By Larry Murray
Published: Sept 12, 2014
The pending sale of 59 acres and 44 acres of waterlots that is our Oceanfront is a concerning issue for a community that deserves so much more. It’s been reported there is cash purchase of $15 million. But let’s not forget there is a debt of just over $11 million against the property.
The $15 million isn’t a correct picture. Why is the community Squamish Oceanfront currently being sold for under five million dollars then? A much smaller municipal lot in the industrial park across from Toyota was recently sold for $8 million. What about the due diligence of the decision-makers for this recent SODC sale. Who was driving the debt and who was approving it?
Many can recall the earlier Qualex project brought a robust deal to the district and the full details were outlined early for all to see.
That deal offered 50 per cent return to the district plus numerous amenities and SODC remained in the driving seat well into the future of the development. As for this deal, very little real information is available. I sense the community is getting truly ‘slammed and dunked’ in this current sale. There are many unanswered questions on SODC.
What are the conditions of sale? Does this refers to raw land or zoned or unzoned? Is the land serviced? Who pays for the services? Who determines the DCC’s? And who pays the DCC’s? Who pays for the on-going remedial costs? What does ‘potential to participate in future profits’ mean? Are these gross or net profits?
It seems to me a LNG referendum pales in comparison to the SODC debt ($11.5 million). This really makes the pending sale of the community asset known as the Oceanfront about $4.5 million.
A LNG Referendum is a ‘what could be’ action as it is non-binding while the SODC debt is a ‘what is’ in that the tax payer will receive only $4.5 million for this massive land and waterlot location, and it’s moving rapidly to become binding.
A referendum to reopen the SODC ‘deal’ would have a real impact on the possibility of reworking this sale in the community favour. So many non-public decisions from a board that is supposed to be arms distance from the DOS and represent this asset for the community interest.
Where is the public discourse on the SODC deal? The fairy tale about the sale of the Golden Goose is about to happened again….but for real.
Larry Murray was the chairman of SODC from 2004 to 2008
Douglas Day says
I fully agree with Larry Murray on this issue. There is still time to put an end to this virtual theft of our prime waterfront property.
Vote Kirkham out of office on November 15th before he can complete this outrageous give away of our lands.
Respectfully submitted,
Douglas R. Day
Donny says
Larry and Doug,
The documents including the Sales Agreement and the Memorandum of Agreement are on the Municipal/SODC website.
I have worked with many Loan Agreements/Sales Agreements but must confess I found these to be a little difficult so if I have mis–read them , forgive me.
But first to Qualex. I was against the DEAL , not Qualex. It was negotiated out of weakness, giving far too much away. e.g.
-Qualex was the sales agent for the development. Even if another realtor sold a unit, Qualex ALSO got paid a commission out of profits BEFORE a distribution to Qualex/Squamish.
-Squamish doesn’t pay taxes. Qualex does. “To level the playing field” Qualex was given the right to increase its share of the profits BEFORE a distribution to Qualex/Squamish. Only once have I seen one party give away its tax benefits to another, and that was between Federal/State in Australia.
That’s just to give a flavour of what happens when a strong experienced party negotiates with a weaker one who was desperate to get enough cash out of the deal to retire a mortgage of $1.5mm that was at the time “hidden”.
The current deal:
Squamish is selling for $15mm(million)…..not $4.5mm Larry.
The Buyer pays cash of $1mm now in trust..
The Buyer pays $14mm cash on closing or can assume the Bank of Nova Scotia debt for a deemed amount of $14mm.
If on closing, the amount owing is less than $14mm, the buyer pays Squamish the difference (lets say $14mm- actual $11.5mm = $2.5mm cash). I would not have given the option to assume; because the loan will still have the signature of Squamish on it, and although the documents will declare Squamish no longer on the hook, similar cases have seen that if a project gets into financial trouble , every one in sight gets linked into the law suit.
SODC will change its name to something else (don’t remember what it will be)
The buyer is a numbered company and will change its name to SODC.
A shell game will then take place , the outcome being that the Buyer will be come the General Partner . Squamish will become the Limited Partner.
The General Partner will then DEEM Squamish to have a 25% $5mm interest in the project with NO liability for Remediation.
The General Partner will have a 75% interest , liable for 100% of remediation, and the right to further mortgage the property.
