Northlands’ Vision 2020 is not going to happen

The City of Edmonton released its analysis of Northlands’ Vision 2020 proposal today. Introducing the report, City Manager Linda Cochrane said, “we acknowledge that Vision 2020 is an option for what could be done with the 160 acres.” It’s clear from reading the report however that the City doesn’t support the plan.

“Northlands has proposed an ambitious plan and there are elements that are worthy of future exploration,” Mayor Iveson said. But there’s a but. “Council’s job must be to make decisions that are in the best interest of the city, not just one organization.” Suggesting that there’s more work to be done, he said “it’s critical that we aren’t rushed and that we make the right decision for our city.”

Northlands Park

Vision 2020 proposes a transformation of both Northlands as an organization and the 160 acres of land that it leases from the City and operates, which includes Rexall Place, the Edmonton EXPO Centre, Northlands Park Racetrack and Casino, and all of the parking. The plan would see Rexall Place repurposed as a recreation facility, a retrofit for Hall D in the EXPO Centre, a new agriculture strategy, the end of horse racing and a redevelopment of Northlands Park into an urban festival site, and a redevelopment plan consisting of commercial, retail, and residential uses. The key to making the plan work is debt forgiveness on the $48 million outstanding debt that Northlands owes on the Edmonton EXPO Centre, to say nothing of the capital expenditures required to build everything outlined in the plan.

Debt Forgiveness

On the debt forgiveness, Mayor Iveson was clear that is not likely to happen. “I don’t believe Edmontonians would support forgiving a debt this large.” Perhaps more importantly, there’s no upside to the City by forgiving the debt.

Northlands owes $47.4 million as of June 30, 2016 and the City has a corresponding debt obligation with the Alberta Capital Finance Authority for the same amount. Every year Northlands pays the City $4.05 million which the City in turn pays to ACFA, so there’s zero impact to the City. If the loan were forgiven, the City would have to find a way to pay the $4.05 million each year for the loan from ACFA, which expires in 2034 and does not have an option for early termination. “Funding this loan from the tax levy would require a 0.3% tax levy increase in 2017 at a total cost of $72.8 million for the remaining duration of the loan.”

Northlands is projecting negative cash flows of $7.7 million per year which means it may be at risk of defaulting on its loan payments as early as next year. If that were to happen, the City would have the ability to terminate the lease and take back possession of the EXPO Centre which provides the City with “a tangible capital asset that will limit the impact of a default on the City’s financial position.” In theory the City could use income generated from the EXPO Centre to fund the ACFA loan.

“The business case for the expansion of the Expo Centre was overly ambitious in retrospect,” Mayor Iveson said today. But we are where we are, there’s no going back now.

Debt forgiveness or not, the City is on the hook for the money. But by allowing Northlands to default on its loan, the City gains complete control of the Northlands site and EXPO Centre as well.

Repurposing Rexall Place

“There is no immediate demand for six new ice sheets in Edmonton,” the report states, “however opportunity does exist to leverage the Rexall repurpose concept in the context of closing or repurposing four single-sheet ice facilities in north and northeast Edmonton.” The Mayor sounded somewhat optimistic about the idea, and mentioned that he had even spoken with Hockey Canada recently to explore the idea of a hockey academy in the facility. Northlands estimates the cost of repurposing the facility at $85 million. While the City says it “is technically feasible” they disagree on the cost, suggesting “an estimate of $102 million within -10% to +20% would be more appropriate.”

Farewell Rexall Place
Farewell Rexall Place, photo by Jeff Wallace

The wrinkle with this part of the plan is that the City is restricted by the Master Agreement with the Edmonton Arena Corporation (EAC) on the kind of investments it can make to Rexall Place. “The City cannot not make additional capital expenditures that exceed those required to maintain Rexall Place in a safe condition and in compliance with applicable laws.” Furthermore, as soon as Rogers Place opens the City has to stop providing any financial support to Rexall Place, directly or indirectly, except as required to comply with the law and maintain public safety.

The biggest issue however is that “the City must not financially support or advocate in favour of any plan to rebuild or renovate Rexall Place, unless it is to convert the facility to something other than a sports or entertainment facility.” If the plan to repurpose Rexall Place is going to go ahead, the EAC would need to formally waive that restriction.

