Rendez-Vous Lebreton Bid Fails

[NorthCoast]

Saw this today and thought it was interesting:

Markets to watch in 2019

Says rents will stay at an all time high regardless of potential doubling of inventory in some areas (lebreton).

 

[bert]

the contention is about changes to the developments reducing the share the market the Rendevous bid could count on. I honestly don't know, where any of the other ones you mentioned changed to include more units or created since the Rendezvous bid was launched/won?

My point is an extra 200 units isnt going to change the scope of the profits very much considering there are 2000+ being built in the same general area. It pertains to Melnyk simply using it as an excuse to pull out of the deal when its evident he didnt have or didnt want to put in the required capital to fullfill his partnership agreement in the deal.

 

[supsens]

They'd likely sell it to a developer looking to convert it into a mall or something. Maybe Walmart needs a new distribution center or something. While it may not have the same value as if it were part of a sale of the team, I'm sure there would still be lots of opportunity to offload it and all the surrounding property they have at a tidy sum.

there's 100 acres I believe, and when Firestone wrote about why the CTC is where it is, he mentioned land in the area was trading for 300 to 550k an acre. That's 30 to 55 mil based on his numbers from 4 years ago.

They would try to sell it, a buyer might be hard to find. Retail space demand is vanishing off the planet and that building would cost a fortune to remove. It wouldn’t be an easy sell at all

 

[BonkTastic]

They would try to sell it, a buyer might be hard to find. Retail space demand is vanishing off the planet and that building would cost a fortune to remove. It wouldn’t be an easy sell at all

Last I heard, a few years ago when there was some exploration about what to do with the arena assuming Lebreton happened, there were definitely buyers interested in it as a distributiontion center.

It's perfect for that use, IMO.

 

[supsens]

Last I heard, a few years ago when there was some exploration about what to do with the arena assuming Lebreton happened, there were definitely buyers interested in it as a distributiontion center.

It's perfect for that use, IMO.

These distribution centers are bought and payed for by the cities these days with tax breaks, free land, and those sorts of things. Someone might buy it up, or it could sit empty for years. Selling an old arena is not easy

 

[BonkTastic]

Selling an old arena is not easy

No one here is claiming it is, though.

It's a huge piece of land with a massive structure on it. Land transactions of that size are usually fairly complex.

 

[Micklebot]

My point is an extra 200 units isnt going to change the scope of the profits very much considering there are 2000+ being built in the same general area. It pertains to Melnyk simply using it as an excuse to pull out of the deal when its evident he didnt have or didnt want to put in the required capital to fullfill his partnership agreement in the deal.

If there's a sudden jump of 10% in vacancies, you don't think that would have much of an effect on the market?

I think there's more to the story than just 900 Albert for sure, but you've got a pretty well respected company in PwC saying the market can't bare both, and another one in Urbanation that thinks despite that change, due to faster than expected population growth, the market should be able to bare it. It's certainly a reasonable concern to be worried about, and depending on what your risk tolerance is could be enough to scuttle the deal.

The real question imo is, and always has been, what is Melnyk's level of risk tolerance, and why does it appear to be very low?

 

[AchtzehnBaby]

If there's a sudden jump of 10% in vacancies, you don't think that would have much of an effect on the market?

I think there's more to the story than just 900 Albert for sure, but you've got a pretty well respected company in PwC saying the market can't bare both, and another one in Urbanation that thinks despite that change, due to faster than expected population growth, the market should be able to bare it. It's certainly a reasonable concern to be worried about, and depending on what your risk tolerance is could be enough to scuttle the deal.

The real question imo is, and always has been, what is Melnyk's level of risk tolerance, and why does it appear to be very low?

All his money is tied up. No cash I would think. Probably made a bad decision a while back.

 

[Micklebot]

All his money is tied up. No cash I would think. Probably made a bad decision a while back.

Yeah, that's the one that has been highly speculated on. I wonder if his health scare might have changed his acceptable risk profile too.

 

[AchtzehnBaby]

Yeah, that's the one that has been highly speculated on. I wonder if his health scare might have changed his acceptable risk profile too.

I think he may have done some fancy investing that backfired and rendered his ability to get access to more dollars

 

[Micklebot]

I think he may have done some fancy investing that backfired and rendered his ability to get access to more dollars

Shorted bit coin in 2015 with a close out date in dec 17 or Jan 18...


That would qualify for fancy investing, right? Long term shorting seems pretty fancy to me.

 

[JD1]

So, I've seen 600 mil for the arena thrown around a lot, only time I recall seeing somebody involved in the bid putting down a number it was 500, I think Ruddy claimed in his lawsuit or in the media that Melnyk wanted a 500 mil arena for free. Not a big gap but still... Is 600 coming from the assumption it will be the same as the Edmonton arena? If so, that's likely high given that 600 mil was the entire project which included some non-arena stuff. The actual arena portion of the Edmonton project was around 480.

