HomeMy WebLinkAboutDSD-2021-018 - Assignment of Lease - 200 King St WREPORT TO:Community & InfrastructureServices Committee
DATE OF MEETING:February 8, 2021
SUBMITTED BY:Cory Bluhm, Executive Director, Economic Development,
519-741-2200 ext. 7065
PREPARED BY:Rob Morgan, Capital Investment Advisor, 519-741-2200 X7734
WARD(S) INVOLVED:Ward10
DATE OF REPORT:January 13, 2021
REPORT NO.:DSD-21-018
SUBJECT:Assignment of Lease – 200 King Street West
RECOMMENDATION:
That the Mayor and Clerk be authorized to execute an assignment and amending
lease agreement with 2609699 Ontario Inc.and Feelings from the Heartallowing for
the assignmentof the existing City Hall wedding chapel leasefor a five year term,
with an option to renew for an additional five years and other minor amendments as
outlined in this report;said agreement to be satisfactory to the City Solicitor.
REPORT HIGHLIGHTS:
The purpose of this report isto request approval of the transfer of the existing City Hall
Wedding Chapel Lease to a new owner andamend the lease term to five years with an
option to renew foran additionalfive yearterm.
Financial implications:The lease rate would be set at$13.75/ sq. ft for Years 1 and 2,
with a 2%/year annual increase applied at the beginning of years 3,4 and 5.
This report supports the delivery of core services.
BACKGROUND:
The City Hall Wedding Chapel has been a tenant in City Hall for 25 years, with the current
owner operating the business for the past 20 years. In 2018, the City entered into a new
lease with the current tenant which expires August 31, 2021. The current owner wishes to
retire and sell thebusiness and has found a purchaser. Under the terms of the current
lease, the owner retains the right to transfer the lease subject to Council approval. The
proposed purchaser wishes to invest in the space and as such has requested an extended
term from the current lease. The proposed business purchase is anticipated to take effect
in Marchof2021.
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REPORT:
Under the terms of the existing lease, the owner has the right to transfer the lease to a new
tenant, subject to City Council approval. The proposed new tenant is Maeck Weddings
(2609699 Ontario Inc.), owned and operated by a local wedding planning and officiating
team that have been coordinating and officiating weddings in Waterloo Region since 2012.
They intend to utilize the space in the same way that it has been used for the past 25 years
but intend to renovate and revitalize the space to make it more current and attractive.Staff
have determined that the potential purchasers are currently well regarded within the
communityand recommend support for the proposed transfer of the lease.
Lease Extension
When a lease is set to expire, the City’s practice is torenegotiate a new lease with the
existing tenant. Only if the existing tenant does not wish to continue operations would the
space be made available to other potential tenants.As such, should Council accept the
transfer, the City would normally renegotiate the leasewith the purchaserin August.
However, in order to achieve financing, the purchaser is requesting that the current lease
be extended to 2026 (a full 5-year term), with an option to extend the lease for an additional
5 years. Staff recommend approval of the lease extension subject to the lease rate
considerations below, as no other terms of the lease would change.
Lease Rate
In 2018, the City received a lease valuation to determine fair market value. The valuation
confirmed that a lease rate of approximately $13.75 - $14.00 per square foot represents fair
market value. Staff believe the 2018 valuation is still relevant.
Based on the foregoing, andgiven thecurrent economic climate, staff believe the current
rate of $13.75 + Common Area Maintenance feesis appropriate. The current lease does
not contemplate annual increases; however, the purchaser has agreed to anannual
increase of 2%per yearfor years 3, 4 and 5 should Council approve the transfer.The
purchaser has requested a clause in the lease that would allow the lease rates to be
renegotiated should, in they future,they wish to consider a major capital improvement to the
space that would benefit the City for the life of the facility (ex: a new washroom). Such
negotiations would be subject to Council approval at a future date.
STRATEGIC PLAN ALIGNMENT:
This report supports the delivery of core services.
FINANCIAL IMPLICATIONS:
Capital Budget – The recommendation has no impact on the Capital Budget.
Operating Budget – The recommendation has no impact on the Operating Budget. Approval
of the transfer and extension ensures no disruption to the revenue generated by this space.
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COMMUNITY ENGAGEMENT:
INFORM – This report has been posted to the City’s website with the agenda in advance of
the council / committee meeting.
PREVIOUS REPORTS/AUTHORITIES:
There are no previous reports/authoritiesrelated to this matter.
APPROVEDBY: Justin Readman, General Manager, Development Services Division
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