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Post by mikecubs on Feb 9, 2014 0:40:55 GMT -6
Sinking loonie threatens teams’ bottom linesCanada’s cross-border sports discount shopping spree may finally be coming to an end. It’s been a good run. For nearly a decade participation in US-based sports has been at marked down prices for Canadian clubs — at least according to historic trends — thanks to the robust health of the Canadian dollar compared with its US counterpart. That’s changing. For the first time in five years the dollar is hovering around 90 cents and some economists are predicting we will see an 85-cent dollar by the end of 2014. Where it goes from there only Nostradamus knows, but it’s seems the currency parity-party could be over. It’s a prospect that owners and executives fear and has been the mover behind seismic shifts in the Canadian sports landscape in the recent past and yet is the easiest to overlook. “It’s not good, it’s trending the wrong way,” said retired Maple Leafs Sports and Entertainment executive Richard Peddie, who joined MLSE when the dollar was trading at 70 cents and was helped in his efforts to turn the company that owns the Toronto Maple Leafs, Toronto Raptors, Toronto FC and the Air Canada Centre into a $2-billion business, in part because the dollar had surged to $1.04 by the summer of 2011 when he announced he was retiring. “We used to say every penny the dollar went down cost us about $1.1-million in profit.” The reason isn’t complicated: the single greatest expense for all Canada’s NHL teams, the three MLS teams, the Toronto Blue Jays of MLB and the NBA’s Raptors is player salaries, which are paid in US dollars. As the Canadian currency slides, expenses rise. “It won’t affect our plans for this year, we’re already locked and loaded (with regard to payroll),” says Blue Jays president Paul Beeston. “But it will affect our bottom line, that’s for sure.” There is no operation more vulnerable to a weakened dollar than the NHL. There are just seven Canadian-based franchises but the industry is so robust north of the border that it’s estimated between 25 and 40 per cent of league-wide revenues flow south from Canada. As the Canadian dollars rose, the league’s hockey related revenue (HRR) swelled and the salary cap figures – particularly the floor – jumped at a rate faster than local revenues in many US markets. It’s no surprise then that the league’s overall financial health traces the path taken by the Canadian dollar. A decade ago or more the NHL was a league widely considered in disarray, with runaway salaries – $11-million for Keith Tkachuk, anyone? – and Canadian markets under siege: Quebec City and Winnipeg were long gone but Ottawa and Edmonton were under threat as they tried to cope with a 62-cent dollar and no salary cap. When the Vancouver Grizzlies of the NBA moved to Memphis at the end of the 2000-01 season, currency woes were cited as the prime factor. In the NHL tools like a salary cap that ties revenues to wages, greater revenue sharing and a general sense of fiscal health permeates the second-half of commissioner Gary Bettman’s 21-year reign, but the league’s ebbs and flows can just as easily be tied to the strength of the Canadian dollar relative to its American cousin. When Quebec and later Winnipeg left for Denver and Phoenix, respectively, their trips south were greased by a dollar that hovered in the 70-cent range. When Winnipeg made its triumphant return (thanks to the Atlanta Thrashers) for the 2011-12 season, the Canadian dollar was trading close to historic highs. Today the NHL seems incredibly robust, with record revenues expected to top $4-billion in the next year or two. That picture seems even rosier when the ground-breaking, 12-year, $5.2-billion Cdn television deal the league signed with Rogers, owners of Sportsnet, kicks in for the 2014-15 season. But a sliding dollar could slow that growth. That $5.2-billion Canadian broadcast deal was worth about $4.94 billion US the day it was announced, but would be worth just $4.42-billion if the dollar slides to 85 cents by the end of the year. The NHL is better positioned to sustain a weakened dollar that it has been in the past. The share the Canadian clubs get from the league’s 10-year, $2-billion US television contract will be more meaningful and big pays generated by the Winter Classic and the Stadium Series will help further. Still, there seems to be some confusion about whether or not the NHL’s new CBA has provisions to soften the effect of currency fluctuations.
“The falling Canadian dollar has had no impact on us at all due to currency mitigation laid out in the CBA,” said Winnipeg Jets spokesman Scott Brown, via email. “Generally speaking, the clause allows that for any revenue lost due to the low Canadian dollar, that team is equally compensated through increased revenue sharing in the CBA.”
