Lansdowne Park Business Plan for Transformation
9 June 2010
Strictly Private and Confidential
Transaction Services
Table of Contents Page
1 Introduction
1
2 Project stages
12
2.1 stage 1
13
2.2 stage 2
15
2.3 Stage 3
18
2.4 stage 4
21
Stadium and Arena
22
Parking
30
Retail, Integrated Office, and Associated Parking
37
Office Tower
44
Residential
47
3 Summary
50
3.1 Financial Summary
51
3.2 Revenue Neutrality Analysis
57
4 General Assumptions and Limiting Conditions
62
Section 1 Introduction
Transaction Services
Section 1 - Introduction
Overview and Objectives of the Business Plan • This business plan was prepared for Graham Bird and Associates in regards to the transformation of Lansdowne Park the City of Ottawa is considering; • The objectives of the business plan are to: – present certain financial forecasts for the project partners in relation to the proposed legal covenants; and – provide commentary on the key financial metrics of the Lansdowne transformation;
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Section 1 - Introduction
The Business Model • The Lansdowne transformation will provide for an iconic world class sports venue and retail and commercial entities. The proposed transformation is to occur through four stages: – stage 1 (up until 28 June 2010): feasibility planning and structuring – stage 2 (29 June 2010 – project close (est to be July 2011)): design, tendering and structuring – stage 3 (July 2011 – August 2013): construction
– stage 4 (September 2013 – September 2042): operations
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Section 1 - Introduction
The Business Model • The interface between the City and Ottawa Sports and Entertainment Group (OSEG) is key to the success of the Lansdowne transformation. It is expected that the City will enter into a 30-year head lease with OSEG for the entire park and contract OSEG to undertake redevelopment and construction. OSEG will assume the construction risk during the redevelopment period and the operations risk on revenues and expenses once the site reopens.
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Section 1 - Introduction
The Business Model • The stadium, arena, parking and commercial components form part of a „closed system‟ whereby cash flows from operations are distributed to the City and to the OSEG according to a priority payment structure. The lifecycle fund established to maintain the City‟s infrastructure on Lansdowne Park will have first priority over all cash distributions.
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Section 1 - Introduction
The Business Model • Equity contributions are determined as follows: – City of Ottawa: > Funding Equity = Total project cost minus the amount that can be debentured from 75% of property taxes on Lansdowne from the retail, office and parking components minus the proceeds from the sale of air rights from the residential development > Deemed Equity = The fair market value of the retail and office land
– OSEG > Equity = minimum equity plus additional equity
> Minimum Equity = $30,000,000 > Additional Equity = OSEG expenditures above minimum equity
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Section 1 - Introduction
The Business Model • The priority payment structure is as follows: – Level 1: Annual payments to the City‟s lifecycle fund take precedence over all other payments. This is estimated to be $1.3 million in 2013, growing with inflation in years after; – Level 2: > Annual payments to the OSEG partners of 8% of the year end balance of their equity. > Annual payments to the City of Ottawa of 8% of the year end balance of its funding equity.
– Level 3: > Annual payments to the OSEG partners of a return of minimum equity, amortized over 27 years beginning in 2020; > Annual payments to the City of Ottawa of a return of funding equity, amortized over 27 years beginning in 2020; Lansdowne Park • Business Plan for Transformation
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Section 1 - Introduction
The Business Model • The priority payment structure (cont‟d) – Level 4: Annual payments to the OSEG partners of a return of additional equity; – Level 5: Annual payments to the City of Ottawa of 8% of its deemed equity, valued at $23.75 million;
– Level 6: Cash balances after levels 1 to 5 have been fully met are split evenly between the City of Ottawa and the OSEG.
• To the extent that cash flows are not sufficient to service all levels, annual deficits will accumulate and be paid out in subsequent years.
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Section 1 - Introduction
Analysis • For the purposes of analyzing the impact of the components, the following assumptions have been made: – Where impacts have been presented in terms of net present value: > A discount rate of 5.35% was used, this is expected interest rate the City of Ottawa can borrow at for 40 year debt; and
> The net present value period is 2010 to 2042.
