Quote:
Originally Posted by waterloowarrior
|
Field of broken dreams: The inside story of how Ottawa's $4B landmark development deal fell to pieces
On Friday, Eugene Melnyk dropped a bombshell, suing his partners in the LeBreton Flats project, which has been called 'one of the most exciting projects' in the city's history
Adrian Humphreys and Barbara Shecter, The National Post
November 23, 2018, 11:46 PM EST
Last August, the Ottawa media was summoned to City Hall to observe the tail end of a private meeting that looked for all the world like it had been cordial and productive. At the head of a gleaming, gilt-edged table sat the city’s mayor, Jim Watson. On his right was John Ruddy, a prominent local real-estate developer. On his left was the billionaire owner of the National Hockey League’s Ottawa Senators, Eugene Melnyk.
It was a public gesture intended to calm the public’s fraying nerves over the future of a grand $4-billion project to develop a swath of unique real estate in the heart of the nation’s capital.
Several blocks west of Parliament Hill, past the Bank of Canada and the Supreme Court and across from the Canadian War Museum, LeBreton Flats sits empty. It is a 21-hectare expanse not far from the shore of the Ottawa River, and for decades it has been the subject of ambition for those frustrated that Ottawa sometimes still feels more like the sleepy timber town it was at its founding than the modern capital of a G7 nation.
Ruddy and Melnyk were partners in the bid that had won the competition to finally redevelop the Flats, the last significant patch of clear land near the city centre and perhaps the best chance to elevate the nation’s capital into something more. Their RendezVous LeBreton Group’s boisterous and ambitious plan had beaten a bid funded by Quebec’s powerful Desmarais family and Guy Laliberté, the founder of Cirque du Soleil. It would, they promised, revitalize the area with retail and housing, and a new home for the struggling Senators, an 18,000-seat arena that would be the showpiece of the development.
Smiles, handshakes and all the right words.
“The LeBreton project is going to be one of the most exciting projects in the history of the city of Ottawa,” Watson told reporters as things wrapped up that day in August. Shovels should be in the ground “as quickly as possible.”
The show of unity was necessary because questions were swirling about the future of the project and the RendezVous group. And behind the smiles, the reality was this project had been in a two-year-long death spiral, the relationship between the partners seated at the mayor’s table that day collapsing irreconcilably.
On Thursday, at a meeting of the National Capital Commission, the Crown corporation responsible for planning and stewarding the capital region, it was finally revealed publicly what deep trouble the LeBreton Flats redevelopment deal was in. The NCC’s chief executive officer, Mark Kristmanson, announced Melnyk’s and Ruddy’s companies had both informed him they had “unresolved issues” and were unable to close a partnership agreement.
The NCC, Kristmanson assured the public — before even breaking the news — had “pulled out all the stops” to move the redevelopments forward over four years. “We are disappointed,” he said.
Reluctant to kill the project then and there, however, the NCC board voted to give the two partners until January to “get their act together,” as Watson put it. Failing that, the NCC gave itself the option to start the process all over again.
But the effort to reunite Melnyk and Ruddy seems an unnecessary pipe dream.
On Friday, Melnyk dropped a bombshell, filing a lawsuit against his partners, the statement of claim filled with remarkable allegations of political interference, conflict of interest and betrayal. John Ruddy fired back, hours later, strongly denying the allegations, which have not yet been tested in court.
Through legal filings, as well as insider accounts from behind the scenes and previously unreleased documents reviewed by the National Post, a picture is emerging of how the monumental deal fell to pieces — a story that blends high-stakes business and politics against the backdrop of two pillars of Canada’s identity: the nation’s capital and the national game.
— — — —
On July 15, 2015, as Eugene Melnyk recovered in Toronto from liver transplant surgery that had lasted 11 hours and saved his life, a small circle of his close confidants clustered around him, having traveled from Ottawa to bother him with business.
Among them were Sheldon Plener, the Senators’ long-time legal counsel and alternate governor with the NHL’s board of governors; Geoff Publow, the Senators’ vice-president of strategic development; and Ken Villazor, an adviser and another alternate governor for the hockey club. Cyril Leeder, the Senators’ long-time president, was patched in by phone.
