Developer offers to sell imaginary arena to Senators for imaginary price

The private developer competing with Ottawa Senators owner Eugene Melnyk to build an arena (among other things) on the LeBreton Flats site now says it would consider allowing Melnyk to own the rink if that would make things easier:

“Our attitude is, if we win the bid – and we firmly believe that the Senators should be downtown – we’re there and we’re willing and able to have a variety of discussions,” said Daniel Peritz, Canderel senior vice-president and spokesman for the Devcore Canderel and DLS Group, in an interview.

When asked specifically if that included the Senators owning the arena, Peritz answered: “Under the right conditions, everything is on the table.”

Presumably Devcore wouldn’t build an arena and then just give it to Melnyk for free, so how much would he have to pay for it? And how much would he be willing to pay for it? There’s a hint of a hint elsewhere in the Ottawa Sun report:

Earlier in the day, Melnyk told Postmedia’s Bruce Garrioch that playing in a new downtown arena could mean as much as $10 million more for the Sens’ payroll, so the team “can spend more.”

Does that mean $10 million more after paying for arena construction? Because if not, a new arena sounds like a pretty crappy investment, since it would cost around $500 million to build and only produce $10 million a year in new revenue. And even if that’s net gain, it’s a pretty marginal return on that kind of investment — Melnyk would be better off just putting his money in a mutual fund. (Okay, not the past few months, but in the long term.)

The takeaway here, as always, is follow the money. Once somebody has any idea how to pay for all this, it’s worth taking seriously. Until then, it’s not even pretty pictures.


5 comments on “Developer offers to sell imaginary arena to Senators for imaginary price

  1. He said $10 million more for payroll not $10 million more in revenue. So its conceivable that he will have a revenue bump greater than $10 million but $10 million is the portion that goes to payroll.

  2. The Senators are about $10 million below the cap right now so no matter how much more he took in he couldn’t increase payroll by more than $10 million.

  3. Aqib: Exactly. Historically (while the C$ was at or near par) the Sens have spent to near the salary cap, so there is a practical limit to how much they can increase spending on players regardless of how much more money a new arena might bring in.

    And keeping in mind that the new arena will be in the centre of a political capital, where there is money but a high percentage of it is made from wages and not business earnings (which can be offset with tax deductible business spending), count me among those who are very skeptical that a ‘downtown’ leBreton flats arena will generate significantly more revenue from effectively the same fan base.

    Yes, no doubt some Ottawa residents would go to a downtown arena but won’t go to Kanata. However, the reverse is also true. Like the Islanders, moving across town isn’t really about getting more fans… it’s about trading one subgroup of fans for another (in the Isles case, hopefully higher income/spending fans… but how is that working out so far?).

    It’s not necessarily a gain in either quantity or ‘quality’ of fans, however.

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