed over the next year to determine the viability and future use of
the entire building and site beyond 2017.A building assessment completed in 2011 concluded
that thelifecycle for replacement of the boiler is 2017. The boiler is on a regular maintenance
program and fully inspected annually.
The first floor is leased to Conestoga College, which is subleasing space to the University of
Waterloo Critical Media Lab, Wilfrid Laurier University and more recently, the Accelerator
Centre (AC). The AC tenants in the space are rapidly growing in employment size. The lease
for the first floor expires August 31, 2017.
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It is unlikely that a private tenant will assume leasehold costs for a limited lease for the 2 floor
from now through December 2017, rendering the space unusable until the City determines its
preferred strategy for disposition or use of the space and/or property.
Currently, the City of Kitchener incurs approximately $30,000 per year for Common Area
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Maintenance (CAM) fees to maintain a vacant 2 floor.
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
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The Accelerator Centre (AC)
The AC is a non-profit organization with a network of facilities located in the David Johnston
Research Park and Stratford, dedicated to developing and commercializing technology
startups. The AC provides an essential combination ofin-house mentorship, educational
programming, facilities, networking, access to funding and facility services, with a goal of
building and providing scale to successful companies. The AC has provided startup services
for ten years to more than 300 tech startups, with more than 100 startups in residency today.
The AC is funded by its own operations, the University of Waterloo, City of Waterloo, and
through federal and provincial programs.
ArtsBuild Ontario
ArtsBuild Ontario is dedicated to realizing long-term solutions to building, managing and
financing the sustainable arts facilities needed in Ontario communities. Together with industry,
non-profit and government partners, ArtsBuild jointly and cost-effectively develops and delivers
innovative tools, services and resources to help over 700 arts organizations across Ontario
construct and operate the facilities they need. ArtsBuild is funded by the federal government
and Ontario Trillium Foundation.
REPORT:
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The vacant space on the 2 floor of 44 Gaukel presents an unique opportunity for a pilot
project to meet some immediate demands in the downtown core: turning an underutilized, City-
owned space into an animated, thriving and productive space, benefiting startups and artists:
creating new ideas, employment, economic activity, building new capacity, and setting the
stage for future investment in Downtown Kitchener.
Due to the potential limited life span of the boilers, and the desire to keep options open beyond
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the short term, leasehold improvements have been kept to a minimum to bring the 2 floor up
to building code for occupancy and minimum office use requirements.
Demands not being met
Since the AC began moving startups to downtown Kitchener, it has not been able to meet the
demand of AC clients wishing to locate in an urban environment. The startups in downtown
Kitchener have experienced rapid employment growth on the
first floor of 44 Gaukel with more startups interested in relocating downtown. In addition, the
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2 floor of 44 Gaukel is particularly well-suited to lab and workshop spaces, with an in-demand
mix of wash sinks, workbenches, and office space which is different from other ACfacilities
and attractive to startups in the Internet of Things (IoT), micro-machine and machine
technology space.
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A recent needs analysis conducted by ArtsBuild Ontario in participation with the City of
Kitchener and local arts and culture groups (e.g. JM Drama, MT Space, Globe Studios) has
identified an immediate and critical demand for space, as follows:
Performing arts rehearsal space
Artist studio and workshop space
Classroom and learning amenities
A place for artists to converge and collide
Clean, dry, secure storage space
Administrative offices for festivals and other non-profits
Meeting rooms
The preferred location is downtown, on public transit, accessible, secure, and at a reasonable
cost to end users.
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44 Gaukel, 2 Floor
The City of Kitchener would enter into a 4 year lease (with the option to terminate should the
boilers fail) with the AC (and sublease to ArtsBuild Ontario) for the 2nd Floor of 44 Gaukel
Street, for the purpose of creating a shared tech startup/arts and culture use. The lease would
outline terms to ensure an equal share of space for the AC and ArtsBuild.
The AC and ArtsBuild Ontario would then sublease space/rentals to startups and arts
organizations at market rates, and retain revenues from those activities to offset costs of
managing andprogramming the space.
In exchange for managing the space, the AC will pay the incremental CAM fees as rent and
will incur management, programming and event costs to operate the space. An estimated
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operating budget for the 2 floor, including administrative, maintenance, occupancy costs and
programming costs, is estimated to be $185,000 in the first year and $230,000 in the second
year (at expected full occupancy).The preliminary budget indicates an operating shortfall
which will be reduced through cost cutting, and applying for grants, sponsorships and
donations.
Table 1. Vacant vs. Occupied Costs
VacantOccupied
Expenses
Common Area Maintenance Fees(CAM)-$30,000$45,000
annual
Leasehold Improvementsone time$0$25,000
Property Tax-annual$0$30,000
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The CAM expenses are $30,000 while the property is vacant and expected to be $45,000
when occupied a difference of $15,000. Accordingly, we are proposing the AC pay the
difference of $15,000 to the City annually in the first and second years, increasing to $17,500
in the third year and $20,000 in the fourth year.
