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

[The Yen Man]

Originally Posted by zuluking

Or maybe you got fooled by some random guy who tilts at windmills. Like, seriously, how do they construct an article around some guy that ... ooooooo ... is an engineer WITH a business diploma who self-professes to know a thing or two about business deals. But in reality doesn't know anything more than the next guy, but rather makes a bunch of assumptions to feed his faux outrage.

Thanks, Herald and all, for foisting a bunch of unsubstantiated clickbait on the rest of us, and making us have to do YOUR due diligence to discover that this is just an attention seeker with no relevant credentials or insider information.

Lol, I'm reading that article, and I'm like, did they just quote some random twitter guy who self professes to be a business deal expert?

[Buff]

Originally Posted by taxbuster

When I was a STH before moving to BC, we often arrived early for a game to eat as it was easier than first going home, eating and trying to speed a trip to the Dome. The food choices were terrible: wings/fries in the restaurant seemed the best "value", pizza or (while it was there) noodles. Our seats were in 215 so we hit the restaurant up top for beer and could get bottled beer there, not the heroin beer in the rest of the place.

But it was expensive and crappy...so often we went to places close to the Dome instead. Short-sighted marketing.

I'm from Lethbridge and I would drive up with my kids and stop at a McDonald's along Macleod Trail before hitting the Dome. Around $20 for two meals at McD's for a quick bite to eat was all we needed. Tried the Dome once and around 20 mortgage payments for burgers that tasted terrible.... just not feasible.

[Scornfire]

Originally Posted by Buff

I'm from Lethbridge and I would drive up with my kids and stop at a McDonald's along Macleod Trail before hitting the Dome. Around $20 for two meals at McD's for a quick bite to eat was all we needed. Tried the Dome once and around 20 mortgage payments for burgers that tasted terrible.... just not feasible.

It's impressive how brazen they are with the pricing given the quality could be rivaled by some brands of dog food

[calf]

Originally Posted by Lanny_McDonald

Well that’s what a biased article with details from an uninvolved third party and no access to the agreement is saying. I also think he should return his business diploma. He’s complaining about the construction costs being one sided and the Flames making their payments over time. That is what happens when you own a building and then lease it out. Also, what business in their right mind is going to sign a lease where they pay more in years of positive revenue but still pay the same in years of poor or negative revenue? Yeah, I want this guy representing or running my business. What a terrible article.

While I'm not a huge fan of the deal, I am a huge fan of getting facts straight. This one lost me. Without being too cocky, I have significant experience around infrastructure projects and their related commercial deals.

However, Fazel notes the city’s upfront costs are much higher, since CSEC is only putting in $40 million at the start of construction. It will pay back an additional $316 million in annual payments that begin at $17 million and climb by 1 per cent each year.

The $316 million is clearly noted as the present value of the lease payments using a 5% discount factor. The amount of the lease payments starting at $17 million, increasing by 1% each year for 35 years is about $708 million total.

If you compare that to the City's initial $515 million investment, that's about a 1.8% IRR over the 35 year term, which is not great (the city better hope property values an investments in the area increase the tax rate to realize better returns). That's on quick math without having all of the details of ins/outs of cash during the construction process, etc. I think Fazel is probably not privy to/doesn't know where some of the additional up front cash is coming from - there's likely more to the story on that.

It's also not uncommon at all for the owner/lessor to simply just recoup and earn an ROI, and not participate in the operating profits/losses (imagine the uproar if the City had to pay a portion of CSEC's losses if there's another extended strike or lockout?). The structure, in my opinion, helps to mitigate some of the risk from a taxpayer perspective while limiting upsides, which is the tradeoff.

[Derek Sutton]

Originally Posted by The Yen Man

Lol, I'm reading that article, and I'm like, did they just quote some random twitter guy who self professes to be a business deal expert?

He is an expert on a number of things including Covid 19 given his position with the Canadian Aerosol Transmission Coalition. Also appears to be very trusted by the local media.

https://www.safeschoolscoalitionbc.c...tyfor-schools/
https://globalnews.ca/news/7709093/a...t-tracing-app/

https://www.cbc.ca/news/canada/calga...says-1.3075825

[Paulie Walnuts]

Sorry just saw thr article posted by Farkas.

Probably still annoyed people voted for the UCP just based on getting the arena deal done.

[Infinit47]

Originally Posted by calf

While I'm not a huge fan of the deal, I am a huge fan of getting facts straight. This one lost me. Without being too cocky, I have significant experience around infrastructure projects and their related commercial deals.



The $316 million is clearly noted as the present value of the lease payments using a 5% discount factor. The amount of the lease payments starting at $17 million, increasing by 1% each year for 35 years is about $708 million total.

If you compare that to the City's initial $515 million investment, that's about a 1.8% IRR over the 35 year term, which is not great (the city better hope property values an investments in the area increase the tax rate to realize better returns). That's on quick math without having all of the details of ins/outs of cash during the construction process, etc. I think Fazel is probably not privy to/doesn't know where some of the additional up front cash is coming from - there's likely more to the story on that.

