What’s in the Brandt-REAL deal? Breaking down the agreement

A 24-page non-binding agreement will be the basis for final discussions between the City of Regina and Brandt Properties on a sale agreement for a large portion of the REAL District.

The “term sheet”, as it is called, is to be considered a “working draft for discussion purposes only,” according to the documents filed for Wednesday’s Executive Committee meeting.

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The committee is made up of the mayor and all 10 councillors, and based on how it votes, the deal will be forwarded to the May 6 council meeting for final approval to enter detailed negotiations.

Here is a breakdown of the term sheet:

Master agreement

The first step is to enter into a Master Purchase Agreement, which will lay out the conditions for each step that follows.

On or before July 1 of this year, the agreement to buy the Canada Centre (also known as the Avana Centre) is expected to close.

Brandt would be provided early access to the building, which it intends to use as offices and construction-related activities area for its conversion of the Agribition Building into Queen City Distillers.

The remaining building sale, with the surrounding land to be leased, would be expected to wrap up by Sept. 1. The final date is Dec. 31, 2027 to complete the sale and subdivision of the land.

The Brandt Centre. (980 CJME file photo)

Purchased assets

Brandt is proposing to buy the following:

• The Brandt Centre (built in 1977 and originally known as the Agridome.)
• The Agribition Building (built in 1972.)
• The Canada Centre Building (built in 1983 and also known as the Avana Centre.)
• The Queensbury Convention Centre (built in 1986 and originally known as Queensbury Downs) — this also includes the REAL administrative offices.
• The Ag-Ex Building and Banner Hall (built in 1977.)
• The Commercial Cattle Barn (built in 1985) and the Stockman’s Building (built in 1988.)
• The land leased to McDonald’s.
• Parking lots B, C, D, E, F, and G.
• The digital sign at the Lewvan Drive entrance.
• Intangible property of REAL related to the purchased buildings — this includes things like contracts, customer lists, records, websites, social media accounts, and phone numbers.
• Equipment and furnishings used in the buildings being bought.

Bunge International Trade Centre. (REAL District website)

Lease of the ITC

Brandt is also agreeing to lease from the city, for one dollar per year, the Bunge International Trade Centre (ITC) built in 2017, as well as the parking lot to the north (Lot M) and two fabric buildings on Lot M.

The company would be expected to operate the ITC on the city’s behalf, provide parking access, and keep it maintained to the standard of a first-class convention centre.

It would also contribute to a capital reserve fund, at an amount starting at $550,000 per year and then adjusted for inflation.

Excluded Assets

Here’s which buildings are not included in the sale:

• The Co-operators Centre (built in 2010.)
• he AffinityPlex (built in 2004 and originally known as the Credit Union EventPlex.)
• Mosaic Stadium (completed in 2016) and Confederation Park.
• Parking Lot L.

Transition

As soon as city council gives its approval of the term sheet, the city and REAL will start co-operating to help relocate affected tenants, so that Brandt can begin using the Canada Centre as soon as possible.

This does not include the offices of Canadian Western Agribition, which are expected to remain in the Canada Centre.

If, for some reason, Brandt and the city are unable to reach a final agreement and Brandt has already begun occupying the Canada Centre, the company would then start paying rent at commercial terms.

This early access would not include any change to the permitted land use, or any alterations to the building that would require a development or building permit, unless Brandt got the required permits first.

Purchase price

Brandt would pay REAL and the city $6.5 million, beginning with $500,000 as of the first closing date and the other $6 million on the second. The final amount may be adjusted based on details like owed vacation pay, pre-paid services, and so on.

Post-closing investment

Brandt has promised to invest at least $15 million into the assets it’s buying within two years of the second closing date (expected to be no later than Sept. 1.)

If it doesn’t, the city would have the option of effectively cancelling the whole sale and getting back the purchased assets.

Operating cost adjustment

The city has agreed to help cover operating costs of the purchased assets for the first two years.
The amounts the city would pay to Brandt are $6 million the first year, and $3 million the second. Each amount would be paid in equal quarterly instalments.

Right of first refusal

If the city decides it wants to sell any of the excluded assets, including the ITC, it has to offer Brandt the right to buy those assets at the same price before selling them to anyone else.