The City would provide the AC with a $50,000 grant to offset the establishment of the AC
downtown at 44 Gaukel, including start-up administration, programming, marketing and shared
space expenses, to be paid from the Economic Development Reserve.
The City must undertake some initial leasehold improvements, up to $25,000 to remediate the
space (e.g. removal of sensitive material left by the previous tenant, cleaning, painting,
repairs), bring the space up to code, and make it ready for occupancy. In light of the short term
nature of the lease, every opportunity to minimize leasehold costs will be undertaken
The City will work together with the AC and ArtsBuild Ontario to seek and apply to other
government and grant-making organizations.
In summary the following would be expensed from the Economic Development Reserve fund:
Exhibit 2. Condensed Table of Costs
Year 1Year 2
Year 3Year 4
Revenues
CAM paid to City$15,000$15,000$17,500$20,000
Expenses
CAM$45,000$45,000$45,000$45,000
Property taxes$30,000$30,000$30,000$30,000
Leasehold improvements (one time)$25,000
Start-up costs (one time)$50,000
Total$135,000$60,000$57,500$55,000
Lease Terms
The City would enter into a 4year lease with the AC with an option to terminate should
the boilers fail.
Ensure an equal division of space between startup and arts and culture uses, with the
City of Kitchener approving the lease between the AC and ArtsBuild prior to execution.
Ensure competitive market lease terms to end-users.
The AC is to pay CAMs of $15,000 annually in year 1 & 2, $17,500 in year 3 and
$20,000 in year 4.
Re-use as much of the furniture and infrastructure left behind by Everest College as
possible.
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ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
Strategic Priority: Strategy Strong and Resilient Economy
2.1 Foster a business environment that stimulates innovation and job creation, helping startup
entrepreneurs establish and grow their business.
Strategic Action:
emphasizing an innovative, caring and vibrant Kitchener and by contributing to a strong and
city by working together with citizens to create memorable public places and spaces, that
encourage new business and economic growth, promote health, happiness and community
-2018).
Make It Kitcheneric development
strategy. Under Make It Start:
Support digital content startups by facilitating the development of a digital content
incubator at 44 Gaukel.
Establish a creative hub for artists especially in the music, film, theatre and digital
media industries offering such things as rehearsal spaces, entrepreneurial and
promotional services, skills development, and event programming.
FINANCIAL IMPLICATIONS:
Costs (outlined in Exhibit 2) will be funded from the Economic Development Reserve Fund.
COMMUNITY ENGAGEMENT:
INFORM with the agenda in advance of the
council / committee meeting.
CONSULT Through the Ideas of the Brave Symposium, economic development staff
consulted with over 4000 citizens, stakeholders, community leadership and partners
representing a wide range of perspectives. Comments and suggestions included:
support
there are more than 700 self-identified artists in the
region;-
performance spaceconcentrate arts together;
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- upport growth and acontinuum
of space available IoT ;"New
Era" of Manufacturingease capacity in local rapid prototyping and micro-
manufacturingAccess to tech, micro-manufacturing, wifi deskspace, peers
COLLABORATE This project is a collaboration of the City of Kitchener, Accelerator Centre,
ArtsBuild Ontario, and various arts organizations.
ACKNOWLEDGED BY:
Jeff Willmer, CAO
Enclosures:
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Appendix A: Estimated Operating Costs for the 2 floor of 44 Gaukel Street
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Estimated 4-year Operating Costs 2-44 Gaukel Street
REVENUES
Year 1Year 2Total
Accelerator Centre lease revenues$87,494$174,987$262,481
ArtsBuildOntario lease revenues$23,750$23,750$47,500
City of Kitchener grant$50,000$50,000One-time scale-up grant
Revenue Totals$161,244$198,737$359,981
EXPENSES
Administrative Expenses
*Facilities manager salary and benefits$60,000$60,000$120,000Accelerator Centre full time staff person onsite
Specialized equpiment and tools$15,000$5,000$20,000e.g. wifi hotspots, artist tools, fume hoods, etc.
Administration costs$5,000$5,000$10,000Other admin costs
Programming and events$29,340$58,680$88,020
Marketing$10,000$10,000$20,000
Occupancy Costs
Cleaning$17,000$17,000$34,000
Repairs and maintenance$5,000$5,000$10,000
Insurance ($5M liability)$2,000$2,000$4,000
Office supplies$6,000$6,120$12,120
Shared lab supplies$12,000$12,240$24,240
Facility supplies$6,000$6,120$12,120
Amenities$15,000$15,300$30,300
Photocopier lease$5,000$5,000$10,000
IT
VOIP$6,000$6,000$12,000minimum VOIP contract
Internet$9,600$9,600$19,200minimum fibre contract
IT support$1,200$1,200$2,40012 hours per year
Shared Meeting Room Equipment$6,000$6,000$12,000conference unit and line
CAM paid to the City of Kitchener$15,000$15,000$30,000
Totals$225,140$245,260$470,400
Surplus (-Deficit)-$63,896-$46,523-$110,419
Notes:
Manager of facilities and programming represents compensation fo
Most monthly occupany costs will be shared between Accelerator C
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