View from upper level seating during the Toronto Maple Leafs season opener against traditional rivals, the Montreal Canadiens at the Air Canada Centre Oct 7 2010. Graeme Roustan is convinced he can build a 20,000-seat arena in the suburbs northeast of Toronto and make it profitable without an NHL team as a major tenant.Fred Lum/The Globe and Mail
Graeme Roustan is convinced he can build a 20,000-seat arena in the suburbs northeast of Toronto and make it profitable without an NHL team as a major tenant.
A lot of skeptics are just as convinced he cannot. Among them are taxpayers in Markham, Ont., who wonder about the promises from local politicians, and from Roustan and his partner, real-estate tycoon Rudy Bratty, that the cost of the $325-million project will not come out of their pockets.
Also doubtful are NHL executives, and those familiar with the operations of the Air Canada Centre, one of North America's busiest arenas some 32 kilometres south in downtown Toronto.
One source, who knows the hockey and concert business in the Greater Toronto Area but requested anonymity because he is not authorized to speak for the owners of the Air Canada Centre (Maple Leaf Sports and Entertainment Ltd.), says even if Roustan can book close to the 50 concerts a year that the ACC averages, they do not bring in enough money to support a large arena.
The best concert acts will produce a $200,000 profit for MLSE, the source said, but many produce $100,000 or less, which means the annual take is about $7.5-million.
What makes the ACC a cash cow is that just one of the Toronto Maple Leafs' 41 regular-season home games brings in about $2-million for MLSE. Add a lesser, but still healthy, amount for the Toronto Raptors' 41 NBA regular-season games and it is clear why BCE Inc. and Rogers Communications Inc. combined to pay $1.3-billion for a 75-per-cent ownership share of MLSE.
Since all of the $325-million construction cost for the proposed Markham arena will be borrowed, the debt service alone will be in excess of $10-million a year. (The suburban city of Glendale, Ariz., pays about $8-million [U.S.] annually on the $180-million it borrowed almost 10 years ago to build the Phoenix Coyotes' arena.)
There will also be several million dollars in operating costs, which will be paid by GTA Sports and Entertainment Ltd., the company Roustan and Bratty formed to build and operate the proposed arena. The company is also on the hook for any operating losses.
This does not dissuade Roustan, 52, who is also chairman of Bauer Performance Sports Ltd., from insisting he and his partners and the City of Markham will make money.
With a population of six million, growing by about 100,000 people a year mostly to the north of Toronto, Roustan says the GTA is ripe for a second major sports and entertainment facility.
"I'm a businessman who makes investments in companies where I surround myself with really smart people who've done this stuff before," he said. "I make my decision based on what I know. I'm told by the experts a second [arena] would be very profitable."
In this case, the experts were from Global Spectrum, which manages arenas around the world, including many in the NHL, and the Canadian arm of Live Nation Entertainment, the biggest concert promoter in the world. The companies will manage and promote events at the arena for Roustan and Bratty, and were asked for an unvarnished report on the chances of turning a profit.
"They did their analysis and said this facility would be very busy without any professional sports franchise and you'll make money at it," Roustan said.
About that professional sports franchise: As the head of Bauer and as someone who attempted to buy his hometown Montreal Canadiens, Roustan is well connected in the NHL community.
There is an assumption – perhaps fuelled by the thinly disguised enthusiasm of Markham politicians – that Roustan must have some sort of nod-and-a-wink understanding with NHL commissioner Gary Bettman about landing a second NHL team for the Toronto area.
Roustan insists he has no such understanding and his partners have no expectation either. Bettman says the NHL has no plans to expand or move a team to Toronto.
"I'm not the guy to go down the road on a $325-million investment based even on a handshake," Roustan said.
The project took an important step forward last week when Roustan filed a site-plan application for the development, which is proposed for a six-acre plot at Highway 407 and Kennedy Road. He hopes to begin construction by December, with the arena opening in time to possibly play host to the 2015 world junior hockey championship.
Roustan, who is well connected in international hockey, says he plans to chase every International Ice Hockey Federation event from the junior tournament to the men's and women's world championships.
Roustan still needs approval from Markham council for his site plan, which requires consultation with the public.
Concerns about parking have already been raised, as there are just 4,400 parking spaces planned within walking distance. But Roustan says with a GO Station planned nearby, some 57 per cent of those coming to the arena will use public transportation.
However, the concert-business source says there are other potential problems concerning Roustan's plans to have more than 130 events a year at the arena.
Live Nation, for example, is already a partner with MLSE in promoting concerts at the ACC and other venues in Ontario. The source said MLSE will object, if it has not already, to Live Nation doing business with Roustan.
Roustan said Live Nation has agreements with a lot of arena owners but he does not see his facility as competition for the ACC.
"An act can play your [building] two nights and then move to the next arena 20 miles away, whether it's Oshawa or Hamilton or wherever, that doesn't take away the two nights you get," he said.
Riley O'Connor, chairman of Live Nation Canada, could not be reached for comment.
The source said there are few major concert acts that have enough demand to play more than two dates at the ACC. He also doubted people in the GTA would travel to the northeast to see a concert even if there is a nearby GO Train station.
Roustan rejected this notion as well, on the grounds that just as many people don't want to fight traffic to go downtown to the ACC.
"There's millions of people who live north of [Highway] 401 who won't bother to go downtown," he said. "First, the concert is sold out. Second, they're not going to fight their way there. By the time they get home, it's midnight. This gives them an alternative.
"The opportunity of serving people in the north to me is a no-brainer. When I saw this, I thought to myself, I better do this before somebody else figures it out."