Downtown arena update Jan. 2013 #2

7/29/2019 Downtown arena update Jan. 2013 #2

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Repl ace w it h appropr iat e im age in View > Mast er.

1

Dow nt ow n Arena Updat e

January 23, 2013


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Agenda

PreviousCouncilDirection(October17th &

December12th,2012)

DesignOptions

KatzGroupStatement

Status

of

Negotiations NextSteps


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Previous Counci l Di rect ion

October17,2012

SuspendnegotiationswithKatzGroupondowntownarena

LookatframeworkforpotentialavenuestosustainNHLhockeyinEdmonton(October2012)

Councildid

not

rescind

support

for

October

2011

Framework

December12,2012

ReopennegotiationswithKatzGroup

Extendlandinventoryagreement

Securemediator

&

financial

analyst

EvaluateothernonfinancialissueswithKatzGroup


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Design Opt ions

Exploredthreeoptions:

OptionA valueengineeredoriginaldesign

includingWintergarden and

underground

parkade

OptionB reviseddesigntoincludeopenair

pedestrianlinkageover104th Avenueandabove

gradeparkade

OptionC reviseddesigntoremove

Wintergarden andincludeabovegradeparkade


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Opt ion A -View Looking West 104 t h Avenue


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Opt ion A - View Looking East 104 t h Avenue


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Opt ion A - Plaza at Grade


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Opt ion A

18,559(manifested

seats)

Similarindesign&programtooriginaldesignincluding:

Wintergarden

350stallundergroundparkade

Stainlesssteel

cladding

executed

morecosteffectively

$480Marena

$601Mtotalproject(includes

arenaand

public

infrastructure)

$219MCitycontribution

$143MKatzGroupcontribution

Providesguaranteedtenant

$480M

(includesunderground

parkade)

WinterGarden$53M

PedestrianLink $15M

LRT Connection

$7MCommunity Rink$21 M


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Opt ion B -View Looking East 104t h Avenue


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Opt ion B Plaza at Grade


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Opt ion B -View Looking West 104 t h Avenue


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Opt ion B

18,559seats

Similarindesign&programtooriginaldesign,differencesare:

WinterGardenreplacedwithpedestrianlinkover104th Ave.

340stallabovegradeparkade

Seatingbowlrevised,removalofsomepremiumspaces

Additionalopportunitiesforintegrationof104Avenueintroduced

Newatgradeentryplazaadded

$493M

arena

$576.8Mtotalproject(includesarenaandpublicinfrastructure)

$214.9MCitycontribution

Tenanttobedetermined

$493M (includes parkadeshown in green)

CommunityRink $21M

Pedway over104th Avenue $15.8M

LRT Connection$7M

Pedestrian LinkPedestrian Link

$15M$15M


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Opt ion C - View Looking West 104 t h Avenue


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Opt ion C -View Looki ng East 104t h Avenue


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Opt ion C Plaza at Grade


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Opt ion C 18,559

seats

Similarindesign&programtooriginaldesign,differencesare:

WinterGardendeleted

300stallabovegradeparkade&44stallsbelowgradeforteamuse

Seatingbowl

revised,

removal

of

somepremiumspaces

Additionalopportunitiesforintegrationof104Avenueintroduced

Newatgradeentryplazaadded

$511.75marena

$571.25Mtotal

project

(includes

arenaandpublicinfrastructure)

$217.25MCitycontribution

Tenanttobedetermined

$511.75M (includesarena & parkade shown in

Green)

LRT Connection$2.75M

Community

Rink

$31.75M


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Financial analysis of t hree opt ions

$217.25M$571.25MOptionC

$214.9M$576.8MOptionB

$219M$601MOptionA

MunicipalContribution

TotalProjectCost

Option


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Finance Opt ions

Proposedfundingmodelfrom2011Framework&modifiedinaccordancewithaproposedagreement

OptionB&CnoprivatecapitalinvestmentbutCity

wouldexpecttoearnrentsimilartoinvestmentinOptionA. Tenantwouldneedtobedetermined.

