After costing taxpayers an extra $100 million dollars in construction costs due to being a Mulroney government P3 the Federal Building in Edmonton and eight others across Canada are being sold at fire sale prices.
The $400 million they make off this mistake will not cover the 25 year rental cost to taxpayers of $79 million a year. Instead it's going to cost us almost $2 billion to lease back.
So would you sell your house and then rent it back, and agree to invest in upgrades? This is another example of neo-con ideology trumping economic common sense.
The federal government is selling nine office complexes, including two in Ottawa, to a private Vancouver developer for $1.64 billion -- $400 million more than the appraised value for the properties.
At the same time, the union representing many of the federal workers in the buildings labelled the deal "a give-away of colossal proportions."
"In addition to ceding ownership of the nine premium properties, the federal government has, in effect, written a $630-million cheque signed by Canadian taxpayers," said Patty Ducharme, the union's national vice-president.
The union cited its own study, done by Informetric, an Ottawa economic consultant. It valued the nine properties at almost $2.3 billion, Ms. Ducharme said.
The deal involves the sale of government property to Larco Investments Ltd., but also requires the federal government to lease back the office space for 25 years. That substantially reduces the risk to the new private owner.The lease-back agreement calls for the government to pay base rent of $79 million a year plus operating and maintenance costs, officials said. Rents will be set annually by Public Works and Government Services to cover agreed-upon services, including annual maintenance costs.
Of the $1.644-billion purchase price, $1.567-billion will go to the government. Of this, RBC and BMO will each receive commissions of $5.7-million, according to a government official. There will also be up to $500,000 in expenses for the sale.
The remaining $77-million of the sale price will be used to undertake a 10-year capital repair program, while the government will be responsible for other expenses, including maintenance, repairs and other building improvements.
The government has agreed to lease back the nine buildings for 25 years, with payment amounts rising in five-year increments. Lease payments will total $505.3-million over the 25 years, rising from $82.2-million in the first five years, to $122.1-million in years 20 to 25.
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