REAL another step closer to more cash to stay afloat

With votes passing at Regina’s executive committee on Wednesday, Regina Exhibition Association Limited (REAL) is another step closer to having the money its CEO says it needs to ride out the rest of the year and stay solvent.

The arms-length, city-owned entity that runs the REAL District is asking for access to $3.4 million that it already has in a line of credit that was recently paid off — but it needs city council’s approval to do so.

Executive committee approved that, making sure the amount doesn’t go over $3.4 million and doesn’t go over the existing guarantee the city has on REAL debt for $21 million.

It also approved direction for the city’s administration and REAL to go back and restructure REAL’s debt, and for a long-term plan to be created to address and update REAL’s business model. These decisions still need a final yes from city council next week.

In his presentation, REAL president and CEO Tim Reid talked about REAL’s business model, noting it needs one major concert and one major event to stay afloat each year.

“When we host a stadium concert, it generates $750,000 in earnings. When we host a major event, it generates $750,000 in earnings. And our financials work when we host a major event — Grey Cup, Brier, world juniors — in alignment with a major summer concert,” said Reid.

The revenue from those large events pays for other things REAL does that don’t make money, like community events. For example, the Frost festival lost about $600,000 in its first year, and lost $100,000 last year.

Reid said the last quarter of 2022 was excellent, but in the first quarter, its operations were shut down by COVID again so that offset the whole year.

According to Reid, before the pandemic, REAL either broke even or made a modest profit every year — as much as $500,000 — but COVID threw a wrench into that.

He believes this year will be another recovery year — REAL lost two large concerts this year to larger venues that threw in incentives — and in the next 12 to 20 months, things will get back to normal.

“We will get back to a place where we’ll continue to make money. The challenge with it remains that there is debt that has been incurred that we need a strategy on,” said Reid.

The questions and discussions on the subject ranged from some councillors like Lori Bresciani having concerns about, essentially, throwing good money after bad.

“I will be looking very deeply into this (when it) comes back from the workings between REAL and the city to find ways to look forward to reflect to what we’ve learned, to move forward as to what we need to do. And I think we actually have to look at a different business model because I don’t think this business model, this financial model, is sustainable,” Bresciani said in the preamble to one question.

Other councillors felt the money was needed to keep afloat a corporation that provides a lot to the community.

“REAL has contributed in many, many ways to the city without sending the city a bill, and I don’t think we should lose that fact,” Coun. Bob Hawkins said while asking the other councillors to imagine a city without REAL.

In the short term, Reid said REAL needs that line of credit to keep operations going and to pay for things now that might not see a profit until the late summer or fall.

As part of the vote at executive committee, REAL and the city’s administration are going to go back and put together a long-term plan for REAL.

Speaking to media after the vote, Reid sees that as having three parts. The first is debt and how to write it down, either restructuring long term or having the city invest in its debt.

“The debt that we incurred during COVID-19, if we make a quarter-million bucks or a half a million bucks a year, we’re never going to pay off or, frankly, we’re just going to have to pay off over a long period of time,” explained Reid.

The second part is operating. Reid admitted that such a precarious business model isn’t ideal.

“As long as we were making a little bit of money, everybody seemed to be OK with it. I’m not sure that it was sustainable in 2017, I’m not sure that it’s sustainable in 2023, but I think it wasn’t urgent, or it wasn’t emergent,” said Reid.

“I think what happened with COVID-19 is it probably expedited a conversation that we need to have anyways, and so … no, it’s not sustainable (and) probably never has been sustainable but because we were making a little bit of money, people were comfortable with it.”

Reid told executive committee REAL is incurring its expenses by 15 per cent and will restructure and trim its overhead. He said REAL does believe it will get back to being profitable.

The final piece to Reid is capital. REAL has $44 million in deferred maintenance at the facility and he said there needs to be a plan where the assets — which he said are city-owned — come under the city’s asset management plan.

Mayor Sandra Masters was firmly on the side of REAL through the discussions and in the vote, particularly on the deferred maintenance portion.

“I think it’s probably overdue and about due for looking at how that model needs to move forward to ensure that the capital is invested in things like roofs and plumbing and all of those things so that the asset is maintained,” Masters said after the meeting.

She spoke about REAL not getting any piece of the COVID relief money the city got – though REAL did get millions from the Canada Emergency Wage Subsidy (CEWS) – and so those problems are COVID coming to roost.

Masters also talked about overall benefit that REAL bringing in and hosting events has for the city, even if it doesn’t make much or loses money on them.

“The impact for the city is enormous and so we want to ensure that those facilities are up and running,” Masters said.

“REAL’s not going to make a ton of money if they break even on that, but the city as a whole benefits from it and I think that’s a little bit of the tradeoff in terms of a break-even proposition on civic assets.”

These recommendations will head to city council next week for a final vote. Then in June, administration and REAL will come back with a debt restructuring plan and a bylaw to allow the borrowing that will need to be voted on before everything can go ahead.

The long-term plan for REAL’s operations isn’t expected back until late fall.