Derrick Penner, The Vancouver Sun, November 12, 2002
There are at least three buyers anxious to take the famed Douglas Lake Ranch off the hands of bankrupt American telecom giant WorldCom Inc. now that the company appears to have seized control of the property from Bernard Ebbers, said Vancouver real-estate consultant Rudy Nielsen.
"I've got three buyers who have been looking at it really seriously," said Nielsen, owner of the property firm NIHO Land and Cattle Co. "I'm trying to see who is going to be in charge [of a sale] and I'd like to do a non-disclosure agreement with them and and keep all of my purchasers quiet until such a time as a deal could be made."
He doubts, however, that the ranch will fetch anywhere near the almost $100 million Ebbers reportedly paid for it in 1998. Nielsen did a detailed appraisal of the property at the time that valued it between $65 million and $85 million.
"You've got to have some return on it. There's not many guys like Ebbers out there that'll pay that trophy fee [with] unlimited money," Nielsen said.
All Nielsen would say about the potential purchasers he represents are that two are Canadian, the third is from "offshore" and that all of them are interested in operating the 66,371-hectare property as one big ranch and have no intention of parceling off any land for further sale.
"It's a beautiful piece of property and such a milestone for B.C.," he said. "It would be a big shame if it were to be broken up into smaller pieces and separate legal descriptions. But that's where a lot of money could be made."
A spokesman for the ranch could not be reached Monday for comment.
The Douglas Lake Ranch, located 230 kilometres northeast of Vancouver, is Canada's largest cattle ranch. It stretches from a point 26 kilometres southeast of Merritt almost to Vernon and is home to a herd of about 22,000 cows and calves. It was established in 1872 by rancher James Douglas, incorporated in 1886 by its second owner, Joseph Greaves, and made famous as Canada's biggest ranch by its second-to-last owner, Charles (Chunky) Woodward of the Woodward's department store empire.
Residents of the area value the ranch not only for its history, but for the 100 or so jobs it supports and its multimillion-dollar impact on the regional economy.
On Friday, WorldCom's board of directors reportedly seized control of the ranch and other assets that former CEO Ebbers pledged as collateral for $415 million US in personal loans he obtained from the bankrupt telecom.
Ebbers, originally from Edmonton but a resident of Mississippi for almost 40 years, bought the Douglas Lake Ranch in 1998 for a price reported to be somewhat less than the $100 million Cdn asking price. He accumulated personal holdings that included 200,000 hectares of southern-U.S. timberland and a Savannah, Ga., yacht-building business.
WorldCom, which declared Chapter 11 bankruptcy in the U.S. in August, seized the property out of fear Ebbers will file for personal bankruptcy and potentially complicate the company's attempts to recoup the loans.
Ebbers helped found WorldCom as a discount long-distance telephone company and helped it become the U.S.'s second-largest provider. Its share value began to crash in 2000 and its stock last traded for 11 cents US a share on the U.S. Over the Counter exchange.
Ebbers initially backed the loans using his own shares in WorldCom as collateral. In April, he was forced to put up the property he purchased with the loans as surety when the value of his shares fell below $60 million US.
Nielsen said big ranches like Douglas Lake have an intrinsic value beyond that of the property and its ongoing business. It is called the "trophy price" that someone is willing to pay for the prestige of owning it.
"If somebody wants to sit there and say 'I own the second-largest ranch in North America,' one person might be willing to pay $5 million over the appraised value," he added. "Another person, like Bernie, will pay $30 million over the appraised value."
Nielsen added that a potential buyer would have to undertake a serious due-diligence process to establish a purchase price. That price, he said, would be based upon the number of cattle that the land can support and would be enhanced by the licence the ranch has to graze cattle on 140,000 hectares of Crown land.
The timber rights the ranch has, as well the operations of two fishing lodges and a farm-equipment dealership with four outlets that are part of the business, would have to be analysed. He added that a purchaser would have to contend with potential claims by two First Nations bands in the area. The Upper Nicola Indian Band expressed interest in making a bid on the property when a potential sale was first rumoured in August.
Derek Trethewey, co-owner of the neighbouring Stump Lake Cattle Co. Ranch, said his company was in the process of making a bid as well.
Nielsen said what happens to the ranch will depend on how whoever controls a sale goes about putting it on the market. If they do it as a "fire sale," it will go quickly. He would prefer to see six months of worldwide marketing, which would increase the chances of finding a buyer willing to pay a high enough purchase price to satisfy the creditors.
When interviewed in August, ranch manager Joe Gardner said Ebbers had no intention of selling the ranch, but if forced to, he would do whatever he could to make sure it stayed a cattle ranch.
"The way Bernie was going, I thought there would be a sale sooner or later," Nielsen said.