By Alan Freeman
Six years after its opening, the Lansdowne redevelopment is on the brink of financial collapse and can only survive with financial help from the city, according to City of Ottawa manager Steve Kanellakos.
Some critics condemned the proposal, which was released unexpectedly November 4, as a bailout for the Ottawa Sports and Entertainment Group (OSEG) which is owned by some of the city’s most prominent real estate developers.
Blaming the pandemic for a collapse in revenues from sports, concerts and other events and from its already troubled retail and commercial operations, OSEG says it’s on the verge of default.
“OSEG has a retail loan outstanding of $106 million that must be re-financed over the next two years, and the worsened financial projections due to the pandemic will make that difficult, putting them at a very real risk of default,” the report states, noting that OSEG had “made a request for help to the city.”
The lengthy report recommends a series of measures to keep OSEG afloat, including giving the partnership access to $4.7 million from a rainy-day fund to help it keep operating in 2021. City staff also suggests that the public-private partnership be extended by 10 years to 2054 and that the city give up half of the cash flow from retail operations it would have collected at the end of that period.
Councillor Shawn Menard called the proposal “a bailout to OSEG” that will add to the city’s long-term liabilities. The Glebe Community Association raised questions and concerns about the proposal, complaining that it was put together without any public input.
At press time, Menard had organized a community meeting on Zoom for November 10. It was to be discussed by city council’s finance and economic development committee on November 12.
The OSEG partners include Minto Development chairman Roger Greenberg, Trinity Developments’ John Ruddy, developer William Shenkman and businessman John Pugh. They are not named in the report, and it’s unclear whether they are willing to provide more cash to help OSEG avoid default.
The report paints a bleak picture for OSEG, which owns the shopping centre and professional sports teams at Lansdowne. The residential condos, which were developed successfully by Minto, aren’t part of the partnership, nor is the office building.
The report says that due to the pandemic, OSEG only expects to collect 75 per cent of its rental income in the current fiscal year, ending next March 31. According to CBC, OSEG collected less than half the rent from shops and restaurants between April and September.
A visitor to the $425-million Lansdowne project sees the impact immediately, with restaurants and stores shuttered, several of them permanently. It is unclear when the sports teams owned by OSEG, including the Redblacks and Ottawa 67s, will resume operations.
The report says OSEG expects to spend an additional $40 million on operations and capital expenditures over the next five years due to the pandemic.
The city has already spent at least $210 million on Lansdowne. The report recommends that a new working group of OSEG representatives, city managers and city councillors be formed to study options for Lansdowne and report back by the spring.
It’s clear the pandemic is only part of the problem. The report notes that the situation was “already challenging” before COVID-19 took hold. OSEG reported a net loss from recurring operations of $11.4 million in the last fiscal year because of weak revenues from the Redblacks.
OSEG has repeatedly complained that visitor numbers at the site are too low, and it has been trying to find ways to attract more people.
Ominously, the report warns that even when COVID-19 abates, it will take at least five years for rents to get back to pre-pandemic levels. And it hints that even more city money is going to be needed in the future, including millions to renovate the north stands of the stadium.
The report appears to question the whole future of the retail part of the development, predicting a continuing trend towards online shopping in the post-COVID world. For residents passing empty shopfronts on Bank Street, it’s clear there’s a glut of retail space in the neighbourhood.
Despite strong community opposition to the development a decade ago, the city signed a complex sole-source 30-year deal with OSEG. The report warns that if the city doesn’t bail out OSEG and lets it default, it would probably end up closing the sports teams and the city would be forced to run the shopping centre itself. The report insists that the new deal will improve the city’s financial situation.
Alan Freeman is a freelance journalist and columnist for iPolitics who lives in the Glebe.