Ottawa, ON, December 18, 2018 – Capital Sports Management Inc. (CSMI) has proposed to Trinity Development Group a resolution to the impasse on the LeBreton Flats project.
It was CSMI who first articulated a vision for the revitalization of Ottawa’s downtown – anchored by the development of a state-of-the-art sports and entertainment venue in the heart of the capital. As part of the plan put forward, CSMI intended to reinvest its share of the profits to repay the debt financing that would fund half the costs of the new downtown event centre.
Put another way, the plan was always to use CSMI’s share of the profits from proceeds of the retail, office, residential and recreational components of the real-estate project to fund the arena. This is standard business practise in large scale, mixed-use real-estate development business deals.
More importantly, once completed, it was intended the arena would not be owned by CSMI, but rather by an arms’ length, not-for-profit entity known as a Municipal Capital Facility, that is separate and unrelated to the Senators and Eugene Melnyk. The idea was never to fund a property owned by Eugene Melnyk or CSMI, but to reinvest funds into a venue whose purpose was to revitalize and serve the community.
However, due to the impact of Trinity’s parallel development at 900 Albert Street, CSMI now strongly believes that it would no longer be economically viable.
Trinity, for its part, argues strenuously in the statement of defense it delivered today that this is not the case. In fact, it claims that 900 Albert Street will not only “enhance the value of the LeBreton real estate,” but that the two projects are “complementary,” and the redevelopment as currently envisioned by the RLG partnership and approved by the NCC will be substantially profitable.
A Proposed Solution:
In spite of this impasse, and because CSMI’s commitment to a vibrant downtown development and new arena for the NHL hockey team has never wavered, CSMI is proposing a solution that would allow the parties to move forward. CSMI is prepared to forge ahead with the current plan, favoured by the NCC, with one change: CSMI would assign to Trinity its interest in the retail, residential, commercial and recreational components of the project and all the profits it would have been entitled to receive – which were to be used to finance the sports and entertainment facility. In exchange for this significant concession, Trinity would assume CSMI’s responsibilities to finance the arena. Any surplus profits will belong to Trinity – not to CSMI.
Under this proposal, Trinity would become the sole developer of the mixed-use components of the project, and enjoy the profits that CSMI would otherwise have been entitled to receive, including $466-million in development fees Trinity estimated in its Statement of Defense. Accordingly, Trinity would take on CSMI’s obligation to repay the debt financing for the arena and use its share of the profits from 900 Albert Street to meet this obligation, if necessary.
In short, CSMI would forfeit profit that it would have used to invest in an arena it would never have owned — and is now proposing that Trinity make the same commitment, using the very same profits.
The proposal is beneficial to all parties involved because:
- It allows the LeBreton Flats project to continue in a timely manner, within the framework of the existing process being led by the NCC;
- It allows CSMI to focus on the design, development and management of a world class entertainment venue at the heart of the city;
- CSMI would continue to be responsible for 100 per cent of the arena’s operating and lifecycle costs during the term of its lease; and
- It transfers to Trinity all of the revenue and profits of the mixed use real estate development.
CSMI believes that this proposal will harmonize the development of LeBreton with the development of Trinity’s 900 Albert. If Trinity is correct in its belief that the LeBreton Flats project remains viable and profitable despite the impact of 900 Albert Street, then it must also conclude that this deal enables Trinity to collect greater profits than it would have under the original structure of the deal.
Chief Operating Officer