Tucked away in the potential $550-million arena deal revealed earlier this week between the City of Calgary and the Flames’ ownership group was a pair of land transactions, reflecting a growing trend where pro sports teams are stepping into real estate.
On Monday, a tentative agreement between the city and the Calgary Sports and Entertainment Corporation (CSEC) was revealed for a new arena which would house the Flames. As part of the deal, CSEC will have the option to acquire two valuable pieces of city-owned land: the site where the historic Enoch Sales House used to stand and the current site of the Victoria Park bus barns.
This move to purchase and develop land shows the Flames’ ownership is stepping onto a well-trodden path by other teams in Canada and the United States.
From Edmonton’s downtown ICE District developed around the Oilers’ now three-year-old arena Rogers Place, to the CFL’s Ottawa RedBlacks ownership group converting land near their home field at Lansdowne Park into residential development, sports teams are increasingly looking for other avenues to generate revenue, including more examples of land development in the last decade.
“These sports teams in many ways don’t think of themselves as sports teams,” said University of Alberta sports economist Brian Soebbing. “More and more, these ownership groups are more real estate development and/or media companies.”
The Enoch Sales Residence was a 115-year-old building in Victoria Park. It was the last house of its era in the neighbourhood before a fire ripped through the building earlier this year. Flames owners have the chance to buy the land where this house once stood, based on its value in spring 2018, prior to the formation of the event centre assessment committee. That option expires once the CSEC occupies the new arena, projected to be around 2024.
Meanwhile, CSEC will have the option to acquire the bus barns lands within a decade of occupying the arena, if they “become available” for development. The city has long planned to demolish these barns and reclaim the land to build something else.
Calgary Municipal Land Corporation (CMLC) President and CEO Michael Brown, whose organization is overseeing the arena’s construction, estimated the market value of these acquisitions at $85 million for the bus barns’ land and $15 million for the Enoch House’s land.
Brown said he could logically see the CSEC wanting to use the land to develop retail properties, a residential tower or a hotel. These properties were included in the deal, he said, because the CSEC expressed a desire to participate in developing the community around the arena.
“We saw that as a positive. We didn’t feel as though we were giving anything away, they were paying market value for it, and in addition to that, we knew ultimately we were going to have to negotiate design as well as timing of the build-out,” Brown said, adding that the CMLC will work with the CSEC to develop the land to a point where both parties are happy with what’s being designed and constructed.
But Moshe Lander, a Concordia University economist, argued the land purchases in the Calgary arena deal don’t operate in a conventional market, with little to compare them to, making it hard to determine their value and overall demand. He also said the Flames would likely only take this deal if their own internal calculations said they were getting a good price for it.
“That is a worry because you’re effectively handing them a gift that market or no market is not in the taxpayer’s benefit,” Lander said.
But including land sales, possibly at an adjusted price, in these negotiations is a creative way for cities to add value to an arena deal in place of including more public cash, Lander said.
For sports franchises, there’s a natural limit for the use they can get out of home games played in their arena. The Flames will play 41 regular season games at home, with a small number of pre-season games and the potential for a maximum of 16 home games in the playoffs. So ownership groups like CSEC will naturally look for alternative revenue sources, Lander said, which allows franchises to rely less on money generated from ticket sales.
This could come from using the arena for other purposes, he said, pointing out how the Saddledome currently also houses Calgary’s junior hockey team, the Hitmen, and their professional lacrosse team, the Roughnecks. But getting into land development has been a growing sports trend for the past decade, he said.
Examples of this include the Los Angeles Rams of the NFL whose ownership has bought land nearby its planned new stadium, and the Columbus Crew of Major League Soccer who have invested in the district around their new arena.
When it comes to the ongoing development of the ICE District in Edmonton, Soebbing said reactions in the city are still mixed with some supporting the development that’s ongoing in downtown Edmonton and others seeing the city’s investment in the downtown arena as a use of public money that hasn’t necessarily benefited the general public.
