CALGARY—Tucked away in the potential $550-million arena deal revealed earlier this week between the City of Calgary and the Flames’ ownership group was a pair of land transactions, reflecting a growing trend where pro sports teams are stepping into real estate.

On Monday, a tentative agreement between the city and the Calgary Sports and Entertainment Corporation (CSEC) was revealed for a new arena which would house the Flames. As part of the deal, CSEC will have the option to acquire two valuable pieces of city-owned land: the site where the historic Enoch Sales House used to stand and the current site of the Victoria Park bus barns.

This move to purchase and develop land shows the Flames’ ownership is stepping onto a well-trodden path by other teams in Canada and the United States.

From Edmonton’s downtown ICE District developed around the Oilers’ now three-year-old arena Rogers Place, to the CFL’s Ottawa RedBlacks ownership group converting land near their home field at Lansdowne Park into residential development, sports teams are increasingly looking for other avenues to generate revenue, including more examples of land development in the last decade.

“These sports teams in many ways don’t think of themselves as sports teams,” said University of Alberta sports economist Brian Soebbing. “More and more, these ownership groups are more real estate development and/or media companies.”

The Enoch Sales Residence was a 115-year-old building in Victoria Park. It was the last house of its era in the neighbourhood before a fire ripped through the building earlier this year. Flames owners have the chance to buy the land where this house once stood, based on its value in spring 2018, prior to the formation of the event centre assessment committee. That option expires once the CSEC occupies the new arena, projected to be around 2024.

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Meanwhile, CSEC will have the option to acquire the bus barns lands within a decade of occupying the arena, if they “become available” for development. The city has long planned to demolish these barns and reclaim the land to build something else.

Calgary Municipal Land Corporation (CMLC) President and CEO Michael Brown, whose organization is overseeing the arena’s construction, estimated the market value of these acquisitions at $85 million for the bus barns’ land and $15 million for the Enoch House’s land.

Brown said he could logically see the CSEC wanting to use the land to develop retail properties, a residential tower or a hotel. These properties were included in the deal, he said, because the CSEC expressed a desire to participate in developing the community around the arena.

“We saw that as a positive. We didn’t feel as though we were giving anything away, they were paying market value for it, and in addition to that, we knew ultimately we were going to have to negotiate design as well as timing of the build-out,” Brown said, adding that the CMLC will work with the CSEC to develop the land to a point where both parties are happy with what’s being designed and constructed.

But Moshe Lander, a Concordia University economist, argued the land purchases in the Calgary arena deal don’t operate in a conventional market, with little to compare them to, making it hard to determine their value and overall demand. He also said the Flames would likely only take this deal if their own internal calculations said they were getting a good price for it.

“That is a worry because you’re effectively handing them a gift that market or no market is not in the taxpayer’s benefit,” Lander said.

But including land sales, possibly at an adjusted price, in these negotiations is a creative way for cities to add value to an arena deal in place of including more public cash, Lander said.

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For sports franchises, there’s a natural limit for the use they can get out of home games played in their arena. The Flames will play 41 regular season games at home, with a small number of pre-season games and the potential for a maximum of 16 home games in the playoffs. So ownership groups like CSEC will naturally look for alternative revenue sources, Lander said, which allows franchises to rely less on money generated from ticket sales.

This could come from using the arena for other purposes, he said, pointing out how the Saddledome currently also houses Calgary’s junior hockey team, the Hitmen, and their professional lacrosse team, the Roughnecks. But getting into land development has been a growing sports trend for the past decade, he said.

Examples of this include the Los Angeles Rams of the NFL whose ownership has bought land nearby its planned new stadium, and the Columbus Crew of Major League Soccer who have invested in the district around their new arena.

When it comes to the ongoing development of the ICE District in Edmonton, Soebbing said reactions in the city are still mixed with some supporting the development that’s ongoing in downtown Edmonton and others seeing the city’s investment in the downtown arena as a use of public money that hasn’t necessarily benefited the general public.

While fans may look at these investments and hope it means some of the added revenue is invested back in a team’s on-ice product, Soebbing said there isn’t much evidence to back up this idea.

But he argued it’s important for the public to know about these land options, their value and what the team’s ownership group will pay. Regardless of where the public money comes from, these are resources relevant to taxpayers and Soebbing argued taxpayers should know their value upfront to make a judgment on this deal’s cost to the city.

Lander also pointed out that including land acquisitions in place of more cash to build an arena helps add value and resources for team owners without possibly upsetting the public by offering more public dollars, especially as city council also announced major cuts to public services last week.

“The mayor himself said when the deal was announced on Monday that the optics were bad,” Lander said.

“If you’re looking for the common theme through a lot of these arena deals, is that the way you want to try and keep the public from getting a little antsy about cities helping out billionaire owners is if you try and get money into the team’s pocket without it looking like a (large) cheque.”

With files from Madeline Smith

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