Carla Wilson, Victoria Times Colonist, March 27, 2010
Creditors of major projects like Bear Mountain Resort should stick with developers while waiting for a stronger economy and a revitalized market, says Rudy Nielsen, president of NIHO, a company that develops residential property throughout B.C.
Langford's Bear Mountain Resort is one of several large B.C. projects to face financial woes in the recession, said Nielsen, also president of Landcor Data Corp. Bear Mountain Master Partnership was placed under creditor protection this week, a move that also unseated Len Barrie as CEO.
"My suggestion to any developer is to sit tight until things start picking up a bit. All my subdivisions -- I put everything on hold ... I'm just hunkering down," Nielsen said.
Despite indications of an improving economy, Nielson is not doing any development until the market is stronger.
"The creditors in some cases just don't have much choice but to work their way through with the owners. Why foreclose? The owners know more about it than the creditors do. You're only going to get so many cents on the dollar, so I say to all creditors right now on any project, 'Try to hang in there with everybody until we see a better market.'"
Some projects in trouble in B.C. should never have been started in the first place, Nielsen said.
Nielsen, however, has flown over Bear Mountain a few times in a helicopter and calls it a "pretty good project."
The recession has swept through B.C.'s real estate industry, leading builders to cancel or postpone multi-million-dollar housing developments, and financial institutions to tighten up lending.
"There's lots of big projects like that that just weren't ready for a recession like we've had," Nielsen said.
"The financing on most of these projects is very, very expensive. Pretty soon, you've got no more credit line."
Large developments "are great when we have a year like 2007, when we had $64 billion worth of real estate sold in B.C. Now we are down around $42 billion [annually]," he said.
The Edmonton and Calgary markets, which used to bring $2 billion annually in sales to B.C., has dropped off to probably $500 million, Nielson said.
He is now focusing almost entirely on attracting international interest.
Bear Mountain sales were strong in 2009, with sales of nearly $100 million. While housing lots were selling, condo construction ground to a halt and prices on finished units were slashed.
Condos in the eight-storey Finlayson Reach were knocked down by 30 per cent last year and are still being advertised at that rate. One two-bedroom unit dipped to $399,000 from $599,000, according to the Bear Mountain Resort website yesterday.
Bear Mountain's financial issues are not being raised by sellers or buyers, said Matt Bourque, an agent with Fair Realty. "It doesn't seem to come up," he said.
Bourque sold eight houses on Bear Mountain last year, with most going to buyers from out-of-province.
A $1.374-million home facing the 18th fairway is one of his four current listing.
Executives are attracted to Bear Mountain houses, and buyers are interested in the resort's amenities, Bourque said.
BEAR MOUNTAIN BUMPS
- The Spencer Road interchange has been stalled since June 2009. Dubbed the "bridge to nowhere," the $9.75-million project was to be paid for by five property owners with development properties in the Skirt Mountain area. It was chiefly fast-tracked to solve the bottleneck created by swift growth at Bear Mountain Resort, which has only one way in and out. Bear Mountain's share was pegged at $4.797 million. Barrie's insistence on completing the interchange and roads angered environmentalists and First Nations who coveted the area for what they called a sacred cave system.
- An annual audit of Bear Mountain's financial dealings, leaked late in 2009, raised questions about transactions attributed to Len Barrie. A subsequent report from the Bear Mountain Partnership's accounting firm suggested Barrie consented "to misappropriate funds [from Bear Mountain Master Partnership] for personal purposes."
The report refers to fund transfers totalling $28.6 million. At the same time, Barrie was raising funds to finance the purchase of the Tampa Bay Lightning of the National Hockey League.
- The real estate crash cancelled or stalled some development projects at Bear Mountain. These include Robert Quigg's $1.4-billion luxury condominium Capella, and the $100-million Soaring Peaks condominium project on Champions Court at Bear Mountain.
- Efforts have failed in the past couple of years to sell parts of the 500-hectare development located in Langford and the Highlands. A $350-million agreement in principle with a Dubai-based investment-holding firm was announced in July but did not close in the fall. Siraj Capital was planning to buy the residential component remaining at Bear Mountain through a sukuk, a hybrid of a share and conventional bond that Islamic investors use to avoid paying interest, something that is forbidden in Islam.
- Len Barrie, former Bear Mountain Resort CEO, was named in a lawsuit filed in December by GE Canada Equipment Financing G.P. for what it claimed was a default on a $4-million loan to buy a private jet in 2006. However, one of the other owners in BM Jet Corp., has said he reached an agreement to buy the plane.
IF YOU'RE A BEAR MOUNTAIN EMPLOYEE:
The B.C. Supreme Court, under the Companies' Creditors Arrangement Act, says Bear Mountain is entitled to pay all outstanding wages, salaries, employee and pension benefits, including long and short term disability payments, vacation pay, bonuses and expenses -- excluding severance pay -- incurred in the ordinary course of business. With the consent of the monitor, Bear Mountain can terminate or temporarily lay off employees.
IF YOU'RE A SUPPLIER OR CREDITOR:
Bear Mountain is entitled to pay all expenses reasonably incurred in carrying on the business. These include expenses for preservation of property and business as well as capital expenditures. Bear Mountain is to pay expenses on all obligations incurred after the March 25 filing date, including goods and services supplied to Bear Mountain; and amounts outstanding to creditors for goods and services provided prior to the court filing date.
IF YOU'RE A HOMEOWNER:
All services will be maintained. Roads and utilities belong to the municipality of Langford, which is responsible for services.
ROLE OF MONITOR:
PricewaterhouseCoopers Inc. will monitor the property and conduct of business.
ROLE OF CHIEF RESTRUCTURING OFFICER:
Prowis Inc. will oversee Bear Mountain Master Partnership, Bear Mountain Development Holdings Ltd., 18 on 18 Developments Ltd. and Bear Mountain Resort Management Corp. The court order says the chief restructuring officer will be given access to all books, securities, records, documents, accounts, contracts, deeds, papers, minute books, records and information related in any way to the property; all budgets, accounting and computer records, computer programs and tapes, leases and agreements related in any way to the property; all money arising in respect to the property.