The Oak Bay Beach Hotel’s receiver is recommending that court approve the sale of the luxury waterfront property to one of the construction lenders for $62.2 million.
If accepted, it will only cover about half the $125.9 million claimed by secured creditors, and leaves unsecured creditors, topping $20 million in claims, with nothing.
The bid from OB Hotels Ltd. and NOAH Holdings Ltd., which were created by secured creditor REV Investments Inc., includes $37.5 million cash and an agreement to take on certain liabilities, according to a report late Tuesday from receiver Michael Bell, a vice-president with Ernst and Young in Vancouver.
The plan is to cover the bulk of $62 million claimed by a group of construction lenders. The group financed the hotel’s construction and has been ranked in priority over other secured creditors.
Plans call for the receiver’s recommendation to go before the Supreme Court of B.C. on or before April 8. If approved, the sale would close April 29.
Ernst and Young has been marketing the hotel since October.
More than 250 domestic and international prospective buyers were initially contacted, sparking hundreds of inquiries, Bell said. This resulted in 15 non-binding bids, a list pared down to eight and kept confidential by the receiver.
The highest offer came in at $65 million. But that bidder, who was not named, failed to provide funding verification and a required deposit. Bell said that offer “is likely not capable of completion.”
REV’s offer was the next highest, he said. It had also put down $1 million. As one of the construction companies, REV is owed $12.7 million, and Metro-Can Construction Ltd. is owed $6 million. REV is part of Surrey-based Metro-Can.
REV has promised to borrow up to $38.5 million to fully pay construction lenders, the John and Bonnie Buhler Foundation Inc. and Highland Park Financial Inc. (Highland is part of Buhler Industries). That would also cover $3 million the receiver borrowed to keep the now-profitable hotel running.
Another construction lender, Sterling Bridge Mortgage Corp., has a claim of $16.8 million.
Lower bids were submitted, but the report did not say how many came in. These included a higher amount of cash, but the proceeds would not be enough to repay the construction lenders, Bell said.
The next-highest bid was conditional on financing, making it uncertain, he said.
REV is seeking to have three condos and 24 hotel suites vacant by April 29. The company is willing to talk to occupants about whether they could come to terms that would allow them to have some use of the units, Bell said.
This group represents bondholders who signed agreements with Bison Properties to receive a condo or hotel unit, but never received title. Records covering occupancy agreements were incomplete or not signed, the report said.
Within the building, there are 18 owners holding legal title.
Other secured creditors are Computershare Trust Co. of Canada at $13,500, followed by a 53-member group of bondholders with a total claim of $49.9 million.
A legal opinion sought by the receiver deemed the construction lenders’ security valid against the hotel property.
However, some of bondholders, claiming a total of $18 million, argue their claim should come before the construction group’s. They filed a lawsuit to back up their position. It is scheduled to start Monday in the Supreme Court of B.C.
The Oak Bay Beach Hotel opened in 2012, briefly fulfilling a dream of Kevin and Shawna Walker, who had taken down the previous hotel on their 1.9-acre property. The Walkers could not be reached for comment.
In December 2014, Bison Properties, the name of the company owning the hotel and spa at 1175 Beach Dr., went into receivership.
Commanding the highest average room rate in the region, the hotel consists of 100 individually titled strata hotel units, 20 condominiums, a restaurant, pub, theatre, spa and pools built into the rocky waterfront.
Since Ernst and Young took over operations, occupancy increased 8.4 per cent, revenues rose by more than $1 million compared with 2014, and the property has won several awards, Bell said.