Citydoesnotrecommendcondominiumization of

seatsmodelasitborrowsfromfuturerevenues


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Design Opt ion Sum m ary

Administrationlooked

at

3options

and

while

Options

B

&

C

arelessexpensivebothrequireadditionaldesignwork,timeandriskrelativetotenancy

Administration

is

recommending

the

updated

Framework

withOptionAasthebasisfordesignasit: MeetsgoalofsustainingNHLhockeyinEdmonton

Guaranteeslongtermtenancy

Reasonablefinancialarrangementformunicipality

RealizesCitysvisionofarena&entertainmentdistrictoutlinedinTheWayWeGrow&contributestoongoingrevitalizationofdowntown

IconicstructureinsupportofCapitalCityDowntownPlan


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Kat z Group St at em ent


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Recom m ended Negot iat ed Fram ew ork

Interviewedanumberofpotentialmediators

Concurrentlyresumednegotiationswiththe

KatzGroup

Asaresultofaseriesofmeetings,

AdministrationisrecommendingtheCity

enterinto

an

agreement

based

on

the

followingnegotiatedframework


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Nochange.SustainabilityofNHLHockeyinEdmontonis

aprimeconsideration.

TheCommitmentisincreasedby$15millionto

coverhalftheprojectedincreaseinthecostofthe

arenabuilding

total

commitment

to

be

paid

as

rentover35years(includinginterest).

TheKatzGroupwillpaytheprincipaland

interestcostsassociatedwith$100millionof

capitalcost

over

35

years.

Upset(maximum)priceis$480millionwiththe$30millionincreasetobesplit50/50betweentheCity

andtheKatzGroup.

TheArenaBuildingProject(whichincludes350parkingstalls)hasamaximumpriceof

$450million.

RecommendedNegotiatedFrameworkOctober2011ApprovedFramework

Recom m ended Negot iat ed Fram ew ork


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TicketsurchargetobeleviedbytheCitywiththe

ratetobedeterminedbyEdmontonArenaCorp

(EAC).The

rate

to

be

at

least

sufficient

to

fund

principalandinterestpaymentsforthe

repaymentofthe$125millionofinitialcapital

overa35yeartermanda$1.5millionannual

contributiontoongoingmajorcapital

maintenance.

Fundsgenerated

by

the

surcharge

inexcessofthisamountwillberetainedbyEAC.

Aticketsurchargewillbeleviedonadmissionsat

Rexall Placeandshallbeatthesamerateasthe

ticketsurchargetobechargedonnonhockey

eventsattheDowntownArena,toamaximum

of7%.

The

proceeds

of

this

surcharge

will

be

remittedtotheCity.

Userfeeleviedthroughticketsurchargetofund

$125millionplusinteresttofundthecapital

project.

TheCommitmentisincreasedby$15millionto

coverhalftheprojectedincreaseinthecostof

thearenabuildingforatotalof$140million.

CityofEdmontonwillcontribute$125millionto

thearenabuildingincluding$45milliontobe

fundedbyaCommunityRevitalizationLevy

RecommendedNegotiatedFrameworkOctober2011ApprovedFramework


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Nochangewiththeexceptionthat

Administrationnegotiatedanextensioninthe

deadlinein

the

Land

Inventory

Agreement

from

December31,2012toApril30,2013asper

Councildirection.

Landtobepurchasedatthesamepriceandon

thesametermsandconditionsasinthecurrent

purchaseagreements

plus

third

party

costs

associatedwiththelandacquisitionandzoning.

TheCityscoststobuildanLRTconnectionto

thearenawillbecappedat$7million. TheCity

isresponsible

for

all

operating

and

on

going

capitalcostsfortheLRTconnection.

TheCityscoststobuildanLRTconnectionto

thearenawillbecappedat$17million.

ClarificationthatIfthenetcostexceeds$50

million,KatzGroupistocovertheoverage. Net

Costs meansthegrosscostofthe

Wintergarden lessthe

reasonable

value

of

the

retailcommercialspaceinthesouthendofthe

Wintergarden.

Pedway (Wintergarden bridge)over104Avenue

isrequiredadjacentinfrastructurefunded

outsideofthearenabuildingproject. Katz

Groupand

City

each

pay

half

of

cost;

however,

theCitycontributionislimitedtonomorethan

$25million. TheKatzGroupcontributionwillbe

amortizedoverthe35yeartermofthelease

withinterestcostsincluded.

