The Town of Ponoka released the full lease details between it and Landrex, the company planning on developing the land where the old hospital sits. The plan allows for a buyout option at any time. File photo

Town of Ponoka releases Landrex lease agreement

Town can buy-out Landrex learning centre at any time, lease agreement shows.

The Town of Ponoka will be able to buy-out the proposed learning centre set to be developed by Landrex at any time.

The lease agreement on the building and option to purchase between the town and Landrex — in the agreement the company is named as Thackeray Enterprises — was released for public viewing last week after the development company was able to finalize financing, which lifted the confidentiality clause in the agreement.

The biggest difference from previous negotiations with Landrex is that the town can purchase the building at any time as opposed to the two-year time line. There are two documents available for viewing at Town Hall: the lease agreement and the option to purchase, both signed April 4 by Mayor Rick Bonnett and CAO Albert Flootman.

The former outlines the main details of the lease, which shows the annual payments of the learning centre at $25 per square foot with the area being 28,000 square feet.

That amount is $700,000 for the space with main operations expenses falling to the town. While full operating costs to run the building aren’t known as the centre isn’t complete, costs like that are already being paid for by the town to operate the different town-owned or leased buildings.

The agreement also outlines the landlord costs, which include structural repairs, elevators and income taxes levied on the income. It also provides guidance on a security deposit, which is three months’ rent.

Planning for budget 2018

Residents will not be on the hook for the lease payments in 2017.

As such the town is in the planning stages of looking at surplus properties and the potential to sell them to offset the costs of the lease, estimated at a 9.75 per cent tax increase for 2018.

Mayor Rick Bonnett acknowledges in the release that, “The Town is examining options to offset any tax increase as much as possible through actions such as selling or leasing town-owned properties that are deemed surplus.”

Buying the building would necessitate another borrowing bylaw for the actual purchase of the building. The town could finance the debenture through the Alberta Capital Finance Authority, with interest roughly set at 3.5 per cent.

Option to purchase

As for buying the building, the town — as stated in previous releases — and Landrex would each hire an independent appraiser of the building to determine the cost.

The land itself would be for sale for $1 and the town and Landrex would then take the average of the two appraisals of the building at fair market value. The town can exercise the option to subtract money from a capital reserve fund out of the average cost.

“The decisions of the said appraisers shall be final and binding upon the vendor and the purchaser,” states the option to purchase.

Capital Reserve Fund

The town also agrees in the lease to provide funding to a capital reserve fund at three per cent of the total rent — that amount includes rent and operating costs — for the first lease year.

“This amount will be adjusted at the end of the first lease year, and from time to time thereafter, in accordance with the capital reserve report,” states the agreement.

This fund is intended for the replacement of capital items on the lease land. A capital reserve report will be prepared by an arms’ length engineering company selected by Landrex.

The money in the reserve fund will be a joint account with the town and Landrex showing both parties as signatories on the account. “The capital reserve fund will be used to provide sufficient funds for major capital repairs,” states the agreement.

Replacement of property owned by the landlord or tenant, common areas and property owned by either party that is required to be replaced will come from this fund.

The town and Landrex must agree if the funds are to be used for any other purpose not provided in the agreement.

Arbitration

Should the town default on the lease payments, Landrex shall advise the town of the issue. The Town of Ponoka has seven days from notice to agree to rectify the defaults within 30 days. If there is no resolution to any alleged defaults, states the document, then the matter goes to arbitration.

It falls to the town and to Landrex to diligently pursue arbitration, with costs born by both parties.

The town can sublet but must have written consent of the landlord to do so.

Operating costs

It should be noted that the town is already responsible, for much of what is outlined in operating costs, for its current buildings.

The lease agreement also outlines four schedules, with Schedule D providing clarity of what operating costs are for the Town of Ponoka. In it, the town is responsible for insurance of the building, which will be maintained by Landrex. Should there be any reimbursement to Landrex, that amount will be deducted from the operating costs.

Also part of operating costs are cleaning and maintenance, taxes, local improvements plus fuel, utilities and energy to run the building.

The concept plan provides for three floors, with 7,000 square feet proposed for the new Ponoka Jubilee Library space and 5,000 square feet for Campus Alberta Central (CAC).

Lease costs to the town, which includes the library, are at $575,000 per year. That leaves $125,000 left. It is not known what CAC’s portion for its space will be. According to a press release from the Town of Ponoka, CAC is close to finalizing its sublease agreement with the town.

“We anticipate a sublease agreement will be finalized in the very near future,” stated CAO Albert Flootman in the release.

Money set aside for moving in

The town has set aside $1.3 million on tenant improvements.

The money for tenant improvements is from reserves, provincial grant funding and money from the Municipal Sustainability Initiative. In the release the town states the funds were set aside in anticipation of rebuilding the old Town Hall.

Group served the town but withdrew the case

There’s a group that served the Town of Ponoka contesting the borrowing bylaw, however, much of what was requested in the claim has been answered.

The group has since withdrawn its claim.

Signed by Edwin Geuder, the group of about 10 people served notice in May stating issues with the borrowing bylaw originally approved on the lease. The bylaw put the borrowing as 35 years for the lease, which has since changed to 25 years.

“We are not against progress and not against a new building. We simply feel that the cost is too high and the bylaw incorrect,” said Geuder.

Upon reading the lease agreement and option to purchase Geuder said the group met and agreed to withdraw.

“They (town planners) answered all the questions,” he said.