900 Albert Street: gateway for a $700 million lawsuit
James Bagnall, Ottawa Citizen
Updated: December 17, 2018
How did 900 Albert St. — a three-acre triangle on the western fringes of downtown Ottawa — emerge as such a potentially destructive force for LeBreton Flats?
The address is the site of a former train yard and snow dump and until very recently was criss-crossed by sewer pipes. It is now the focal point of a $700-million lawsuit launched on Nov. 23 by Ottawa Senators owner Eugene Melnyk against Trinity Development founder John Ruddy and others. Ruddy is expected later this month to file a statement of defence and, possibly, a counterclaim.
Before Ruddy shelled out $22.8 million three years ago to acquire control of 900 Albert St., the property had had a succession of owners: CP Rail, the city, the federal government’s National Capital Commission and DCR Phoenix, a private firm.
Ruddy’s timing was the best. The Ottawa real-estate entrepreneur saw a lot of value in the site’s proximity to the future Bayview station on Ottawa’s light rail transit line — especially with the LRT due to open this spring.
Ruddy’s plan, approved by city council last summer, is to build three towers capable of accommodating nearly 1,300 apartments, along with offices and retail stores — about 1.4 million square feet in total. His projected opening date for the $400-million complex: summer of 2022.
Except now there’s this legal mess.
Melnyk is suing Trinity and others, alleging the 900 Albert St. project will render uneconomic the much bigger transformation underway at LeBreton Flats.
Which on the face of it is odd, because Melnyk and Ruddy are the two main partners of RendezVous LeBreton, the group negotiating with the NCC for the right to create a community on the Flats. The $4-billion, 20-year-long project is to include 4,400 condominiums, as well as office buildings, retail outlets and public spaces — with an NHL arena at its core.
The inference in Melnyk’s litigation appears to be that Ruddy is willing to undercut his own stake in RendezVous LeBreton.
Why would Ruddy do this? Melnyk alleges it’s in Trinity Development’s interest to fill apartments first at 900 Albert before marketing residential units slated for LeBreton. This, in turn, Melnyk asserts, makes it more difficult for him to finance the construction of the arena, which is meant to be hosting NHL games as early as 2022 under RendezVous LeBreton plans.
A look at the detailed timelines of the two projects gives an idea of what Ruddy’s rebuttal could be.
Set aside for now the duelling real-estate forecasts offered by PwC and Urbanation — the consultants hired by Melnyk and Ruddy, respectively. At heart, the split within RendezVous LeBreton is rooted in lack of personal trust.
Start first with the very short history between Melnyk and Ruddy who, according to the litigation, met for the first time on Oct. 30, 2014. Cyril Leeder, then the chief operating officer of the Ottawa Senators, had suggested forming a team to respond to the NCC’s recent decision to open up the Flats for development.
Melnyk’s statement of claim suggested that at that meeting he discussed the idea of collaborating with five partners, with Trinity Development being considered for its experience in retail. The subject of 900 Albert St. came up. The litigation said Ruddy outlined his plans to build 1.5 million square feet of residential, retail and office space there.
However, provincial land registry records show that Trinity did not acquire its substantial majority share (90 per cent) of 900 Albert St. until early February 2015. So, while Ruddy may have outlined his plans for the site in October 2014, he was likely not yet able to act upon them.
In any case, Melnyk seems to have been aware of the 900 Albert St. development from the beginning. So was Leeder, who handled negotiations with Trinity during much of 2015 and early 2016 — notably during a stretch when Melnyk was preparing for and recovering from his May 2015 liver transplant. According to a close Senators colleague, not only was Leeder familiar with 900 Albert, he also viewed development there as net benefit for the LeBreton project because he believed it would help lift the local economy.
In April 2015 RendezVous LeBreton became one of four teams qualified to bid on the LeBreton project, prompting the Senators and Trinity in July to sign a non-binding teaming agreement.