Hall D

The Hall D retrofit would increase seating capacity to 5,000 but “appears difficult to justify based on the anticipated market demand” for events it might serve. Vision 2020 assumes the facility could attract 50 concerts and events annually, but the consultants research indicates that “a maximum of 20 to 24 concerts annually appear to be the upper boundary for this type of building.” Last year, Hall D hosted 6 concerts.

Electrical and mechanical upgrades as well as a roof replacement would all be required for Hall D in the next 2-4 years. “Without a long term tenant (e.g. minor sports franchise), enhancements to Hall D cannot be justified in the immediate term.” Again the report suggests a higher cost estimate than Northlands did, at “$38.7 million within -10% to +30%.”

Urban Festival site

Recognizing that the site “may provide a unique opportunity to the region” the report raises major concerns about the feasibility of the idea. Industry data suggests there may be market demand in the long-term, but “it is unclear if there is sufficient market demand to achieve the necessary revenue to make the site profitable.” Interviews conducted with local festival organizers suggest “there is not significant interest in relocating to the Northlands site at this time.”

K-Days

In general, the report highlights a lack of detail supporting the idea and says that further investigation would be required. “The updated cost estimate provided by Northlands of $83.6 million cannot be verified as accurate with any certainty,” the report says.

Residential Opportunities

Vision 2020 proposes 3,195 residential units in a mix of concrete high-rise buildings, wood frame low/mid-rise buildings, and townhomes. It anticipates absorption of 540 units per year, a figure the report says is unrealistic. The consultants estimated that Northlands “could reasonably capture at most 15-20% of apartment demand in the city’s mature neighbourhoods” which would mean demand for, “at most, 100-150 multi-family apartment units per year on average from 2015 to 2035.” There does appear to be “market demand for 400 beds to serve Concordia University” but the report notes that in addition to a lack of funding, “the economics of a concrete high-rise for student housing that assumes market rates for land is difficult to achieve.”

The Future of Northlands

When Vision 2020 was released earlier this year, Northlands suggested it would cost $165 million. The City puts the estimated cost at more than $230 million. Northlands deserves some credit for thinking big and putting something on the table, but Vision 2020 just isn’t realistic and will not happen. The future of Northlands will be something different.

Asked if the decision to build the new arena is the root of all of Northlands’ problems, the mayor said that was an oversimplification of a complex situation. “This has hastened a conversation that I think would have happened anyway,” he said.

mayor don iveson

Mayor Iveson indicated he will propose a merger of the EXPO Centre and Shaw Conference Centre next week when Council discusses the report. “This report provides a wake up call that the time for integration is now,” he said. “I believe that if we look at bringing the two conference centres together under a shared events authority, we will get better tourism and economic development results for our city.” He wouldn’t speculate on whether Northlands, EEDC, or a new organization should become that shared events authority.

This is an idea that is long overdue. It regularly comes up in discussions about the various facilities and organizations, and came up again earlier this month when Chris LaBossiere suggested a merger could be a way forward for Northlands. To his credit, Northlands CEO Tim Reid is open to the idea. “One of the things that has never made sense to me in our city is why we have two very large conference, convention and trade facilities that are run under different entities,” he told Metro.

Council will discuss the report at a Special City Council Meeting on August 31. You can dig into the full analysis here.

Can new President & CEO Tim Reid help Northlands find its way?

Northlands announced today that Tim Reid will step into the role of President and CEO effective September 15, 2014. He takes over from CFO and VP of Corporate Services Sharilee Fossum, who stepped into the role in January when Richard Andersen resigned. Tim is coming off a successful stint in Fort McMurray and inherits an organization facing great uncertainty about its future.

Tim Reid

It was just over a year ago that Tim became CEO of the Regional Recreation Corporation of Wood Buffalo (RRC), the organization responsible designing, building, stewarding, and operating “several state-of-the-art community recreation, sport and event facilities and venues” in the Regional Municipality of Wood Buffalo. Prior to that, he was COO of MacDonald Island Park Corporation, precursor to the RRC. Tim will ease into his new role, remaining with the RRC in a supporting capacity for the next six months. The RRC had five projects in the design or construction phase as of January 2014, with a total budget of more than $360 million, including the $127 million Shell Place, slated to open in January 2015.

