The city’s executive policy committee voted to approve a lower penalty for construction company Stuart Olson after it failed to deliver on attracting a hotel to the convention centre — and also made a move that puts a wrench in an agreement that gave True North first dibs on putting up a hotel at the spot.
Councillors on EPC and Mayor Brian Bowman met at 1 p.m. to decide what to do about the company’s failure to attract a hotel to the site north of RBC Convention Centre and grilled CentreVenture board members for hours before arriving at a decision.
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Stuart Olson was contracted by the convention centre to handle a $180 million expansion. They were also tasked with attracting a hotel to the adjacent lot owned by downtown development agency CentreVenture.
If they couldn’t, the convention centre would hold back $16 million in payment to the company as a penalty.
Stuart Olson has been unable to attract a hotel so far, and last week, convention centre board chair Bob Silver asked EPC to green-light a reduction in that $16-million holdback to just $3.75 million.
Silver argued if the penalty wasn’t reduced, a lengthy, expensive legal battle could ensue with Stuart Olson.
Complicating matters is news that CentreVenture entered into an option agreement with True North Sports and Entertainment to build a hotel on the site.
Bowman said he wasn't happy that option agreement existed while the convention centre still had a contract for the property on its books.
He said he wants to see other developers be able to bid on the location so taxpayers get the best deal. EPC agreed on a motion that will see the project go to an expression of interest.
The full city council will still have to approve the EPC's decision.
Convention centre board chair questioned
On Monday, it was revealed the $3.75 million settlement number was actually negotiated by CentreVenture, not by the convention centre.
Coun. Marty Morantz asked Silver why CentreVenture was negotiating a settlement between the convention centre and Stuart Olson over the failed hotel plan.
Silver was also asked how CentreVenture and Stuart Olson arrived at the $3.75 million figure, but he couldn't say. He said he just didn't know and wasn't privy to those meetings.
“I wasn’t unhappy, and I wasn’t happy any more than you’re happy or unhappy at this moment,” said Silver. “It was recognized by me as a way out of a difficult situation.”
Coun. Jeff Browaty asked Silver who gave the go ahead to begin work on the $180-million convention centre expansion without having a hotel deal in place.
“One of the reasons that a hotel became viable was if the expansion went ahead,” said Silver. “It was the convention centre’s prime concern that the expansion go ahead.”
Bowman said he believed getting the hotel built at the site was the right thing to do — but he wanted to know more about how the hotel deal fell through.
“There’s doing the right thing and doing it the right way. And what we want to ensure is that things were done the right way,” said Bowman.
“I will repeat what I said last time … communication can always be better,” said Silver.
Bowman wants access to CentreVenture documents
Bowman repeatedly expressed frustration with the lack of documentation provided by CentreVenture to EPC.
He specifically requested information on the option agreement with True North and wanted minutes from meetings where the deal was discussed.
“We have serious concerns that things haven’t been done the right way,” said Bowman. “We’re making really big decisions about millions of dollars of taxpayers money.”
CentreVenture board chair Kurt Vossen said some of that information had been provided to certain members of the city's administration, but Bowman pressed him on providing the option agreement with True North specifically to council members.
Vossen said he would provide it, but about an hour later, CentreVenture officials said they would not be able to provide it due to confidentiality issues.
Later, they said True North was comfortable with EPC members being briefed on the option agreement, but they would not consent to councillors receiving copies of it.
CentreVenture lays out a timeline
CentreVenture board member Richard Olfert laid out a detailed timeline for councillors Monday afternoon, explaining when they began negotiating with True North and when they found out the deal with Stuart Olson was falling through.
According to Olfert, real estate developer Matthews Southwest had originally been on board to help develop the hotel but it later pulled out, leaving Stuart Olson to find a hotel for the space on its own.
By early 2014, CentreVenture was worried Stuart Olson wouldn’t be able to deliver on the hotel, and it discussed the problem with EPC at that time, Olfert said.
“We were encouraged to find an alternative deal that could be presented at the same time as the release of Stuart Olson,” said Olfert. “The administration made it clear that having a credible, alternative hotel deal as a Plan B after the approval of the Stuart Olson release … was critical.”
Olfert said the previous administration, including the city’s CAO, had encouraged CentreVenture to come up with an alternative.
“At that time it was seen as a conundrum,” said Olfert. “It seemed at the time … that to be able to have both [a new offer and the release of Stuart Olson] would put council in a better position.”
'Only credible proposal'
In May, True North officials approached CentreVenture with an interest in the lot, Olfert said.
At the time, True North board chairman Mark Chipman was also on the board of CentreVenture.
Chipman resigned from the board a few months later, and Vossen said Chipman recused himself from any of the meetings about the True North interest in developing the hotel.
Last week, Bowman had raised questions about whether or not an RFP should have been issued for the space — meaning multiple companies would have had an opportunity to bid on the hotel build.
“This was the first and only credible proposal that surfaced in the last 30 months,” said Olfert.
He said in fall 2014, the city administration encouraged CentreVenture to keep working on the deal with True North.
Bowman asked why CentreVenture didn’t take True North’s interest in building the hotel to Stuart Olson.
Olfert said it was because at this point, Stuart Olson had indicated it wouldn’t be able to meet its obligations in building the hotel.
Bowman challenged that, saying the company still hasn’t formally said it can’t deliver on the hotel.
True North issues statement
True North issued a statement Monday afternoon as the EPC meeting was underway and councillors were grilling CentreVenture board members about the option agreement they signed with the company.
True North officials said the agreement gives the company the rights to acquire the property in the future. The statement said, “The agreement also provides for a fair market value mechanism to determine the value of the property upon acquisition.”
True North officials also said, “The property at 220 Carlton St. along with a number of other downtown properties contiguous to it are part of a broader land assembly package to the southwest of the MTS Centre and the northeast of the RBC Convention Centre.”
True North has not yet commented on how it will proceed given EPC's motion to open up the site to expressions of interests from other developers.