But both deputy NHL commissioner Bill Daly and the NHLPA told Sportsnet there is no specific clause to deal with a falling dollar, just a recognition that all league revenues used to calculate HRR are converted to US dollars and that revenue sharing payments will be made in US dollars. But that doesn’t offset the reality for Canadian clubs: local revenues will need to grow considerably to make up for ground lost by a weakened Canadian dollar. The impact may be felt differently by small and big markets. How will a team like the Jets, in the league’s smallest city and playing in its smallest arena fare if the dollar slides? Will Quebec City remain a viable landing spot for an NHL team if the dollar remains well below 90 cents? For a team like the Leafs a falling dollar would mean a lower salary cap and therefore less leeway to flex their financial muscle. The reality is there are too many variables to predict. A strengthening US dollar suggests a stronger overall economy south of the border, which the NHL could translate into new business to the benefit of Canadian clubs. Similarly a dollar trading at 90 cents would have benefits for Canadian exports which could help the economies around Canadian clubs. But after a decade where Canadian teams were benefitted from the currency divide, the balance may be shifting. www.sportsnet.ca/hockey/nhl/sinking-loonie-threatens-teams-bottom-lines/
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Post by mikecubs on Feb 9, 2014 0:57:58 GMT -6
Nothing much to worry about here for Canadian NHL fans in my opinion. Sure the dollar falling a bit will hurt but the Canadian teams are so freaking rich and will get richer(see Ottawa's and Montreal's local new TV deals), the overall national TV deal etc...Other big difference between last time the loonie was low and this time is everyone should have a modern arena except Calgary(unless Edmonton implodes spectacularly in the next month). And not only that but the developments around the arenas. See Vancouver's new towers, MTS Centre's shed thing, Edmonton's big towers around the new building, Montreal's Hab tower. So not only will the teams still make big $$$ but if for some odd reason they do lose a few bucks if the loonie really tanks they will have $$$ coming in other ways outside the teams.
This will hurt the Raptors a bit but not a big deal, they survived the low dollar last time and the new CBA is much more owner friendly than what was in place the last time the loonie was low. If worst comes to worst they can accept some revenue sharing. This will sting the Jays most since they will no longer be eligible for revenue sharing(the top 15 markets are being phased out in MLB).
Where this really hurts is an Expos return. Expos at best (according to Cromartie) would be a small market team under positive assumptions. 90 cent dollar plus another possible looming English exodus makes an Expos return very unlikely.
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Post by NHLWinnipeg on Feb 9, 2014 22:08:34 GMT -6
A few points re. a falling CAD:
1) CDN teams nowadays hedge their USD expenses with OTC currency swap contracts. There is an expense to doing this, but to the extent that they do it (dollar amount), they are protected.
2) As the CAD declines so too does the USD denominated NHL revenue, meaning the CAP declines also. If say 1/3rd of NHL revenues are made in CAD, there's a 1/3rd built in hedge, due to the new salary cap link to revenue system.
3) The ultimate protection, however, is the revenue sharing mechanism in the CBA. If the CAD declines far enough, small market CDN NHL teams will receive a proportionately larger share of the revenue sharing pool. To my knowledge no Canadian team receives revenue sharing now, so the CAD has a long way to fall before CDN teams require large amounts of revenue sharing -- which will be available to them.
Conclusion: the situation now is much different than it was in the past and small market Canadian teams with their increased revenue streams (increased TV $, better arenas, increased revenue sharing availability etc.) should be just fine. For the Leafs, since they will likely never qualify for revenue sharing, it could eat into their profits if they aren't fully hedged.
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Post by donwood on Feb 9, 2014 23:12:04 GMT -6
It would be funny if the sliding Canadian dollar took money away from teams like the Coyotes and Panthers to give to Canadian teams
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Post by The Unknown Poster on Feb 10, 2014 8:58:44 GMT -6
Even companies like WestJet are raising prices to off-set lower Loonie. Though I dont recall them lowering prices when our dollar reached parity (they might have, I just dont recall).
