[News] Calgary, Alberta, & CSEC agree in principle to $1.223bn Event Centre + infrastructure

[automaton 3]

Originally Posted by RoadGame

I'm sorry, this is incorrect. The relevant benchmark here is the 5%, not the 1%. The city arrived at an estimated contribution of $316M from CSEC through their rent payments at a discount rate of 5%. Implicitly that's the value to the capital stack of the debt that would be secured by the lease. If they can raise debt at less than 5%, then the CSEC lease will enable a higher amount of upfront debt capital, if rates move against the city then the lease will support a smaller amount of upfront debt capital, which will create a shortfall somebody's got to pay for.

The 1% escalator only serves to shape the payments over time. Capital tariffs like this are often flat nominal, but where there are big differences in cost of capital between the two parties involved it can make sense to shape the tariff. For example, utilities (power companies) often have lower opportunity cost of capital than oil companies, so when the power company builds a cogen for an oil company you can escalate the tariff by a few percent per year. When the utility company looks at that revenue stream and applies their opportunity cost of capital discount factor they see a number, let's call it X. When the oil company uses their opportunity cost of capital to discount that financial commitment (larger discount), they see a number smaller than X. Strike the right balance and everyone's happy.

The 1% could just as easily be set to 2% with a smaller initial payment, and the resulting PV at 5% would be the same.

TL;DR the 1% is not useful to focus on, the city is betting they can finance the loan at 5%.

Excellent post, thank you.

[Fuzz]

Originally Posted by Dan403

Same thing from "forever orange."

Get over your biases.

LOL...not at all the same. Are there some, sure. But most people are voting NDP because it's the other choice(and many very reluctantly). I've voted for pretty much every party in Alberta at one point or other(other than the whackadoodle ones), What percent of Conservative voters have ever voted for anyone else?



Both sides though, right?

[Scroopy Noopers]

Originally Posted by Dan403

Same thing from "forever orange."

Get over your biases.

Any “forever” voter is a ####ing moron.

[Redlan]

Originally Posted by Aarongavey

Weirdly the private company is still paying 40% of the construction cost on the Titans stadium and that is the largest percentage of public funding for a sports facility in US history.

In Calgary the taxpayer is paying 900 million of the construction costs and the private entity is paying 40 million of the construction cost, for a split of 4% for the private entity and 96% for the taxpayer.

There is no way to connect all these dots…it is apple and oranges. The US and Canada are different countries with different tax structures and they are 2 different venues. In addition the NFL is the largest money generating league in the US with the NHL being fifth I believe.

[Zarley]

Originally Posted by Aarongavey

Do you know the option terms? I have not seen them yet. I have never, ever, and I practice real estate development law for a decade, heard of a deal with options that did not have a price point. How would you even know if you want to exercise your option if you do not know how much it would cost you? Do the Flames have a triple net lease where they have to pay maintenance and municipal taxes? Has that information been released, because the municipal taxes on a property like that over 35 years would probably be worth over 100 million bucks.

My guess, and it is only a guess because stuff like that is not known right now or is what some would call secret, is that the option price is real low, basement level type price and that the property will not be on a triple net lease. That should add another 150 million+ from the city to the Flames.

This Herald article indicates the options are at fair market value, presumably at the date of exercise. So it sounds like the value of the options is tied to control only, as opposed to any uplift on land value. Tough to comment much more without seeing how the options are worded.

[GioforPM]

Originally Posted by Zarley

This Herald article indicates the options are at fair market value, presumably at the date of exercise. So it sounds like the value of the options is tied to control only, as opposed to any uplift on land value. Tough to comment much more without seeing how the options are worded.

I can’t find any reference to FMV in that article.

[powderjunkie]

Coun. Gian-Carlo Carra told Postmedia the city will sell the real estate at full market value.

“The city’s going to get a long-term tax base that supports the investment,” Carra said. “Giving (CSEC) avenues to reinvest that capital back here is absolutely essential to the entire deal.”

I'm not sure Carra is the guy I'd trot out for assurances that everything related to a land deal will be absolutely above board.

I'm also not sure how you determine a fair (or apparently full?) market value for fairly unique parcels by restricting your market to one bidder. Nor how you maximize the overall outcome of those parcels by restricting yourself to one bidder who seems to have little to no experience in blank slate urban development.


IMO you can justify a pretty wide range for 'fair' market value. Considering the sale of public land should be a lot more nuanced and considered, as there is always also an option to not sell and utilize it for something else, should the free market indicate underwhelming external value.

[GioforPM]

Originally Posted by powderjunkie

I'm not sure Carra is the guy I'd trot out for assurances that everything related to a land deal will be absolutely above board.

I'm also not sure how you determine a fair (or apparently full?) market value for fairly unique parcels by restricting your market to one bidder. Nor how you maximize the overall outcome of those parcels by restricting yourself to one bidder who seems to have little to no experience in blank slate urban development.


IMO you can justify a pretty wide range for 'fair' market value. Considering the sale of public land should be a lot more nuanced and considered, as there is always also an option to not sell and utilize it for something else, should the free market indicate underwhelming external value.

