It’s everybody threaten the Senators will leave Ottawa without a new arena week!

The Ottawa Senators story so far: Then-owner Rod Bryden built an arena in the suburbs in 1996 to be the anchor of a new retail district, then that didn’t work and he went bankrupt. Then new owner Eugene Melnyk decided in 2014 that what he really wanted was an arena downtown, blaming this on the suburban one not being “built to last,” and started angling for development rights to a plot of downtown land, which he got the rights to negotiate for last year. But Melnyk still needs to negotiate how much he’ll pay for those rights, plus whether he’ll get public money toward construction costs despite having promised that “no government money” would be involved, all of which means it’s high time for move threats! Levied by anyone other than Melnyk, because that’s the way this game works.

First up, NHL commissioner Gary Bettman:

“A new downtown arena is vitally important to the long-term future, stability and competitiveness of the Senators,” Bettman said. “The process is ongoing, but I think asking Mr. Melnyk or the Senators the status would be more appropriate than asking us.

“However, we believe there needs to be a solution for the long term.”

That’s a pretty oblique threat, admittedly — “vitally important” to the team’s “stability and competitiveness” could mean a lot of things, from the team leaving town to it just not making as much money as it might otherwise, I think? It’s a nice start, and why Bettman earns is salary, but really you want somebody to come right out and say — oh, hi, legendary hockey announcer Don Cherry:

“If they don’t put an arena downtown they’re gone,” Cherry said during Hockey Night in Canada on Saturday. “I think they’re just hanging on here in Ottawa, not drawing out, with a great team like that.”…

“If they’re not drawing out with that team… I say they’re gone, and I say they go to Quebec,” said Cherry.

The Senators are definitely not selling out despite a contending team, and the suburban location probably isn’t helping. Moving to Quebec, though, would require selling the team to Quebecor, the media giant that owns the management rights to Quebec’s arena and has said it wants to be the owner of any NHL team there. And Melnyk has been pretty adamant that the team is not for sale — even saying “the team is not for sale” and that he’s promised his daughter she can own it when he dies — so that doesn’t seem like a thing that is likely to happen.

More to the point, meanwhile, is that if the Senators need a new arena, they can build one right now: They have the land, and if a downtown venue would be so much more lucrative that it’d be worth the construction costs, then Melnyk can just go to a bank and borrow the money. Unless what Bettman et al are saying is that the only way it would pay off for the team is if Melnyk got public subsidies to help pay for it — either via a sweetheart lease or straight-up cash or tax breaks to pay for construction — in which case this isn’t actually “the Senators need a new downtown arena” so much as “the Senators owner is unhappy with how much money he’s making, and would appreciate it if someone would undo the previous owner’s mistake and build a new arena in a better location, please.”

As for how much money Melnyk is making, Forbes estimates the team turns a profit of a few million dollars a year, while the team is valued at $355 million, up from the $100 million that Melnyk paid for it in 2003 — an annualized return on investment of about 9.5%, thanks to the discounted sale price he got in part because of that whole bankruptcy thing and the lousy arena location.

Tl;dr version: Sports executives have a funny definition of “need.”


7 comments on “It’s everybody threaten the Senators will leave Ottawa without a new arena week!

  1. You’re right about the threats and presumable ask for money coming, but a correction – Melnyk and the Senators do not have the rights to the downtown land yet. They’ve been awarded preferred (but not exclusive) negotiating rights for it. They’re not just negotiating the cost, but also hammering out many details of the actual development plan for the area. The NCC could choose to begin negotiations with the other bidder on the project at any point, if they felt the negotiations with the Sens group wasn’t going well enough.

    (Also, the original owners wanted the arena to be basically where the new one is supposed to be, but that idea was shut down immediately by the NCC)

    • Yeah, I knew I was saying that wrong. “Got exclusive negotiating rights to the development rights,” does that cover it?

      • Not even exclusive, “preferred”. They couldn’t just walk on a whim, but the NCC could open concurrent negotiations if they felt negotiations with the Sens group was going poorly.

  2. I remember the team trying to negotiate land in the downtown core without success. It was an odd place to put the arena, basically in the middle of nowhere. The team even had to pay for the interchange off the highway (imagine that!) at the time, something like $17 million. A lot of the land is still undeveloped around it. It feels out of place driving by in on the highway.

  3. Rod Bryden wasn’t the first owner and didn’t select the “space”. That accolade belongs to Bruce Firestone, who actually picked the location as it was an anchor for his major development plan in Kanata (he owned Terrace Investments at the time). Some believe the whole application for a franchise in the first place was really just a carrot for the public (to approve/support the full section sized ‘Firestonia’ community he planned). Not sure on that myself.

    His adjacent development (which as I recall included thousands of homes, retail etc) did not happen (if I remember right, Kanata approved a scaled down arena but not most of the adjacent development), so the arena ended up ‘staying’ in the middle of nowhere (more or less).

    One of the reasons the development corp had to pay for the interchange was that it was going to be used for both the arena and the retail/residential development, all of which was to be controlled by Firestone & co. Developers typically do pay for access roads to their own developments.

    Bryden bought the franchise in a distress sale (with the arena already underway as I recall). Firestone and his partners were far too heavily leveraged and had to get out… plus I imagine they could see that – without the adjacent development – the arena project would not be self sustaining economically.

    Years later, Melnyk bought the team and arena in a bankruptcy sale. So he owns the arena. Anyone else wondering what he plans to do with it if his new building is approved? Keep it as a spare? Or will the public be expected to buy back the arena, refund the millions for the interchange, and pay to demolish the facility for him?

    Both Melnyk (Biovail) and Murray Edwards (CNRL) in Calgary have a similar problem…. they both live outside Canada in order to avoid paying personal income tax in the country, yet are demanding tax money for their arena projects (and lots of it).

    Even for sports owner/billionaires, this is a tremendous level of hubris. If he wants to “do something” for Ottawa, he might start actually paying income tax there as a start.

  4. The whole Ottawa situation is a not-very-funny joke. First, as much as the suburban arena is in the middle of nowhere, that’s also the direction in which the city has grown – there are probably as many if not more people living nearby than there would be downtown.

    Second, the location of the planned “downtown” arena is not remotely what anyone other than someone with a vested interest would consider downtown. It’s *closer* to downtown, which, sure, but that wouldn’t make a lick of difference in getting more bums in seats.

    They could build Melnyk an arena on the front lawn of the Parliament Buildings, fully paid for by any level of government, and it still wouldn’t change the fact that Ottawa is a government town without a corporate presence large enough to support a base of season’s ticket sales. They live and die on individual ticket sales, and they always will.

    • The location didn’t seem to prevent sellouts a few years ago did it? Other than perhaps the general economy, what has changed?

      The worrying thing now is that even at a (discretionary) reduced capacity, they still are carrying 3-4,000 empty seats on an average night.

      Are you an Ottawa resident? If so do you have any thoughts on whether Melnyk himself might be a significant part of the problem?

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