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Section 1 - Introduction
The Business Model • Both parties will contribute capital to redevelop Lansdowne Park. OSEG will build the retail component with associated parking and will rebuild the stadium and arena. The City of Ottawa will receive property taxes from the commercial components and both parties will share revenues from retail, stadium, arena, office and parking. Compared with historical operations of Lansdowne, the project is expected to generate positive cash flow to the City over stage 4 of the agreement.
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City of Ottawa Capital
OSEG
Tax Levies, Waterfall Payments
Capital
Lansdowne
Public Benefits
• Income • Public Space • Taxes • Jobs
Waterfall Payments
Section 1 - Introduction
Capital Contributions Millions $
140 120 100 80 60 40 20 City of Ottawa
Stadium and arena
City parking
106,200,000
23,100,000
OSEG
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Retail
Retail parking
Total 129,300,000
86,959,518
11
11,900,000
98,859,518
Section 2 Project stages
Transaction Services
Section 2.1 stage 1
Transaction Services
Section 2.1 - stage 1
Description • Stage 1 extends from council‟s preliminary approval of the Lansdowne transformation (November 2009) to 28 June 2010; • The City of Ottawa‟s soft costs for this period are estimated to be $2,100,000, $190,000 can be recovered from the stadium budget; and
• OSEG‟s soft costs for this period are estimated to be $1,940,000, of which $480,000 is recoverable from the stadium and arena budget.
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Section 2.2 stage 2
Transaction Services
Section 2.2 - stage 2
Description • Stage 2 extends from Council‟s approval of the Lansdowne transformation (29 June 2010) to “project close” (estimated to be on or around July 2011); • The City of Ottawa‟s soft costs for this period are estimated to be $6,500,000, $5,150,000 can be recovered from the stadium budget; and • OSEG‟s soft costs for this period are estimated to be $6,200,000, of which $500,000 is recoverable from the stadium and arena budget.
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Section 2.2 - stage 2
Millions
Soft costs excluding the urban park development (cumulative) $7.0
$6.0
$5.0
$4.0
$3.0
$2.0
$1.0
$Jun-10
Aug-10
Oct-10
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Dec-10
Feb-11
City of Ottawa
OSEG
17
Apr-11
Jun-11
Section 2.3 Stage 3
Transaction Services
Section 2.3 - Stage 3
Description • Stage 3 constitutes the construction period for the stadium, arena, parking, retail, office tower, and residential units; • Stage 3 commences on project close (estimated to be on or around July 2011) and runs for 24 months to August 2013; • The City of Ottawa‟s hard and soft costs for this period are estimated to be $129,300,000 less those costs expended in stage 1 and stage 2 (estimated to be $5.34 million); and • OSEG‟s hard and soft costs for this period are estimated to be $114,961,033 (including franchise and mobilization fees for the professional sports teams, and costs associated with the retail development).
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Section 2.3 - Stage 3
Millions
Hard and soft costs (cumulative) 140.0
Reopening 120.0
Completion of retail construction, acquire pro sports teams
100.0
80.0
60.0
40.0
20.0
0.0 Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
City of Ottawa
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Oct-12 OSEG
Dec-12
Feb-13
Apr-13
Jun-13
Section 2.4 stage 4
Transaction Services
Section 2.4.1 Stadium and Arena
Transaction Services
Section 2.4.1 - Stadium and Arena
Description • The redevelopment of the Frank Clair Stadium and the Civic Centre Arena is central to the Lansdowne transformation; and • The combined stadium and arena will support a new CFL franchise team, the Ottawa 67s along with other semiprofessional and amateur teams and associations.
City of Ottawa
OSEG
• Will provide the land and the funds for redevelopment
• Will manage and assume the risk of the redevelopment • Will manage the stadium and arena and provide for lifecycle costs
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Section 2.4.1 - Stadium and Arena
Risk • Risks have been allocated to the party best suited to manage; • Cost overruns on the stadium and arena resulting from risks allocated to OSEG will be paid for by OSEG; • Cost overruns paid for by OSEG will increase OSEG‟s minimum equity position; and • The City will be responsible for leasehold management.