There was just one thing to discuss: LeBreton Flats, specifically the partnership agreement with Ruddy’s company, Trinity Development Group, that Plener and others had been working on while Melnyk was out of commission.
According to sources familiar with events, the summer before, staff from the office of foreign affairs minister John Baird, the Ottawa West MP who was also the minister responsible for the NCC, as well as representatives of the commission itself, had courted Melnyk to anchor the development. (Baird said he doesn’t recall whether such a meeting took place.)
The idea was enticing to Melnyk given that the Senators’ current home, 30 minutes outside the capital in Kanata, has long been a problem — often blamed for the team’s attendance woes. The Senators is one of the few NHL teams to play in the suburbs and NHL commissioner Gary Bettman has said a downtown arena is “vital to the future” of the franchise.
“It was important to the Senators organization that we be part of the LeBreton Flats redevelopment,” Melnyk said in an interview with the National Post.
But in the year following initial talks about the development, as Melnyk’s company, Capital Sports Management Inc. (CSMI), was putting together a bid, Melnynk says, “It’s no secret that I was very sick.”
He tapped Leeder as the point person for the deal, who assembled a team and spoke with several builders — including John Ruddy.
Ruddy, trained as an architect, moved into retail development and founded Trinity Development Group in 1992. Neither is he a stranger to arenas: As the majority shareholder of Ottawa Sports and Entertainment Group, he owns the Canadian Football League’s Ottawa Redblacks, the Ottawa Fury Soccer Club and the Ontario Hockey League’s Ottawa 67’s.
He was also developing a 1.2-hectare property directly adjacent to LeBreton Flats, known as the 900 Albert Street project.
It seemed a smart fit, since Melnyk — who made his money in medical publishing, specialty pharmaceuticals and horse racing — had not been involved in a real estate project anywhere close to this magnitude.
Further, Ruddy was well connected in Ottawa and seen as affable and well liked, while Melnyk might best be described as a quixotic figure. In March, following Melnyk’s remarks that if game attendance didn’t improve he’d move the team elsewhere, a Senators fan crowdfunded $10,000 to put up billboards in the city. The message: #MELNYKOUT.
— — — —
At the southwest corner of Booth and Wellington, on the edge of a flat, empty expanse of LeBreton Flats, there is a small fountain and a handful of interpretive signs, at once a memorial to what came before and a wistful hint of the future.
In 1820, John LeBreton, a retired army captain, bought the land with an eye for a profitable real estate flip. Although his name remains attached to the plot, he alienated civic authorities and was accused of land speculation.
In 1900, a devastating fire gutted the wooden houses and thriving lumber industry on the Flats, the signs explain, and an industrial, working-class neighbourhood was rebuilt.
Then, under Prime Minister Mackenzie King, redeveloping the plot became a federal project. After a very long study, an urban planner from France reimagined Ottawa as a true capital city in 1949. The renewal of the blighted LeBreton neighbourhood was an important part of the remake.
From 1962 until 1966, the federal government systematically expropriated the land and the buildings were torn down. The property was placed in the care of the NCC.
Fifty years have passed, leaving a fallow brownfield with stop and start plans and piecemeal construction, some of great significance, such as the Canadian War Museum and National Holocaust Monument.
Today, one of the interpretive signs in LeBreton Flats proclaims its future as a new, thriving community. You can see that happening around you, it says.
Looking up from the sign, a reader would be forgiven doubts, seeing stretches of a wide, empty expanse of weeds poking through a thin layer of snow, with a few tall spruce in the distance.
In 2014, the NCC made it a renewed priority.
— — — —
There was some drama in the NCC’s call to the private sector for imaginative proposals on the use of LeBreton Flat that year, already assured Melnyk was waiting in the wings.
“The redevelopment of LeBreton Flats offers a unique opportunity to create a dynamic new community in the heart of the Capital,” the NCC said in a splash on its website.
After whittling proposals down, first to four, then to two, in April 2016, the commission named CSMI-Trinity’s submission the first-ranked bid.
The “world-class event centre” — the arena as the home of the Senators — was promoted as the anchor, with promotional material heralding it all as a future “destination of national and international significance.”
“A community is reborn and it shines like never before,” a promotional video from the NCC enthused. There was hope something special was underway.
