deloitte review

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City o f Ottqwa

Review of th e Lansdowne Live Proposal

. March 2009

PRIVILEDGED AND CONFIDENTIAL

Audit. Tax. Consulting. Financial Advisory.


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Table of Contents

Background Lansdowne Live - Proposal Description Operating Proforma

Analysis Overa I Assessment Appendix

2 PRIVILEDGED AND CONFIDENTIAL

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Deloitte & Touche LLP and affiliated entities.


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BACKGROUND

3 PRIVILEDGED AND CONFIDENTIAL Deloitte & Touche LLP and aff i l ia ted ent i t ies .


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Background.

In October 2008, th e Ottawa Sports and Entertainment Group ("OSEG"), a consortiumowned and to be operated by Roger Greenberg, Jeff Hunt, John Ruddy and WilliamShenkman, submitted an unsolicited proposal to the City of Ottawa to materially transformLansdowne Park into a vibrant, multi-purpose sports and entertainment destination, to beknown as "Lansdowne Live".

Lansdowne Live would: build on th e site's current attractions (OHL major junior hockey, amateur sports,

farmers' market, public exhibitions, concerts and shows); materially refurbish Frank Clair Stadium ("FCS") and th e Civic Centre Arena (the

"Civic Centre");

return a Canadian Football League CCFL") team to the City; and a number of new features and developments, including a hotel, Canada's first walk

through aquarium, a public amphitheatre l amateur sport fields, formal gardens andreflecting pools, a variety of shops, boutiques and restaurants, and a small number ofprivate residences.

Prior to taking an y course of action, th e City retained Deloitte to undertake a review of th eproposal, th e purpose of which is to opine on th e overall reasonableness of th e proposal,its operating proformas and proposed business deal.

This report is confidential to th e City of Ottawa, and should no t be disclosed to any otherparty, quoted from or used by any other party without our prior written consent. No otherparty is entitled to rely on our report for any purpose whatsoever. We reserve th e right to

. review all calculations included or referred to in this report, and jf we consider itnecessary, to revise ou r conclusion in l ight of any new facts existing at the t ime of thisreport and which subsequently become known to us.

4 PRIVILEDGED AND CONFIDENTIAL Deloitte & Touche LLP and affiliated entities.


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5

LANSDOWNE LIVE

PROPOSAL DESCRIPTION

PRIVILEDGED AND CONFIDENTIAL Deloit te & Touche LLP and aff i l ia ted ent i t ies .


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Lansdowne Live - Proposal Description

PROJECT DESCRIPTION

As we understand it , OSEG's vision fo r Lansdowne Live is to create a modern, worldclass sports and entertainment centre that will build civic pride and attract andinspire Ottawans of all ages and walks of life. According to information prepared byOSEG, Lansdowne Live has been "carefully structured to take advantage of anumber of converging trends and factors", including:

Aging facilities Strong public support for th e renewal of Lansdowne Park;

A credible, experienced and local ownership group; Th e re-emergence of th e CFL; and The evolution of Bank Street .

Lansdowne Live is to consist of th e following projects / dimensions:

6

Th e renovation of FCS, including th e reconstruction of th e south grandstand,th e replacement of benches with modern seats, th e construction ofapproximately 50 corporate suites, th e adding of a new restaurant, th einstallation of a roof over th e south grandstand and replacement of th e existing

roof over the north grandstand, the addition of seating areas in each end zone,and th e inclusion of a new state-of-the-art video scoreboard. Renovations to the 10,OOO-seat Civic Centre. The development and operation of a walk-through aquarium in the Aberdeen

Pavilion, featuring a 92-metre tunnel that winds its way through a 4. 0 millionlitre tank filled with various undersea life.

PRIVILEDGED AND CONFIDENTIAL Deloitte & Touche LLP an d affiliated entities.


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7

The construction of approximately 200,000 square feet of retail space, 45,000square feet of residential space, and 150,000 square feet of office and hotelspace.Retail elements anticipated to be included in the development include abookstore, fashion boutiques, music stores, restaurants, specialty food shopsand a theatre. To facilitate th e development of these retail uses, th eLansdowne Live proposal calls fo r the removal of the Coliseum building.Residential would be developed along Holmwood Avenue, serving as a bufferbetween the proposed retail developments and the existing residentialcommunity.

PROJECT FINANCING

As we understand it , th e nature of th e proposed business arrangementssuggested by OSEG to realize Lansdowne Live involve: the City agreeing to absorb and pay for th e cost of th e improvements to th e

Civic Centre and FCS;

Major life-cycle repairs and capital maintenance would be paid for through aticket surcharge imposed on all events held at Lansdowne Park (including CFLfootball, OHL hockey, at the aquarium, shows and exhibitions); and

OSEG would assume responsibility fo r th e everyday operations of theLansdowne Live project, eliminating anyon-going financial responsibility of th eCity to the facility.

PRIVILEDGED AND CONFIDENTIAL Deloitte & Touche LLP and affiliated entities.


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PROJECT COSTS The costs associated with effecting improvements to FCS and th e Civic Centre have been

estimated at some $77.8 million, with this amount divided between th e following:

Upgrades to FCS and th e Civic Centre: Infrastructure upgrades:

TOTAL

$ 76.8 million1.0 million

$ 77.8 million

I t should be noted that these estimates are based on a "Class D" estimate of project costs,and reflect hard construction costs only. A "Class D" estimate is typically based upon astatement of requirements, and an outline of potential solutions. As such, this estimate isstrictly an indication, or "rough order of magnitude", of th e final project cost. Generally,such estimates are sufficient to provide an "indication" of cost and allow fo r rankingoptions being considered; however, when associated with a significant structural andbuilding renovation, they may not provide a sufficient approximation of costs.

As we understand it through conversations with OSEG officials, these estimates have beenbased without the benefit of any engineering review of th e eXisting structures, and havebeen based mostly on "comparable ll projects (some of which are new construction).

For th e purpose of this review, i t is recommended that a contingency allowance of at least30% (perhaps as much as 40%), as well as an allowance fo r soft costs of 20 0/0, beincluded.



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With these allowances included, the total estimated cost of th e FCS

andth e

CivicCentre renovations an d improvements is estimated at between $121.4 million to$130.7 million, as follows:

Total Estimated Costs (Class D Estimate): $77.8 million Contingency Allowance (@ 30% to 40%): $23.3 to $31.1 million Allowance for Soft Costs (@ 20 0/0, including contingency): $20.2 to $21.8

million

TOTAL $121.4 to $130.7 million

Based on th e proposal forwarded by OSEG 1 we understand that 100% of this cost isto be borne by the City of Ottawa and partially financed through the currentoperating support to Lansdowne Park (estimated at between $3.2 million and $4.2million).

9

Based on the initial construction cost estimate provided by OSEG ($77.8 million),th e annual servicing cost of this debt would be approximately $5.45 million to $6.55million per year (assuming a 5.75 % interest rate and 20-year and 30-yearamortization an d payback of th e loan). However, under the revised estimateprovided immediately above, th e annual carry of the project could reach between$8.5 million (lower range of estimate financed over 30 years) and $11.0 million(higher end of range, financed over 20 years).

In each case, th e annual amount required to carry this debt is in excess of the. rangeidentified by OSEG as being available to support the project.



