Weekly newsletter: October 10, 2023
Hello!
The revised Lansdowne 2.0 proposal was released on Friday, so that was my entire Sunday and Monday (we do Thanksgiving on Saturday).
Given we’re coming off a holiday weekend and my mind’s still a bit fried from a whole weekend of reading (plus I ran out of time to finish writing), I’ll share some history of the site and how we got to where we are this week.
In brief, based on the information currently available, I will be voting against the proposal, mostly because risky investments like these should be meant for private money, not public money. There are other reasons behind my choice, but I will expand on that next week.
Sorry for the length, but given the implications of Lansdowne 2.0, it’s worth a deep dive and longer read.
History
The area now known as Lansdowne has a long and rich pre-Confederation history dating back to 1847.
About 40 acres of land were acquired and assembled by the City of Ottawa (Bytown at the time) through colonial government deeds and by purchasing from local landowners. Save for minor land acquisitions in 1883, the size of the site was unchanged since.
The grounds played host to several exhibitions in its history, including the annual Central Canada Exhibition (later the SuperEx) from 1888 to 2010. The telephone was demonstrated to the public for the first time at an exhibition at the grounds in 1870.
In 1890, the grounds were named Lansdowne Park, for Henry Petty-Fitzmaurice, 5th Marquess of Lansdowne, the previous Governor General of Canada. I included the name only because of how delightfully British it sounds.
Built in 1898, the Aberdeen Pavilion was used mostly for agricultural shows, which earned it its nickname, the Cattle Castle. Part of its original purpose was an indoor hockey rink, and it hosted Stanley Cup games in 1904.
Originally developed as a rural fairground, Lansdowne Park evolved as Ottawa evolved in the 20th century.
Permanent grandstands were built in 1908 where the north side stands of TD Place Stadium presently sit, with stands on the south side added in 1920. The south side stands were replaced in 1960, while the north side stands were replaced by the Ottawa Civic Centre in 1967.
The pavilion had major military significance as a recruiting centre, encampment, and mustering point for soldiers before heading overseas in the First and Second World Wars. During the Cold War, Lansdowne Park was selected as the assembly point for the city where survivors of a nuclear attack would receive food and water. Thankfully, it never served that purpose.
Lansdowne Park’s original redevelopment… almost
Lansdowne Park became a major financial burden for the old City of Ottawa by the late-1990s. Then-Councillor Jim Watson proposed allowing a private developer to revitalise the site. All submitted proposals included residential properties on the stadium site, which fueled significant public opposition.
Major debt, public opposition, plus the fear of quashing hopes of a CFL return to Ottawa led the property to be transferred to the then-regional government of Ottawa-Carleton.
Lansdowne Park’s redevelopment was attempted again in 2007, when then-Mayor Larry O’Brien invited local developers to submit proposals for the site. Council overrode him and instead approved a design competition process for the site.
The design competition, which aimed to create a plan for what Lansdowne Park was to have and to be for developers to bid on and construct, concluded in May 2008. One month later, before the report for Council was completed, it was suspended to evaluate if the stadium was worth saving. The south side stands were condemned and demolished in July 2008 while the Civic Centre and Frank Clair Stadium were retained.
The design competition process would never be revived, a fate which was sealed after the Ottawa Sports and Entertainment Group (OSEG) were awarded a new CFL franchise contingent on a stadium in which to play.
Lansdowne Park’s original redevelopment, actually!
Following their successful CFL bid, OSEG approached the City of Ottawa to propose a public-private partnership (P3) to develop Lansdowne Park, including renovating the north side stands and building new south side stands. The proposal was publicly announced in October 2008.
Council voted to work with OSEG in April 2009 and approved a proposal in November 2009. The approval included some conditions:
Transportation and retail studies
Plan for the relocation of the Aberdeen Pavilion
The urban park was subject to a design competition
Creation of a design review board to oversee elements of the site’s design
By June 2010, Council voted to proceed with sole source negotiations with OSEG, including developing a plan to combine OSEG’s residential and commercial plans with the urban park, whose design was selected just a few weeks earlier.
The land’s rezoning was approved in September 2010 by a tied vote broken by then-Mayor O’Brien, with the site plan approval coming in November 2010. The project would receive its final approval in August 2011 under then-new Mayor Jim Watson.
May 2012 saw the first contracts awarded to begin the redevelopment with the demolition of the Coliseum, construction of a new foundation for a to-be-relocated Horticulture Building, and soil remediation of the entire site. The Horticulture Building was relocated in November 2012.
An investigation into whether the arena and north side stands should be reconstructed was conducted in 2012, with the City and OSEG reaching a joint decision to make short-term, mostly cosmetic improvements to the structure until a full renewal was required later in the partnership term.
The stadium renovation and new stands were completed in July 2014 for the home openers of the Redblacks and Fury, while the urban park and Horticulture Building opened in August 2014.
The OSEG partnership
The City of Ottawa retains ownership of the Civic Centre, Frank Clair Stadium, the public parking, and the retail buildings, while OSEG (through its subsidiaries) would occupy, operate, and maintain the assets, costs of which are then passed down to its tenants and sports teams.
The City owns and maintains the urban park, Aberdeen Pavilion, and the Horticulture Building.
The initial terms and conditions of the partnership were established in 2012 and were based on balancing risks between the City and OSEG while ensuring both parties could expect reasonable returns on their respective investments.
To date, the City and OSEG have invested an estimated $425 million into the redevelopment of Lansdowne, $210 million of which are municipal funds, broken down as follows:
$135.8 million for the stadium and arena renovation (City’s maximum in the deal, the remaining costs were guaranteed by OSEG)
$45.7 million for the urban park
$32.2 million for the retail and parking structures
A City debt of $127.6 million was issued to cover the stadium/arena and retail/parking portions of the project, repayment of which is ongoing at $6.9 million per year. Debt repayment is covered by property taxes from the property.