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Post by jetsorbust on Feb 11, 2014 13:30:09 GMT -6
A few points re. a falling CAD: 1) CDN teams nowadays hedge their USD expenses with OTC currency swap contracts. There is an expense to doing this, but to the extent that they do it (dollar amount), they are protected. 2) As the CAD declines so too does the USD denominated NHL revenue, meaning the CAP declines also. If say 1/3rd of NHL revenues are made in CAD, there's a 1/3rd built in hedge, due to the new salary cap link to revenue system. 3) The ultimate protection, however, is the revenue sharing mechanism in the CBA. If the CAD declines far enough, small market CDN NHL teams will receive a proportionately larger share of the revenue sharing pool. To my knowledge no Canadian team receives revenue sharing now, so the CAD has a long way to fall before CDN teams require large amounts of revenue sharing -- which will be available to them. Conclusion: the situation now is much different than it was in the past and small market Canadian teams with their increased revenue streams (increased TV $, better arenas, increased revenue sharing availability etc.) should be just fine. For the Leafs, since they will likely never qualify for revenue sharing, it could eat into their profits if they aren't fully hedged. Completely agreed about points 2 and 3. But in regards to hedging, there is no such thing as long-term hedging really. They may have got contracts to cover the bulk of their Canadian Revenues (and convert them into US dollars now) for a couple of years at the most. Hedging really does nothing in the long run, it just smoothes the sudden up and down swings a currency might take. But yes, Canadian teams are much more financially sound and able to withstand a lower dollar than before. Plus, the more Canadian teams we have the more the league's revenues are in Canadian Dollars so it effects things less. Actually that makes me wonder about something else, does anyone know if the Canadian TV Contract is in Canadian Dollars or US? I would guess Canadian no?
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Post by TheDeuce on Feb 11, 2014 14:38:50 GMT -6
The only hedging that would work for Canadian teams is if they drew up their contracts with customers (TSN, CBC, season ticket holders) in US dollars. You can't hedge your way out of a long-term currency decline, as noted by our Conan-avatared member above.
m.
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Post by mikecubs on Oct 21, 2014 8:49:24 GMT -6
More weakness expected for the Canadian dollar Loonie forecast to shed a few more pennies by year’s end, say currency analysts It’s been a rough ride for the Canadian dollar — and it’s probably not over yet. Sure, the plummeting oil price and stock market sell-off have been the major pre-occupation for investors and consumers over the last week, but they’re also dragging the lowly loonie down with them. The volatility has resulted in markets flocking to the safe-haven status of the U.S. dollar, which has punished the loonie and helped drive down commodity prices, which are priced in U.S. dollars. And while the bear market in crude is good news at the gas pump, it’s also a big factor fuelling the decline in the Canadian dollar since the economy is closely linked to commodities, particularly oil, analysts say. “Not only are we a commodity producer — we’re also an economy that depends on how the world is doing,” said Mark Chandler, currency strategist at RBC Dominion Securities. Though they started to come back Friday, financial markets around the world have been hammered by a recent run of economic data showing deteriorating economic strength just about everywhere except the United States. Meanwhile oil slumped below $82 U.S. a barrel as supply soared to 30-year highs while demand continued to weaken. The loonie also had a brutal week, sinking to five-year lows in trading last Wednesday under 88 cents U.S. It slid 0.22 of a cent to 88.68 cents (U.S.) Friday amid data showing Canada’s cost of living was up 0.2 per cent in September after increasing 0.1 per cent in August. “We’re looking at the currency continuing to weaken another two to three cents from current levels,” noted Chandler. Although the Canadian dollar in recent months had been one of the strongest currencies in the world against the greenback, “in the past week we’ve been one of the weakest along with Norway. And guess what – their economy is heavily reliant on oil too,” he said. It’s easy to forget that as recently as July, the loonie was trading above 94 cents U.S., and was even above par for a chunk of 2013. “We’ve seen a lot of retreat for the Canadian dollar,” said Camilla Sutton, chief currency strategist and managing director at Scotiabank. She noted the main reason at first for the 5 per cent drop in the loonie since the summer was the broad rally in the U.S. dollar as that economy started to bounce back. But now it’s also tied to dropping oil prices and wobbly equity markets, she says. “The trend in the next few weeks is we’ll continue to see some downward pressure on the Canadian dollar, but then it should stabilize,” she said. “The Canadian dollar won’t collapse, but there’s a risk of more weakness in the near-term” considering the current shaky mindset of investors, which is likely to affect global markets and currencies, Sutton said. While those who like cross-border shopping will feel the pinch in the pocketbook, Canada’s exporters stand to gain from a depreciating loonie since most of what is made or produced here is exported to the U.S., and sold in that currency. Plus Americans will be more tempted to travel and shop north of the border. “So it’s not all negative for the Canadian dollar,” she added. www.thestar.com/business/economy/2014/10/17/more_weakness_expected_for_the_canadian_dollar.html
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Post by mikecubs on Oct 21, 2014 8:51:59 GMT -6
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Post by mikecubs on Dec 3, 2014 0:36:28 GMT -6
Exchange-Rate Issue Is Cold Cash to N.H.L.
