The Land Conservancy of B.C. will be seeking approval for a plan to bring more than three years of creditor protection to an end.
If creditors support the proposal on Dec. 2, it will go to the Supreme Court of B.C. for a final decision.
A court date has not been set.
“This vote could potentially end the process [of creditor protection],” said Cathy Armstrong, The Land Conservancy’s executive director.
“It really all hinges on the support of the creditors.”
Three years ago, The Land Conservancy was granted protection from creditors as debts totalled about $7.5 million. The organization has also paid $2.5 million in administration costs for the restructuring and monitoring.
The group’s financial troubles came to a head as it embarked on an enthusiastic purchasing program by relying on mortgages to buy land, a practice that is not common among Canadian land trusts. By 2010, it had 26 mortgages on 15 properties.
Money woes mounted as unhappy members charged that funds earmarked for one cause would be used for another. Money ran out. Donations dropped. Taxes were late, and the Canada Revenue Agency froze accounts. Staff were asked to defer salaries. Board members quit. Last-ditch fundraising appeals were heard. Bitter feuds broke out over money and management.
New management and a new approach took over as the organization worked with the monitor to resolve the complex situation. Many creditors have stuck with the organization throughout, forgiving $1.78 million they were owed.
The proposal is a critical step in the struggle to climb out of debilitating debt, restructure the organization, and ensure its long-term survival.
“I’m optimistic, based mainly on the lack of reaction,” Armstrong said, adding that creditors have been kept up to date.
“Everything we committed to do, we’ve done. It was a massive undertaking.”
Court-appointed monitor Wolrige Mahon said in a report to the court that the proposal is “fair and reasonable.”
Two votes — one for secured creditors and one for unsecured creditors — will be held at the Sandman Inn, 2852 Douglas St. A secured creditor is a lender that has access to an asset if the money is not repaid.
Upcoming property sales are anticipated to fully redeem what’s owed to secured creditors. Wolrige Mahon figures that the sales will bring in $1.509 million. The Land Conservancy and the monitor have submitted reports on the proposal to the court.
An October report stated that $377,000 was owed to secured creditors, whose claims are secured by Land Conservancy assets. Since then, a $134,000 mortgage has been repaid.
The other remaining secured creditor, with a second mortgage on the Qualicum Bat House, would be able to foreclose on that property.
That leaves 146 unsecured creditors owed a total of $3.32 million.
They fall into two groups. One group is made up of 92 creditors owed $5,000 or less apiece.
The plan calls for them to be repaid whatever they are owed — a total of $495,700.
The remaining 54 unsecured creditors are owed more than $5,000 each, for a total of $2.722 million.
Under the plan, members of this group would receive $5,000, plus 22.5 per cent in promissory notes to be redeemed by the end of March 2017.
They could also receive more money through a plan for a zoning bonus density swap.
That proposal would see Victoria developer Chris Le Fevre pay $250,000 to The Land Conservancy for the density allowed at Abhkazi Garden, which has zoning that would allow townhouses on the site.
Le Fevre would transfer that density to another project. Abhkazi Garden would remain in its current state.
The agreement between the developer and The Land Conservancy runs into 2018.
If the City of Victoria goes along with the density proposal, the 54 creditors would receive 31.5 per cent of their original claims, about $857,000. A total of $1.865 million would need to be forgiven.
The Land Conservancy once owned 46 properties around B.C., representing historic and ecologically sensitive sites.
The organization plans to hold onto seven properties with a book value of $7.4 million:
• Abkhazi Garden in Victoria
• Madrona Farm in Saanich
• Second Lake in Highlands
• Kurta/Clearwater near Wells Gray Provincial Park
• Todd Road near Kamloops, south of the South Thompson River
• Fort Shepherd, south of Trail
• Nimpo Lake, 300 kilometres west of Williams Lake in the Chilcotin region
Of those, six have some sort of limitation on the organization’s ability to sell them.
Abhkazi Garden is considered its flagship property and is a revenue generator.
To date, 38 properties have gone to new owners. A major transfer took place a year ago, when 26 properties went to the Nature Conservancy of Canada for $1.5 million.
More recently, the court approved the transfer of Lohbrunner farm in Langford to the Farm Folk City Folk Society with a covenant to preserve the land for farming purposes. That deal brought in $300,000 to help repay creditors and another $200,000 in creditor forgiveness.
Many properties have their own group of supporters, who do not always agree with The Land Conservancy’s plans. A battle is going on right now over the future the Wildwood property near Cedar.
The Land Conservancy plans to sell the ecoforest to a forester who would buy the property with a conservation covenant on it for $725,000, including $100,000 of creditor forgiveness.
Another group, the Ecoforestry Institute Society, is opposed to the sale. The society has been managing the land and wants to take it over.
The Supreme Court of B.C. is scheduled to hear submissions about Wildwood on Monday and Tuesday in Vancouver.