Other generated revenues are distributed through a closed financial system, known commonly as a waterfall agreement. A waterfall is an agreement where parties are paid in a “seniority” system of sorts. Distributions must be made in full at the first level before proceeding to a subsequent level.
Lansdowne’s waterfall consists of six levels of distribution and does not cover the City-owned components of the site:
Lifecycle fund – to maintain retail, stadium, and parking
Returns on OSEG equity – interest earned on cash contributions
Return of additional OSEG equity – for additional cash contributions
Returns of OSEG equity – distributions for the return of minimum contribution
City return on deemed equity – interest earned on the City’s deemed contributions, equal to the value of the retail lands
Residuals (profits) – to OSEG first, then City
As the City has made no cash contributions (equity) to the project, it’s not entitled to distributions 2 and 4. Additionally, should the Redblacks and 67’s ever be sold, the proceeds would also flow through the waterfall.
Projections in 2012 estimated over the 30-year term of the agreement, the City would earn $60.8 million in interest from the value of the retail lands (deemed equity) and $32.8 million in residuals. Neither return was expected to start until 2035.
Above the actual redevelopment costs, OSEG has contributed $160 million to the project, which is $100 million more than projections in 2012. As a result of the interest to be earned by OSEG on their additional equity, the City is no longer expected to receive any residuals throughout the term of the agreement.
The pandemic
A requirement of the partnership includes an annual report to provide updates on the agreement, operations, revenues, usage, etc. of the site. The 2020 annual report recommended an approach to begin the conversation to address the challenges to long-term sustainability of the partnership.
Of note was the financial pressure on OSEG as it had to contribute more equity than they were recuperating plus operating and financial challenges with the north side stands and arena. Work was underway to increase reliable foot traffic to Lansdowne on non-event days, but the start of the pandemic placed unforeseen pressures on that plan.
In December 2020, City Council approved amendments to the partnership to ensure they were positioned to survive the pandemic, including:
Allowing OSEG to access the lifecycle reserve for three years to stabilise itself
Extending the agreement from 30 to 40 years
Eliminating the need to pay the City additional rent if additional investors were added to the retail component of the site
Though the measures helped OSEG through the impacts of the pandemic, it’s unlikely to address any financial sustainability pressures raised since 2018, pressures expected to persist. A working group of City and OSEG staff was struck in December 2020 to explore other options.
Original Lansdowne 2.0
In July 2021, City Council approved a path to sustainability and next steps report for Lansdowne. The report included an assessment of the north side stands and arena, which were now deemed functionally obsolete.
At that time, Council also provided further direction to staff to:
Bring forth a proposal to attract more people to Lansdowne, including more housing and expanding retail to add foot traffic
Examine the public realm, including recommendations for safety improvements
Develop public programming to increase usage of the public realm
That all culminated to May 2022, when the Council of the time approved a preliminary concept plan for Lansdowne prepared by OSEG, which included:
Redevelopment of the north side stands and arena
A new standalone 5,500-seat event centre to be home to the 67’s, BlackJacks, and a regional venue to attract a range of cultural events
108,000 square feet of new retail (currently 41,000 square feet)
About 1,200 units of new housing across three towers (two towers on retail podium, one beside the Aberdeen Pavilion) — 10 per cent as affordable units
The retail and residential would reside in new space created by additional setback fronting the main roadway from the new north side stands’ steeper orientation.
Like Lansdowne 1.0, debt from the capital costs of reconstructing the public facilities would be repaid using property taxes from the residential and retail units. The underground and air rights would be sold to generate additional revenue.
Those parameters became the basis of negotiations with OSEG, which created the original Lansdowne 2.0 price tag for the City of $332.6 million, financed through the sale of underground and air rights, plus debt to be serviced through site property taxes, ticket surcharges, and other cashflows through the waterfall agreement.
Council at the time also approved $8 million (to be part of the project’s cost) to initiate cost sharing provisions, agreements, and design and engineering of the new facilities. Staff were also directed to take next steps in developing programming, advancing animation, and access of the public realm at Lansdowne.
Revised Lansdowne 2.0
Following the approval of the concept plan, four streams of due diligence work were undertaken:
Request for expression of interest in underground and air rights
Financial due diligence
Applications required through the provincial planning process
Public consultations
Staff also explored the project’s constructability, complexities of the site, and impacts of construction staging. Each stream of due diligence was validated by a third party.
That work led to the modified proposal which was released on Friday and is currently what’s up for discussion by current Council.
While the redevelopment of the standalone arena and north side stands are unchanged, the retail, residential, and public realm components were adjusted primarily in response to public feedback, including:
Reducing the new retail space to 49,000 square feet to be mostly occupied by the GoodLife Fitness
Reducing the residential units to 770 across two towers, one 40 storeys tall, one 25 storeys tall
27,900 square feet in new public realm (former occupied by proposed third residential tower)
Some streamlining was also introduced to reduce costs to the City and OSEG.
Previously, construction of the parking garage, retail podium, and residential towers were to be separately done as each had a different owner and operator. Instead, one entity will build all three components (retail the City’s specifications), then return the retail component to the City.
The underground and air rights above and below the retail will be sold for $39 million, which means the parking and residential will be owned and operated privately.
Next week, I will dive into an Auditor General report from 2020 about the waterfall arrangement, what I like and don’t like about Lansdowne 2.0, next steps for Council, and why I will not be supporting the proposal.
Until then, thanks for reading!
-Wilson