Cost Category Construction Design Errors Quantity Estimating Errors (Construction Cost) Change Orders - City
Retained by the City of Ottawa
Transferred to the OSEG P P
P
Change Orders - OSEG
P
Schedule Delay Construction Defect Escalation Environmental Archeological Operations and Lifecycle Event Demand (Revenue) Physical Security Construction Defect Operating Costs Leasehold Management
P P P
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P P P P P P P
Section 2.4.1 - Stadium and Arena
Financial Assumptions • The City of Ottawa will provide funding of $129.3 million, of which $106.2 million will be used to fund the redevelopment of the stadium and arena; • OSEG will be responsible for constructing a new stadium and arena; • OSEG will be responsible for all stadium and arena operations; • The CFL team will pay annual rent to the stadium of $300,000 beginning in 2013; • The OHL team will pay annual rent to the arena of $100,000 beginning in 2013;
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Section 2.4.1 - Stadium and Arena
Financial Assumptions • The lifecycle fund will be consumed in six year intervals beginning in 2017.
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Section 2.4.1 - Stadium and Arena
Financial Overview – Stadium and Arena 2013 to 2019 (in thousand of dollars)
CAPITAL Net Carrying Amount - MSC North Side Stands and Civic Centre South Side Stands and Stadium Total OPERATIONS Annual Revenues Stadium Arena Total Annual Expense Stadium Arena Total P&L Stadium Arena Total
2013
2014
2015
2016
2017
2018
2019
$ 64,010 $ 39,535 $ 103,545
$ 62,368 $ 38,522 $ 100,890
$ 60,727 $ 37,508 $ 98,235
$ 59,086 $ 36,494 $ 95,580
$ 59,037 $ 36,464 $ 95,500
$ 57,395 $ 35,450 $ 92,845
$ 55,754 $ 34,436 $ 90,190
$ $ $
1,511 $ 1,425 $ 2,936 $
1,549 $ 1,460 $ 3,010 $
1,588 $ 1,497 $ 3,085 $
1,628 $ 1,534 $ 3,162 $
1,668 $ 1,573 $ 3,241 $
1,710 $ 1,612 $ 3,322 $
1,753 1,652 3,405
$ $ $
1,296 $ 2,406 $ 3,702 $
1,328 $ 2,466 $ 3,794 $
1,361 $ 2,528 $ 3,889 $
1,395 $ 2,591 $ 3,986 $
1,430 $ 2,656 $ 4,086 $
1,466 $ 2,722 $ 4,188 $
1,502 2,790 4,293
$ $ $
216 $ (981) $ (765) $
221 $ (1,006) $ (785) $
227 $ (1,031) $ (804) $
232 $ (1,057) $ (824) $
238 $ (1,083) $ (845) $
244 $ (1,110) $ (866) $
250 (1,138) (888)
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Section 2.4.1 - Stadium and Arena
• OSEG will provide for franchise fees and startup costs estimated$19.6 million; these will go towards OSEG‟s equity minimum contribution; and
Millions $
CFL and OHL Operations
• The CFL and OHL teams will pay rent for the stadium and arena.
3.0
2.0 Combined losses (2013 - 2018) = $7.7M
Combined profits (2019 - 2042) = $52.8M
1.0
0.0
20
13
20
15
20
17
20
19
20
21
20
23
20
25
20
27
20
29
20
31
20
33
(1.0) Combined profits (2013 - 2042) = $45.2M
(2.0)
(3.0) Football - CFL
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Hockey - OHL
20
35
20
37
20
39
20
41
Section 2.4.1 - Stadium and Arena
CFL and OHL Operations • Profits and losses from the CFL and OHL teams will form part of the closed system; and • Over stage 4, the sports franchises are expected to contribute to the closed system as follows: – Hockey – OHL: $10.410 million nominal and $4.204 million in net present value; and – Football – CFL: $34.756 million nominal and $6.727 in net present value.
