On the Deal Q&A: Under the Big Top

‘Retail-tainment’ rises: Québec-based icons team up to offer Cirque du Soleil CREACTIVE in malls
The stage was set for a stellar performance as lawyers for shopping centre owner and developer Ivanhoé Cambridge and Cirque du Soleil negotiated their first agreement for a new retail concept: CREACTIVE family entertainment centre at Vaughan Mills mall.

LEXPERT: This deal is innovative in the retail space. Can you talk about how it all came about? Did the shared connection with the Caisse de dépôt et placement du Québec play a role?
Isabelle Durand, Vice-President, Legal Affairs, Operations, Ivanhoé Cambridge: The shared connection with the Caisse did play a role and allowed for an easy introduction, but discussions between our respective senior management soon revealed the extent of our complementary expertise.Ivanhoé Cambridge as an experienced real estate owner, developer and operator with an international footprint, and Cirque as an internationally renowned live entertainment company.
Geneviève Paradis, Senior Director, Legal Affairs, Cirque du Soleil Entertainment Group: Cirque du Soleil Entertainment Group had been working on this creative concept for years and we were looking for the right partner to bring it to fruition. We wanted to open the first CREACTIVE location close to our home and naturally looked to our closest partners. Ivanhoé Cambridge seemed like the perfect fit: of course, we both share ownership with the Caisse. But beyond that, this project fulfills both the vision of growth of Cirque du Soleil and Ivanhoé Cambridges vision for the future of retail.

LEXPERT: I understand that Ivanhoé is constructing a buildout to accommodate the height of the project. Why was Ivanhoé willing to make a large capital investment?
Durand: It is really one of Ivanhoé’s priorities to offer innovative experiences and diversify its offering to embrace entertainment and experiential, both to support its existing tenants and to offer the best and most up-to-date experiences to its discerning consumers.  We believe that this collaboration with Cirque exemplifies this vision for the future of retail, and the investment required is evidence of Ivanhoé’s commitment to making it happen.
 
LEXPERT: And from the Cirque side, how does this deal fit with its goals?
Paradis: While we will always continue to create shows centered on circus arts, an important part of our diversification strategy is to broaden our project portfolio by developing new forms of entertainment, reaching new audiences and expanding our own creative and production capabilities. Family entertainment centres are a natural fit supporting this effort. It is the evolution of a concept which has been successful at Club Med since 2015. We are adapting it to make it more accessible to families by opening indoor locations close to their homes and available year-round.

LEXPERT: What can you tell me about the way that the agreement was structured?
Anthony Arquin, Davies Ward Phillips & Vineberg LLP (for Ivanhoé Cambridge): We cannot share the specifics of this transaction, but its essence was really about partnering and sharing of risks in this innovative concept for the retail-tainment industry.
Mathieu Deschamps,
Norton Rose Fulbright Canada LLP (for Cirque du Soleil): I would add that, as should be the case in negotiations with respect to putting in place a partnership like CREACTIVE, we have all worked toward the common goal of creating a “win-win” situation for both parties. The collaborative spirit everyone displayed during the negotiations was key in achieving this goal and making sure that both parties are incentivized and aligned in making this adventure a success. 
 
LEXPERT: Was the agreement novel or something the lawyers have seen many times before? How complex was it? Was it structured in a particular way to be a model for the next deal of this kind?
Arquin: It was a complex transaction to put together, in the sense that both parties wore many hats — landlord, tenant, partner, licensor, operator — in a mix of real estate and artistic industries, which entailed a broad scope of business considerations. What struck me the most during this transaction is how often we spent time brainstorming together so as to anticipate how this venture would evolve over the years. In light of this unique venture, the agreements are truly tailor-made.
Deschamps: One of the key aspects of Cirque du Soleil’s business is to build on its peoples creativity to achieve outstanding results. I have been working on many projects with Cirque and I can confirm that Geneviève and her colleagues of the Cirque legal team are no exception to this. This is one of the reasons why working on Cirque’s projects is always so interesting. In this transaction, we had the opportunity to work with Isabelle, Anthony and the rest of the working group who were equally committed to find creative solutions to complex legal and business considerations. This contributed a great deal in making this transaction a success.
Durand: I would add that this transaction really played internally on the depth of expertise that we have in our legal department, which enabled us to cover all the angles: the leasing aspect was spearheaded by Sunita Mahant, who heads the legal team in our Toronto office, and our compliance officer Isabelle Tremblay assisted with the privacy, data protection and IP aspects; they were the key team members internally in making this happen!
 