RecommendedNegotiatedFrameworkCouncilOctober2011ApprovedFramework


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EACtohavefirstrighttonegotiateupto3lease

extensionsfortenyearsandwillhavethefirst

rightofrefusalonanysubsequentleaseorland

andbuildingsalenegotiatedwitha3rd party.

KatzGrouptohaveoptionfor3tenyearlease

extensions.

TheCitywillproceedwiththeconstructionof

thecommunityrinkforamaximumof$21

million.City

to

own

and

operate

the

rink

with

all

revenuesandcostsaccruingtotheCity.

However,EACwillactasanagentfortheCityto

solicitadvertisingandsponsorshiprevenue

withoutcommissionorrestrictioninconjunction

withadvertising

and

sponsorship

of

the

arena.

ThisprovidesanopportunityfortheCityto

shareintheupsideofsponsorshippackagesthat

includethecommunityrink. Approvalof

sponsorshipproposalsforthecommunityrink

restswiththeCity.

Communityrinktobeconstructedadjacentto

thearenacontingentonfundingfromthe

federaland

provincial

government

with

total

maximumcostof$21million. Citytoownand

operatetherinkwithallrevenuesandcosts

accruingtotheCity.



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IntheeventofanEACdefaultunderthelease,

Rexall SportsCorp.(RSC),ownerofthe

EdmontonOilers,

shall

be

obliged

to

cure

the

defaultsundertheleaseandassumeall

obligationsundertheleaseinplaceofEAC.

Alternatively,RSCmayenterintoacommitment

tofundpaymentsassociatedwiththeEACs

$140million

contribution

under

anew

lease

withtheCitythatisconsistentwiththeexisting

Rexall Placelease(includingF&Brightsfor

hockey,butnotinrespectofotherevents,and

excludinganyreversionoftickettaxtoRSC). In

anyevent,theCitywillhaveinplaceatickettax

bylawat

alevel

sufficient

to

sustain

the

capital

maintenancelevelsspecifiedintheleasewith

EACandtoprotecttheCityforthe$125million

tickettaxrelateddebt.



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EACwilloperatethenewarenaandwillpayall

operatingandmaintenanceexpenses. Major

building

capital

rehabilitation

and

replacement

willbetheresponsibilityoftheCitytobefunded

with$1.5millionannuallyfromtheticket

surcharge. Allothermaintenanceandcapital

enhancementsandproductivityimprovements

willbetheresponsibilityofEAC.TheCityandthe

KatzGroup

have

agreed

on

adefinition

of

CapitalMaintenancecostsandonanallocation

ofresponsibility.

EACwillpayallrequiredEducationProperty

Taxes. Themunicipalpropertytaxestobepaid

byEACandaffiliatesistobeamaximumof

$250,000annually. Thisamountwillbereduced

totheextentthattheaggregatemunicipaltaxes

leviedonthearmslengthsubtenantsofthe

Arenacarryingonbusinessonlywithinevent

hoursexceeds$250,000annually.

TheKatzGroupistooperatethenewarenaand

istopayalloperatingexpenses,capital

maintenance

and

repair.



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Inordertomoveforwardonthearenaona

timelybasis,theprojectedstartdatefor

construction

would

be

August

2013

through

a

phasedGuaranteedMaximumPrice(GMP).

TheCitywillcontinuetoworktosecurea$100

millioncontributiontotheprojectfromthe

Province

Thelandassemblyistobecompletedby

October31.

Thedesign

process

is

to

commence

as

soon

as

possible. TheCitywillfundthecostofdesignto

a60%levelonwhichthetenderdocumentswill

bebasedinordertogetthebestpossible

GuaranteedMaximumPriceforthearena.The

costofthedesignwouldbepartofthe$450

millioncost

of

the

arena.

The

conceptual

design

workcompletedtodateisownedbytheKatz

Group.Ifeitherpartyelectsnottocompletethe

deal,theCitywillhaveownershiprightstothe

designworkundertakenbytheCity.

TheCity

will

continue

to

work

to

secure

a$100

millioncontributiontotheprojectfromthe

Province.