By my calculation, $1mm cash, $14mm debt assumption and $5mm free capital ownership, that makes the sale price $20mm ????????????
I had originally assumed that it was sold for $15mm , and Squamish then re injected $5mm into the project , so there is room for confusion here.
So here are a few of my concerns about the deal , irrespective of the Sale Price.
-The documents state that Squamish will proceed with zoning to enable the development to proceed. Why didn’t Squamish complete zoning within the last 8 years and sell as “zoned property” at say twice the price. Banks rarely lend against un-zoned raw land , it has no cash flow to service the debt. Once zoned they lend 505 of value and when serviced 75%. That would have taken all the pressure off Squamish with its lender and would have avoided Squamish giving Bank of Nova Scotia its Guarantee. All that did was put our taxes at risk. We blinked at the poker game.
It isn’t clear who pays for the Services, or how far up the street will be Squamish and how far will be the Developer’s cast.
It doesn’t deal with new roads (the estuary) and who will pay.
It doesn’t say that the General Partner will do the development himself. If the job is sub contracted, we don’t know the financial or completion capability of the contractor. i.e. Squamish doesn’t know who it will be having a relationship in the end.
The participation in profits is all in the mists of the future, The General Partner is entitled to Management fees ( fair enough) but there are all sorts of costs that are chargeable Before Squamish sees any return on profits.
(sounds a bit like LNG with unnamed deductions before profits are taxable)
Perhaps it is my thickness, but I couldn’t figure out were Squamish 25% $5mm investment is placed. The company shell game left me muddled. Maybe a Council member can clarify!
We have no idea what , if any, undeclared Side Agreements may exist.
And lastly, my old soap box; Squamish is now a Developer of commercial and residential property. How many commercial and residential developers will cry foul, CONFLICTOF INTEREST, when they apply and are rejected for zoning or variances????
Hope that helps, Larry and Doug.
Donny.
Donny says
Just to add to my last epistle;( noting my caveat that all I say is only MY interpretation of the facts. No politician has discussed what they have committed us to, hopefully ALL candidates will be forced to speak on the deal.)
What is missing is a 15 year Cash Flow projection Best, Expected, Worst cases showing costs to develop, hold periods, and sales achievement and debt levels AND the ultimate return that is expected by us the Limited Partner. From that we could see also just what infrastructure costs are going to be for the developer and what is for us the citizen/tax payers. Perhaps it could even show why Doug Race and Mayor Kirkham are so optimistic about this deal.
The General Partner is going to want to borrow money for this project and any lender will require those projections. The projections surely exist now , if the developer is any good.
As the Limited Partner holding 25% of this project , WE are entitled to see them so that WE can assess the value of this deal.
So lets challenge the candidates for Mayor to “show us the money”.
Wolfgang W says
Thanks Donny, although you address this to Larry and Doug, let me jump into it too: You are hedging your post by stating that ‘there is room for confusion’ presumably because of the complexity and wording of the deal.
Firstly, when Larry named the $ 4,5mm figure, he must have meant ‘net proceeds’ – sales price minus outstanding debt. Same as if you mortgage your home to the hilt and then sell it at whatever price, but as a result of the debt against it you end up with only a pittance in your bank account. That’s what we have here.
Secondly, the 25% Limited Partnership interest deemed to be $ 5,0mm appears to me simply a means of putting a base value figure on that LP participation. It is not the same as the receipt of $ 5.0mm in cash now, which the seller could then choose to reinvest or not. Not only will its eventual payment likely be far in the future, but also depending on future events. At least that is how I read it from your comments.
Donny says
Wolfgang, You are probably right , and Larry and I are both also right. The real point is the ludicrous situation that we only net about $4.5mm because
our present and past Councils wasted $11.5mm borrowed money on virtually nothing.
I am working on the assumption that the buyer numbered company has $15mm in capital and uses the resulting cash is used to buy the land. In issuing 25% of that share capital to Squamish then we have 25% of $15mm.
(I know , very simplistic and only equals $3.75mm+ say $1.25mm future value).
Yes I’m hedging my bets on this interpretation . Alas alack it just shows how infuriating it is that Council has released almost a total lack of solid information.
I find it hard to give my vote to any one of the incumbents that allowed this whole situation to accrue.