Private/Public partnerships were addressed by this panel, including Bob Black, Katz Group; Art Aaron, ICON Venue Group; Rick Daviss, City of Edmonton; and Melissa Heiter, ICON Venue Group. (VT Photo)
REPORTING FROM PITTSBURG — It often takes more than just public money to get a mega-complex entertainment district project off the ground. Canada’s Rogers Place is a prime example of how to get it right.
Speaking at a panel at the Association of Luxury Suite Directors (ALSD) annual conference held here this week, Rick Daviss, director of the Edmonton Arena District for The City of Edmonton, venue building organization ICON Venue Group’s Art Aaron and Melissa Heiter, and for-profit entity Katz Group executive vice president Bob Black discussed the difficult, often contentious process of minds meeting to get their $613.7-million project from the drawing board to full realization.
Rogers Place is the anchor that will house the Edmonton Oilers hockey team and a host of other entertainment-related enterprises. Its 1.2 million sq. ft. of development will open this fall. The arena has class-leading design, environmental facilities and the most modern player facilities available in the world today with state of the art technology. When phase one of the entertainment district known as ‘The Ice District’ is completed, it will cost $2.4 billion and cover 7.1 acres of prime downtown space.
“These projects are not easy to get done. We see a lot of pretty pictures and hear a lot of wonderful stories about how great these projects are going to be, but the reality is far from what is presented to the public,” said Heiter. “There are a lot of things that get said, a lot of threats that get made and there are a lot of feelings and emotions of the stakeholders, the city and the residents that all tie together before anything comes to fruition.”
Daviss said that getting Rogers Place built has been quite a journey. “Rogers Place will be jaw-dropping,” said Daviss. “The secret of the project is the unlikely partnership between Katz Group, a bottom-line driven private sector firm, marrying up with the city of Edmonton and the provincial government of Alberta, Canada, to make this happen. We had some issues, problems and hurdles as we’ve gone through this process, but it’s been incredibly satisfying.”
It all started when the city of Edmonton looked into renovating Rexall Place, the existing hockey arena, which was long overdue for a modernization. The result was a $250-million tab. They thought, “Do we really want to spend $250 million on an old building?” A committee tasked with deciding what to do ultimately concluded it was not worth putting a dime more into that facility. “We decided an arena done right could revitalize downtown Edmonton,” explained Daviss.
When the committee finished talking about it, they determined it wasn’t about building a new arena for a billionaire hockey team owner and his millionaire hockey players, it was about revitalizing Edmonton’s downtown core, said Daviss. “Our downtown wasn’t growing. We wanted a downtown that people went to with an event. We wanted better streets, people working, living and playing downtown. Drawing pretty pictures wasn’t enough. We needed money to realize our dream and we only had one chance and had to get it right.”
Daviss and his council were well aware of the old adage that whenever the public sector and the private sector get together the public sector gets killed. “As a public entity we thought we should stay away from any for-profit involvement and we shouldn’t get drawn in,” said Daviss. “But that wasn’t going to get us what we needed.”
With major hesitation and initial mistrust, the city still approached the Katz group. They quickly stepped up. “We had a common vision,” said Black.
The project was funded with a four-way split. “The Katz group put up a quarter of the money, the city put up a quarter, a tax levy and a per-use ticket tax,” said Daviss.
The Katz Group spent $100 million to buy land and design the arena district; the Katz Group and WAM are building a $300-plus million, 27-story office tower and a $500 million, 60-plus story office and condo tower. The partnership is also building a $75-million Katz Group headquarters and casino next to the arena, a $150-million four-level below-grade parkade and at-grade plaza, a $350-million, 50-story hotel and condo tower and a new $200-million 50-odd story condo tower.
The initial $100-million budget quickly swelled to $140 million. The Katz Group agreed to foot the bill for the cost overrun. “We wanted to create the finest arena in the world,” said Black. “There were a lot of difficulties in the negotiations between the Katz Group and the City of Edmonton. We fought hard to make sure it wasn’t just ‘good enough.’ We wanted it to be great.”
Rendering of the ICE District and Rogers Place in Edmonton, Alberta, opening this fall.
Both sides agreed there were two main goals: The long-term sustainability of The Oilers to remain in Edmonton and the revitalization of the Edmonton downtown district.
“Anytime you talk about a partnership between the public and private sectors, the issues are enormous,” said Black. “Things get heated pretty quickly and ultimately, it’s a clash of cultures. We had no experience dealing with a public entity and we had to have a shotgun wedding with them. Private sector companies make their decisions on being nimble. In the public sector it’s about process and transparency and taking incremental steps. We had to find a way to adapt to each other’s way.”
“We didn’t see it as bureaucratic process; we saw it as being thorough,” said Daviss.“What it took from the city’s perspective was not to butt heads with the idea of a private company wanting to generate profits, but to embrace it. We had to measure the risk and then stay out of the way. When the private sector realizes they have to work with government it sends chills down their spines. We had to both do a lot of seeing things from the other side and a lot of compromising.”
Often, creative solutions were necessary. The city wanted to see the Katz Group books. The Katz group laughed. A compromise was made – one city official could see the books but was not allowed to disclose anything in them. After viewing them, the official gave the thumbs up. To this day no one from the city, except the sole ‘books looker,’ knows the content of Katz Group’s finances.
The perception of the city residents about a private company whose sole goal is to make profits was another big bar to jump. “Of course we want to make money, we wouldn’t be in it if there was no opportunity to generate money,” said Black. “We had to get the people to embrace the reality that we had to justify the level of money we were going to pour into the project with the end game of making profits.”
“We had to change the conversation from how much money these guys were going to make to how much money this deal was going to save the city,” said Daviss. One of the things we did was keep the media up to date so the public felt satisfied and informed.”
The allocation of risk was another large hurdle to overcome. “We are used to taking risk with every precaution put in place to mitigate it,” said Black. “Of course the public sector wants to take no risk.”
At one point the risk equation just stopped making sense and it looked like the city and Katz Group were headed to divorce court and Katz Group was going to pack up the Edmonton Oilers team and move to Seattle.
“There was a point at which Rick and I were not allowed to talk to each other. But talk we did,” said Black. The secret talks led to a breakthrough and a deal. “This is a game-changer and it’s tremendously satisfying to get to this point,” he said.
“We were there for more then just approving forms and signing documents,” said Daviss. “We had to satisfy the public, the city council and the provincial government.”
Art Aaron, president of ICON Venue Group, was wedged firmly in the middle. “This was unique. We’ve done several of these projects and there’s always one party that takes far more risk. We started with the idea that the private party was going to take more risk and have greater control, but we quickly realized the city was not going to roll over and let the Katz Group dictate the process. It turned into a truly joint project. The city and Katz Group shared in all aspects of planning, budgets and decisions. This was unlike any other project because of the ability of these two entities to come together. In most cases we are the voice of reason; in this case all parties were in the driver’s seat.”
On the panel: Melissa Heiter, (303) 796-2655; Rick Daviss, (780) 496-6261; Bob Black, (780) 401-2745; Art Aaron, (303) 796-2655.