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Oncethenewarenaisopen,allsubsidiesto

Rexall Placewillbeeliminated.Aticket

surchargewillbeleviedonadmissionsatRexall

Placeand

shall

be

at

the

same

rate

as

the

ticket

surchargetobechargedonnonhockeyevents

attheDowntownArena,toamaximumof7%.

Theproceedsofthissurchargewillberemitted

totheCity.

TheKatzGroupwaivestherequirementforthe

noncompeteclause.

TheCityhasagreedthatacompetitivemarket

betweenRexall Placeandthenewarena

requiresalevelplayingfieldandso,oncethe

newarenaisopenwilleliminateanysubsidiesto

Rexall Place. Asupplementaryticketsurcharge

willalsobeleviedagainstalladmissionsatRexall

Placein

the

future

at

the

same

percentage

(currentlyestimatedat7%)astheticket

surchargetobeleviedatthenewarena. Foras

longastheticketsurchargeatthenewarenais

allocatedtotheCitytopayforthecostsof

borrowingthe$125millioninconstructioncost

tobe

paid

by

this

user

fee,

the

City

will

retain

therevenuegeneratedbytheticketsurchargeat

Rexall Place. CityCouncilwilldeterminetheuse

ofthosefunds;however,theintentofthe

agreementisforthefundsnottogobackto

Northlands.



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Thelocationagreementistobesupportedbya

letterofcooperationfromtheNHL.

TheEdmontonOilersHockeyClubwillstayin

Edmontonfor35years

TheCity

and

EAC

will

complete

the

design

and

buildingofthefacility. Anydisputeswillbe

handledbyMr.Farbrother andMr.Karvellas or

theirdesignees.

Designprocess

to

be

undertaken

collaboratively

betweentheCityandtheKatzGroup.

Nochange;

however,

for

clarification,

the

City

willhaveaccesstotheArenaandWintergarden

forupto28daysayearatEACs incremental

costwithallfood,beverageandotherrevenue

accruingtoEAC. TheCitysusewillbefor

communitypurposes notforCFRorother

commercialevents.

Cityaccess

to

the

new

arena

for

any

28

days

ayearatitsdiscretion.



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Nochange;however,additionalclarification

provided: Acknowledgementofcommunity

contributionof

Oilers

Community

Foundation.

Inaddition,bothPartiescommittocommunity

benefitsincluding(i)establishmentofa

communityadvisorycommitteetoidentifyand

addresscommunityissues,(ii)aseniormember

oftheOilersoperationswillbeavailableto

meetat

least

annually

with

the

community

advisorycommittee,(iii)development/

facilitationoftraining/employmentforlow

income/highneedEdmontonians.

TheKatzGroupwillenterintoaCommunity

benefitsagreementwiththeCity,takinginto

accountthe

activities

of

the

Oilers

Community

Foundation.

NoChange;however,ifEACelectsnotto

proceedwith

the

commercial

development

associatedwiththeeastsideofthearenathat

necessitatesachangeinthedesignoftheeast

walloftheArena,theCitywillberesponsiblefor

thecost.

TheKatzGroupcommits$100millionto

associatedadjacent

investment,

with

aleast

$30

milliontobeinvestedpriortoconstructionof

thenewdowntownarenaandthebalancetobe

subjecttocommercialviability.



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Nochange.Anymethodofpersonalseatlicenses,

condominiumization modelorseatrightswould

notbe

pursued

by

the

Katz

Group.

Nochange.TheCitywillenterintoamarketingpartnership

withtheEdmontonOilers,investing$2million

annuallyinaprogramtopromotetheimageof

theCityandtobuildCityrecognitionwiththe

Oilersbrand.

The

City

will

enjoy

amost

favoured nationstatusinitsmarketingpackage.

Themarketingpackagewillbeofaqualityand

impactthatisconsistentwitharrangements

withtheprivatesectoratasimilarlevel.



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Next St eps

Councilapproval

of

Option

A

as

the

basis

for

design&constructioninaccordancewith

modified

agreement

with

Katz

Group Councilapprovalofrevisednegotiated

frameworkforthedesignandconstructionof

OptionA

arena

Downtown arena update Jan. 2013 #2

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