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Millions $
50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 -
Hockey - OHL
Football - CFL
Total
Nominal
10,410,138
34,756,230
45,166,368
NPV
4,203,835
6,726,565
10,930,400
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Section 2.4.2 Parking
Transaction Services
Section 2.4.2 - Parking
Description • The City and OSEG will partner to build an underground parkade of approximately 1370 stalls – The City will provide funds for 660 stalls for stadium and public use; – OSEG will provide funds for 340 stalls associated with the retail development; – A residential developer will provide funds for 280 stalls; and – An office developer will provide funds for 90 stalls.
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Section 2.4.2 - Parking
Risk • Risks have been allocated to the party best suited to manage; • Cost overruns on the parking component resulting from risks allocated to OSEG will be paid for by OSEG; • Cost overruns paid for by OSEG will increase OSEG‟s minimum equity position; and • The City will be responsible for leasehold management.
Cost Category Construction Design Errors Quantity Estimating Errors (Construction Cost) Change Orders - City
Retained by the Transferred to City of Ottawa the OSEG P P P
Change Orders - OSEG
P
Schedule Delay Construction Defect Escalation Operations and Lifecycle Revenue Construction Defect Operating Expenses Leasehold Management
P P P
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P P P P
Section 2.4.2 - Parking
Financial Assumptions • The total expected construction costs are as follows: – City parking: $22,750,000 – OSEG parking: $11,900,000
• Total operating expenses for the parking development are expected to be $1.3 million in 2013;
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Section 2.4.2 - Parking
Financial Assumptions • The total expected annual operating revenues from parking operations are as follows (2013$): – – – – – –
Monthly Parking Daily & Hourly Theatre Grocery Store Special Events Total in 2013
$264,000 $591,416 $111,504 $27,080 $1,148,009 $2,142,009
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Section 2.4.2 - Parking
Financial Assumptions • Revenues, operating costs and provisions for lifecycle repairs will form part of the closed system priority payment; • The City‟s share of the parking development is expected to be designated a municipal capital facility and will not be subject to property taxes; and
• OSEG‟s share of the parking development will contribute $110,000 per year in property taxes to the City of Ottawa, 75% of which, or $82,000 has been used to assess revenue neutrality.
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Section 2.4.2 - Parking
Financial Overview – Parking (in thousand of dollars) 2013
2014
2015
2016
2017
2018
2019
CAPITAL Net Carrying Amount - City Stadium and Arena Total
$ 22,523 $ 21,945 $ 21,368 $ 20,790 $ 20,773 $ 20,195 $ 19,618 $ 22,523 $ 21,945 $ 21,368 $ 20,790 $ 20,773 $ 20,195 $ 19,618
Net Carrying Amount - OSEG Retail Total
$ 11,603 $ 11,305 $ 11,008 $ 10,710 $ 10,413 $ 10,115 $ 9,818 $ 11,603 $ 11,305 $ 11,008 $ 10,710 $ 10,413 $ 10,115 $ 9,818
Parking Revenues
$ 2,142
OPERATIONS Annual Expense Below Grade Total
$ 1,263 $ 1,295 $ 1,327 $ 1,360 $ 1,394 $ 1,429 $ 1,465 $ 1,263 $ 1,295 $ 1,327 $ 1,360 $ 1,394 $ 1,429 $ 1,465
Surplus (deficit)
$
760
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$ 2,196
$
779
36
$ 2,250
$
798
$ 2,307
$
818
$ 2,364
$
839
$ 2,423
$
860
$ 2,484
$
881
Section 2.4.3 Retail, Integrated Office, and Associated Parking
Transaction Services
Section 2.4.3 - Retail, Integrated Office, and Associated Parking
Description • The OSEG will invest approximately $99 million in development costs to create approximately 339,000 square feet of new retail and integrated office space, and 340 underground parking spaces.
City of Ottawa
OSEG
• Will provide the land for the redevelopment
• Will provide equity, construct, own and operate the retail complex
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Section 2.4.3 - Retail, Integrated Office, and Associated Parking
Risk • The OSEG will assume all construction risks and all but one O&M risk; and • The City will be responsible for leasehold management.