Melnyk, however, had graver things on his mind. He needed a new liver, within “a week at most,” his doctor at Toronto General Hospital had told him. On May 14, 2015, it was Leeder who delivered a plea at a hastily called press conference for someone to volunteer as a live liver donor.
The plea was answered and, on May 19, 2015, the grueling surgery left Melnyk weak — physically and mentally — but slowly on the mend.
It was at this point that Melnyk was briefed in Toronto on what had gone on with LeBreton Flats while he was sick.
Melnyk wasn’t impressed, according to those familiar with the situation. He wondered why Trinity’s position was boosted in the deal from the early discussions and he worried about the impact of the 900 Albert development on LeBreton. He told his team to improve the deal.
A six-page memorandum of understanding was eventually cobbled out, a document reviewed by the Post, and signed six days later by Ruddy, Melnyk and Leeder. The agreement between CSMI and Trinity said each had a 50 percent interest as Master Land Developer and responsibility for half of all equity.
That document allowed work to continue to submit an official bid together, but left a final partnership agreement unresolved. At the time, Melnyk didn’t have it in him to fight for more.
As intense community consultations came together and as Melnyk regained strength and ramped up his work schedule, the two business partners at the head of the project were getting further apart.
“After I began recovering my physical and mental capacities, which took several months, I realized that our partnership with Trinity had changed dramatically while I was away,” Melnyk said.
He had growing concerns about Trinity’s priorities.
As the LeBreton plan wallowed, Trinity’s 900 Albert project trotted along. The proposed density seemed to grow each time Melnyk heard about it, he complained, and now there was a three-tower complex of 65, 56 and 27 stories — two of which would be the tallest buildings in Ottawa.
By July 2016, just three months after being named the first-ranked proposal, CSMI, Trinity and their blue-chip lawyers were already at an impasse and in secret mediation to settle their differences.
There would be no true reconciliation, but both sides trundled on.
Internally, Melnyk took Leeder off the LeBreton file and replaced him with Publow, and, in January 2017, fired him from the Senators organization.
Contacted by the Post, Leeder declined to comment on “the sad state of affairs.”
At a contentious meeting with the NCC on Sept. 29, 2017, Ruddy gave an update on recent city hall approvals of his 900 Albert venture: three towers on a retail podium with a projected density of 1.75 million square feet of space. CSMI learned that Trinity sold off part of its interest in 900 Albert and brought in two new partners.
InterRent Real Estate Investment Trust took a one-third interest in 900 Albert for $14.2 million in August 2017, according to the lawsuit. “This represented an approximately 30 per cent increase on the previous value of the land,” the suit states, suggesting the proximity to the LeBreton project was boosting its value, providing “considerable cachet.”
Ruddy was proud of what he was creating at 900 Albert, and it showed at the meeting, CSMI said. The Albert development, Melnyk and his team noted with alarm, was taller and larger than expected and coming to market earlier.
Even the NCC seemed to see a problem.
At the meeting, after seeing artist renderings of 900 Albert, Marco Zanetti, the NCC’s real estate specialist and lead negotiator, allegedly said Trinity’s project will “take the wind out of the sails of LeBreton,” according to the lawsuit, filed by Melnyk on Friday.
Melnyk alleges Trinity was working behind his back to push and finance 900 Alberta at LeBreton’s expense.
The joint venture failed “because of an egregious conflict of interest on the part of Trinity and its principal, John Ruddy, that ought to have been identified to CSMI and resolved but instead only worsened over time,” the lawsuit alleges.
At a meeting with the NCC on Jan. 5, 2018, the commission was formally warned in a prepared statement that CSMI was re-assessing its involvement because of the “size and scope” of 900 Albert.
Despite CSMI’s concerns, the NCC, the lawsuit alleges, pushed the parties to move forward, telling both CSMI and Trinity to settle the outstanding issues of their partnership in 48 hours, a deadline that was never met.
“NCC turned a blind eye to CSMI’s concerns,” the suit claims, applying pressure even though it knew Melnyk’s group was still investigating its viability.
Both Trinity and CSMI commissioned studies to back their position on what the overlapping projects might mean to LeBreton.
In an April, 2018, report prepared for CSMI, PriceWaterhouseCoopers questioned the ability of the region to support both projects. The developments would “directly complete with one another,” it says.
