1996.03.12 - Records of Meeting - Ad Hoc Lease Negotiation



RECORDS OF MEETING

AD HOC COMMITTEE ON LEASE NEGOTIATIONS

A meeting of the Ad Hoc Committee on Lease Negotiations of the Commonwealth Automobile Reinsurers was held at the offices of C.A.R., 100 Summer Street, Boston, on -

WEDNESDAY, MARCH 13, 1996 AT 10:00 A.M.

The following Members were present -

Mr. Richard W. Brewer

*Mr. George Dillard

**Mr. Patrick Finckler

***Ms. Paula Gold

Mr. Thomas K. Randall

Mr. Arthur J. Remillard, Jr.

Mr. Edwin J. Rinehimer

*Mr. George Dillard substituted for Mr. Robert Gowdy

**Mr. Patrick Finckler substituted for Mr. Donald Burns

***Ms. Paula Gold substituted for Mr. James Stone

There were also present -

Commonwealth Automobile Reinsurers

President Mr. R. M. LaFontaine

Executive Vice President and Treasurer Mr. M. J. Trovato

Administrative Vice President and Secretary Mr. D. I. Jewell

Vice President and General Counsel Mr. J. J. Maher, Jr.

Office Manager Mr. J. R. Arcadipane

Chairman Arthur Remillard called the meeting to order at 10:00 a.m. and announced the substitution of Mr. George Dillard for Mr. Robert Gowdy, Ms. Paula Gold for Mr. James Stone, and Mr. Patrick Finckler for Mr. Donald Burns.

96. Lease Negotiations

Chairman Arthur Remillard opened the meeting by stating the reason for convening the Committee was to discuss lease and relocation options for C.A.R. He pointed out that if it is decided that CAR will remain at its current location, notice must be provided to the landlord by August, 1996.

Mr. Raymond LaFontaine stated that in March 1995, Mr. Dana Jewell and Mr. Joseph Arcadipane, with the assistance of Whittier Partners, began to explore options for CAR’s relocation, as well as to enter into negotiations with 100 Summer Street Associates for a lease renewal. After extensive research, they garnered sixteen proposals and reduced those to the four best. Finally, concluding lease negotiations with 100 Summer Street Associates, CAR Staff negotiated a lease renewal that is proposed for approval today.

Mr. Michael Trovato stated that CAR’s strategy was to negotiate for the lowest fixed rate lease and remain at 100 Summer Street. Although the landlord wanted an annual escalated rate, as is customary, CAR Staff was able to negotiate a fixed rate by using some monies offered by the landlord for leasehold improvements as dollars to reduce the final rate. Since Mr. Jewell and Mr. Arcadipane had kept up with maintenance of this space, very few leasehold improvements are needed at CAR, and therefore the reduction in leasehold improvement dollars has no impact on the quality of the office space and CAR’s future needs.

Mr. Joseph Maher stated that the lease proposal from 100 Summer Street Associates is in order, and that the they are willing to include language that states that CAR’s acceptance of these provisions is subject to ratification by the full Governing Committee. He stated that CAR would get specific lease amendments consistent with the terms of the Letter of Agreement. Mr. Maher advised that if the Committee approved the acceptance of the lease renewal, the next step would be to have a motion to authorize the President of CAR to sign the Letter of Intent, and proceed to finalize and execute the actual lease amendments. He suggested that the agent members of the Governing Committee be polled for their acquiescence to entering into the lease amendments. Following that, this subcommittee would report to the full Governing Committee in mid-May on its actions.

Mr. Rinehimer complemented CAR Staff on the thoroughness of its analysis and questioned the necessity for CAR to remain in downtown Boston. He opined that more favorable real estates rates were available outside the city.

Mr. LaFontaine replied that a former Commissioner of Insurance had indicated that he wished CAR to remain in Boston. In addition, most of CAR’s employees use the commuter rail and the T-service for their commute--very few drive into Boston and relocation would have an impact on staffing. Other members of the Committee pointed out that the Automobile Insurance Bureau, Division of Insurance, Insurance Fraud Bureau, the Fair Plan, and the Workers Compensation Board are in Boston, and that there was value to CAR having ready access to these agencies.

In response to a question concerning the operating expense portion of the lease, Mr. Trovato stated that this provision had always been a part of the lease, but that this time CAR Staff, consistent with its strategy, had been able to negotiate an 8% cap on escalations, taxes, and operating expenses.

96. Lease Negotiations (continued)

The Committee discussed the number of square feet required by CAR now, and how that need might change over the next ten years in terms of more or less space.

Mr. Finckler asked how many square feet are allocated per CAR employee, and whether through better space configuration some portion of CAR’s current space could be sublet.

Mr. Trovato indicated that currently, and at least for the next two years, it is not envisioned that there will be enough unoccupied available space that could be considered for alternative uses, given the need for computer and conference room facilities.

Mr. Remillard stated that even though the industry might change in the future, there would always be a need for a residual market mechanism that would have to provide the same quality and level of service currently given by CAR. He said that after reviewing the information presented by Staff, he felt that little savings, if any, would be realized by subletting space because additional expenses would be incurred resulting from security and other considerations.

It was also noted that CAR’s role as the statistical agent for the state would not shrink in the future, and that a significant portion of CAR’s space requirements is devoted to this function.

Following further discussion, a motion was made by Mr. Thomas Randall and duly seconded by Mr. Richard Brewer to approve the recommendation of Whittier Associates and CAR senior management to enter into a lease amendment based on the provisions of the Letter of Intent, to authorize the President of CAR to sign the Letter of Intent, to proceed with finalizing the lease amendment documents, and to direct Counsel to poll the agent members of the Governing Committee for their agreement with this Committee’s actions.

The motion passed on a unanimous vote.

OTHER BUSINESS

There being no further business, a motion was made by Mr. Edwin Rinehimer and duly seconded by Mr. Thomas Randall to adjourn. The motion passed on an unanimous vote.

The meeting adjourned at 10:55 a.m.

DEBORAH A. WALSH

Administrative Assistant

Boston, March 25, 1996

Note: These Records have not been approved. They will be considered for approval at the next meeting of the Ad Hoc Committee on Lease Negotiations.

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