Cost Category
Retained by the City of Ottawa
Construction Design Errors Quantity Estimating Errors (Construction Cost)
Transferred to the OSEG P P
Change Orders - OSEG
P
Schedule Delay Construction Defect Escalation Operations and Lifecycle Rent Construction Defect Operating Expenses Leasehold Management
P P P
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P P P P
Section 2.4.3 - Retail, Integrated Office, and Associated Parking
Financial Assumptions • Using a capitalization rate of 7%, the value of the retail (excluding the value of the land), integrated office and associated parking development is estimated to be $115.0 million; • OSEG is able to debt finance 75% of the value of the retail development, or approximately $86.2 million; • The total project cost of the retail development and associated parking is estimated to be $98.9 million; • OSEG will contribute, in equity, the difference between the total development costs and the amount of permanent financing. This is estimated to be $12.6 million; • Retail rental revenues are expected to grow with inflation; Lansdowne Park • Business Plan for Transformation
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Section 2.4.3 - Retail, Integrated Office, and Associated Parking
Financial Assumptions • The retail development is expected to have an initial vacancy rate of 10% in 2013, decreasing by 1.25% per year until 2017; • The retail development is expected to have a steady state vacancy of 5% in years 2018 to 2042; • OSEG‟s long term financing on the retail development and associated parking will be issued at a 7% interest rate and a term of 25 years; • Net cash flow after debt payments forms part of the priority payment structure. This is estimated to be $1.6 million in 2013;
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Section 2.4.3 - Retail, Integrated Office, and Associated Parking
Financial Assumptions • 75% of property taxes (net of vacancies), or $2.1 million in 2013 have been included for the purposes of assessing revenue neutrality; • It is expected that the retail development will refinance in order to make structural and tenant improvements in 2038;
• It is expected that the refinancing will be approximately $56.5 million in permanent financing with a term of 25 years and an interest rate of 7%; and • The value of retail land is estimated to be $20,000,000 for the purposes of determining the City‟s deemed equity.
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Section 2.4.3 - Retail, Integrated Office, and Associated Parking
Financial Overview - Retail (in thousand of dollars) 2013
2014
2015
2016
2017
2018
2019
$ 84,786 $ 84,786
$ 82,612 $ 82,612
$ 80,438 $ 80,438
$ 78,264 $ 78,264
$ 76,090 $ 76,090
$ 73,916 $ 73,916
$ 71,742 $ 71,742
CAPITAL Net Carrying Amount - OSEG Retail Construction Total OPERATIONS Revenue (net of taxes expenses) Vacancy Mortage payment Principal Interest Net cash after debt
$ $
9,735 $ (974) $
9,979 $ 10,228 $ 10,484 $ 10,746 $ 11,015 $ 11,290 (873) $ (767) $ (655) $ (537) $ (551) $ (565)
$ (1,363) $ (1,459) $ (1,561) $ (1,670) $ (1,787) $ (1,912) $ (2,046) $ (6,037) $ (5,941) $ (5,839) $ (5,730) $ (5,613) $ (5,488) $ (5,354) $ 1,362 $ 1,706 $ 2,061 $ 2,429 $ 2,809 $ 3,064 $ 3,326
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Section 2.4.4 Office Tower
Transaction Services
Section 2.4.4 - Office Tower
Description • OSEG will lease land to a office developer to construct a new office tower of approximately 90,000 square feet of rentable space; • To account for the land value contributed, the City‟s deemed equity will increase by $3,750,000;
• Net rents for the office development (estimated to be $198,000 in 2013) will form part of the closed system priority payment structure;
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Section 2.4.4 - Office Tower
Description • The office development will contribute $198,000 per year in property taxes to the City of Ottawa, growing with inflation in years after; and • 75% of property taxes, or $399,000 in 2013 have been included for the purposes of assessing revenue neutrality.
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Section 2.4.5 Residential
Transaction Services
Section 2.4.5 - Residential
Description • The City will sell land to a residential developer to construct residential units on Lansdowne: – 44 townhomes along Holmwood; – 176 condominium units above the retail development; and – 60 condominium units in a stand-alone tower.
