Yellowknife North MLA Rylund Johnson is calling on the GNWT to stop leasing office space from Northview Canadian High Yield Residential Fund.
Speaking in the legislative assembly Tuesday, Johnson said the company has “repeatedly showed little interest in our community.”
Local landlords are key parts of community identity and should reinvest rents back into the community but Yellowknife doesn't have enough local owners, he said.
“Thousands of our housing units and millions of dollars worth of commercial office space are owned by southern REITs or various southern multibillion dollar investment funds. These landlords have long treated real estate as an investment rather than the offices and homes we work and live in,” Johnson said.
The MLA spoke just over a year after Northview Apartment Real Estate Investment Trust was purchased by Starlight Investments and KingSett Capital for about $4.8 billion.
The company owns dozens of commercial and residential properties in Yellowknife, Inuvik and Iqaluit and thousands across Canada, according to its online portfolio.
Just before the sale to Starlight and KingSett last year, Johnson said the landlord has a “near-monopoly on rental apartments in both Yellowknife and Inuvik.”
Lease analysis needed
The situation with leasing in Yellowknife has been such that leases at a higher rate – rather than ownership - were justified to support northern businesses, Johnson explained on Tuesday.
But over a period of years, properties were sold and resold and the GNWT renewed the leases without proper consideration of its policy.
“Our current policy requires that the GNWT only lease at a rate no greater than the cost of ownership. If we're going to sign a lease at a cost greater than owning a building it must be to a Northern business. A lease ownership analysis is required for every building and every GNWT lease signed over five years and those premiums can only be paid to Northern companies,” he said.
Johnson then pointed to Department of Infrastructure data showing it manages a $28 million portfolio of 109 leases comprising 190,846 square metres of office space, many of them in downtown Yellowknife.
The department also provides facility management support services for 72,601 square metres of owned office space.
Millions of dollars should stay in NWT: MLA
Those millions of dollars could be going to local landlords, Indigenous development corporations and to “anyone willing to make sure that our government's rent money stays in this territory,” he said.
Turning to Infrastructure Minister Diane Archie, he asked how much the government pays per year in leases to southern landlords.
“Every year we pay about $18 million,” Archie responded, adding that the GNWT is in compliance with its property policy.
Cheaper to own than lease
But Johnson suggested it's cheaper for the GNWT to own buildings than lease them.
“We built a giant building, and we decided not to lease it,” he said, referring to the Tatsaotine Building on 49th Street. Originally called the New Government Building, the contract for its construction came to $25.1 million and it opened in 2015.
“Will the minister commit to doing a cost benefit analysis of lease-to-own versus the policy to make sure we're not in fact paying a premium to any of these southern landlords?” he asked.
The department will review the leases as they expire for the cost benefit analysis, Archie said.
“In accordance with the policy, we undergo lease versus own analysis proposed on new lease contracts with terms of over 10 years,”
The GNWT leases 72 per cent of its general office space and owns 28 per cent, she said. That breakdown is influenced by location, local market conditions, operational needs, assessments and also availability of capital.
In a Committee of the Whole meeting on Wednesday, NWTHC vice president Jim Martin said analyses in 2017 showed it is cheaper to own property than lease.
"The landlords would have been factoring in profit components and reflecting the cost of the construction," Miller said. "To construct, for the Housing Corporation at that time, it was actually cheaper than leasing. There are a number of factors that had to be considered in this. As costs do change over time, it is important to have more frequent assessments, and we are doing that."
A spokesperson for Northview Canadian High Yield Residential Fund was not immediately available.