Back in September 2012, when negotiations around the proposed new downtown arena were at their ugliest, Edmontonians learned that Daryl Katz was refusing to sign the deal, unless city council promised to move city workers into a new Katz-built tower in the arena district. To underline his point, Katz flew to Seattle with team officials, hinting that unless he got his office block, he would move the Oilers south.
Councillors were outraged. Their message seemed clear. They would make no guarantees about moving their workers to a Katz building. They would hold an open competition for new office space.
On Thursday, the city, the Katz Group, and WAM Developments announced plans for a new $300-million, 27-storey office tower on the site of the shuttered Staples store at 101st Street and 104th Avenue. The city has signed a 20-year lease agreement. It will move about 2,000 city workers out of other buildings across the downtown into the new site, starting in 2016.
Yup. Katz got exactly what he’d demanded.
Coun. Mike Nickel doesn’t blame voters who might be cynical.
“They hear we’re going to pay him rent, and they go, ‘Say what?’ It’s unfortunate. It looks as though we’re subsidizing Daryl Katz once again.”
Nickel was one of three councillors who voted against the deal — but not because of the optics. He thought the city should build its own building instead of leasing. Still, he’s also concerned that the decision and the vote happened, behind closed doors. No matter how good the Katz-WAM deal was, he believes the private debate and vote can only fuel public suspicion.
“Some of it could have been done in public,” says Nickel.
Coun. Michael Oshry also voted against the lease agreement. He too thinks the city should have built its own tower. Still, he says the bid process was fair and open.
“The Katz bid was a nine out of 10. The next closest was about a six. That might be hard for some people to swallow. But people are going to believe what they’re going to believe.”
“To some of our great surprise, their proposal was head and shoulders above the other competitors,” said Coun. Ben Henderson. “Some of us would have been happier if it had worked out the other way. I think this deal would have been done ages ago if we hadn’t been worried about the optics of saying yes.”
The Katz-WAM proposal beat out 13 bids. The city says the tendering process was reviewed by an external fairness adviser, as well as two independent reviewers who scrutinized the process.
Gary Klassen, the city’s general manager of sustainable development, says the Katz-WAM proposal offered a great location near City Hall, a large floor plan, and high environmental standards. But he says the lease rate was also extremely attractive.
“They were the clear winners. It wasn’t even a question of being close. They were the most competitive from a pricing point of view, in providing that product.”
It’s a wee bit hard for arena skeptics like me to credit, especially in the absence of any public disclosure of the rival bids. But if the Katz Group and WAM dropped their lease prices to somewhere near the loss-leader mark, it may say something about the importance of this tower as a key to their arena development strategy.
While the prospect of a major new downtown tower in place of an ugly, empty stationery store is attractive, there is a legitimate risk with this tower, and the Kelly-Ramsey project on Rice-Howard Way, that our downtown could see a serious glut of office space, driving down rents and city tax revenues for years to come.
Klassen, though, argues lower vacancy rates and lease rates may instead attract more small and medium businesses to the city core. There’s the potential for redevelopment, too. Chancery Hall, the city-owned modernist block on Churchill Square, is in serious need of renovations. If it were retrofitted as a hotel or condo, it could be a valuable addition to the civic precinct and arts district.
Yes, it’s natural to be cynical when a closed-door deal gives Katz exactly what he’d demanded in 2012. Still, it does make common sense for the city to consolidate staff. And if WAM and the Katz Group indeed made the best bid, it would be foolish to reject it. If this really is a win-win deal for downtown Edmonton, we should rejoice. Goodness knows, Oilers fans are owed some wins.
Source: Edmonton Journal