Downtown Arena Update

January 23, 2013

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Agenda
PreviousCouncilDirection(October17th & December12th,2012) DesignOptions KatzGroupStatement StatusofNegotiations NextSteps
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Previous Council Direction

October17,2012 SuspendnegotiationswithKatzGroupondowntownarena LookatframeworkforpotentialavenuestosustainNHLhockeyin Edmonton(October2012) CouncildidnotrescindsupportforOctober2011Framework December12,2012 ReopennegotiationswithKatzGroup Extendlandinventoryagreement Securemediator&financialanalyst
EvaluateothernonfinancialissueswithKatzGroup

Design Options
Exploredthreeoptions:
OptionA valueengineeredoriginaldesign includingWintergarden andundergroundparkade OptionB reviseddesigntoincludeopenair pedestrianlinkageover104th Avenueandabove gradeparkade OptionC reviseddesigntoremove Wintergarden andincludeabovegradeparkade
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Option A -View Looking West 104th Avenue

Option A - View Looking East 104th Avenue

Option A - Plaza at Grade

Option A
LRT Connection $7M

18,559(manifestedseats) Community Rink Similarindesign&programto $21 M originaldesignincluding:

Wintergarden 350stallundergroundparkade Stainlesssteelcladdingexecuted morecosteffectively

$480M
(includes underground parkade)

Pedestrian Link $15M

Winter Garden $53M

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$480Marena $601Mtotalproject(includes arenaandpublicinfrastructure) $219MCitycontribution $143MKatzGroupcontribution Providesguaranteedtenant

Option B -View Looking East 104th Avenue

Option B Plaza at Grade

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Option B -View Looking West 104th Avenue

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Option B
LRT Connection $7M Community Rink $21M

18,559seats Similarindesign&programto originaldesign,differencesare:

WinterGardenreplacedwith pedestrianlinkover104th Ave. 340stallabovegradeparkade Seatingbowlrevised,removalof somepremiumspaces Additionalopportunitiesfor integrationof104Avenueintroduced Newatgradeentryplazaadded

$493M (includes parkade

shown in green) Pedestrian Link $15M

Pedway over 104th Avenue $15.8M

$493Marena $576.8Mtotalproject(includesarena andpublicinfrastructure) $214.9MCitycontribution Tenanttobedetermined

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Option C - View Looking West 104th Avenue

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Option C -View Looking East 104th Avenue

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Option C Plaza at Grade

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Option C
LRT Connection $2.75M

Community Rink

18,559seats Similarindesign&programto originaldesign,differencesare:

WinterGardendeleted 300stallabovegradeparkade&44 stallsbelowgradeforteamuse Seatingbowlrevised,removalof somepremiumspaces Additionalopportunitiesfor integrationof104Avenueintroduced Newatgradeentryplazaadded

$31.75M

$511.75M (includes
arena & parkade shown in Green)

$511.75marena $571.25Mtotalproject(includes arenaandpublicinfrastructure) $217.25MCitycontribution Tenanttobedetermined

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Financial analysis of three options

Option OptionA OptionB OptionC TotalProject Cost $601M $576.8M $571.25M
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Municipal Contribution $219M $214.9M $217.25M

Finance Options
Proposedfundingmodelfrom2011Framework& modifiedinaccordancewithaproposedagreement OptionB&CnoprivatecapitalinvestmentbutCity wouldexpecttoearnrentsimilartoinvestmentin OptionA.Tenantwouldneedtobedetermined. Citydoesnotrecommendcondominiumization of seatsmodelasitborrowsfromfuturerevenues
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Design Option Summary

Administrationlookedat3optionsandwhileOptionsB&C arelessexpensivebothrequireadditionaldesignwork,time andriskrelativetotenancy AdministrationisrecommendingtheupdatedFramework withOptionAasthebasisfordesignasit:
MeetsgoalofsustainingNHLhockeyinEdmonton Guaranteeslongtermtenancy Reasonablefinancialarrangementformunicipality RealizesCitysvisionofarena&entertainmentdistrictoutlinedinThe WayWeGrow&contributestoongoingrevitalizationofdowntown IconicstructureinsupportofCapitalCityDowntownPlan
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Katz Group Statement