Decline in Value of Canadian Dollar Could Affect N.H.L. Salary Cap The N.H.L.’s general managers count on the salary cap to rise every year. But what if, as some fear, it does not go up next season? The defending champion Los Angeles Kings might not have the cap space to retain Justin Williams, scorer of more Game 7 points than anyone else in league history. The Boston Bruins might have to part with Dougie Hamilton, Torey Krug or another of their defensemen of the future. The Rangers would have to make some hard decisions about Martin St. Louis, Derek Stepan, Mats Zuccarello, Carl Hagelin and Marc Staal, who all become free agents next summer. The reason for all this trepidation? The falling Canadian dollar. But league officials say the speculation is overblown. “I expect there to be a healthy rise in the salary cap for next season,” Bill Daly, the deputy commissioner, said last week. “The Canadian dollar would have to continue to fall in a material way for that to change.” For the N.H.L., a strong Canadian dollar means strong business growth. But with the Canadian dollar skidding, speculation is rife that the league’s bottom line may suffer, triggering a cascade of side effects, including a stagnant salary cap for the 2015-16 season. Next season’s salary cap is certain to be a main topic of discussion when the N.H.L.’s Board of Governors meets Dec. 8 and 9 in Boca Raton, Fla. The salary cap is tied to league revenue. When the Canadian dollar falls, the portion of league revenue generated by the N.H.L.’s seven Canadian teams diminishes as well. That affects the salary cap. “It’s like throwing a dart at a dartboard — you make your best guess,” said Cyril Leeder, president of the Ottawa Senators. “We’ll be making contingency plans for if the cap goes up, cap stays the same, cap comes down. The league will advise us throughout the year.” The salary cap has climbed steadily every non-lockout year since it was instituted for 2005-6, and general managers have come to count on that rise when they sign players. This season the cap is at $69 million per team. Early forecasts predicted it to increase to $74 million for next season, but that may prove optimistic. The Canadian dollar, which matched the American dollar as recently as February 2013, now trades at just over 88 cents. A Canadian Imperial Bank of Commerce report issued in September estimated that the loonie (so called because it is engraved with an image of a loon) will fall below 85 cents. How can the state of the Canadian dollar affect the fiscal health of United States hockey clubs? “Canadian teams earn in Canadian dollars but pay their players in American dollars, so in U.S. dollar terms they’ve lost more than 10 percent of their revenues from a year and a half ago,” said Glen Hodgson, chief economist of the research group The Conference Board of Canada. Even though Canadian teams make up only 23 percent of the N.H.L., by most estimates they contribute about 35 percent of revenue. “So there clearly has to be an effect on overall revenue for the league, on the salary cap, on revenue sharing,” Hodgson said. Last season, Commissioner Gary Bettman conceded that the falling loonie lowered the league’s financial performance slightly. It also cut into growth of this season’s salary cap by about $2 million (to $69 million, from $64.3 million in 2013-14).
