Manitoba

Province wants out of 20-year lease on facility for children in care, citing 'indefensible contract'

The Manitoba government is trying to terminate the lease on an untendered facility for children in care signed while the NDP was in power. 

Legislation would end lease on 'a facility that was never appropriate for childcare,' finance minister says

The province has introduced a bill to get out of a 20-year lease for for 800 Adele Ave., which was entered into with a numbered company in 2007. (CBC)

The Manitoba government is trying to terminate a 20-year lease on a facility for children in care signed in 2007, while the NDP was in power.

The province introduced legislation on Wednesday that would prematurely end the lease between a numbered company and the Southern First Nations Network of Care for the use of an 18,000-square-foot facility.

A 2016 audit of the long-term property deal noted several irregularities, including the original untendered lease cost being twice the market rate.

The building had sat partially empty since 2014, CBC News reported at the time.

'Never appropriate for childcare'

"This lease is an untendered agreement for the rental of a facility that was never appropriate for childcare," Finance Minister Scott Fielding said on Wednesday, while introducing the bill.

"The building lease and its terms were not in the public interest. Given the landlord's refusal to agree to a reasonable termination agreement, we have taken this measure to terminate the lease," he said.

We've made every effort to try to renegotiate in a fair way the terms of the lease, which we do not believe to be defensible, and have been unsuccessful … so this is our course of action now.- Premier Brian Pallister

The lease was signed in 2007, under the NDP government, to provide an alternative to hotels for kids in the care of Child and Family Services.

The building at 800 Adele Ave. in Winnipeg, located near Arlington and Notre Dame, was owned at the time by a numbered company run by Winnipeg businessman Peter Ginakes and two partners.

The building, however, needed $2.1 million in renovations — $1.5 million of which was paid by the numbered company and the rest by the province.

It opened in 2010, mainly as an emergency placement for youth in need.

A portion of the facility became vacant in 2014 because of two instances of water damage that forced tenants to vacate the space, the province told CBC News in 2016.

Watch a report on the underutilized facility from 2016:

A building leased by the Southern Chiefs Organization for half a million dollars a year has been sitting half empty since 2014. 1:31

In a statement Wednesday, the province said the large office portion of the building has been vacant since 2013, and the residential portion was never fully occupied.

"It was being used for temporary programs that did not meet the facility's intended purpose until early 2019 when those programs relocated," the statement said.

The government said it began reimbursing the Southern First Nations Network of Care, also known as the Southern Authority, for its lease costs as of 2016.

The 20-year deal was worth a total of $9.4 million. 

Premier Brian Pallister was tight-lipped Wednesday on the rationale behind the government's bill because of the potential for court proceedings.

"We're of a mind that the contract that was entered into was not justifiable," Pallister said.

"We've made every effort to try to renegotiate in a fair way the terms of the lease, which we do not believe to be defensible, and have been unsuccessful in doing so, so this is our course of action now."

Indefensible contract: Pallister

When asked what message the legislation sends to businesspeople who may become wary of signing agreements with his government as a result, Pallister said: "Don't enter into an indefensible contract at the behest of a government that is misguided in its efforts."

NDP Leader Wab Kinew told reporters he didn't know much about the legislation, but said his caucus would support pulling out of the lease agreement if it is a bad deal.

The saga over this building demonstrates a tendency of provincial governments to consent to untendered contracts, said Liberal Leader Dougald Lamont, who demanded that every tender be issued fairly.

"We should be making sure we have a proper tendering process and we can avoid all this mess."

About the Author

Ian Froese

Reporter

Ian Froese is covering the Manitoba provincial election for CBC Manitoba. He previously has reported on provincial politics and breaking news in Winnipeg, Brandon and Steinbach. Story idea? Email ian.froese@cbc.ca.

With files from Caroline Barghout

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