Brandt would have 30 days to respond. If it declines, the city can sell them to someone else, but only at the same price or higher.

A cow gets dolled up for the Agribition competition. (Gillian Massie/ 980 CJME)

A cow gets dolled up for the Agribition competition. The term sheet says there will be ongoing access to community events like Agribition. (Gillian Massie/ 980 CJME)

Step 1. Building sales and pad site leases

The sale is happening in stages. The first step is for the buildings themselves, with the land to be leased to Brandt.

That lease will include development rights, but any development has to follow the zoning regulations including the existing master site plan.

REAL, which currently has a master lease for the exhibition grounds, would see that lease adjusted to remove the sold buildings.

Following the September closing date, Brandt would take over that master lease temporarily. This would also make Brandt the exclusive food and beverage operator for the excluded assets, and the company would keep all revenue from those services.

People skate at the rink in Victoria Park.

Already-signed contracts would be assigned to Brandt, for things like FROST Regina. (City of Regina/X)

Operating agreement

Brandt and the city would then work out an operating agreement. While Brandt would be able to run operations, events, and long-term planning with full autonomy, there would be rules for operations and shared spaces.

This is meant to cover things like concerts, Agribition, parking coordination, security, snow removal, public access, etc.

The agreement would cover some specific areas of concern:

• Existing bookings. Already-signed contracts would be assigned to Brandt, for things like the 2027 Grey Cup, SUMA convention, Mosaic Cultural Festival, FROST Regina, Canada’s Farm Show, and Remembrance Day Services.
• Ongoing access to community events like Agribition and Queen City Ex at commercial rates.
• Cost-sharing for common areas like parking and utilities. This includes the mechanical systems shared by the Queensbury Centre (being sold) and the AffinityPlex (not being sold). They will try to separate utilities between purchased and excluded assets.
• Parking. Brandt will provide a certain number (to be determined) of parking stalls for Saskatchewan Roughrider games and other Mosaic Stadium and ITC events at no cost.
• There will be no parking fee charged for Rider games, community events, Agribition, or the Queen City Ex.
• Parking will continue to be managed based on the stadium parking plan and the Riders’ lease. All sides will continue efforts to avoid scheduling conflicts between Mosaic Stadium and other REAL District events.
• The “community events” mentioned above do not include private for-profit events that are not open to the public.
• All sides will also work to avoid conflicts with existing agreements related to naming rights, pouring rights, advertising, sponsorship, or branding.
• Brandt will have access, at commercial rates, to the assets remaining under city ownership for major events and shows that require a combination of facilities. (However, there will be no cost for those facilities for the Grey Cup or Agribition.)
• There will be an ongoing governance committee including REAL, the city, and Brandt.
• The city will pay Brandt $500,000 a year, with annual inflation adjustments, as an operating fee. The agreement will automatically renew every five years to a maximum of 99 years, unless terminated earlier.

Services agreement

Brandt will also become the service provider for the facilities remaining under city ownership, except for Mosaic Stadium and Confederation Park.

Brandt will manage existing sponsorships and have the right to sell new sponsorships, splitting any new revenue with the city 50/50.

Brandt will continue the existing food and beverage services agreement with Compass Group Canada. However, a new food and beverage deal would have to be made for Mosaic Stadium.

Existing agreements

All other contracts and agreements tied to the assets Brandt is buying will be moved to Brandt. This includes naming rights.

Since there isn’t currently a naming rights deal for REAL District itself, Brandt can rename the district and keep 100 per cent of the revenue of any new naming rights deal.

Employees

Unionized employees of REAL who work in the purchased assets would become Brandt employees and the existing collective bargaining agreements with the Retail, Wholesale, and Department Store Union (RWDSU) and the International Alliance of Theatrical Stage Employees (IATSE) would continue.

According to the administration’s report, REAL employs 208 IATSE members and 485 members of RWDSU, as well as 50 out-of-scope employees.

REAL and the city will be liable for any termination costs or damages for any non-unionized employee who is not offered employment by Brandt, or who turns it down.