Even the bulk of the league’s television money comes from Canada. But Rogers Communications’ 12-year, $5.2 billion broadcast deal is paid in Canadian dollars, so while that contract was worth $4.9 billion in United States dollars when it was signed a year ago, it is worth $4.6 billion today. A weaker Canadian dollar could have other side effects. If the league expands or existing teams in Florida or Arizona move, a faltering loonie could hurt Quebec City’s bid to land a franchise since, as a small Canadian city, it would contribute less revenue to the N.H.L. If Quebec City’s chances diminish, the odds improve for Seattle and Las Vegas. Still, an 88-cent loonie is a far cry from the mid-1990s, when it traded below 75 cents and was a major factor in moves to the United States by Quebec’s previous team, the Nordiques, and the original Winnipeg Jets. The currency continued to plunge, hitting a low of 62 cents in 2002. That period, from the mid-1990s to the mid-2000s, was not a good one for the N.H.L. Franchise shifts, negligible television revenue and shrinking visibility in the United States were some of the biggest problems confronting the league. After 2005, the league rebounded financially — a period that has coincided with a surge in the Canadian dollar. That was only one factor, others being the creation of the Winter Classic; Stanley Cups in Detroit, Pittsburgh, Chicago and Boston; N.H.L. participation at the Winter Olympics; cost certainty for owners after two lockouts; and lucrative television contracts on both sides of the border. But the influence of a stronger Canadian dollar is unmistakable. It is reflected in Forbes magazine’s annual estimates of N.H.L. franchise values. In 2002, the average Canadian-based team ranked 21st in value out of the league’s 30 franchises. In 2013, the average Canadian team’s value had risen to ninth. Despite the loonie’s recent drop, the Forbes list released last Tuesday still puts the average Canadian team’s value at 10th. Daly agrees that a stronger Canadian dollar helps the N.H.L. as a whole.
“The league is obviously healthier when the dollars are closer to par,” he said. “But I think the business success of the league and the clubs over the last several years stands on its own.” Hodgson and other Canadian economists say the loonie would have to drop well below 85 cents to have a significant impact on the N.H.L.’s nearly $4 billion-a-year business. But, as Bettman has noted, the league watches the exchange rates every day. Its financial health depends on it.www.nytimes.com/2014/11/30/sports/hockey/decline-in-value-of-canadian-dollar-could-affect-nhl-salary-cap.html?_r=1
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Post by mikecubs on Jan 23, 2015 23:12:50 GMT -6
Loonie’s free fall is bad news for the NHLIt was a tumultuous, uncertain time that every Canadian hockey fan remembers well. In the early 1990s, the dollar sunk sharply, taking with it the finances of many of the NHL teams based in this country. With American teams dealing with a currency worth 30 to 40 cents more for nearly a decade, they had an advantage. Some teams such as Quebec and Winnipeg relocated south. Others simply struggled. Those remaining also petitioned the government to step in, including one famous series of impassioned speeches at the House of Commons in the spring of 1998. In his speech, then-Montreal Canadiens president Ronald Corey noted that “it costs us $300,000 more every time the dollar loses one cent.” Today, almost 17 years later, with player salaries more than double what they were, those drops are even more costly. And there are concerns teams could wind up in uneasy territory again. On Wednesday, the Canadian dollar plummeted dramatically, initially falling 2.2 cents against the U.S. dollar in less than four hours after the announcement that the Bank of Canada was cutting interest rates. The dollar closed at 80.50 cents on Friday afternoon – a more than five-cent drop in the past month and down 13 cents since late June when the NHL’s current $69-million (U.S.) cap was established. Because of energy prices and other factors related to the economy, that free fall may not be over. No one’s quite sure. What they do know is the dollar’s decline has already outpaced economists’ downward projections for the year in the first 23 days of 2015.
