A long delay in closing the sale of the Oak Bay Beach Hotel could affect its ultimate value, says a hotel and tourism consultant.
“The industry and the staff and management need some certainty of the direction of the property, so a delay is not a great thing,” said Frank Bourree of Chemistry Consulting. “Is this going to go on for a year or two? That will diminish the value.”
The hotel could be affected by uncertainty within the tourism industry, Bourree said, adding that staff tend to drift away when a property is in receivership.
The luxury hotel and spa has been in receivership under the management of Ernst and Young since December 2014. Competing creditors are seeking priority in claims, which could hold up a proposed sale.
Ernst and Young vice-president Mike Bell said in a report this month that the receivership is “preventing the hotel from reaching its full potential.”
In a report issued Wednesday, Ernst and Young said it is going to B.C. Supreme Court in Vancouver next week to seek approval to sell the Beach Drive property to one of the construction lenders.
REV Investments, of Abbotsford, wants to buy the 1175 Beach Dr. site for $62.2 million.
That would pay off the construction creditors, but not other creditors, who are claiming a total of $126 million.
Ernst and Young believes that the construction lenders have priority over other creditors.
Another group of creditors is fighting the construction lenders in court over who has priority and is opposing the sale. This group claims $18 million in total.
They invested in the hotel believing they would receive a unit in the property, but never received legal title. If the proposed sale goes ahead, they stand to lose their units.
Justice Paul Walker of the Supreme Court of B.C. said this week that he was unable to make a decision between either creditor group at this time.
The Oak Bay Beach Hotel was built by Bison Properties Ltd., headed by Kevin Walker.
As of March 31, 2009, about the time those who wanted to own a unit began to invest, the land was appraised at slightly more than $22 million, the judge said. By then, Bison had already incurred liabilities of more than $21 million.
Although the hotel is running at a profit, there is not enough equity in the hotel and its property to pay out creditors, the judge said.