It's also not uncommon at all for the owner/lessor to simply just recoup and earn an ROI, and not participate in the operating profits/losses (imagine the uproar if the City had to pay a portion of CSEC's losses if there's another extended strike or lockout?). The structure, in my opinion, helps to mitigate some of the risk from a taxpayer perspective while limiting upsides, which is the tradeoff.

Does anyone know about what the City's cost of capital is? I'm going to go out on a limb and say it's nowhere near this 1.8 IRR

[getbak]

Originally Posted by Paulie Walnuts

Probably still annoyed people voted for the UCP just based on getting the arena deal done.

Do you really think it caused people to switch their votes to the UCP?

[FlamesAddiction]

Originally Posted by getbak

Do you really think it caused people to switch their votes to the UCP?

Yeah, the opinion polls I saw suggest that it probably hurt the UCP more than it helped.

As far as the critic goes, critics criticize. It seems like this guy pops up as a critic on various things frequently. I think it's like his job or something.

[Paulie Walnuts]

Originally Posted by getbak

Do you really think it caused people to switch their votes to the UCP?

Well some of the posts here seem to suggest it was important enough to vote UCP don't know if it switched a vote but maybe reinforced voting UCP.

[Barnet Flame]

Originally Posted by Scornfire

It's impressive how brazen they are with the pricing given the quality could be rivaled by some brands of dog food

Bought by people that hate their dog.

[powderjunkie]

I've never understood the 'wait for details' people here. It was always in all parties' best interest to present this in the most favourable light for taxpayers, and this was the best they could do.

The deal stinks. The criticism is valid based on the information available. And again, there is absolutely zero reason to have hidden mitigating details.

[calgaryred]

Originally Posted by ComixZone

…I’d be demanding that they do it in exactly the same fashion. Unrivalled.

Costumes, dancing, everything. Do it all again.

That clip was definitely Calgary in the 80s

Sent from my SM-G990U1 using Tapatalk

[Aarongavey]

Originally Posted by Lanny_McDonald

Well that’s what a biased article with details from an uninvolved third party and no access to the agreement is saying. I also think he should return his business diploma. He’s complaining about the construction costs being one sided and the Flames making their payments over time. That is what happens when you own a building and then lease it out. Also, what business in their right mind is going to sign a lease where they pay more in years of positive revenue but still pay the same in years of poor or negative revenue? Yeah, I want this guy representing or running my business. What a terrible article.

I don't think many landlords build a building for 538 million dollars and then lease it out to get a present value of 316 million dollars over a 35 year lease. I did a lot of development law when I was practicing law and I just don't recall many developers coming in and saying "I have a killer deal where my up front costs are 170% of the value of my return". Usually the landlords tried to make money on the buildings they owned.

[accord1999]

I think Calgary has to accept that it is not a large enough entertainment market to justify a privately funded modern NHL sized arena by itself.

If it wants a major, state-of-the-art anchor tenant in its Rivers District development it'll need to subsidize it, like it is doing with Arts Commons development. And just like Arts Commons, the benefits will be mostly the wider economic spin-offs, quality of life and revitalization of downtown, not from making money from the venues itself.





To borrow from Mayor Nenshi's quote:

[butterfly]

Originally Posted by Paulie Walnuts

Well some of the posts here seem to suggest it was important enough to vote UCP don't know if it switched a vote but maybe reinforced voting UCP.

All the rural Alberta Oiler fans just voted to fund the new Flames arena.

[Rutuu]

Originally Posted by Infinit47

Does anyone know about what the City's cost of capital is? I'm going to go out on a limb and say it's nowhere near this 1.8 IRR

Municipalities can't issue debt in Alberta, the province runs borrowing programs through the Treasury. So you're looking at using the provinces cost of capital for these projects.

The last debt issuance in Alberta was done at a 4% coupon...the average yield to maturity of the portfolio of Alberta's debt is trading at 4.17% at the moment. Government's don't really raise equity, so you can use the current debt price as your cost of capital.

For conversation sake as there will be a bunch of O&G folks running around running NPV8 figures off their respective economic packages.

Fresh off Bloomberg:
CNQ WACC: 13.27%
VET WACC: 11.65%
Tourmaline: 12.57%
Suncor: 10.69%

[Rejean31]

Originally Posted by FlamesAddiction

Yeah, the opinion polls I saw suggest that it probably hurt the UCP more than it helped.

As far as the critic goes, critics criticize. It seems like this guy pops up as a critic on various things frequently. I think it's like his job or something.

So he’s a professional bitcher!! He can piss off as far as I’m concerned!! Yeah dip####, let’s not build an arena, lose our hockey team and be forever known as Edmonton’s ugly weak cousin!! No ####ing thank you!!

[GordonBlue]

He's just saying Calgary might have beat Edmonton again.
Edmonton got bent over on their deal and Calgary might have bent over even more

[Royle9]

Farkas… lol.
Nothing more needs to be said about that guy.