Trinity offered a market study, prepared by Urbanation, that was far more optimistic, saying the local economic slowdown due to cutbacks in public sector spending was over and Ottawa was in a “rebound.”
What Melnyk saw, however, was a competing, potentially project-killing development right next door being pushed forward by his own partner.
“The experts told us 900 Albert would have a devastating financial impact on LeBreton,” Melnyk said. “We repeatedly raised this issue with Trinity, the NCC and city officials.”
— — — —
As the partnership was collapsing, there were efforts to salvage what was still being touted as the most significant development project in the nation’s capital in a generation.
From Melnyk’s side, in October, there was an appeal to the mayor’s office for intervention, Melnyk’s lawsuit alleges.
The alleged response is remarkable.
Watson was no doubt concerned with the disarray in such a marquee project in his city. The mayor’s office was also allegedly concerned about what it might mean for him politically if the deal collapsed during the “election cycle,” the lawsuit claims.
The mayor’s office responded to the Melnyk group’s concerns with “threats and intimidation,” the lawsuit alleges.
“Serge Arpin, the chief of staff to Mayor Watson, informed CSMI’s Chief Operating Officer that any attempt to withdraw from the LeBreton Project during the current election cycle… would be viewed as a direct attack on the mayor’s political career and re-election effort,” the lawsuit claims
“It would result in a ‘severing’ of any relationship between between Mayor Watson and Melnyk and CSMI. CSMI interpreted this as a thinly veiled threat that Mayor Watson would not only withdraw support for any new arena project, but would oppose any initiatives by Melnyk or CSMI for the duration of his mayoralty,” the suit claims.
The mayor’s office declined a request to respond to the allegations. “As the matter is before the courts, Mayor Watson and Serge Arpin are unable to comment,” spokesperson Livia Belcea said in an email.
Melnyk was already concerned about what was happening in political backrooms, his people say.
Graham Bird, who served as project manager with his consulting and property management company, Graham Bird Associates, had allegedly met at least five times with city officials about the project without notifying CSMI.
CSMI only learned of the meetings during a June 11 meeting with Bird and Brendan McGuinty, who has held a number of political positions and has worked as volunteer for Watson, and as an adviser to his brother, former Ontario premier Dalton McGuinty.
McGuinty “has been associated with Trinity in an unknown capacity (whether as an employee, consultant, lobbyist or adviser has never been made clear) since at least 2015,” according to the lawsuit.
On July 11, 2018, Ottawa city council approved Trinity’s “controversial” plan to develop 900 Albert “with unprecedented density and height,” including the tallest building in Ottawa. “Trinity and Ruddy were able to obtain this political coup through the efforts of McGuinty, who advocated for Trinity’s interests with the City and the mayor without being registered as a lobbyist, and Bird, a former Ottawa City Councillor,” the lawsuit claims.
In an email, McGuinty told the Post “the claim is 100 per cent false.”
The allegations in the lawsuit, not yet tested in court, make it difficult to believe Melnyk and Ruddy will jointly put a ceremonial shovel in the ground at LeBreton Flats, let alone erect a glittering arena and a retail and condo palace.
Melnyk confirmed as much to the Post.
“As an organization, we just didn’t have the confidence and the comfort that we would actually be building a viable project for the city at LeBreton, instead of a white elephant.”
In a statement Friday, Ruddy was equally forceful. “Trinity strongly denies the allegation in CSMI’s lawsuit and intends to vigorously defend the claim. For over 30 years, I have sought to make a contribution to the communities in which Trinity operates, and in particular my hometown of Ottawa. I will always find ways to build Ottawa up and continue to make a contribution to our great City.”
The NCC clings to the dream, at least officially. But the starkness of the situation is no doubt settling in.
As NCC board member Aditya Jha, a plainspoken entrepreneur, said at Thursday’s meeting of the NCC, the whole LeBreton venture has been “so long on process and patience, and we are kind of short on reality.”
— With files from Maura Forrest in Ottawa and Tyler Dawson in Edmonton.
• Email:
[email protected]
• Email:
[email protected]
https://nationalpost.com/news/canada/fie...in-failing-4b-ottawa-development-project
Prev
Linear Mode