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In addition to th e estimated $77.8 million

inimprovements to FCS and the,

OSEGalso provided costs associated with the construction of approximately 233,000square feet of retail space. These costs have been estimated at $62.7 million, asfollows:

. % OF HARD COST PERDEVELOPMENT COMPONENT AMOUNT COSTS SQUARE

FOOT

Construction Costs $ 46,333,718 $ 198.86

Tenant Inducements 5,015,000 10.8% 21.52

Miscellaneous Costs 3,331,732 7.2% 14.30Professional Fees 2,014,000 4.3% 8.64

Projec t Fees 3,756,180 8.1% 16.12Capitalized Profit / Loess - Lease up 0.0%

Financing Costs 2,198,184 4.7% 9.43

Development Contingency 100,000 0.2% 0.43

TOTAL DEVELOPMENT COSTS $ 62,748,814 $ 269.31

At an all-in hard construction cost of roughly $200 per square foot, including siteservicing ($80 psf) and base building costs ($105 psf), these costs do not appearunreasonable. Included within th e Construction Cost estimate is a contingencyallowance equal to 5% of base building, land servicing and other construction costs.Based on our review of this estimate, we do not believe th e estimate provided byOSEG is unreasonable.

Based on similar ne w retail construction projects we are currently advising on, wedo, however, caution that the allowance fo r Tenant Inducements (@ $21.52 persquare foot), may be conservative.



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OPERATING PROFORMA

11 PRIVILEDGED AND CONFIDENTIAL Deloit te & Touche LLP and affiliated entities.


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Operating Proforma

Pursuant to information provided byOSEG, Lansdowne Live is projectedto incur an operating lossapproximately $310,000 in Year 1,with this loss declining annuallythereafter to approximately$160,000 by Year 3. Thereafter, theprojected operating position of th eentire project is estimated toincrease marginally (t o almost

$170,000 by Year 5) . The projected operating results

shown opposite, ar e consolidated fo rth e following components only:

th e Civic Centre Arena; Frank Clair Stadium; and Exhibit Hall.

Excluded from th e above areoperating revenues associated withth e anticipated 400,000 square feetof commercial and residential space,as well as the operations of th eOttawa 67 5 and new CFL team.

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

. Numbercf Events 184 '186 ' 1 8 6 188 :: . I .1Il6,~ , , " t. ,

, Attendance 646,100 647.100 663,600" 65{, .3,50 ' , . .>661.6,00._,

Rental Income trom Events $ 1,094,430Net-Reimbursable trom Promoters I TeamsTotal 1,094,430

Suite Ticket Income 167,000Facility Fee Income 620,184Ticket Convenience Fee Income 329,938Tota l $ 1,117,122

Ancil lary IncomeConcessions $ 539,147catering 13,565Audio-VisualNovelties 129,556Parking 809,625

Total $ 1,491,B93

Total Event I n c o m e $ 3,703,444

Other IncomeAdvertising (net of commissions) $Naming I Pouring Rights (net of commissions)Ice RentalsLuxury Seating

Cub SeatsSuitesLoge BoxesParty Suites

InterestOrder Fees - Phone I WebMiscellaneous

Total

55,000

70,83980,22930,000

236,069

$ 1,085,930

$ 1,085,930

$ 161,000620,084335388

$ 1,116,472

$ 566,07512,365

137,656797,375

$ 1,513,471

$ 3,715,872

55,000

71,58986,39630,000

$ 244,985

"

' ..

$ 1,111,930 $ 1,108,430 $ 1,112,430

$ 1,111,930 $ 1,108,430 $ 1,112,430

$ 163,500 $ 181,500 $ 175,000652,084 646,709 657,730347,188 354,788 373,738

$ 1,182,772 $ 1,162,997 $ 1,206,468

$ 571,847 $ 564,525 $ 545,04714,555 13,685 14,865

137,686 146,709 127,651835,667 786,188 815 500

$ 1,559,755 $ 1,531,106 $ 1,503,063

$ 3,854,456 $ 3 , 8 2 2 , 5 3 2 $ 3,821,960

$

55,000 55,000 55,000

75,964 76,814 84,18984,604 92,438 92,47930,000 30,000 3 0 0 0 0

$ 245,569 $ 254,252 $ 261,669

",

$ 1.741,977 $ 1,741,977 $ 1,741,977 $ 1,741,977 $ 1,741,9772,508,304 2,505,242 2,514,615 2,502,445 2,509,773

Source: Global Spectrum FacllJty Management (as outlined In an e-mail diJted December 23, 2008)



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Operating Proforma The following table summarizes th e anticipated ne t operations, as provided by OSEG, fo r

th e Lansdowne Live project (stadium complex), th e proposed retail development (233,000

square feet), as well as the net operations fo r the Ottawa 67s and proposed ne w CFL team.As we understand it, OSEG intends to pool the net operating income from all teams andfacilities. Excluded from this estimate is any revenue (from land sales, land lease, oroperations) associated with the proposed hotel /residential development.

For th e purpose of creating this consolidated estimate, we have assumed th e following: th e operations of th e Ottawa 67s will approximate what this team is projected to realize

on a net basis in 2008/09; revenues associated within the 2008/09 IIHF World JuniorHockey Championships have been excluded; and

the net operating obligation of all facilities will approximate $1.0 million per year (asoutlined in th e OSEG proposal), thereby yielding a ne t operating obligation fo r th eAberdeen Pavilion and Coliseum of approximately $690,000 in Year 1.

Without the revenues expected from the hotel and residential development, LansdowneLive is projected to incur a loss of some $700,000 in Year 1, with this loss lessening in Year2. By Year 3, th e consolidated operations of th e Project (including th e operations of th eteams), is projected to generate a combined operating surplus of some $300,000 annually.

13

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Lansdowne Live - Stadium I Arena Operat ions $ (310,800) $ (286,400) $ (156,800) $ (167,600) $ (168,100)

Other Facilities $ (689,200) $ (713,600) $ (843,200) $ (832,400) $ (831,900)

Retail Development (af ter Debt Servlee) $ 2,029,000 $ 2,029,000 $ 2,029,000 $ 2,029,000 $ 2,029,000

Ottawa 67 s $ 256,700 $ 256,700 $ 256,700 $ 256,700 $ 256,700

CFLTeam $ (2,000,900) $ (1,592,100) $ (974,800) $ (955,600) $ (936,800)

NET OPERATING REVENUE $ (715,200) $ (306,400) $ 310,900 $ 330,100 $ 348,900

Source: Global Spectrum Facility Management (as outlined in an e-mail dated December 23, 2008)



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Operating Proforma

On an individual basis l th e

operations of th e modernized CivicCentre is projected to realize a netoperating surplus ranging between$240 1 000 and $420,000 per year

In developing this estimate ofoperations, OSEG assume th e CivicCentre will attract between 71 and74 events pe r year, and achievetotal annual attendance ranging

between 390,000 and 400,000people. Revenues ar e projected to be

sourced from:

Event renta I; Ticket revenue; Ticket convenience fees; Concessions; Catering; Novelty sales; Parking; and Ic e renta Is.