LEXPERT: What was the atmosphere like in the boardroom?
Durand: This was one of the best things about this transaction — two sophisticated parties who recognize what the other can bring to the table — discussions were always constructive and conducted in the most respectful manner. 
Arquin: This transaction is the epitome of how smooth a transaction can be when there is reciprocal trust and respect amongst the parties. The negotiations took time, not because of a difficult atmosphere, but simply because we all worked hard together to come up with the best end result for everyone. In many years of negotiating real estate deals, I have rarely seen such a constructive atmosphere in the boardroom. All of the parties saw this deal as a win-win venture and it was felt from the outset.
Deschamps: I agree. We were lucky to work with highly competent people on all sides who are confident about their capacity but are also able to take into consideration the others’ point of view. This helped us develop a trusting environment in which we could create open communication channels in order to come up, as a group, with great legal solutions for both parties despite the complexity of the transaction.
Paradis: The lease was a cornerstone agreement to negotiate in this deal. Isabelle’s team and colleagues in Toronto were particularly attentive and responsive to the complexity and specificities of the project. Building an innovative concept of indoor family entertainment experiences specifically designed for a retail location requires a great deal of flexibility for both the tenant and landlord.

LEXPERT: What kind of insurance is necessary with an attraction of this kind? How did the teams deal with this?
Paradis: Nothing is more important than safety at Cirque. The activities offered at CREACTIVE will be recreational in nature and all equipment used in our centres will be designed to be used safely by the general population without any particular training. The idea is for families to imagine themselves in the shoes of our artists and have fun doing so, not to reproduce the acrobatic disciplines done by professional artists in a context of performance.
Durand: Both Ivanhoé and Cirque have internal insurance departments who advised — and in fact discussed together — the specific requirements of this investment.  This is another good example of the complementarity of our teams: Ivanhoé is well versed in everything required from a real estate perspective, and Cirque from the operational and intellectual property perspective.
 
LEXPERT: Would you say that entertainment uses in retail are trending upwards?
Durand: Yes. Entertainment uses are in fact a key component of Ivanhoé’s strategy for the future of retail, to offer innovative experiences for the benefit of the communities in which our properties are located. We believe a key success factor is to choose the right partners for these initiatives, as we have done in this investment with Cirque.
Arquin: Shopping centres have key advantages in the face of a transforming retail industry: prime location; massive excess lands with a high potential of mixed-use redevelopment; heavy foot traffic on an existing densified space; and multiple options to create community events. Retail-tainment enables landlords to draw customers to their malls, similarly to grocery anchor tenants, or the new high-end food halls under construction — another emerging trend. Having said that, retail-tainment should not be seen as the absolute savior of retail: as for all businesses, only the most innovative concepts will thrive and achieve the goal of rejuvenating the retail landscape. This is why the venture between Ivanhoé and Cirque du Soleil is so exciting for real estate insiders: two behemoths in their respective industries are joining forces to create a brand new product, at the forefront of the retail-tainment trend.
 
LEXPERT: Finally, what was most memorable about working on this deal? What did you enjoy? What was most challenging? What will you take away with you?
Durand: The people. All the discussions and the negotiations were always constructive … And of course an incursion into the Cirque world was a real pleasure. Quite a change from our usual files!
Arquin: I often felt as if the teams had previously worked together for many years. The most memorable moment for me was seeing the magnitude of Cirque du Soleil’s facilities and attending an exclusive presentation of the CREACTIVE family entertainment centre concept.
Deschamps: Because of the novel nature of the transaction, which involved juggling with M&A, real estate and intellectual property matters, among others, this transaction was not only an honour to work on but also a great learning experience.
Paradis: At Cirque, we mostly deal with foreign partners and different cultures, which is great, but this deal was different as we were negotiating between two Québec-based international flagships. The collaborative spirit and a real eagerness to make things happen despite the complexity … made it a very positive experience. The additional perk was to conduct most of our negotiations in French for a change!