I had an option to purchase land next to mine (from the province coincidentally) - basically we used a recognized appraiser.

[Zarley]

Originally Posted by powderjunkie

I'm not sure Carra is the guy I'd trot out for assurances that everything related to a land deal will be absolutely above board.

I'm also not sure how you determine a fair (or apparently full?) market value for fairly unique parcels by restricting your market to one bidder. Nor how you maximize the overall outcome of those parcels by restricting yourself to one bidder who seems to have little to no experience in blank slate urban development.


IMO you can justify a pretty wide range for 'fair' market value. Considering the sale of public land should be a lot more nuanced and considered, as there is always also an option to not sell and utilize it for something else, should the free market indicate underwhelming external value.

Agreed that Carra is a buffoon.

Typically a commercial appraiser is engaged to provide an opinion of market value under highest and best use, which would be a valuation of the parcel as a fee simple asset clear of encumbrances. This valuation would capture the value of the development potential of the parcel as if it was offered on the open market - the existence of the option has no bearing on the market value opinion. I used to work in commercial valuation, and typically we would see these types of options at the expiry of long term land leases. Again, it’s tough to analyze this any further until we see the text of the agreement.

[Flames_Gimp]

Originally Posted by AFireInside

An arena isn't though. Really is it that much of a benefit. Are people not going to spend money on other forms of entertainment or products in Calgary? Instead of going to a game a family of four goes out for other forms of entertainment probably 5 or 6 times.

I don't think anyone wants them gone I just don't want want public money to prop up billionaires.

entertainment that brings 20,000 people 3x week, there's nothing else that good for the city. Also better concerts because the new building will attract better performers. This is huge for the city and worth the government spending.

The dome is literally crumbling, we need this. We don't build and flames leave and the city and province eventually pays for an event Centre in full because the city will still need an arena.

[Flames_Gimp]

Originally Posted by Sylvanfan

I see Kyle's mom is doing her pre-election spending. Everytime I see her I hear Eric Cartman start with my friend Kyle's mom is a big fat...

She might be shocked to find out how many Calgarians want the Flames gone and not have to pay for an arena on election day.

a bad season after a team changing trade where we lost are best players, and many people want the team gone? i don't think so. wtf man, i thought you're a fan?

I feel that there's been so much disappointment and bad feelings at the dome, a fresh start in a new building sounds good to me!

[zamler]

I would be shocked to find out a large number of people want the Flames gone.

[GreenLantern2814]

Originally Posted by Bonded

Fixed that for you. It is wild that the UCP have picked the one candidate that can lose them the election.

Seems to be an issue with the Conservatives as well. Scheer was terrible, O'Toole seemed decent but had a terrible campaign, and I don't think Poilevre will resonate with Ontario and Quebec and will hand the election back to the Liberals

If inflation isn’t a rear view mirror issue by the next election, Trudeau and Singh will be punted like it’s 4th and 50.

[Southside403]

Originally Posted by zamler

I would be shocked to find out a large number of people want the Flames gone.

It's a hard sell some folks don't care about hock some folks are struggling just to live especially with alot people having to renew there mortgages cost of living is hard for some.

[zamler]

Originally Posted by Southside403

It's a hard sell some folks don't care about hock some folks are struggling just to live especially with alot people having to renew there mortgages cost of living is hard for some.

I'd love to hear how us not having an NHL team will fix this.

[FormerPresJamesTaylor]

Originally Posted by zamler

I'd love to hear how us not having an NHL team will fix this.

Because the city and the province are using our money. Losing the Flame isn't a real threat, and if it happened well, we'd get one back eventually.

[zamler]

Originally Posted by FormerPresJamesTaylor

Because the city and the province are using our money.

This is grossly simplistic, government spends around $65 billion per year. Our money in case you forgot.

[Flames_Gimp]

Originally Posted by FormerPresJamesTaylor

Which we'll pay an exorbitant amount of money to go inside each time.

So? don't go.

[FormerPresJamesTaylor]

Originally Posted by zamler

This is grossly simplistic, government spends around $65 billion per year. Our money in case you forgot.

It's simple but not grossly so.

Originally Posted by Flames_Gimp

So? don't go.

You missed the point completely. Shocker.

[GreenLantern2814]

Originally Posted by FormerPresJamesTaylor

Because the city and the province are using our money. Losing the Flame isn't a real threat, and if it happened well, we'd get one back eventually.

No, but a real threat is “the Saddledome suffers a major structural collapse while people are inside.”

Maybe not this year, maybe not next year (and it could be this year or next year, these things can be unpredictable) but it is a nearly 40 year old structure that was underwater up to the luxury suites. The one working freight elevator to the main concourse has a placard proudly certifying it passed inspection in 1983.

The city needs a new event centre. They can either build it themselves, or partner with the local hockey team who will shoulder a significant portion of the cost and provide 150+ nights of entertainment to the city each year, plus whatever other touring acts add Calgary to the stop list.

I suspect 20k people who don’t go to hockey games might enjoy it if Taylor Swift or Ariana Grande came to town.

To say nothing of the area surrounding the dome being decades overdue for redevelopment - they could have so much going on down there, instead it’s a wasteland.