No revenue is projected from: Suites and club seats; Naming rights / building

sponsorships; and ' advertising

Civic Centre Arena - Projected Operations

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5,

' ' ' ,' , : < ; 7 ~ ~ ~ ~ . ~

Number of Events n. 7 1 , ; ' ,:.73, . 7 ; > ' , "' P,4;if:Attendance 390,000 3 8 1 , 0 0 0 ' } , .: 'l97;SO,O,' , 3 9 1 , 2 5 0 : ' ". 3 9 S , , 5 0 0 " ~ {

Rental Income from Events 513,650 $ 490,150 $ 517,150 $ 512,650 $ 531,650Net-Reimbursable from Promoters / TeamsTotal $ 513,650 490,150 $ 517,150 512,650 $ 531,650

Suite Ticket Income $ 141,000 $ 141,000 $ 157,500 $ 161,500 $ 149,000facili ty fee Income 290,875 268,375 310,375 295,000 305,125Ticket Convenience fee Income 17B 375 167575 193,375 186,975 187,175

Total 610,250 $ 576,950 $ 661,250 $ 643,475 641,300

Ancil lary IncomeConcessions 374,472 $ 365,400 $ 387,972 $ 383,850 $ 384,372Catering 11,565 11,565 12,555 12,885 12,225Audio-VisualNovelties 88,876 81,226 95,506 90,279 93,721

Parking 487,500 476,250 4 9 6 8 7 5 489,063 494375Total $ 962,413 934,441 $ 992,908 $ 976,076 $ 984,693

Total Event Income $ 2,086,313 $ 2,001,541 $ 2,171,308 $ 2 ,132 ,201 $ 2 / 1 5 7 , 6 4 3

Other IncomeAdvertiSing (net of commiSSiOns) $Naming I Pouring Rights (net of commissions)Ice Rentals 55,000 55,000 55,000 55,000 55,000luxury Seating

du b SeatsSuitesloge BoxesParty Suites

Interest 49,930 44,530 54,055 49,755 52,130Order Fees - Phone I Web 39,083 36,833 42,208 40,875 40,917Miscellaneous 10,000 10,000 10,000 10000 10,000

Total 154,013 $ 146,363 $ 161,263 155,630 $ 158,047

EXPENSESSalaries & Benefits (full and part time) 783,890 $ 783,890 $ 783,890 $ 783,890 $ 783,890Materials, Supplies and Services 1,128,737 1,127,359 1,131,667 1,126,100 1,129,398

.., . ~ "... : ~ ,,"

NET OPERATING REVENUE $ 327,700 $ 236,656 $ 417,015 $ 317,841 $ 402,402

Source: Global Spectrum Facility Management (as outlined in an e-maIl dated December 23, 200S)



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Operating Proforma

On an individual basis, th e operationsof th e modernized and renovated FCS

is projected to realize a net operatingloss ranging between $165,000 and$280,000 per year

In developing this estimate ofoperations, OSEG assume that FCSwill attract between 27 and 30 eventsper year f excluding CFL footballgames, an d achieve total annualattendance ranging between 90,000

and 100,000 people ( i t should benoted that the proforma does no tinclude information pertaining to th eCFL team; in addition, i t includesrental revenue from a 18 week periodwhere the Stadi"um is leased toColiseum Inc.).

Revenues are projected to be sourcedfrom:

Event rental; Ticket revenue; Ticket convenience fees; Concessions; Catering; Novelty sales; and Parking.

Frank Clair Stadium - Projected Operations

, YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

'. Nu..,'berOfEvents 27 30 28 ' I' . '30" " ,'-:'. ~ i ~I ( , : ', ' i , ., , " - ' '''",,1'1

, Attendance 8 9 , 6 0 0 . . 99,600 . 9 9 , 6 ~ P :';' " 9 9 , 6 0 ~ .'. , \ , ~ ~ { ~ O ! : ? ' ~

Rental Income from EventsNet-Reimbursable from Promoters I TeamsTotal

Suite Ticket IncomeFacility Fee IncomeTicket ConvenIence Fee Income

Total

Ancillary IncomeConcessionsCateringAudioVisualNoveltiesParking

Total

Total Event Income

Other I ncome

Advertising (net of commissions)Naming I Pouring Rights (net of commissions)Ice RentalsLuxury Seating

Club SeatsSuites

Loge BoxesParty Suites

InterestOrder Fees - Phone I WebMiscellaneous

Total

EXPENSESSalaries &. Benefits (full and part time)Materials, Supplies and Services

$

$

168,900 $ 183,900 $ 182,900 $ 183,900 $ 168,900

168,900 $ 183,900 $ 182,900 $ 183,900 $ 168,900

26,000 $ 20,000 $ 26,000 5 20,000 $ 26,000146,496 168,896 158,896 168,896 169,792

115 000 131 ,250 117250 131,250 150 000

287,496 $ 320,146 $ 302 ,146 $ 320,146 $ 345,792

120,800 $ 156,BOO $ 140,000 $ 156,800 $ 116,8002,000 800 2,000 800 2,640

40,680 56,430 42,180 56,430 33,930

114,000 113,000 130,667 89,000 113000

277,480 ~ 327,030 $ 314,847 S 303,030 $ 266,370

733,876 $ 831,076 $ 799,893 $ 807,076 $ 781,062

18,850 25,000 19,850 25,000 30,00020,833 31,250 22,083 31,250 31,250!O,OOO 10,000 1 0 0 0 0 10,000 1 0 0 0 0

49,683 $ 66,250 $ 51,933 $ 66,250 $ 71,250

435,494 $ 435,494 $ 435,494 $ 435,494 $ 435,494627,076 626,310 628,704 625,611 627,443

NET OPERATING REVENUE $ (219,011) $ ( l 64 ,479 ) $ (212,312) $ (181,779) $ (210,626)

Source,' Globdl Spectrum Facility Management (as outlllled In an e-mail dated December 23. 2008)

15 PRIVILEDGED AND CONFIDENTIAL Deloitte & Touche LLP and affiliated entities,


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Operating Proforma

No revenue is projected from:

16

Suites and club seats; Naming rights / building sponsorships; Advertising; an d CFL football (some 10 games pe r season, comprised on 1 exhibition season game an d

9 regular season games, and attracting between 157,000 an d 168,500 spectators).



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ANALYSIS

17 PRIVILEDGED AND CONFIDENTIAL Deloit te & Touche LLP and aff i l ia ted enti t ies .


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Analysis

In an effort to better understand th e OSEG proposal, a series of questions wereposed to OSEG an d a meeting was held with OSEG principals. In addition, a followup telephone conversation was held with Global Spectrum Facility Management. Thepurpose of these meetings was to obtain a more in-depth understanding of th eOSEG proposal and to obtain from them additional insight and clarification into theirvarious development and operating assumptions.

Information provided by OSEG officials included: Additional information and insight to the OSEG proposal, provided in response

to questions posed by City staff; Additional information and insight into th e basis fo r various assumptions

contained within th e OSEG operating proforma; and Revised operating proformas.

In addition, operating information for Lansdowne P a r ~ ,and in particular fo r th e CivicCentre and FCS, were provided by City staff, including information detailing th eCity's operations at Lansdowne Park, a calendar of events and insights into minorcapital and major maintenance obligations.

A review of various Facility operating accounts follows.



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Analysis

Lansdowne Park Operations

As we understand it , th e City of Ottawa currently provides Lansdowne Park an annualoperating subsidy which has averaged some $575,000 per year between 2000 and 2007;this operating loss has ranged from a low of $135,000 in 2003 to a high of $1.12 million in2000. Over the past tw o years (2006 and 2007), Lansdowne Park has incurred anoperating loss of $920,000 and $720,000 respectively.

2000 2001 2002 2003 2004 2005 2006 2007 2",000-2007~ e r a g e

REVENUE $ 2,652,700 $ 3,184,800 $ 3,703,900 $ 4,163,200 $ 4,282,100 $ 5,411,800 $ 4,477,800 $ 4,642,600

EXPENSESCompensation $ 1,931,700 $ 1,814.300 $ 1.598.700 $ 1,911.900 $ 2.232.600 $ 2,214.900 $ 2,269,600 $ 2,359,600

Purchased Services $ 1,199,300 $ 1,123,500 $ 1,364,300 $ 1,242,900 $ 1,031,200 $ 1.903,500 $ 1,882,300 $ 1,913,800

Materials & Supplies $ 625,600 $ 971.900 $ 851,700 $ 923,200 $ 1,169,800 $ 1,180,400 $ 1.094,400 $ 952,800

Other Costs $ 16,400 $ 92.800 $ 98,600 $ 219,300 $ 252,100 $ 318,400 $ 150,800 $ 208,BOO

TOTAL EXPENSES $ 3,773,000 $ 4.002,500 $ 3.913.300 $ 4,297,300 $ 4.685.700 $ 5,617.200 $ 5.397.100 $ 5,435.000

;


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Analysis

Lansdowne Park Operations

In total, i t would appear that th e City's annual financial obligations to operating andmaintaining Lansdowne Park is in th e range of $3.1 and $4.3 million per year. On a capitalized basis (i.e., assuming th e City could turn this annual capital and operating

subsidy into a debt repayment obligation), this level of subsidy could support debt ofbetween $40.73 million to $57.29 million.