Conditions

Approval is needed from several parties before this step can be completed. That includes the food and beverage provider (which may also cancel the agreement); REAL’s banks; Saskatchewan Liquor and Gaming Authority; and consultation required with the Riders, Agribition, and the provincial government.

Step 2: Subdivision and Land Sale

After the first step is completed (on July 1 and Sept. 1), next up are the final agreements to sell the affected land.

This includes subdividing the parcels to separate the land being sold from the land the city is keeping. The city has to pay any costs associated with this.

The city also will have to apply for any needed changes to zoning or the Official Community Plan. This would include allowing Brandt to continue to operate the property as it already is, and permission for the future development of an entertainment of a commercial business.

They’ll have to negotiate access and servicing agreements and use a legal measure to ensure continued public access and parking.

This final step is planned to wrap up Dec. 31, 2027.

Brandt is agreeing to provide access to its purchased facilities to events like Queen City Ex. (Nicole Garn/980 CJME)

Brandt covenants

There are a number of legal measures that are expected to be part of the final agreements that hold Brandt and the city to a number of conditions.

One main reason the city administration is recommending this sale agreement is Brandt’s promise to continue to operate the REAL District for the hosting of recreational, cultural, sporting, entertainment, convention, agri-business, and other special events.

But the city also acknowledges that market conditions may change over time and Brandt’s operation has to be commercially viable. So they agree Brandt may make changes to the operation over time, as long as it doesn’t change the primary use of the site to something completely different like manufacturing, industrial, or residential.

There is a 10 year “post-closing period” during which Brandt may decide in good faith that it’s no longer financially viable to operate the REAL District. If it decides that, or shuts down operation for two consecutive months, the city may force a buyback of the property at the current market rate.

Brandt may decide to sell the property to someone else. If it does, everything agreed to would transfer to the buyer.

In the meantime, Brandt is agreeing to provide access to its purchased facilities to Agribition, Queen City Ex, and other community events at commercial rates and subject to market demand. In fact, Brandt will take over operating the Queen City Ex, consistent with the format and scope that it’s always been known for, but only as long as it’s commercially viable and subject to market demand.

Under the agreement, Brandt would get the right to host two events per year at Mosaic Stadium. (Saskatchewan Roughriders/Submitted)

City/REAL covenants

Under this agreement, Brandt would get the right to host two events per year at Mosaic Stadium and keep food and beverage profits from those events.

The city would provide Regina Police Service traffic services as well as fire and bylaw enforcement. Brandt would have to pay all other costs and pay the city a $12/ticket commercial event licence fee. The agreement also gives Brandt access to Confederation Park for the events.

Brandt also agrees to resurface the parking lots within one year of the final closing date, but the city will have to put up half the cost, up to $2.5 million.

The city will also work on a potential south access to the REAL District from Saskatchewan Drive, described as a “right in/right out” intersection across the CPKC rail line. If it can be done for up to $2 million, the city will pay the cost. Brandt may agree to pay the overage, or for the two sides to find another access solution.

Brandt has a 99-year lease for the Queen City Distillery in the Agribition Building, as well as a Facility Use Agreement for the Regina Pats in the Brandt Centre. Both will be cancelled, since Brandt will own both buildings.

Property tax exemption

If city council approves, Brandt will get a five-year property tax exemption on the property it’s buying.

After five years, it can apply for further exemptions but if they don’t get council approval, the city would then agree to provide an operating grant equal to the taxes being paid.

The document says any third parties leading the purchased properties for commercial use would still have to pay property taxes.

Exclusivity

Before the final closing date, the city is promising not to shop around for a deal with another prospective buyer. If REAL receives such an offer, it’s supposed to break off any discussions and inform Brandt.

Then, for 20 years afterward, should the city build a new arena as a Brandt Centre replacement, and Brandt is not involved, the company would then have the right to sell back to the city the Brandt Centre, Queensbury, Ag-EX and Barn Buildings.

Risks

The administration’s report to council outlines how the deal attempts to cap or negotiate out any risks involved.

One of the biggest risks is the city’s ability to force Brandt to live up to its obligations. Requiring a commitment by Brandt to spend $15 million within the first two years is meant to reduce that risk.

The administration concludes that the proposal’s terms are reasonable and favourable to taxpayers, but it will be up to council to decide.