Speaking of Edmonton, they did get public money, about 50% of the arena was covered by public funds, more if you count a ticket surcharge, but tbh a ticket surcharge likely eats into what they can charge so I don't know how I'd categorize that. Katz paid or is paying about a third of the cost to build the arena (about 130 mil some of it in the form of rent) and Edmonton owns it and the land, so no salvage revenue when the place has used up it's lifecycle. Katz is also responsible for maintenance and operating costs

To compare that to Melnyk's ask when everything was going sideways: rent for free and he pays operation and maintenance cost while retaining operating revenue and naming rights, well lets just say on the surface Melnyk asked for a much better deal than Katz got to salvage the deal.

The original plan to have condo's ect fund the deal probably wouldn't have covered 66% of the cost to build the arena. But, Melnyk presumable would have owned the arena. I think the biggest issue would have been floating the initial costs until revenues from the rest of the project caught up; once the arena was built, he could get a cash infusion by selling off the CTC and land.

there's a few inaccuracies in there. don't have time to get into it now but will later

 

[JD1]

@bert still waiting for you to post up some numbers how the deal all makes sense

 

[Knave]

@bert still waiting for you to post up some numbers how the deal all makes sense

As opposed to what? The half assed Citizen article you posted full of bullshit, supposition and no understanding or the real estate market or condos in general?

 

[Nac Mac Feegle]

If there's a sudden jump of 10% in vacancies, you don't think that would have much of an effect on the market?

I think there's more to the story than just 900 Albert for sure, but you've got a pretty well respected company in PwC saying the market can't bare both, and another one in Urbanation that thinks despite that change, due to faster than expected population growth, the market should be able to bare it. It's certainly a reasonable concern to be worried about, and depending on what your risk tolerance is could be enough to scuttle the deal.

The real question imo is, and always has been, what is Melnyk's level of risk tolerance, and why does it appear to be very low?

Just take a bit longer to sell. The money is still there.

This is Ottawa after all, not Nowheresville, Newfoundland.

 

[Micklebot]

there's a few inaccuracies in there. don't have time to get into it now but will later

By all means, I mostly went of memory, but I can certainly dig up references for where I got stuff from. Those references might conflict with other ones though, a lot of what's out there is he said she said.

Actually, looks like two sources covers just about everything I said, so here's where it all comes from:

Lebreton arena cost:
Ruddy's countersuit claimed 500 mil.

the developer alleges Melnyk's "true aim" is to force either Trinity or the City of Ottawa to pay for a $500-million arena, and claims the hockey franchise has "admitted lacking the cash" to contribute to the project... According to the statement of defence, Melnyk proposed in October that Trinity spend $500 million to build the events centre — a key component of the LeBreton redevelopment — and that Melnyk rent if for $1 a year.

Edmonton arena:
built for 483.5 mil

Rogers Place is being built for $483.5 million, including underground parking.

Katz group paid 1 third (my math was off, its more like 27%)

The Katz Group is paying $132.5-million. $112.8-million of their contribution will be paid to the City as rent over 35 years, and cover the City’s principal and interest costs. The remaining $19.7-million will be paid as cash.

Public funds covered 50%

The City of Edmonton’s contribution of $226-million to the arena building includes funding through a Community Revitalization Levy, new parking revenues, and redirecting the current Rexall Place subsidy.

A ticket surchage covered the rest

$125-million will be collected through a ticket surcharge.

* the surcharge is set by and paid to the city and covers principle plus interest on a loan of 125 mil used to build the arena

Katz responsible for maintenance and operating costs

EAC will operate Rogers Place and pay all operating and maintenance expenses, and will receive all operating revenues, including naming rights and parking revenue.

City owns the land and arena

The City bought the land for the arena project, which is included in the $613.7-million cost for the entire project. The cost of the land was $26.5-million. The EAC has first right to negotiate up to three lease extensions for 10 years, and has the first right of refusal on any subsequent lease or land/building sale.

Lebreton
Melnyk wants the Event center rent free, not just the Sens as a tenant.

Trinity responded with an offer to take over the entire project and have the Senators as a tenant. "That proposal was categorically rejected by Melnyk, who again insisted that CSMI be given the Event Centre on a rent-free basis."
When the partnership was gasping its last breaths in November, CSMI proposed withdrawing from the deal if Trinity and the city would pay to build the arena and lease it to the Senators, rent-free, for 30 years.
Under that scenario, the Senators would have retained naming rights, royalties and branding rights for the faciity.
Late Tuesday, CSMI offered a similar deal again as a solution to the impasse.
Instead of being 50-50 partners, CSMI would give up any stake in the profits from the master development and Trinity would pay to build the arena. In this scenario, CSMI also wouldn't be putting up half the financing for the $4-billion development. CSMI would pay for the ongoing operations of the arena and any eventual improvements.

Presumably Melnyk would have owned the building; Looks like I might have gotten this one wrong, Melnyk claims he always intended it to be a Municipal Capital Facility, not sure if that can be done unless the property is owned by the city... might be hard to prove the event center has a municipal or public use if it's a private property that runs for profit events, but if he were to get that designation it would be a significant tax break.

