Hopes still high for Lansdowne after slow start

Financial report paints picture of greater returns — eventually

The city’s private partners in redeveloping Lansdowne Park stand to make almost $200 million more from the project than they were expected to, assuming the site’s poor early results turn around.

City councillors get a detailed look at the Lansdowne financials once a year, that day is next week, and there’s a lot going on in that report.

Over the 32-year deal the City of Ottawa made with the Ottawa Sports and Entertainment Group of developers and sports impresarios to renovate Lansdowne into a sports and commercial destination, OSEG was supposed to make $73.1 million in returns on its partners’ investments, according to projections the city made in 2012 when the deal was signed. Now that’s up to $271.7 million, with a big asterisk.

Lansdowne’s off to a slowish start, with fewer big events and higher-than-expected expenses dragging down the bottom line. The partners in OSEG are putting in $17 million more in this startup phase than they were supposed to, after previously covering unexpectedly high costs for things like repairing the former Frank Clair Stadium. According to the latest numbers, though, this will all work out just fine because there’ll be so much more money coming in later.

Which is, to be clear, exactly the way the Lansdowne deal was supposed to work: The partners — developers Roger Greenberg, John Ruddy and William Shenkman, and sports businessmen Jeff Hunt and John Pugh — are responsible for the financial challenges now and they get rewarded for taking that risk with a return of eight per cent a year. The longer it takes to see that return, the bigger the cheques at the end.

Even though Lansdowne’s profitability last year came up $5 million short of projections, the city and OSEG’s forecasts now say it’ll be massively more profitable than it was supposed to be later. In 2012, the whole operation — from the Redblacks football team to the parking revenues to the rent Whole Foods pays — was expected to spin out $314.3 million in cash over 30 years. The latest projection is that the 30-year total will be $508.1 million. Because of the partners’ greater investment now, they stand to get all of that extra profit.

The thing is, the long-term projections keep getting rosier even as Lansdowne’s actual reallife financial performance is wan. Revenue’s up but not as much as it was supposed to be.

The office building facing Bank Street is half-full, having leased just one half-floor more of its five storeys in the past year. Some turnover in the retail tenants is normal but the vacancy rate is up from three per cent to five per cent. Lansdowne hosted fewer large events this past year, and the city’s worried about a post2017 hangover depressing the numbers further next year. The Redblacks sold out every home game but their Grey Cup win cost them money. The 67’s, the sturdy junior-hockey franchise, just isn’t pulling in the fans it was expected to.

“It’s based on (OSEG’s) forecasts based on what they see their revenue projections (being) over the next little while,” said Marian Simulik, the city’s treasurer. “When they started they had a sort of base set of assumptions and now they’ve been able to fine-tune it knowing how the Redblacks are performing and the commercial (leasing) is the big contributor to the bottom line there . ... Everything being considered, what they know today, compared to what they knew seven years ago, they’re more optimistic based on what they’re seeing today.”

Randy Burgess, the OSEG vice-president in charge of communications, said it wouldn’t be appropriate for anyone from the group to talk about the financials until after councillors have scrutinized them.

Lansdowne was never expected to break even right away, Simulik said, which is true. Renovating the dilapidated old fairground in the Glebe was one thing; learning how to run it at maximum efficiency, bring in moneymaking events and market its storefronts to merchants takes a bit of time. Next year, councillors will hear, OSEG expects revenues to increase while costs stay the same, with help from hosting the Grey Cup football game and an outdoor hockey game.

“I think the projections for 2017 are more favourable to plan,” Simulik said. “Overall, the trend is positive.”

We’ll see. Lansdowne’s not failing but it’s not roaring, either, and it’s hard to see why the future is supposed to be so much better than forecast when the present isn’t living up to expectations.