While fans may look at these investments and hope it means some of the added revenue is invested back in a team’s on-ice product, Soebbing said there isn’t much evidence to back up this idea.
But he argued it’s important for the public to know about these land options, their value and what the team’s ownership group will pay. Regardless of where the public money comes from, these are resources relevant to taxpayers and Soebbing argued taxpayers should know their value upfront to make a judgment on this deal’s cost to the city.
Lander also pointed out that including land acquisitions in place of more cash to build an arena helps add value and resources for team owners without possibly upsetting the public by offering more public dollars, especially as city council also announced major cuts to public services last week.
“The mayor himself said when the deal was announced on Monday that the optics were bad,” Lander said.
“If you’re looking for the common theme through a lot of these arena deals, is that the way you want to try and keep the public from getting a little antsy about cities helping out billionaire owners is if you try and get money into the team’s pocket without it looking like a (large) cheque.”
B.C. residential real estate Five things to know
Almost 73 per cent of detached homes sold in Vancouver in the first nine months of 2019 went for below assessed value, while Kitimat and the Kootenays are booming
Province wide real estate figures released this week by Landcor Data Corporation compared all residential sales for the first nine months of 2019 with the same period last year.
It breaks down sales numbers, sale prices, sales volumes and what percentage of sales were above or below the assessed value — a gold mine of information for any homeowner.
Here are five interesting things to know:
1. Let’s start with Vancouver
Most of the horror stories around money being lost in residential real estate are based on sales of high-end detached homes in the province’s largest city.
Using detached homes as a bellwether, Landcor data shows that the value of a detached home in the city fell 11.3 per cent for the first nine months of this year compared to last, with the median price now being $1.825 million.
There were 1,172 detached homes sold from the start of January to the end of September this year, compared to 1,448 for the same period in 2018. The value of those sales fell from $3.8 billion to $2.76 billion. Almost 73 per cent of detached homes sold in Vancouver in the first nine months of 2019 went for below assessed value.
Condo owners in Vancouver saw a 3.3 per cent rise in the median price on 30 per cent fewer sales.
2. LNG boom in Kitimat leads to huge jump in home values
There’s an energy boom underway in northwest B.C., driven by a $40-billion LNG project in Kitimat. There are already 1,000 workers setting up the construction site at the mouth of Douglas Channel, with 7,500 workers expected from 2022 to 2024. That creates a big need for housing and its shows in the data.
In Kitimat, the price of a detached home jumped almost 50 per cent in the first nine months of the year compared to the same period in 2018. While the number of detached home sales actually fell from 99 to 91, the value of those sales soared from $28.1 million to $38.7 million, and only two homes sold for less than assessed value.
Nearby Terrace saw a 21 per cent increase in the value of a detached home to an average of $385,000.
3. How are things in Surrey?
While owners of detached homes in Surrey fared better than in Vancouver, condo owners fared worse. There were 2,201 detached homes sales in the first nine months of 2019, a 22 per cent drop on the same period of 2018. Sales volumes were $2.7 billion for the same period compared to $3.6 billion. Interestingly, that shows that the total sales volumes in Surrey and Vancouver for detached homes are about the same.
The median price of a detached home fell three per cent to $1.038 million, while the median price of a condo was down 9.3 per cent to $365,700. Just over 50 per cent of detached homes sold in Surrey for the first nine months of 2019 went for below the assessed value.
4. The beautiful Kootenays are doing OK
A common refrain in Vancouver is “I’d love to live in Nelson.” It’s the Jewel of the Kootenays, rural with city touches, a world-class ski hill nearby and a reputation for cool known around the world.
The Landcor data shows several Kootenay towns doing well on the real estate front. In Nelson, the median price of a detached home rose 11.4 per cent to $440,000 — and despite the average assessed value of a detached home rising 16 per cent from 2018 to June 30, 2019, over 65 per cent of the homes sold in the first nine months of 2019 went for over assessed.