Melnyk alleges he signed only after he received assurances from Ruddy that the 900 Albert St. project “would not compete with” LeBreton. He said Trinity would serve as the “exclusive” development partner at LeBreton, responsible for office buildings, retailing and residences. Melnyk would look after most of the financing for the arena and sports entertainment venues.
Melnyk’s suit does not make clear how the various revenue streams — rents, ticket prices, parking, condominium sales — are to be split.
RendezVous LeBreton submitted its final bid to the NCC in December 2015. Included was a copy of a real-estate analysis commissioned by Urbanation. The upshot: Ottawa’s economy was sufficiently strong to accommodate 200 additional residential units annually proposed for LeBreton by 2027 and 150 units per year after that until 2033.
As Trinity Development had not yet applied for zoning changes on 900 Albert St., Urbanation did not include that property in its analysis. The zoning changes were requested in March 2016.
At that point, Rendezvous LeBreton was still one month away from being selected as the NCC’s preferred bidder for remaking the Flats. Melnyk in his statement of claim was critical of Ruddy for not updating the Urbanation study after Trinity applied for rezoning. He also accused Trinity and Ruddy of choosing “to conceal the impact of their expanded development.”
However, city minutes show the relevant ward councillor — Catherine McKenney — had conducted a public information session about 900 Albert St. on March 8, 2016 — in advance of Trinity’s formal applications. Several public information sessions followed.
Melnyk’s legal documents are dotted with references to the potentially damaging impact 900 Albert would have on the ability of RendezVous LeBreton to fill its proposed venues.
Based on the public record, you can expect Ruddy to counter with some perspective on the nature of the downtown real estate market. First, even had Trinity never set foot on 900 Albert, the previous owner, DCR Phoenix, had received city council approval in the fall of 2012 for a 1.4-million-square-foot office tower complex.
DCR Phoenix, owned by Ottawa’s Kochar family, eventually decided to sell the property and concentrate instead on building family homes. Even if Ruddy hadn’t come along, it was just a matter of time before someone else did, given the location next to the Bayview station and the city’s push for greater population densities in the downtown core.
Secondly, Ruddy revised plans for 900 Albert St. several times between 2016 and 2018 — from 1.4 million square feet to 1.8 million, at one point including a hotel. All of this was part of a public process. Melnyk in his litigation claimed Ruddy late in 2017 showed him plans for a nearly 2.0-million-square-foot development. However, according to city staff, the scale of the project wound up last July at roughly 1.4 million square feet, including room for fewer than 1,300 apartments, expected to be sold over the next six or seven years.
Melnyk’s statement of claim makes clear his dissatisfaction with the communications he received from Ruddy about plans for 900 Albert St. The Senators owner commissioned his own real estate study (the one by PwC), which concluded there’s only enough room in the downtown Ottawa condo and apartment market to support 900 Albert St. or LeBreton Flats, not both. Given the very long time frame and so many variables, it’s difficult to say which study — PwC’s or Urbanation’s — should carry more weight.
What’s clear is that the projects at 900 Albert and LeBreton both carry significant risks. Litigation is one way of determining who should bear them. Negotiations between partners are another.
Expect Ruddy in his statement of defence — due later this month — to challenge the notion that LeBreton and 900 Albert are incompatible. For one thing, the Trinity founder four months ago updated the Urbanation study, which pointed out Ottawa’s population has been growing faster than previously forecast, with the result that demand for housing is outstripping supply. Look for Ruddy as well to argue that Melnyk was not caught by surprise by the development of the former snow dump on LeBreton’s southwest border.
The NCC has given Melnyk and Ruddy until late January “to get their act together” or it will restart the whole process — whatever that means. Plainly Melnyk and Ruddy are unlikely to resolve their differences on their own, which means a quick resolution will take heavy intervention by the government or the NHL, perhaps both. Meanwhile, that three acre patch of land at 900 Albert is preparing to accept three residential towers with a perfect view of LeBreton Flats. Whether that scene will soon include a lively community centred on hockey is anyone’s guess.
https://ottawacitizen.com/business/local...street-gateway-for-a-700-million-lawsuit
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