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Recommended Negotiated Framework

Interviewedanumberofpotentialmediators Concurrentlyresumednegotiationswiththe KatzGroup Asaresultofaseriesofmeetings, AdministrationisrecommendingtheCity enterintoanagreementbasedonthe followingnegotiatedframework
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Recommended Negotiated Framework

October2011ApprovedFramework SustainabilityofNHLHockeyinEdmontonis aprimeconsideration. TheArenaBuildingProject(whichincludes 350parkingstalls)hasamaximumpriceof $450million. RecommendedNegotiatedFramework Nochange. Upset(maximum)priceis$480millionwiththe$30 millionincreasetobesplit50/50betweentheCity andtheKatzGroup.

TheKatzGroupwillpaytheprincipaland TheCommitmentisincreasedby$15millionto interestcostsassociatedwith$100millionof coverhalftheprojectedincreaseinthecostofthe arenabuilding totalcommitmenttobepaidas capitalcostover35years. rentover35years(includinginterest).

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October2011ApprovedFramework Userfeeleviedthroughticketsurchargetofund $125millionplusinteresttofundthecapital project.

RecommendedNegotiatedFramework TicketsurchargetobeleviedbytheCitywiththe ratetobedeterminedbyEdmontonArenaCorp (EAC).Theratetobeatleastsufficienttofund principalandinterestpaymentsforthe repaymentofthe$125millionofinitialcapital overa35yeartermanda$1.5millionannual contributiontoongoingmajorcapital maintenance.Fundsgeneratedbythesurcharge inexcessofthisamountwillberetainedbyEAC. Aticketsurchargewillbeleviedonadmissionsat Rexall Placeandshallbeatthesamerateasthe ticketsurchargetobechargedonnonhockey eventsattheDowntownArena,toamaximum of7%.Theproceedsofthissurchargewillbe remittedtotheCity. TheCommitmentisincreasedby$15millionto coverhalftheprojectedincreaseinthecostof thearenabuildingforatotalof$140million.

CityofEdmontonwillcontribute$125millionto thearenabuildingincluding$45milliontobe fundedbyaCommunityRevitalizationLevy

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CouncilOctober2011ApprovedFramework Landtobepurchasedatthesamepriceandon thesametermsandconditionsasinthecurrent purchaseagreementsplusthirdpartycosts associatedwiththelandacquisitionandzoning. TheCityscoststobuildanLRTconnectionto thearenawillbecappedat$17million.

RecommendedNegotiatedFramework Nochangewiththeexceptionthat Administrationnegotiatedanextensioninthe deadlineintheLandInventoryAgreementfrom December31,2012toApril30,2013asper Councildirection. TheCityscoststobuildanLRTconnectionto thearenawillbecappedat$7million.TheCity isresponsibleforalloperatingandongoing capitalcostsfortheLRTconnection. ClarificationthatIfthenetcostexceeds$50 million,KatzGroupistocovertheoverage.Net Costs meansthegrosscostofthe Wintergarden lessthereasonablevalueofthe retailcommercialspaceinthesouthendofthe Wintergarden.

Pedway (Wintergarden bridge)over104Avenue isrequiredadjacentinfrastructurefunded outsideofthearenabuildingproject.Katz GroupandCityeachpayhalfofcost;however, theCitycontributionislimitedtonomorethan $25million.TheKatzGroupcontributionwillbe amortizedoverthe35yeartermofthelease withinterestcostsincluded.
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CouncilOctober2011ApprovedFramework Communityrinktobeconstructedadjacentto thearenacontingentonfundingfromthe federalandprovincialgovernmentwithtotal maximumcostof$21million.Citytoownand operatetherinkwithallrevenuesandcosts accruingtotheCity.