ITEM LOW HIGH

Operating Obligation $ 575,000 $ 575,000

Operational Maintenance $ 500,000 $ 750,000

Major Maintenance $ 2,000,000 $ 3,000,000

Capitalized Amount $ 40,732,000 $ 57,290,000

1. Assuming 25-year amortization @ 5.75%



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Analysis

Civic Centre Arena - Events

As noted on Slide 14, above, OSEG project that the Civic Centre will generate anannual operating surplus ranging between $240,000 and $420,000. This estimate ispremised upon the following assumptions:

Total annual events ranging between 71 and 74 , with these events attractingbetween 390,000 and 400;000 people annually;

Revenue sharing between the Ottawa 67s (the \\ OHL Team") and th e Arena,including ticket revenue, concessions, and parking; revenue from suite rental is

presumed to go directly to the OHL Team (as pe r their current lease arrangementswith th e City), while all revenue advertising is also presumed to entirely to th eOHL Team (under th e OHL Team's current lease arrangements, i t has only limitedexcl usivity).

The following table provides a comparison of commercial events which have beenattracted to the Civic Centre over the 2005-2008 period, with the nature of eventsprojected by OSEG to be attracted to th e revitalized Civic Centre.

55

Trade Shows I Exhibitions 29 33 35Other Sports 1 11 9 11Family Show 6 9 5 1Concert 8 9 8 10Other 11 2 3 4

Total 110 102 102 96

21 PRIVILEDGED AND CONFIDENTIAL DeJoitte & Touche LLP and affiliated entities.


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Analysis


While we generally conclude tha t the assumed number of OHL, other sport andfamily shows expected to be attracted to the modernized facility are reasonable andappropriate, we conclude that th e number of concert events expected to beattracted is aggressive.

Illustrated below is a comparison of the average number of events staged at theCivic Centre, with the average number of events staged at Ricoh Coliseum inToronto, and the number of events projected to be staged within th e revitalizedCivic Centre. Ricoh Coliseum is considered by us to be an appropriate comparable

facility given that (a) its seating capacity is similar (8,140 seats compared to th eCivic Centre's 9,800 seats), (b) the facility is similarly located within Toronto'sExhibition Place, a location like Lansdowne Park both in function and proximity to it sdowntown core; (c) it is located immediately abutting a 25,000 footbal l / soccerstadium; and Cd) each facility is located within a market which has a range ofentertainment venues.

EVENT TYPE CIVIC RICOHCENTRE1 COLISEUM 2 OSEG YEAR 1

Hockey (OHL I AHL) 43.0 45.5 40

Trade Shows I ExhIbitions 32.5 44.0 n/aOther Sports '8.0 4.0 8Family Show 5.3 4.0 8Concert 8.8 2.5 16Other 5.0 3.5 n/a

Total 102.5 103.5 72

Excluding Trade Shows 70.0 59.5 72

1, 2005-2008 average

2, 2007-2008 average



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Analysis


As the reader will note, neither the Civic Centre, nor Ricoh Coliseum (which isoperated by Maple Leaf Sports & Entertainment) has been able to successfullyprogram the number of concerts into th e facility as is being assumed by OSEG.Conversations with individuals in the event promotion industry indicate that it mayprove difficult for the Civic Centre to attract significantly more than the historicnumber of concert dates the building has attracted given a combination of th e sizeof this venue and th e presence of Scotiabank Place (among other Ottawa-areavenues). I t should be noted, however, that th e market for live entertainment isever changing and during some periods of time, there may be a larger number ofacts / events which would rather play within a lO,OOO-seat venue; as such th enumber of concert-type events which the Civic Centre could attract will fluctuate,perhaps materially, from year to year.

In our opinion, th e number of concert events assumed to utilize a revitalized CivicCentre is likely aggressive.

Civic Centre Arena - Addit ional Revenue

In addition, we note that no revenue is assumed to be generated for the benefit ofth e Civic Centre from the sale of building naming rights, from advertising or fromthe leaSing of club seats, luxury suites / corporate boxes and party suites.

23 PRIVILEDGED AND CONFIDENTIAL . Deloitte & Touche LLP and affiliated entities.


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Analysis


Generally, such revenues accrue to the benefit of the building, as opposed to th ebenefit of th e building occupant / tenant, unless specifically agreed to by th ebuilding owner and sports franchise. As we understand it, th e OHL Team currentlyafforded th e following benefits:

The OHL Team has "limited exclusivity" fo r commercial advertising throughoutth e arena, provided such advertising does not conflict with City advertisers andsponsors fo r th e arena;

The OHL Team and th e City are to cooperate in th e marketing and sale ofbuilding naming rights; we understand that revenues associated with namingrights ar e to be shared between th e parties; and

The OHL Team has exclusive rights to market private boxes . In general, facility naming rights fo r OHL arenas have ranged from $0 (where

unsold) to a high of some $330,000 annually fo r th e John Labatt Centre in London,Ontario. A number of newer buildings have recently sold naming rights, with thesebuildings generally receiving in th e range of $100,000 to $200,000 annually. Alisting of Canadian venues whose principal tenant is a major junior hockey leagueteam (including WHL, OHL and QMJHL) or American Hockey League ("AHL) team, isprovided on Slide 26, following.

Naming rights deals in Guelph (Sleeman Centre), Kingston (K-Rock Centre), SaultSte. Marie (Essar Centre), and Oshawa (GM Centre) represent recent transactions.On average, th e annual value of these naming rights deals approximate just under$150,000 per year on a la-year deal. Each of these venues constitute smallerfacilities (gen'erally 5,000 fixed seats) and are located in smaller urban centrescompared to Ottawa.



25/44

AnalysisCivic Centre Arena - Addit ional Revenue

AVG. ANNUAL TENANT(S) E "BlJILOII,G NAME CITY NAMING RIGHTS SOLD TO PRICE TERM VALUE xplratron

MjfsrcliIli'e Winnipeg Manitoba Telecom Services $5.900.000 10 $590,000 Manitoba Moose 2015

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, : : ~ ~ ; , ~ : " ; , ~ : : : : : : : : : : : : : : : : ~ ~ ; ~ : : : : : : : : : : : : t f t t i ~ ~ ~ : =: : : : : : : : : m t ; , ~ : r : : : : : : : : { ~ : : : : : : I l t ' i t :" ' c t ; ; d l i ' u r i ~ ~ ' C ; ; ~ t r ~ ' " ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' S ~ ~ k ~ t ~ ' ~ ~ ' ' ' ' ' ' ' ' ' ' ' ' ' .. s ~ ~ k ~ i ~ ~ c ~ ; ; d i i i . i ~ i ~ ~ : ~ i : ~ I : .... ..... '$"-j:600:OOO.. .....;O. .. . $ 1 6 0 : 0 0 0 s ~ ~ ~ i ~ ~ B I ~ d ; i o 1 3 ..."." ..." '" , . . " ~.... .................................."..............." "" .. .........."........... ...... .... " ..................." .................." ........" ............." ...." ." ".. ............" ............................""" ...." .......".. """ ....." ...." ... "" .. ,, .. ,,"" ............."" .. "" ......."." .... ."""",, ......... . " " " " .. " " " . " " .... ~ . ~ ~ 9 . ~ ! ~ : ................................... ~ ~ I ~ . ~ ~ ~ ...~ : ' ; ~ ~............ ~ . ~ ~ ~ ; . ~ ! ~ ? I . ~ ~ . ~ ~ ~ . ! ~ ~ :............................ ~ . ~! ~ ~ ~ ! ~ . ~ ~. . . . . . . . . . . . . . ~ . ?............... ~ . ~ ~ ? ' . ~ ~ ~............... ~ ? ? 9 . ~ ~ Y . ' : ~ ~ ~ . ~ . ~............. ~ . ~ . :~ ..... .