Salmo and Slocan saw a 27 per cent jump in detached home values, while Creston went up 10 per cent and Castlegar 11 per cent.
5. Victoria not so hot, but Langford is
Victoria has seen detached home values fall, though not as much as Vancouver. A detached home is now worth $790,000 on average, which is 4.8 per cent less than in 2018. Volumes are down slightly, with 171 sales in the first nine months of this year; almost 80 per cent of those sales were below the assessed value.
But west of Victoria, in Langford, detached home values soared 12 per cent in the same period, while detached homes in the Gulf Islands rose 19 per cent in average value.
The Canadian Real Estate Industry Just Jumped The Biggest sales In October over 10 Years
Canadian real estate markets are on fire. Canadian Real Estate Association (CREA) data shows sales across the country jumped in October. The rise was actually so large, last month was the biggest for the industry in over a decade. This is the opposite of what the government wants to see ahead of rolling out new demand stimulus.
Canadian Real Estate Sales Rise Over 12%
The headline number used by the industry is seasonally adjusted, which downplayed growth. There was 42,970 seasonally adjusted sales in October, flat from a month before. Unadjusted however, sales reached 44,499 in October, up 12.9% from the same month last year. FYI seasonally adjusted numbers are compared using consecutive periods. Unadjusted numbers are compared on a year-over-year basis.
Canadian Real Estate Sales
The unadjusted sales for all home types, as reported through the Canadian MLS.
Source: CREA, Better Dwelling.
The growth rate is very high, and this is also a new record. The 12-month growth is the highest for October since 2011. The number of sales reported for the month is also the highest since 2007. Some of this is delayed demand from last year’s weak numbers, but it’s still a very large month.
Canadian Real Estate Sales Change
The annual percent chage of unadjusted sales for all home types, as reported through the Canadian MLS.
Source: CREA, Better Dwelling.
British Columbia’s Largest Markets Lead In Growth
The largest growth was in last year’s biggest losers – Vancouver and Fraser Valley. Vancouver reported 2,892 sales in October, up 45% from the same month last year – the biggest jump in the country. Fraser Valley, the neighboring board, followed with 1,500 sales, up 36% from last year. In a distant third was Ottawa at 707 sales, up 25.4% from last year. Both BC markets were near multi-year lows last year, so the jump was a little expected.
Canadian Real Estate Sales By Market
Canadian real estate sales in markets with more than 450 sales in the month.
Source: CREA, Better Dwelling.
Biggest Losses Were In… Wait, There Was None
That’s right kiddos, not one major market showed a loss from last year. Kitchener-Waterloo showed the smallest gain at 502 sales in October, up 2.7% from last year. London follows with 924 sales, up 2.8% from last year. Victoria came in third with 586 sales, up 5.4% from last year.
Canadian Real Estate Sales Change By Market
The percent change in Canadian real estate sales, in markets with more than 450 sales in the month.
Source: CREA, Better Dwelling.
All of Canada’s largest real estate markets pumped out massive gains. Curiously, the rise in sales is not isolated to “hot regions,” it’s a broad market gain. This implies a more macro change to buyer pressure.
Real estate developers are slow to make buildings 5G-enabled
Super fast 5G cellular networks are hot as major wireless carriers from Verizon to AT&T deploy the service, but it’s unclear if the infrastructure is in place for in-home 5G to replace current cable-based broadband.
The 5G-enabled future seems kind of distant. Real estate developers would need to put fiber-optic cables in homes and office buildings, since 5G doesn’t pass through walls, windows, or people. And most developers are not constructing projects or retrofitting existing properties that would allow 5G to be delivered to homes because it’s simply too expensive to implement.
“Not many developers that we speak to are taking 5G into account when constructing new ground-up developments,” said Chen Konfino, founder of Younity, a Tel Aviv-based company that installs internet infrastructure in multifamily buildings.
