Quote:
Originally Posted by RoadGame
Thinking through this out loud a bit in case other people who look at capital investments in particular have some related thoughts.
This table initially struck me as a bit odd, mixing Lease payment value with cash outlays as it does. For instance when a company builds an asset for an oil company, and the oil company pays a lease on it for ~30 years (a cogeneration plant for instance) generally the people putting up the cash for construction would expect the lease payments to provide for both a return of and return on capital over the life of the lease. Now in this case the value created by the event center doesn't accrue entirely to CSEC (majority definitely, but not 100%) so I would expect that the lease wouldn't necessarily provide for a return of let alone return on all the capital.
Even then, just think about the construction bills on the core assets (first two rows) for a second. 26.8+13.2+28.7+26.4+295+207.1+13.2 = 610.4M. Are the assets in those first two rows going to cost $610.4M to build? seems low. The present value of the lease is $316M, so if $610M were the construction cost, in effect CSEC through it's lease is ultimately paying for about half (again, ignoring the need for and utility of the enabling assets)?
Or... is the value of the lease being presented at a 5% discount rate really a proxy for the debt capital the asset owner (CoC) will be able to raise as a part of the capital stack to pay for the whole thing, which does make more sense I guess from the perspective of them putting all these values in the same table despite big differences in timing of cashflows. That seems a more likely explanation.
Hmm.
Not that Murray would monetize it in the near term, but what do we figure the value of the franchise will increase by once they're in the new building? Weighing that against the present value of the financial commitments they're making, relative to say capital investments in the oil patch, would be fascinating.
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Great post.
An 800m arena with 600m to pay for it begs questions. Though I think part of it is the land. There's a fair bit of land swaps in the deal so an $800m arena minus $200m in land maybe checks out.
I think a difference between a purely commercial project is the accrual of benefits are not a zero sum game. This is more like a JV maybe.
Neither the city nor CSEC could make this work on their own (if they could, it'd have been built a decade an ago). The partnership makes the building investment cost less and create way more for both parties.