Interior Savings Centre Kamlpoops Interior Savings $1.060,000 10 $106,000 Kamloops Blazers 2015 S ~ ~ ~ - . ; : F ~ ~ M ~ ; ; . ~ r i ~ ~ C ~ ~ ~ ....V i ~ t ~ r t ~ ...... . . .. . S ~ ~ ; ; . ; ; ~ ~ F ~ d ; .......... .....$1:000:000.. ... . .;O .. . . $100:6oo..V I ~ i ~ ; ; ~ s ~ i ; ; . ~ ~ K i ~ g ~ i o 1 4

: : : ~ l ~ : : ~ ; : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : ~ t ~ ~ ~ : ~ j ~ : : : : : : : : : : : : : : : : : ~ = ~ ~ ~ ~ ; ~ ~ ~ ~ ~ ~ : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : .M i ~ o ~ ~ s ~ i ~ ~.. . .... ... ........... s t : j ~ h ~ ' ~ .. ..... ..; V ~ .. .. . .. . .. . .. . . .... .... $634:11S....;O.$63:412. .. s i : j ~ h ~ ; ; F ~ g D ~ - . ; i l ~ i i ; 1 o .. E ~ ~ ~ ~ ~ .... ......... ... .... . R ~ ~ ; ; ;.. ....... . . E ~ ~ ~ & ; ~ ; ; : .. . ...... ........ ........... ~ i ; .. . 6 . ........ ..; . ; j ~ R ; ; d D ~ ~ ; R ; ; b ~ j ~ ....2008..: : : ~ ~ ~ : ~ ! ~ ; ~ : : : : : : : : : : : : : : : : : : : : : : : : : : : : ~ ~ ~ p . ~ ~ : : : : : : : : : : : : : : : : : : : : ~ ? ~ ~ ~ i l ~ : ~ ~ ~ : ~ ~ ~ : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : ~ ~ ~ : : :

p i o s p e ~ P l a c e Chilliwack Prospera nla 10 nla Chilliwack Chiefs 2014

1. In Canadian dollars; all other quoted amounls era In $US.SOUIC&: S I _ I & Smlth's Spoils Business Journal

Naming rights deals for comparably sized venues in similar markets include London (JohnLabatt Centre, some $330,000 per year, signed in 2002), Ricoh Coliseum ($480,000 peryear, signed in 2003), and MTS Centre (Winnipeg, $590,000 per year, signed in 2005).

In our opinion, th e Civic Centre may be able to generate revenue from naming rights inth e range of $350,000 per year, with a portion of this attributable to the benefit of th ebuilding. Currently, there is no income associated with this in the proforma (an allowanceof $315,000 is, however, identified within a "hidden column", however it is uncertain i fthis amount would be attributable to (a) the Civic Centre, (b ) FCS, or (c ) th e entireLansdowne Park complex).

I f no t included, it could be that this revenue is assumed to go to th e sole benefit of th eOHL Team. In our opinion, this would be inappropriate.



26/44

Analysis


With respect to revenues from suites and club seats, we note that most newbuildings received 10 0 0 /0 of the revenue associated with the licensing of corporateboxes / luxury suites and club seats. In centres like Sault Ste. Marie, th e EssarCentre generated almost $100,000 in income from suites (it has a total of 13 suitesfor rent), while in Kingston, th e building's operating proforma projected some$400,000 in suite license fees from it s 30 boxes.

We note within th e proformas provided by OSEG, that "hidden columns" identify atotal of almost $1.15 million annually to be generated from the licensing of Club

Seats ($220,000 annually), Suites ($654,000 annually), Loge Boxes an d PartySuites ($264,000 annually). Finally, we note in the proforma that "hidden columns" again identify some

$616,000 in potential advertising revenue. We note that other OHL facilitiesgenerate revenue from in-stadium advertising (generally back-lit advertising presentin th e concourses and above vomitory entrances / exists, within th e arena bowlitself, and associated with various components of the building). Generally,advertising revenues from these sourced is shared between th e building and tenant.For example, revenue from in-stadium / arena advertising (Le., advertising that canbeen seen by spectators while sitting in their seats) goes mostly to the benefit ofthe sport team tenant, whereas other in-stadium advertising goes mostly to thebenefit of th e building.

By excluding these sources of revenue from building income, i t could be argued thatthese revenues are instead being assumed as fo r th e benefit of the sport teamtenant, which would serve to increase the franchise value of the sport team (a smore income would be available to it).



27/44

Analysis

Civic Centre ~ r e n a- Addi t ional Revenue

While all building and team operating revenue is to be amalgamated to support theoperations of the entire Lansdowne Live project, ou r strong opinion is that these revenuesshould be specifically included as income and that a portion of them (generally 100% inth e case of naming rights and suite licensing fees and a shared portion of ne t advertisingrevenue) assigned to th e building and th e remaining portion assignment to th e sport teamtenant.

Frank Clair Stadium - Events

Similar to the comments forwarded above with respect to the number of events presumedto occur within th e Civic Centre, we believe that th e number of events presumed to bescheduled within a renovated FCS are aggressive.

As noted on Slide 15, above, OSEG project that FCS will generate an annual operating lossranging between $165,000 and $280,0000 per year. This estimate is premised upon th eassumption that FCS will attract between 27 and 30 events pe r year, excluding 10 CFLfootball games. Events assumed to be attracted to th e facility in Year 1 include: 1 soccer exhibition game; 6 CIAU football games (Ottawa Gee Gees);

1 concert; 1 other event (monster truck); and 18 weeks of rental to Coliseum Inc. during th e winter season.

Based on information provided respecting the operations of th e CFL team, this buildingtenant is expected to playa total of 10 home games each season, including 1 exhibitiongame an d 9 regular season games, and attract between 157,000 and 170,000 fans intotal.



28/44

Analysis

Frank Cla i r Stadium ~ Events

Excluding the 18-week rental to Coliseum Inc., we do not believe the event schedule fo rFCS is unreasonable and conclude that th e schedule ma y be conservative. While OSEGproject that the Stadium would host an "outdoor NHL game", this is only projected tooccur once; similarly, OSEG only project the staging of one outdoor summer concert everyother year. Th e remaining dates are assumed to be a combination of Ottawa Gee Geefootball games, exhibition soccer matches and other family / entertainment / sportingevents.

As we understand it , BMO Field in Toronto has hosted a total of 26 to 32 events per yearduring it s first tw o years of operation. These events include:

15 MLS soccer games per season; FIFA / Canadian Soccer Association exhibition games; Other soccer "friend ies"

Th e following table compares th e historic commercial event programming at FCS and BMOField with the projections made by OSEG fo r a modernized FCS.

Professional Spor ts TeamTrade Shows / Exhibitions 0.0 0.0Other Sports 10.0 13.5Family Show 0.0 0.0Concert 0.0 0.5Other 1.3 0.0

Total 11.3 29.0

OSEG figures exclude 18-weeks of stadium rental to Coliseum Inc.