RecommendedNegotiatedFramework TheCitywillproceedwiththeconstructionof thecommunityrinkforamaximumof$21 million.Citytoownandoperatetherinkwithall revenuesandcostsaccruingtotheCity. However,EACwillactasanagentfortheCityto solicitadvertisingandsponsorshiprevenue withoutcommissionorrestrictioninconjunction withadvertisingandsponsorshipofthearena. ThisprovidesanopportunityfortheCityto shareintheupsideofsponsorshippackagesthat includethecommunityrink.Approvalof sponsorshipproposalsforthecommunityrink restswiththeCity. EACtohavefirstrighttonegotiateupto3lease extensionsfortenyearsandwillhavethefirst rightofrefusalonanysubsequentleaseorland andbuildingsalenegotiatedwitha3rd party.
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KatzGrouptohaveoptionfor3tenyearlease extensions.

CouncilOctober2011ApprovedFramework

RecommendedNegotiatedFramework IntheeventofanEACdefaultunderthelease, Rexall SportsCorp.(RSC),ownerofthe EdmontonOilers,shallbeobligedtocurethe defaultsundertheleaseandassumeall obligationsundertheleaseinplaceofEAC. Alternatively,RSCmayenterintoacommitment tofundpaymentsassociatedwiththeEACs $140millioncontributionunderanewlease withtheCitythatisconsistentwiththeexisting Rexall Placelease(includingF&Brightsfor hockey,butnotinrespectofotherevents,and excludinganyreversionoftickettaxtoRSC).In anyevent,theCitywillhaveinplaceatickettax bylawatalevelsufficienttosustainthecapital maintenancelevelsspecifiedintheleasewith EACandtoprotecttheCityforthe$125million tickettaxrelateddebt.
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CouncilOctober2011ApprovedFramework TheKatzGroupistooperatethenewarenaand istopayalloperatingexpenses,capital maintenanceandrepair.

RecommendedNegotiatedFramework EACwilloperatethenewarenaandwillpayall operatingandmaintenanceexpenses.Major buildingcapitalrehabilitationandreplacement willbetheresponsibilityoftheCitytobefunded with$1.5millionannuallyfromtheticket surcharge.Allothermaintenanceandcapital enhancementsandproductivityimprovements willbetheresponsibilityofEAC.TheCityandthe KatzGrouphaveagreedonadefinitionof CapitalMaintenancecostsandonanallocation ofresponsibility. EACwillpayallrequiredEducationProperty Taxes.Themunicipalpropertytaxestobepaid byEACandaffiliatesistobeamaximumof $250,000annually.Thisamountwillbereduced totheextentthattheaggregatemunicipaltaxes leviedonthearmslengthsubtenantsofthe Arenacarryingonbusinessonlywithinevent hoursexceeds$250,000annually.

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CouncilOctober2011ApprovedFramework Thelandassemblyistobecompletedby October31. Thedesignprocessistocommenceassoonas possible.TheCitywillfundthecostofdesignto a60%levelonwhichthetenderdocumentswill bebasedinordertogetthebestpossible GuaranteedMaximumPriceforthearena.The costofthedesignwouldbepartofthe$450 millioncostofthearena.Theconceptualdesign workcompletedtodateisownedbytheKatz Group.Ifeitherpartyelectsnottocompletethe deal,theCitywillhaveownershiprightstothe designworkundertakenbytheCity. TheCitywillcontinuetoworktosecurea$100 millioncontributiontotheprojectfromthe Province.