Tim takes over at a difficult time for Northlands. The organization seems as uncertain as ever about its future, especially in the face of major changes to its core businesses. Will it be an organization focused on agriculture, one focused on meetings & conventions, or one focused on sports & entertainment? Will it find the courage to narrow its focus, or will Northlands continue to straddle three very different industries?

These questions are all the more pertinent now that momentum is firmly behind Rogers Place, the new downtown arena. Despite repeated statements from Northlands officials over the years suggesting they’ll continue operating Rexall Place as-is, the fact is that losing the Edmonton Oilers will have a significant effect on the financial health of the organization. And no one knows if Edmonton can support two large concert venues.

There’s no question that Tim has had a positive impact on Fort McMurray, but can he find similar success here in Edmonton? Granted he doesn’t start for another month, but Tim’s first interviews with the media don’t provide much confidence.

Tim told Metro today that he understands the need to figure out a future for Rexall Place. “We’re trying to put together the data as we speak, so we know exactly what happens when the Oilers and their properties move to another arena,” he said. However, he went on to say that Northlands needs to “find out what opportunities there are for growth on the agriculture side, on the convention and hosting side.”

The downtown arena wasn’t decided yesterday of course – things have been in motion for quite some time now. Are we really to believe that Northlands is only now running the numbers on Rexall Place without the Oilers? I fully appreciate that Tim hasn’t even started yet, so he probably hasn’t seen all the data. He should have just said so. He told reporters that Northlands need to work with the City, Oilers, and Katz Group, but gave no details.

Edmonton Rexall Place

His second comment about finding other opportunities is potentially more concerning, especially coupled with his stated vision for Northlands:

“We want to be the heart of Edmonton and the place where the community goes to celebrate together.”

As a vision it is certainly concise and inspirational, but it’s also vague and generic. It doesn’t say anything about what Northlands is or does. The organization’s 2013 Annual Report lists agriculture, entertainment, trade shows, concerts, horse racing, casino, and conferences as the businesses that Northlands operates in. Its “looking forward” statement is just as confusing:

“As Northlands moves into 2014, we will continue to provide Edmonton and the Capital Region with the best in events and entertainment. We will capitalize on our role as an urban agricultural society by partnering with like-minded organizations to enhance our already robust local food market. As Edmonton’s destination of choice for entertainment, we will continue to bring some of the world’s best performers to our arena. We will build our visitor base for all of our venues by showcasing Northlands as the destination for entertainment, events and the community.”

Founded as an agricultural society 135 years ago, Northlands has never been willing to fully commit to entertainment, even after bringing in Richard Anderson from San Diego where he was GM of PETCO Park and Executive Vice President of the San Diego Padres. Over the years, members of the board have differed greatly on how much importance Northlands should give to its agricultural initiatives. The organization’s roots might be in agriculture, but it’s sporting that defines Northlands today, at least financially.

Without the $21 million that Northlands received in grant revenue in 2013, it would have run a $19.7 million deficit. Its four main businesses – Northlands Park, Rexall Place, Agriculture and Signature Events, and EXPO Centre – accounted for $136 million in revenue. Of that, Northlands Park (horse racing and casino) accounted for 43% and Rexall Place accounted for 28%.

With declining horse racing revenues and the likely loss of business due to competition with Rogers Place, it’s clear that Northlands needs to make a move. But talk of reinvention is easier said than done. With 19 members on its volunteer board of directors and an 18-person board of governors, Northlands currently has a lot of cooks in the kitchen. Tim certainly has his work cut out for him!

I think it’s great that Northlands was able to find someone relatively close to home to be its new leader. Tim has been in Alberta for years and is already familiar with the political climate here. For all its faults, Northlands remains extremely connected to the community. Last year alone, more than 1,100 volunteers donated more than 21,000 hours of their time and Northlands supported more than 80 charitable organizations, investing “more than $1.25 million in cash and value into the community.” I hope he does find success at Northlands and is able to have a positive impact on our city.

Tim, welcome to Edmonton, good luck, and in true Make Something Edmonton fashion, how can I help?

UPDATE: Here’s a post from McMurray Musings’ Theresa Wells on Tim and his leadership abilities.