29/44

Analysis

Frank Clair Stadium - Stadium Operations

As noted previously, stadium revenuesattributable to th e operations and play of aCFL team ar e not included within theoperating proforma provided by OSEG fo rFCS. Similar to the operations of th e CivicCentre, we would expect th e building togenerate revenue from the following sources,assuming i t will be home to a CFL footballteam:

Stadium rent (percent of t icket sales); Concession revenue (food & beverage); Advertising revenue; Licensing revenue from suites l club seats,

party boxes, etc.; an d Revenue from the sale of naming rights

(including pouring rights). The following table provides a comparison of

BMO Field stadium revenue with revenueprojected fo r a modernized FCS. .

Driving a significant portion of revenue fo rBMO Field is both th e presence of an MLSfranchise and it s 15 home games (averageattendance of 19,500) as well as th e venuestaging 12 FIFA U-20 World SoccerChampionship games (where the averageattendance per game wa s almost 19,000).

Rental Income f rom EventsTicket Convenience Fe e Income

Total

Anci l lary IncomeConcessions (net)Audio-VisualNoveltiesClub FeesAdvertising and SponsorshipsSuites

Other

Parking

Total

EXPENSES

Salaries & Benefits (full and part time)Materials, Supplies and Services

FRANK CLAIRBMO FIELD STADIUM

( 2007 ) (Year 1)

$ 1 ,227 ,700 $ 341 ,400498 ,600 115 ,000

$ 1 ,726 ,300 $ 456 ,400

$ 2 ,173 ,500 $ 122 ,800

141 ,500 40 ,700

78,900

644 ,600

493 ,000

539 ,900 49 ,700

114 ,000

$ 4 ,071 ,400 $ 327 ,200

$ 2,041,100 $2,641,700

435 ,500

627 ,100

NET OPERATING REVENUE $ 1,114,900 $ (279,000)

Source: Global Spectrum Facility Management (as outlined in an e-mail dated December 23, 2008)Source: Board of Governors of Exhibition Place

29 PRIVILEDGED AND CONFIDENTIAL Deioitte & Touche LLP and affiliated entities.


30/44

Analysis


Th e arrangement structured between th e City of Toronto (as owner of th e Stadium) andMaple Leafs Sports and Entertainment ("MLSEL", as operator and owner / operator of th eMLS franchise) is that the team will pay rent to play in the stadium (based on a percentageof ticket sales) and share in a portion of advertising revenue which the stadium is able togenerate. Finally, all suites and club seat licensing revenue goes to th e benefit of thestadium (although th e licensee of th e suite must purchase TFC season tickets).

In addition, during th e time when th e overall deal was being put together, MLSEL provideda guarantee that it would sell th e stadium's naming rights fo r $10.0 million. This amountwent directly to supporting a portion of th e capital cost of th e building. Overall, this $62.8million project was paid fo r from th e following sources:

Federal Government: $27.0 million Government of Ontario: 8.0 million Naming Rights: 10.0 million MLSEL: 8.0 million City of Toronto (excluding land): 9.8 million

Total $ 62.8 million

In examining the proforma provided by OSEG, we again noted various "hidden columns"which identified values for naming rights, advertising and suite rentals. Together thesesources of building income could amount to some $1. 75 million to $2.75 million, as follows: Advertising: $500,000 - $750,000 Naming Rights: $350,000 - $500,000 Suites / Club Seats: $830,000 - $1.4 million



31/44

Analysis


Air Canada Centre Toronto ACE Aviation Holdings Inc. $30,397,191 20 $1,519,860Toronto Maple Leafs, Toronto Raptors,Toronto Rock

2019~ ~ ~ ~. . . . ~ .................. ~ H

Pengrowth Saddledome Calgary Pengrowth Management Ltd. $20,000,000 20 $1,000,000 Calgary Flames, Calgary Roughnecks, 2016...........................................................................................................................................................................................5 ? ~ : ~ . ~ ~ . ! : ' ! ~ ~ ~ ~.........................................................~ i i i i ; ~ i ~.I.I.I.I...... ...... ~ ; ~................ ~ : ; ; : f - ~ : i~ ~ .. .. ...... . .... . . ~ J ? : ~ ~ : ~ ~ ~ .. .... . ~ 6.. ...... .. ! ~ I U : ~.. .. ~ : : ~ ~ ; ~ ~ ~ ~ ~ k ~ ....... .. ....................~ ~ ; . ~..

MLS I Soccer Stadiums

II CFL Football StadiumsII CHL Hockey Arenaso Other Canadian Sports F acliities

31 PRIVILEDGED AND CONFIDENTIAL Deloit te & Touche LLP and aff i l ia ted ent i t ies .


32/44

AnalysisFrank Clair Stadium - Stadium Operations

In addition, it may be possible to sell naming / sponsorship rights to the entire LansdownePark complex (i n addition to the naming / sponsorship of individual buildings therein).

By excluding these revenues, i t may give th e impression that these revenues ar eexclusively for the benefit of th e CFL Team and not the building; as such, it could serve toartificially inflate th e value of th e CFL franchise (despite th e fact that all building and teamoperating revenue is to be amalgamated to support the operations of the entire LansdowneLive project).

Our strong opinion is that these revenues/ in addition to CFL rent to the stadium andconcession revenue/ among others, be specifically included as income and that a portion ofthem (generally 100% in th e case of naming rights and suite licensing fees and a sharedportion of net advertising revenue) be assigned to the building and th e remaining portionassignment to the sport team tenant.

Based on ou r review of th e CFL teams' projected operating budget, it would appear that anappropriate allocation of rent, concessions and sharing of advertising revenues would be asfollows:

32

CFL Rent (based on 5% of exhibition game and 10% of regular season game revenue):$410,000 in Year 1, growing to $535,000 in Year 5.

Concessions (based on 40:60 allocation between Team and Building, assuming per capspending of $8 and 40% net profit after all costs): $200,000 in Year 1, growing to$215,000 in Year 5.

Advertising (assuming 40:60 split between th e building and th e CFL team): rangingbetween $200,000 and $300,000 annually.

Naming Rights: estimated at $350,000 pe r year. Suite Revenue: estimated" at $850,000 per year.

TOTAL: approximately $2.0 million in Year 1 to $2.25 million in Year 5.PRIVILEDGED AND CONFIDENTIAL Deloitte & Touche LLP and affiliated entities.


33/44

Analysis

Retail Development As noted, in th e proposal OSEG propose to develop some 400,000 square feet of

commercial and residential. However, no information has been provided detailing eitherthe development and / or operations of th e proposed hotel, office space or residentialdevelopment.

In developing th e retail space, we understand that OSEG assume that the City would leaseth e land upon which the development would sit for a term of 30 years at no / nominal rent.OSEG would then spend an anticipated $62.7 million to construct th e building and readyth e space to tenants.

OSEG identify total operati ng income in th e TOTAL DEVELOPMENT COSTS 6 2 , 7 4 8 , 8 1 4 2 6 9 . 3 1

ESTIMATED REVENUEange of $7.048 million with equates to anaverage per gross development square footrental rate of $30.25 (assuming the amount YEILDof leaseable space will equate to 90 0 / 0 o f . Total Revenuegross development square feet, the effective Less: Vacancy/ Non Recoverableaverage lease rate is $33.61. Enquiries Net Annual Revenuemade by Deloitte with parties fa m iliar with Mortgage Payments (2 5 year amortization)

Return on Equity (2 0 years)

th e Ottawa retail market indicated a Net Cash Flowconsensus fo r small (1,500 square feet)specialty retail space currently in th e range Net Value of Centre

7 , 0 4 8 , 0 0 0

11 . 2 3 %

5 .00%

7.00%5.00%

7.00%

3 5 . 5 9

7,048,000(352,400)

6,695,600(3,725,363)

(941.232)

2,029,005

95,651,429

of $30.00 per square foot. Given that this Project Cost 62,748,814development will not likely take place fo r a L!;:;~:c::o:~i~:......ag_e____________ 0_.0_0o_yo__ . . ! : . . ! ~ ~ ~ ( : ! ~ : : ! . L . few years, these anticipated rents do notappear unreasonable.