I think everything else was framed as speculation on my part, or opinion. For example, I think the deal Melnyk allegedly asked for is better than what Katz got. Katz did get some tax breaks, too, but gave up something like 28 event days to the city at cost.

 

[Micklebot]

Just take a bit longer to sell. The money is still there.

This is Ottawa after all, not Nowheresville, Newfoundland.

Longer to sell means you're paying taxes, upkeep and insurance payments with no revenue.

It cuts into the margins for sure, and you might be inclined to accept an offer that's below what you otherwise would have.

 

[JD1]

By all means, I mostly went of memory, but I can certainly dig up references for where I got stuff from. Those references might conflict with other ones though, a lot of what's out there is he said she said.

Actually, looks like two sources covers just about everything I said, so here's where it all comes from:

Lebreton arena cost:
Ruddy's countersuit claimed 500 mil.


Edmonton arena:
built for 483.5 mil


Katz group paid 1 third (my math was off, its more like 27%)


Public funds covered 50%


A ticket surchage covered the rest

* the surcharge is set by and paid to the city and covers principle plus interest on a loan of 125 mil used to build the arena

Katz responsible for maintenance and operating costs


City owns the land and arena


Lebreton
Melnyk wants the Event center rent free, not just the Sens as a tenant.


Presumably Melnyk would have owned the building; Looks like I might have gotten this one wrong, Melnyk claims he always intended it to be a Municipal Capital Facility, not sure if that can be done unless the property is owned by the city... might be hard to prove the event center has a municipal or public use if it's a private property that runs for profit events, but if he were to get that designation it would be a significant tax break.

I think everything else was framed as speculation on my part, or opinion. For example, I think the deal Melnyk allegedly asked for is better than what Katz got. Katz did get some tax breaks, too, but gave up something like 28 event days to the city at cost.

Going off memory myself...,i need to go looking for a few articles ive read along the way.

It's such a complicated situation...anyway if i get an hour in the next day or two i'll go looking

 

[JD1]

As opposed to what? The half assed Citizen article you posted full of bull****, supposition and no understanding or the real estate market or condos in general?

I posted in detail why i didn't think that deal was ever viable from Melnyk's POV. Bert criticized and disagreed so i asked him to step up and run a few numbers but i'm still waiting.

Kind of like how i asked you to step up and talk about your experience with large complex government experience. Step up man, lay it out, lets hear your take.

I base what i post on my own first hand experience with those processes.

If you have first hand experience that suggests otherwise... let's hear it.

I'm betting you saw i quoted you and you didn't respond [mod]

 

[Do Make Say Think]

I posted in detail why i didn't think that deal was ever viable from Melnyk's POV.

So why did he get into a partnership with the goal of building an arena at Lebreton?

 

[bert]

So why did he get into a partnership with the goal of building an arena at Lebreton?

Still waiting on that answer.

 

[BonkTastic]

These distribution centers are bought and payed for by the cities these days with tax breaks, free land, and those sorts of things.

The enormous Amazon distro centers, sure.

That certainly is not typical across the board, though.

 

[Knave]

I posted in detail why i didn't think that deal was ever viable from Melnyk's POV. Bert criticized and disagreed so i asked him to step up and run a few numbers but i'm still waiting.

Kind of like how i asked you to step up and talk about your experience with large complex government experience. Step up man, lay it out, lets hear your take.

I base what i post on my own first hand experience with those processes.

If you have first hand experience that suggests otherwise... let's hear it.

I'm betting you saw i quoted you and you didn't respond cause you were talking out of the wrong hole.

Noticed that wasn't a denial.

You come in here with rumor and speculation and treat it as "this is how it happened" and then whine for others to prove you wrong with concrete facts and numbers.

It's a message board. You offer nothing, you get nothing. If someone is willing to offer something good on them.

 

[Do Make Say Think]

Still waiting on that answer.

We won't get one. Because he backed himself into a corner with that assertion on top of his previous number crunching: it never made sense and he backed out because of shifting context. He really doesn't want the Lebreton deal falling through to mostly be on Melnyk's shoulders for some strange reason:

- If it never made sense, why did he spend time and money on trying to make it happen

- If the context changed, in that a nearby project was upscaled unbeknownst to him, why does that make something that didn't make sense from the start now impossible unless he got a free arena

Of course he feels unfairly targeted by this, but this logical conundrum is entirely his own doing. Hence no reply. Just like with Mickelbot: "here's a whole bunch of sourced material that contradicts your assertion" JD1: "uhhh, I will return!".

That's the issue with narratives constructed to reach a pre-determined goal, they cannot withstand probing. Now he thinks I'm an anti-Melnyk guy for poking holes when all I' doing is poking holes in his story.

 

[topshelf15]

The enormous Amazon distro centers, sure.

That certainly is not typical across the board, though.

Agreed...600 or so jobs means more taxpayors ,this isnt uncommon ....