Matthew Pearson, Ottawa Citizen
Extra costs at Lansdowne Park have wiped out the possibility that the city will turn a profit on the project.
The Ottawa Sports and Entertainment Group — the city’s partner in the venture, which brought about the return of CFL football to the city and dramatically transformed the Bank Street site — also stands to make less money than initially expected, and suffered an operating loss of $10.9 million in Lansdowne’s start-up year.
The details, released late Tuesday in advance of next week’s finance and economic development committee meeting, are contained in the first-ever annual report on the Lansdowne Partnership Plan. The report provides council with an update on the first year of operations at the park, which was unwrapped in stages following the Ottawa Redblacks opening game on July 18, 2014.
Financial statements for 2014 were provided to the city at a meeting in June, as well as an updated picture of the profit-earning potential of Lansdowne Park.
OSEG operations are expected to generate $109.7 million more in net revenues over 30 years than projected in 2012 thanks to longer term retail leases (at higher rates), higher CFL revenues with broadcast agreements, and higher than expected revenues from naming rights and ticket fees.
However, the business organization has also had to shell out $53.6 million more in unexpected capital expenditures in 2014 and 2015. OSEG’s unanticipated costs included repairing rust in the arena roof, as well as additional work on the retail area; technology costs of $10 million – which are offset by increased revenue – and $20 million more in retail construction costs.
The impact of the revised figures is reduced profit for OSEG over the 30 years of the agreement. OSEG was expected to spend $56.3 million and get paid $69.7 million, for a net return of $13.4 million, in 2012 dollars. But now OSEG is expected to invest $110.5 million and earn $115.4 million, for a net profit of $4.9 million — a reduction of $8.5 million, in 2015 dollars.
The city’s anticipated profits of $22.6 million, meanwhile, will be wiped out in large measure because of the unanticipated costs of repairing the arena’s roof. Depending on how the city decides to settle its dispute with OSEG, it could recoup $6.8 million of the expected profits, according to the report.
Lansdowne Park opened in stages beginning with TD Place stadium, the parking garage and urban park in the summer of 2014. Retail and office space followed in the fall and spring of this year, while residents in the condos began moving in last fall.
The report says the urban park has become a popular gathering place and hub of activity for all ages.
The Aberdeen Pavilion and Horticulture Building, which the city own, hosted a number major events in the first year, including FIFA Women’s World Cup, the Ottawa Farmer’s Market winter and Christmas markets, Winterlude, the Ottawa Sports Hall of Fame induction ceremony and Mayor Jim Watson’s annual seniors breakfast on Canada Day.
The agreement between OSEG and the city called for 40 per cent of retail at Lansdowne to be new or “unique.” To date, 53 per cent of leases fall within this category, the report says.
But the percentages of retail space at Lansdowne classified as restaurant and cinema exceed the targets for each category.
OSEG says it has created 286 full-time and 1,599 part-time jobs, while the retailers combined have created 367 full-time and 680 part-time jobs.
A second report up for the finance committee’s consideration recommends how council could settle a legal dispute with OSEG over $23.6 million in costs related to repairing the arena roof and spending more on the retail component to better match the urban park.
The settlement would involve OSEG taking out a loan for $23.6 million, which would be guaranteed by the city so that the business group could get a more favourable interest rate. The annual payments of principal and interest on the loan would be paid out of revenues under the Lansdowne agreement.