Subsequent information provided by th e City, however, suggest the OSEG anticipate rentsranging from $25.00 pe r square foot for larger retail tenancies and specialty food stores, to$45.00 pe r square foot fo r smaller retail tenancies and restaurants. A theatre tenant isassumed at $20.00 per square foot.



34/44

AnalysisRetai l Development However, given the nature of th e development, it s location and ability to drive customer traffic

on a year-round basis, such rents and occupancies (OSEG assume a5%

vacancy) may provedifficult to achieve over the long term. As such there may be risk associated with thisdevelopment achieving 95% occupancy and generate some $30.00 to $3 5 per square foot, onaverage.

In preparing their financing analysis of th e retail component of th e Project, OSEG "cap"stabilized income ($6.7 million) at 7.00% to achieve a market value, including land, of $95.7million. While technically correct fo r a development which owns a freehold interest in th eunderlying property, this valuation does not take into consideration th e fact that the property isto be constructed on land leased from the City for a 30-year period.

In our opinion, th e cap rate assumed by OSEG is low, particularly given current marketconditions and trends in valuation. In our opinion, a cap rate in the range of 8.00% and 8.50%(or more) would be more appropriate. Assuming, for th e purpose of this analysis, a 8.25% caprate, th e value of th e retail project, including land, is estimated at $81.16 million.

We note that OSEG have not included an y value associated with the underlying real estate,instead assuming that th e City will lease th e property to OSEG at no or nominal rent. As weunderstand it, the rationale fo r this arrangement is to ensure that th e entire complex (includingstadium / arena operations and the operations of the CFL and OHL teams) operates on a breakeven basis (i.e., the net operating income generated by th e retail development would bepooled to offset facility operating losses and team operating losses, should they occur).

Ou r opinion, however, is that th e retail development should be required to pay land rent andthat th e land lease be registered on title and take precedence over bank debt, to ensure that inthe event of default, th e City will be compensated fo r its ownership of th e property. To offsetth e obligation fo r th e retail development to pay market rent for the property, the City an dOSEG could effect a side deal whereby the City agrees to make contributions to th e operationsof th e overall project in an amount equal to th e land rent (and thereby make the overall projectrevenue neutral fo r requiring th e retail development to pa y land rent).

34PRIVILEDGED AND CONFIDENTIAL Deloitte & Touche LLP and affiliated entities.


35/44

AnalysisRetail Development

Should th e entire development generate a ne t operating surplus (Le., after accounting fo rth e operations of the stadium l arena, OHL team and CFL team), the distribution of cashshould go in some level of priority, to be subsequently negotiated, as follows (note, this isno t intended to be a waterfall):

35

major maintenance / operating reserve (if no t otherwise funded elsewhere);

repayment of City contribution (equal to land rent); OSEG return on invested equity for th e retail development; and sharing of any additional revenues after the above amounts have been considered

between th e teams and buildings (with the portion attributable to th e buildings beingprovided to the City and used to support its debt repayment obligations).



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OVERALL ASSESSMENT

36 PRIVILEDGED AND CONFIDENTIAL Deioit te & Touche LLP and aff i l ia ted ent i t ies .


37/44

Overall Assessment

Based on our review of information, discussions with City staff and OSEG officials, our

opinion is that th e many of th e operating assumption contained within OSEG's operatingproforma are not unreasonable. However, our review and assessment have highlighted anumber of limitations, including th e following:

37

The assumed capital cost of improvements to Frank Clair Stadium C'FCS If ) and th eCivic Centre Arena (the "Civic Centre") is underestimated given that they comprisehard costs only and do not include any contingency allowances or soft costs. Anallowance of 30% to 40% for construction contingency is recommended at this ClassD estimate stage, until such time as when a detailed review and inspection of theexisting structure can be undertaken (after which time a smaller contingency

allowance should be carried). In addition, a further allowance of 20% for soft costsshould be carried. At this stage of assessment and analysis, it is recommended thatan estimate in th e range of $120 million to $130 million'be carried.

Based on our assessment of these costs and th e City's current operating and capitalobligations at Lansdowne Park, our opinion is that th e CitYt even i f it were to agree toallocate its current operating, minor capital and major capital obligations to pay forthis project, would still be required to find additional financial resources to pay fo rthe anticipated capital cost of th e Lansdowne Live project.

The all-in construction cost estimate fo r th e retail development (some 233,000square feet) does not appear unreasonable; however we caution that th e allowancefor tenant inducements ($21.52 pe r square foot) may be conservative.

Th e operating proformas fo r th e Civic Centre and FCS do no t contain revenue lineitems which we would normally expect to see fo r stadiums and arenas (and whichwill be generated by th e Civic Centre and FCS). Such line items include:

Rent from sport team tenants (in this case th e CFL team), including building rentand revenue from concessions / food and beverage;



38/44

Overall Assessment

3 8

Revenue from the sale of building naming rights a!ld other sponsorships (includingpouring rights);

Revenue from the leasing / licensing of club seats, corporate boxes / luxury suites,party suites, loge boxes, etc.; and

Revenue from advertising.

While th e O_SEG proposal advocates that ALL revenue (from team and buildingoperations and th e retail development) be consolidated to ensure at least break-evenoperations, by not explicitly showing these revenues in th e proformas fo r the stadium/ arena, our concern is that th e OSEG may be allocating these revenues to their

respective teams (i.e., th e Ottawa 67s and th e proposed new CFL team) and as suchinflating the franchise value of the sport team tenant (as th e teams could claim th eright to these income streams; revenue streams which accrue, in whole or in part, toth e building).

As such we strongly recommend that these revenues be identified as buildingrevenue so that they can be properly accounted for and "stay" with th e building.

From th e perspective of th e Civic Centre and FCS, we believe such additionalrevenues could comprise th e following:

Facility naming rights: $700,000 in total ($350,000 fo r each of th e Civic Centreand FCS); CFL Rent: some $415,000 in Year 1, growing to $535,000 by Year 5; Concessions: an additional $200,000 in Year 1, growing to $215,000 by Year 5; Advertising: some $200,000 in Year 1, growing to $300,000 in Year 5; Suite / Club Seat revenue: approximately $850,000 per year.These amounts ar e projected to'total additional income to the Civic Arena and FCS ofsome $2.35 million in Year 1, growing to $2.6 million by Year 5.

PRlVILEDGED AND C O N F I D E N T I A L Deloitte & Touche LLP and affiliated entities.


39/44

Overall Assessment

From an event perspective, we believe th e number of non-concert events projectedfo r th e Civic Centre ar e not unreasonable; however, we believe th e anticipatednumber of concert dates are aggressive.

Finally, we do not believe the event schedule fo r FCS is unreasonable and concludethat this schedule may be conservative

With respect to th e retail development, we note the following: There may be risk associated with the development achieving 95% occupancy and it

being able to generate almost $34 per square foot, on average;

OSEG's approach to valuing th e project is likely aggressive given that (a ) caprates

ar e likely higher than assumed in their development proforma, and (b ) th e project isto be built on land leased from the City for 30 years; and

OSEG have assumed that i t would be provided th e land on which to construct andoperate th e retail development at no / nominal cost.

In ou r opinion, th e retail development should be required to pay land rent and that th eland lease be registered on title and take precedence over bank debt; to offset th eobligation fo r th e retail development to pay market rent for the property, th e City andOSEG should effect an arrangement whereby th e City agrees to make contributions to th eoperations of th e overall project in an amount equal to th e land rent (and thereby maketh e overall project revenue neutral fo r requiring th e retail development to pay land rent).