RecommendedNegotiatedFramework Inordertomoveforwardonthearenaona timelybasis,theprojectedstartdatefor constructionwouldbeAugust2013througha phasedGuaranteedMaximumPrice(GMP). TheCitywillcontinuetoworktosecurea$100 millioncontributiontotheprojectfromthe Province

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CouncilOctober2011ApprovedFramework TheKatzGroupwaivestherequirementforthe noncompeteclause. TheCityhasagreedthatacompetitivemarket betweenRexall Placeandthenewarena requiresalevelplayingfieldandso,oncethe newarenaisopenwilleliminateanysubsidiesto Rexall Place.Asupplementaryticketsurcharge willalsobeleviedagainstalladmissionsatRexall Placeinthefutureatthesamepercentage (currentlyestimatedat7%)astheticket surchargetobeleviedatthenewarena.Foras longastheticketsurchargeatthenewarenais allocatedtotheCitytopayforthecostsof borrowingthe$125millioninconstructioncost tobepaidbythisuserfee,theCitywillretain therevenuegeneratedbytheticketsurchargeat Rexall Place.CityCouncilwilldeterminetheuse ofthosefunds;however,theintentofthe agreementisforthefundsnottogobackto 29 Northlands.

RecommendedNegotiatedFramework Oncethenewarenaisopen,allsubsidiesto Rexall Placewillbeeliminated.Aticket surchargewillbeleviedonadmissionsatRexall Placeandshallbeatthesamerateastheticket surchargetobechargedonnonhockeyevents attheDowntownArena,toamaximumof7%. Theproceedsofthissurchargewillberemitted totheCity.

CouncilOctober2011ApprovedFramework TheEdmontonOilersHockeyClubwillstayin Edmontonfor35years Designprocesstobeundertakencollaboratively betweentheCityandtheKatzGroup.

RecommendedNegotiatedFramework Thelocationagreementistobesupportedbya letterofcooperationfromtheNHL. TheCityandEACwillcompletethedesignand buildingofthefacility.Anydisputeswillbe handledbyMr.Farbrother andMr.Karvellas or theirdesignees. Nochange;however,forclarification,theCity willhaveaccesstotheArenaandWintergarden forupto28daysayearatEACs incremental costwithallfood,beverageandotherrevenue accruingtoEAC.TheCitysusewillbefor communitypurposes notforCFRorother commercialevents.

Cityaccesstothenewarenaforany28daysa yearatitsdiscretion.

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CouncilOctober2011ApprovedFramework TheKatzGroupwillenterintoaCommunity benefitsagreementwiththeCity,takinginto accounttheactivitiesoftheOilersCommunity Foundation.

RecommendedNegotiatedFramework Nochange;however,additionalclarification provided:Acknowledgementofcommunity contributionofOilersCommunityFoundation. Inaddition,bothPartiescommittocommunity benefitsincluding(i)establishmentofa communityadvisorycommitteetoidentifyand addresscommunityissues,(ii)aseniormember oftheOilersoperationswillbeavailableto meetatleastannuallywiththecommunity advisorycommittee,(iii)development/ facilitationoftraining/employmentforlow income/highneedEdmontonians. NoChange;however,ifEACelectsnotto proceedwiththecommercialdevelopment associatedwiththeeastsideofthearenathat necessitatesachangeinthedesignoftheeast walloftheArena,theCitywillberesponsiblefor thecost.

TheKatzGroupcommits$100millionto associatedadjacentinvestment,withaleast$30 milliontobeinvestedpriortoconstructionof thenewdowntownarenaandthebalancetobe subjecttocommercialviability.

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CouncilOctober2011ApprovedFramework Anymethodofpersonalseatlicenses, condominiumization modelorseatrightswould notbepursuedbytheKatzGroup. TheCitywillenterintoamarketingpartnership withtheEdmontonOilers,investing$2million annuallyinaprogramtopromotetheimageof theCityandtobuildCityrecognitionwiththe Oilersbrand.TheCitywillenjoyamost favoured nationstatusinitsmarketingpackage. Themarketingpackagewillbeofaqualityand impactthatisconsistentwitharrangements withtheprivatesectoratasimilarlevel.

RecommendedNegotiatedFramework Nochange.

Nochange.

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Next Steps
CouncilapprovalofOptionAasthebasisfor design&constructioninaccordancewith modifiedagreementwithKatzGroup Councilapprovalofrevisednegotiated frameworkforthedesignandconstructionof OptionAarena
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