Winnipeg Convention Centre hotel project is off or is it on?

CBC News has learned that CentreVenture, the city's arm's-length development wing, has an option agreement with a developer on a piece of property across the street from the Winnipeg Convention Centre.

The project may include an elusive hotel development, seen as a key to the fortunes of the convention centre and a needed source of revenue for the city to pay its share of the expansion of the meeting space.

Busy Friday for Bowman

Mayor Brian Bowman dropped a couple of bombs onFriday at the foyer outside his office at Winnipeg City Hall.

The first was the suspension ofacting CAO Deepak Joshi for three days.

Bowman told reporters he had "lost confidence" in Joshi, consulted the City of Winnipeg Charter, and declared Joshi persona non grata.

The mayor gave few other details of why he made the move, citing human resource issues.

• Deepak Joshi suspended as City of Winnipeg's acting CAO

Joshi's status as the highest-ranking city administrator will be scrutinized by the city's executive policy committee on Wednesday.They have the option to extend the suspension by a further 30 days.

Joshi has not returned calls made by CBC News for comment.

Convention centre gives up on hotel project

The second explosion at city hall on Friday was the news that the board of directors of the RBC Winnipeg Convention Centre had thrown in the towel on finding a hotel developer to build near the meeting facility.

• Concern builds over Winnipeg's $180M convention centre expansion

When the convention centre began preparations for a $180-million expansion,it required the winning bidder for the construction work to find a developer willing to finance and run a hotel near the property.

Bowman told reporters that deal was now dead, but it still needs approval from city council to bury it.

The 103,000-square-foot expansion almost doubles the size of the convention centre, but it required a complicated finance package involving the City of Winnipeg, the Province of Manitoba and the Government of Canada.

The convention centre also needed a new hotel built nearby to help market its new size, and the cityneeded help in financing its portion of the expansion costs.

Taxes from the hotel property would help offset the city's contribution to expanding the convention centre.

Construction firm Stuart Olson Construction Ltd. won the contract for the expansion work, but with a proviso that it finds a developer for an adjacent hotel. The agreement established a $16-million holdback from payments to Stuart Olson until the hotel was built.

Late last week,the City of Winnipeg was told thatthe board of the convention centre had reached an agreement with Stuart Olson letting them out of the obligation to build a hotel. In return, the construction firm would pay a $3.75-million penalty.

A resolution in front of Bowman's executive policy committee would see that money flow back to the city.

The city needs the cash

Stuart Olson and the convention centre might have been looking for a hotel developer, but so was CentreVenture.

The arm's-length civic organization purchased the Carlton Inn across the street from the convention centre in 2013 for just under $6.6 million.The cityextended CentreVenture's line of credit to facilitate the purchase.

• CentreVentureacquires Carlton Inn, plans to redevelop it

Sources in the real estate industry have criticized the purchase price, suggesting that previous CentreVenture CEO Ross McGowan overpaid for the property.

Current CentreVenture head Angela Mathieson she was appointed several days ago disputes that assessment and says the price also included an ongoing business and not just the land.

Mathieson says CentreVenture hadidentified safety and security issues stemming from the operation of the Carlton Inn as further incentive to buy the business, shut it down and level the old hotel.

Mathieson was not sure how much CentreVenture has paid for the demolition costs.

If city councillors approve ofreleasing Stuart Olson from its obligation to build the hotel, they would also be asked to agree to use the $3.75-million penalty to be paid by the firm to pay down CentreVenture's line of credit.

A hotel for the convention centre

Sources tell CBC News that an option agreement for CentreVenture's Carlton Street property was signed last spring.

Mathieson won't confirm its existence, but says any deal that includes a proper development agreement for the land is a long way off.

She does say thatCentreVenture is working with one developer on the property, adding thatputting a hotel on that property is still the goal.

"We are not working with anyone else, so we are exclusively working with them on a 'due diligence'period," she said.

Mathieson saidthe goal is a bit larger than just a hotel.

"What we really want to see is connectivity through that site,through the convention centre, then back towards Portage Avenue," she said.

One purpose, little communication

Klaus Lahr, the president of the RBC Winnipeg Convention Centre, expressed relief that the centre's boardand Stuart Olson had reached an agreement letting the construction company out of itsobligation to build the hotel, saying he hopes it clears the way for some other proposals to come forward.

Lahr says there was little communication between himself or the board of the convention centre and CentreVenture on its efforts to develop theCarlton Street property since it purchased it in 2013.

That's despite the fact thatMcGowan, the formerCentreVenture CEO, saton the convention centre's board for a time.

"They are an arm's-length organization of the city, we are a Crown corporation of the city, but there is no cross connections and no cross obligations there," he said. "Our contact with CentreVenture on the issue was irregular at best."

Lahrsaid CentreVenture was talking to Stuart Olson, but not his office and not the convention centre board.

Lahradded that getting Stuart Olson out of the picture for the hotel development is a good thing, but he admits there will not be a hotel in place when the newly-expanding convention centre is completed.

Until it is, the expanded facility will not reach the goals set out in its business plan.

Meanwhile, Bowman told reporters onFriday that he has concerns about the flow of information to city hall about what was happening in the search for a hotel, the development of the Carlton Street property,and the ultimate collapse of the agreement with Stuart Olson.