EDMONTON - Monday afternoon, the City of Edmonton concluded a deal with the Katz Group to purchase three parcels of land for a proposed new downtown arena and entertainment district, for a total cost of $74.9 million.
That’s significantly more than the estimated $20 million figure people had been using to describe the cost of the arena site itself. Robert Moyles, who speaks for the city, said the price is higher than originally suggested because the city has purchased not just the land for the arena complex but the adjacent land, as well as a separate parcel on the south side of 104th Avenue.
The seven-acre site where the arena itself, as well as a planned public skating facility, will sit cost the city $24.6 million, plus an additional $1.3 million in legal fees and carrying costs. That $25.9-million total is roughly in line with the city’s original estimate.
The city has also purchased the adjacent five-acre parcel for another $15.4 million.
“That will allow us to control the development that goes in the area in terms of the time, the type, and the form,” Moyles told me.
As well, the city has purchased 3.7 acres of land south of the arena site, and east of the Greyhound station, for another $33.6 million.
However, Moyles said the Katz Group has agreed to buy back that land, and has already paid the city $16.8 million toward that purchase.
But there’s a twist.
Daryl Katz had long pledged to invest $100 million in commercial developments in the arena district.
At last Wednesday’s city council meeting, Coun. Tony Caterina, a staunch opponent of the arena deal, changed his position and voted in favour of the proposal — but only after he successfully amended the city’s agreement with the Katz Group to include a clause that would require the company to invest a minimum of $30 million in those ancillary commercial developments before construction of the arena is to begin.
I had rather assumed — perhaps naively — that such a $30-million commitment would involve some kind of visible development, like a hotel or an office block.
Not quite. Moyles said the Katz Groups’ repurchase of the 3.7-acre south parcel would be considered as representing that $30-million investment.
Once the Katz Group completes the repurchase of the south parcel, the city’s total costs on the complicated land deal will be $41.3 million.
The Katz Group had no comment Monday on the deal. But once again, I can’t help feeling that the goalposts just got moved. Katz is a tough negotiator — and with this land swap he’s just reduced his capital commitment in the ancillary developments to $70 million. In effect, Caterina’s amendment didn’t make this a better deal for the city — it made it, it would seem, a better deal for Katz.
The money for the land purchase is not included in the $450-million cost for the arena, and will not be covered by any future arena ticket tax or the proposed community revitalization levy. It’s coming, instead, out of general revenues. But no matter how you add the numbers, it’s a lot more money than Edmontonians were led to believe.
One more wrinkle in all this? We, the taxpayers of Edmonton, are now the landlords to the Baccarat Casino, which is owned by the Burnaby-based company, Gateway Casinos and Entertainment. Gateway is no mom and pop operation. The company is Canada’s second-largest casino operator, with nine casinos in British Columbia and Alberta. Last year, the company’s earnings before interest, taxes, depreciation and amortization, or EBITDA, were $105 million, up from $90 million the years before.
What are the terms of the Baccarat’s lease? How much rent does it pay? What legal liabilities might the city, as landlord, incur if it broke the lease to build the arena? On Monday, Moyles told me he couldn’t discuss any of those questions, citing third-party confidentiality. On Monday, no one from either the Baccarat or Gateway returned my calls.
Now, even if, for some reason, the complete arena deal doesn’t come to pass, buying this land is not a bad investment. The city bought the land for exactly what Katz paid for it, which seems to be a reasonable market price.
This property has languished for years. Barring the eyesore Baccarat, it’s used largely for gravel-top parking lots. Yet with the Epcor Tower all but complete, with a half-dozen new condo projects popping up all around, the land has far more development potential. It’s not a bad hold, even if the arena deal were to go sideways.
Still, it does mean the city is carrying a tremendous amount of downtown land in its real estate portfolio. Despite the “postponement” of the Royal Alberta Museum project, the city is also pushing ahead with its deal to purchase the old Canada Post site. (How much will that deal be worth? Neither Canada Post nor the city will say.) Together, the two deals will make city hall one of the city’s largest downtown land speculators. The potential payoffs for our downtown could be great. But the risks to taxpayers are too, especially if the city is depending on unreliable partners like the provincial and federal government for support.
As the RAM funding debacle has amply demonstrated, when it comes to downtown renewal, it’s up to city hall and local businesses and community activists to get the job done. Whether the arena can be part of that equation still remains to be seen.