That uncertainty? It’s back. A low Canadian dollar hurts the NHL in a multitude of ways, and both the league and the seven Canadian teams keep an eye on its fluctuations daily. They engage in what’s known as currency hedging to protect themselves from drops, but dramatic falls such as those of late are difficult to protect against. Because player salaries are paid in U.S. dollars, every currency drop hurts those teams’ bottom line. For a wealthy franchise such as Montreal or Toronto, that simply means a lower profit margin. For a team closer to the break-even point, such as Ottawa or Winnipeg, an 80-cent dollar may well push them $5-million into the red and affect personnel decisions in the future. Spending to the cap may no longer be possible. The dollar’s shift is only one factor, but there’s evidence its movement translates to success on the ice. Between 1994 and 2000, the dollar sat around 70 cents and Canadian teams had an average of only 75 points a season – nearly 10 below U.S.-based ones. Meanwhile, Canadian teams’ most successful season, points-wise, came in 2005-06, when the dollar began to shoot back up to close to 90 cents. But the impact goes beyond only the Canadian teams. Another big casualty of a lower dollar is the salary cap, which is tied directly to the league’s annual revenues. Because Canadian franchises pull in a disproportionate amount of hockey-related revenue – estimated between 30 and 35 per cent – the dollar shifting can have a big impact on the total. In mid-December, NHL commissioner Gary Bettman told the board of governors that the league projected a $4-million rise to a $73-million cap based on the dollar averaging 88 cents for the year, something that is now completely unlikely. The NHL uses the average exchange rate from throughout the season (October to June) to calculate its revenues, meaning Canadian funds collected last summer as part of season-ticket packages will be treated the same way as what’s brought in during the playoffs. If that season-end average is 84 cents instead of 88, that alone could mean a loss of up to $60-million in revenue. Bettman’s $73-million cap was based on revenue of approximately $3.85-billion; if it’s $60-million lower, the cap projection will fall by somewhere in the neighbourhood of $1.2-million. If the dollar falls further, there would be more pain than that. “Still projecting a decent cap increase,” was deputy commissioner Bill Daly’s only comment on the subject this week. The biggest doomsday scenario for the cap would be if players themselves decide they don’t want it to rise. Every June, the NHL Players’ Association has to greenlight a 5-per-cent cap inflator that helps drive the league’s ceiling higher in anticipation of revenue growth. With players currently paying 14 per cent of their salaries into escrow, – a figure that could increase the rest of the season as the dollar falls – they may not want the cap to rise. A low or no-growth cap would create massive pain for successful-but-capped out franchises such as the Chicago Blackhawks, who have been signing players under the assumption the NHL’s ceiling will continue to rise. Already, some teams around the league are considering a “vulture” strategy, where they’ll purposely head into the summer with a lot of cap room in order to take advantage of distressed teams. The New York Islanders pulled this off last fall in landing two of their top defencemen – Johnny Boychuk and Nick Leddy – from Boston and Chicago and now have one of the best records in the league. In that sense, a low cap can hurt big market teams and benefit those resting closer to the salary floor. “If it’s ever not going to be voted in, it’d be this summer,” one source on the NHLPA side said of the inflator. That may be a long shot, but the fact that such extreme scenarios are even on the table shows how vital a stable currency is to the NHL. The league has enjoyed continual and considerable revenue growth for years now and had hoped to top a record $4-billion in revenues during the 2014-15 season. That may now take another year or more. “The league is obviously healthier when the dollars are closer to par,” Daly told The New York Times recently. “But I think the business success of the league and the clubs over the last several years stands on its own.” www.theglobeandmail.com/sports/hockey/loonies-free-fall-is-bad-news-for-the-nhl/article22616925/
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Post by Lions67 on Jan 23, 2015 23:33:41 GMT -6
SHED!!
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Post by USApegger on Jan 30, 2015 12:29:42 GMT -6
This is why True North needs to have their project go through. Two hotels, office tower etc for those two parcels of land would be great. I don't care about all the BS coming from Bowmans mouth about this. Centre Ventures mandate was to get this land developed, they were free to negotiate as they did
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Post by Tim on Jan 30, 2015 14:34:51 GMT -6
This is why True North needs to have their project go through. Two hotels, office tower etc for those two parcels of land would be great. I don't care about all the BS coming from Bowmans mouth about this. Centre Ventures mandate was to get this land developed, they were free to negotiate as they did it will, don't panic!
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Post by phillymike on Jan 30, 2015 20:44:57 GMT -6
This is why True North needs to have their project go through. Two hotels, office tower etc for those two parcels of land would be great. I don't care about all the BS coming from Bowmans mouth about this. Centre Ventures mandate was to get this land developed, they were free to negotiate as they did Were they? A little digging, and if everything is on the up and up, no problem.
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