• The City will receive proceeds from the sale of air rights on or before project close: – $70,000 per townhome along Holmwood; – $30,000 per condominium unit above the residential development; – $50,000 per condominium units in the stand-alone tower; and – The City will have approximately $1.1 million in site serving costs for these units. Lansdowne Park • Business Plan for Transformation
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Section 2.4.5 - Residential
Description • The City will contribute the proceeds from the sale of air rights net of site servicing is (estimated to be $10.2 million) to the capital costs of building the stadium and arena; • The City‟s funding equity position will be reduced by approximately $10.2 million on or before project close; and
• The value of the residential taxes has not been included in the revenue neutrality analysis as it is not considered incremental.
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Section 3 Summary
Transaction Services
Section 3.1 Financial Summary
Transaction Services
Section 3.1 - Financial Summary
• The priority payment structure is cumulative; annual deficits in payments roll forward to subsequent years;
Millions
City priority Payments – 2013 to 2042 $14.0 $12.0 $10.0 $8.0
• The City is in first position in the priority payment structure; no other distributions until the lifecycle fund for the stadium, arena and city parking is fully funded; and • The City of Ottawa is expected to receive a return on funding equity beginning in 2020.
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$6.0 $4.0 $2.0 $2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 Additions to Lifecycle Fund - MSC
Return on funding equity - City
Return of funding equity - City
Return on deemed equity - City
Net cash share - City
52
Section 3.1 - Financial Summary
• OSEG is expected to receive payments through it‟s return on equity, return of additional and minimum equity and a net cash share; and
Millions
OSEG Priority Payments – 2013 to 2042 $8.0 $7.0 $6.0 $5.0
• OSEG is expected to receive a return on equity beginning in 2020.
$4.0 $3.0 $2.0 $1.0 $2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041
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Return on equity - OSEG
Return of minimum equity - OSEG
Net cash share - OSEG
Return of additional equity - OSEG
53
Section 3.1 - Financial Summary
Priority Payments – Total Sources by Component • The retail component is the primary source of cash flow to the priority payment structure; and
Total Nominal Waterfall Sources $245 million
$150,000
Thousands
• The retail accounts for 195.545 million (net of debt servicing), or 80% of total cash flows.
$200,000
$100,000
$50,000
$-
$(50,000)
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Stadium
Arena
Retail
Parking
Hockey - OHL
Football - CFL
Office rent
Tax Vacancies
9,475
(43,078)
195,545
38,583
10,410
34,756
8,693
(8,895)
54
Section 3.1 - Financial Summary
Priority Payments – Total by Component $70,000 Total Nominal Waterfall Payments: $245 million $60,000 $50,000
Thousands
• Priority payments to the City‟s lifecycle fund and distributions to the City‟s return on deemed equity are the two largest components of the priority payment structure.
$40,000 $30,000 $20,000 $10,000 $-
Additions to Lifecycle Fund MSC 58,434
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Return of Return of Return on Return on equity - Return on funding Return of funding additional equity - minimum equity deemed equity OSEG equity - City equity - City OSEG OSEG City 69,602
29,857
2,275
30,000
13,469
41,852
Section 3.1 - Financial Summary
Priority Payments – Total: City of Ottawa and OSEG • Priority payments resulting from all stage 1 components are as follows:
$200,000
Thousands
–The City of Ottawa‟s reserve fund is expected to receive $58.434 million, or 24% of the nominal value and $24.085 million, or 32% of the net present value;
$250,000
–The City of Ottawa‟s reserve fund is expected to receive $85.177 million, or 35% of the nominal value and $24.705 million, or 32% of the net present value; and –The OSEG is expected to receive $101.877 million, or 41% of the nominal value and $27.721 million, or 36% of the net present value.
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$150,000
$100,000
$50,000
$-
City of Ottawa Reserve Fund
City of Ottawa
OSEG
Total
Nominal
58,434
85,177
101,877
245,489
NPV
24,085
24,705
27,721
76,510
56
Section 3.2 Revenue Neutrality Analysis
Transaction Services
Section 3.2 - Revenue Neutrality Analysis
Revenue Neutrality • Revenue neutrality is determined over the life of the project;
• In regards to the Lansdowne transformation, 75% of retail, office and related parking taxes have been included in this analysis for the purposes of determining revenue neutrality as they are considered “incremental” (i.e., they are dependent on this development); and • The analysis shows that this project is not revenue neutral, it is revenue positive.