<p class=”canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm” type=”text” content=”Fiber-optic cables, which run through the walls and the floors of buildings, are required to receive 5G signals indoors, according to Dan Littman, principal of technology, media and telecommunications at Deloitte Consulting LLP. And only some developers like The Related Companies are willing to pay for the infrastructure. Related’s massive Hudson Yards 28-acre mixed-use development in New York City is wired for 5G.” data-reactid=”18″>Fiber-optic cables, which run through the walls and the floors of buildings, are required to receive 5G signals indoors, according to Dan Littman, principal of technology, media and telecommunications at Deloitte Consulting LLP. And only some developers like The Related Companies are willing to pay for the infrastructure. Related’s massive Hudson Yards 28-acre mixed-use development in New York City is wired for 5G.
“Installation is too pricey” data-reactid=”39″>Installation is too pricey
Most builders just opt for traditional internet solutions because it’s affordable. Between conduits, splices, cables, and installation, 5G capability can be a five- or six-figure investment.
From 2003 to 2017, the median budget for a fiber-optic cable installation project, ranging from .6 to 10 miles of cable, was $66,940, according to a U.S. Department of Transportation survey of 150 fiber optic installations. Konfino said he recently completed two fiber-optic cable installations in 30- to 40-foot buildings for about $100,000 each.” data-reactid=”41″>From 2003 to 2017, the median budget for a fiber-optic cable installation project, ranging from .6 to 10 miles of cable, was $66,940, according to a U.S. Department of Transportation survey of 150 fiber optic installations. Konfino said he recently completed two fiber-optic cable installations in 30- to 40-foot buildings for about $100,000 each.
Even retrofitting existing buildings is a pricey endeavor. It costs about 30% more than a regular renovation, taking into account demolition, renovation, and improved telecommunication closets, said Konfino. And the costs skyrocket when a building is more than a mile away from the closest fiber-optic internet line, according to a post by Atlantech, a Maryland-based fiber optics and telecommunications company.” data-reactid=”42″>Even retrofitting existing buildings is a pricey endeavor. It costs about 30% more than a regular renovation, taking into account demolition, renovation, and improved telecommunication closets, said Konfino. And the costs skyrocket when a building is more than a mile away from the closest fiber-optic internet line, according to a post by Atlantech, a Maryland-based fiber optics and telecommunications company.
“The return on investment” data-reactid The return on investment
As one of the few developers making 5G-enabled properties like Boston’s Lovejoy Wharf luxury condominiums and New York City’s Equinox Hotel, Related said the high costs are worth the investment.
“Expense is always a factor. We would never mindlessly invest in infrastructure that we didn’t think would be foundationally important,” said Scott Evans, chief digital officer of Related. Fiber-optic cables will only become increasingly necessary as the infrastructure behind future innovations, added Kenneth Finnegan, chief technology officer of Related.
Fiber broadband cuts down on long-term maintenance costs for building owners. It also allows owners to charge more rent and increases the value of properties. According to Connected Real Estate Magazine, owners can increase rent by an average of 8% and property values are boosted by an average of 2.8%, if the properties are 5G-enabled. ” data-reactid=”66″>Fiber broadband cuts down on long-term maintenance costs for building owners. It also allows owners to charge more rent and increases the value of properties. According to Connected Real Estate Magazine, owners can increase rent by an average of 8% and property values are boosted by an average of 2.8%, if the properties are 5G-enabled.
“I think there’s going to be a price concern for landlords and property owners, but I think there will be a demand for this infrastructure,” said Mike Baumstein, deputy head of Barings’ Private Equity and Real Assets team, an investment firm that recently bought Gigasphere, a fiber-optic telecommunications company serving the multifamily and commercial real estate industries. “Eventually, they [building owners] will have to make an investment to keep their properties updated and competitive.”
But smaller developers still say the cost is too high. Josh Schuster at New York-based Silverback Development uses traditional methods like routers and cell phone repeaters that allow only 4G into buildings, according Schuster.
“There is a cost-benefit analysis. Right now, there are inexpensive ways to include technology in design and construction,” he said. “We definitely incorporate that.”
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