39PRIVILEDGED AN D CONFIDENTIAL Deloitte & Touche LLP and affiliated entities.


40/44

Overall Assessment

Finally, should th e entire development generate a net operating surplus (i.e., afteraccounting for th e operations of th e stadium, arena, OHL team and CFL team), th edistribution of cash should go in some level of priority, to the following users / uses: major maintenance / operating reserve ( if not otherwise funded elsewhere); repayment of City contribution (equal to land rent); OSEG return on invested equity fo r th e retail development; and sharing of an y additional revenues after the above amounts have been considered

between the teams and buildings (with th e portion attributable to th e buildings beingprovided to the City and used to support it s debt repayment obligations) .

Should th e City determine that there exists merit in progressing it s discussions with OSED,it is recommended that th e City and OSEG undertaken the following:

40

Develop a more detailed cost estimate for transforming th e Civic Centre and FCS tincluding undertaking a detailed review of the existing structure such that a higherquality estimate of construction costs can be made.

Include the above noted revenue line items into th e operating proforma of th e buildings. Require th e retail development to pay land rent.

Develop an appropriate allocation of net operating surpluses, should they occur.



41/44

APPENDIX

41 PRIVILEDGED AND CONFIDENTIAL Deloit te & Touche LLP and aff i l ia ted ent i t ies .


42/44

General Assumptions and Limiting Conditions

1. Th e use of any Projections made in conjunction with this Report may not be appropriate fo r use outside of their intended purpose. TheseProjections, which will no t reflect actual financial re.sults, lTi?y reflect a poss!ble scenario fo r th e P ~ o j e c tfo r t h ~P r o j e c ~ i o nPeriod, givenDeloitte's judgment as to a probable set of economic conditions, together with the hypotheses which are consistent with th e purpose ofth e Projections. Each of th e financial scenarios produced in conjunction with ou r analysis ma y contain hypotheses and assumptions whichare based on a se t of economic conditions or anticipated courses of action that are reasonable and appropriate in Deloitte's judgment, areconsistent with th e purpose of th e projections, bu t which may no t materialize as set ou t therein. The hypotheses represent plausiblecircumstances, bu t need no t be, and ma y no t have been fully supported.Since future events are no t subject to precise projections, some assumptions will no t materialize in th e exact form presented by ou ranalysis. In addition, other unanticipated events and circumstances may occur which could influence th e future outcome and performanceof th e Project. Therefore, th e results achieved in future operating periods will vary from th e analysis of prospective market and financialconditions set ou t therein. While there is no recourse to predicting these matters with certainty apart from informed and reasonedjudgments, it must be stated that future events ma y lead to variations in Project performance which may materially alter Project results.Deloitte does not warrant that actual results achieved during th e Projection Period will be the same, in whole or in part, as those shown inth e Projection. The Projection is based on hypotheses and there is a significant risk that actual results will vary, perhaps materially, fromth e results projected.

2. Responsible ownership and competent property management are assumed.3. Information furnished by others, including Ottawa Sports and Entertainment Group, its principals and consultants, including Global

Spectrum Facility Management, and th e City of Ottawa, upon which all or portions of this report are based, is believed to be reliable, bu thas no t been verified in all cases. No warranty is given as to th e accuracy of such information.

4. Our report and work product cannot be included, or referred to, in any prospectus, securities and exchange commission filing or otherpublic or investment document.

5. It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local,provincial, or national government or private entity or organization have been, or can readily be obtained, or renewed fo r any use onwhich the estimates provided in this report are based.

6. No investigation has been made of, and no responsibility is assumed for, the legal description or fo r legal matters including title orencumbrances. The property is assumed to be free and clear of liens, easements, encroachments and other encumbrances unlessotherwise stated.

7. Full compliance with all applicable federal, provincial and local zoning, use, occupancy, environmental, and similar laws and regulations isassumed, unless otherwise stated. .

8. No responsibility is taken fo r changes in market conditions and no obligation is assumed to revise this report to reflect events orconditions which occur subsequent to th e effective date of this report.

9. Any financial structure cities within this report is predicated on the market conditions prevailing as of the date of this report.10. Areas and 9imensions of the property were obtained from sources believed to be reliable. Maps or sketches, if included in this report are

only to assist the reader in visualizing the property and no responsibility is assumed fo r their accuracy. No independent surveys w e r ~conducted.

11. !t is assumed that there ~ r ~no hidden or un.apparent c ~ J n d i t ! o n sof t.he property, subsoil, or structures that affect value. No responsibilityIS assumed fo r such conditions or for arrangIng fo r engineering studIes that may be required to discover them.

12. N.o soil analysis or geological studies were ordered or made in conjunction with this report, no r was an investigation made of any waterOIl, gas, coal, or other subsurface mineral and use rights or conditions.2 '

42 PRIVILEDGEDAND CONFIDENTIAL Deloitte & Touche LLP and affiliated entities.


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General Assumptions and Limiting Conditions

13. Neither Deloitte nor any individuals signing or associated with this report shall be required by reason of this report to give furtherconsultation, to provide testimony or appear in court or other legal proceedings, unless specific arrangements thereof have been made.14. This report has been made only fo r th e purpose stated and shall no t be used fo r any other purpose. Neither this report no r any portions

thereof (including without limitation any conclusions as to value, the identity of Deloitte or any individuals signing or associated with thisreport, or th e professional associations or organizations with which they are affiliated) shall be disseminated to third parties by any meanswithout th e prior written consent and approval of Deloitte.

15 . We have no t been engaged no r are qualified to detect the existence of hazardous material which mayor may not be present on or near theproperty. The presence of potentially hazardous substances such as asbestos, urea-formaldehyde foam insulation, industrial wastes, etc.ma y affect the value of th e property. The estimates presented herein are predicated on the assumption that there is no such material on,in, or near the property that would cause a loss in value. No responsibility is assumed fo r any such conditions or fo r any expertise orengineering knowledge required to discover them. The client should retain an expert in this field if further information is desired.

16. Unprecedented and ongoing events in th e financial and credit markets have resulted in an uncertain and volatile economic environment.

43

While some historic initiatives are being investigated by the U.S. Treasury and Federal Reserve, as well as other Central Banks to halt thedisruptions in capital markets, there is still considerable uncertainty about the near to medium term outlook. Any continued constriction ofth e credit markets, along with weakening economic fundamentals ma y impact all asset classes both in terms of value and liquidity. Whileth e Canadian economy ma y not yet have been impacted Significantly, that situation may no t continue. Given volatility within the currentenvironment, of necessity, this report has been based on th e assumption that the economy will remain stable of soften without furthersignificant disruptions and deterioration in credit availability.

PRIVIlEDGED AND CONFIDENTIAL Deloitte & Touche

LLPand affiliated entities.


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e 01

Deloitte & Touche LLP and affiliated entities

.Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, andfinancial advisory services through more than 6,100 people in 47 offices. DeJoitte operates in Quebecas Samson BelairjDeloitte & Touche s.e.n.c.r.1. The firm is dedicated to helping its clients and itspeople excel. Deloitte is the Canadian member firm of Deloitte Touche Tohmatsu.

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, andtheir respective subsidiaries and affiliates. As a Swiss Verein (association), neither Deloitte ToucheTohmatsu no r an y of its member firms has any liability fo r each other's acts or omissions. Each of themember firms is a separate and independent legal entity operating under the names "Deloitte,""Deloitte & Touche," "Deloitte Touche TOhmatsu," or other related names. Services are provided bythe member firms or their subsidiaries or affiliates and not by the Deloitte Touche Tohmatsu Verein.

Member ofDeloit te Touche Tohmatsu

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