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Section 3.2 - Revenue Neutrality Analysis
City of Ottawa – Revenue Neutrality • The City of Ottawa will service a $119.1 million, 40 year debenture. Annual debt servicing payment is estimated to be $7.271 million;
$20
$15
Millions
• The City of Ottawa is expected to be cash positive in years 2025 to 2042; and
$10
$5 Long term debt coverage = 1 $-
20 1 20 3 1 20 4 1 20 5 1 20 6 1 20 7 1 20 8 1 20 9 2 20 0 2 20 1 2 20 2 2 20 3 2 20 4 2 20 5 2 20 6 2 20 7 2 20 8 2 20 9 3 20 0 3 20 1 3 20 2 3 20 3 3 20 4 3 20 5 3 20 6 3 20 7 3 20 8 3 20 9 4 20 0 4 20 1 42
• Avoided costs, deemed incremental property taxes and priority payments are equal to or greater than debt servicing costs in years 2020 to 2042;
$25
Year Debt Payment
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Taxes, Distributions and Avoided Costs
Section 3.2 - Revenue Neutrality Analysis
City of Ottawa – Revenue Neutrality $140 $120 $100
Millions
• If annual cash surpluses from avoided costs, property taxes and payments from the waterfall are allowed to accumulate, the City of Ottawa will have sufficient cash reserves to retire the outstanding debt in 2040.
$80 $60 $40 $20
20 1 20 3 1 20 4 1 20 5 1 20 6 1 20 7 1 20 8 1 20 9 2 20 0 2 20 1 2 20 2 2 20 3 2 20 4 2 20 5 2 20 6 2 20 7 2 20 8 2 20 9 3 20 0 3 20 1 3 20 2 3 20 3 3 20 4 3 20 5 3 20 6 3 20 7 3 20 8 3 20 9 4 20 0 4 20 1 42
$-
Year Cash
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Debt
Section 3.2 - Revenue Neutrality Analysis
City of Ottawa – Revenue Neutrality Analysis • In nominal terms, over the first 30 years 13% of the property taxes from the retail, office and parking components are required; and • On an NPV basis, over the first 30 years 37% of the property taxes from the retail, office and parking components are required.
Avoided costs Waterfall payments Sub total Total debt servicing Sub total Property taxes Total cash flow Required from taxes (thousands $)
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Nominal 114,000 85,177 199,177 (218,837) (19,660) 155,540 135,880 13%
NPV 48,027 21,744 69,771 (91,930) (22,159) 59,549 37,390 37%
Section 4 General Assumptions and Limiting Conditions
Transaction Services
PricewaterhouseCoopers LLP Suite 800, 99 Bank St. Ottawa, Ontario, K1P 1E4
June 9th, 2010 To: Graham Bird and Associates (G. Bird. Holding Inc.)
PricewaterhouseCoopers LLP ("PwC" or "we") has performed certain advisory services to assist in your evaluation of the Transformation of Lansdowne Park in accordance with our engagement letter dated June 10th, 2009 and subject to the terms and conditions contained therein. Our work did not constitute an audit conducted in accordance with generally accepted auditing standards, an examination of internal controls or other attestation or review services in accordance with standards established by the Canadian Institute of Chartered Accountants (“CICA”). Accordingly, we do not express an opinion or any other form of assurance on the financial or other information, or operating and internal controls. Our work was based primarily on information supplied by the City of Ottawa and the Ottawa Sports and Entertainment Group and was carried out on the basis that such information is accurate and complete. Information was not subject to checking or verification procedures, except to the extent expressly stated to form part of the scope of work.
PwC accepts no duty, obligation, liability or responsibility to any party, other than Graham Bird and Associates, with respect to the services and/or this report. PwC makes no representation regarding the sufficiency of the services for any purpose. With respect to prospective financial information throughout this report, we did not examine, compile or apply agreed-upon procedures to such information in accordance with standards established by the CICA, and we express no assurance of any kind on such information. There will usually be differences between estimated and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. We take no responsibility for the achievement of predicted results.
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