A wrench has been thrown into plans to sell the Oak Bay Beach Hotel next month, after B.C. Supreme Court was unable to settle a fight among competing creditors.
Further legal battles are likely and may block a quick resolution.
The luxury waterfront hotel on Beach Drive has been in receivership since December 2014, two years after it opened.
Receiver Ernst and Young is supporting a plan from a creditor, part of a group that paid for the hotel’s construction, to buy the property for $62.2 million to pay off the construction creditors and close the deal April 29. A sale must be approved by the courts. It’s unclear if the buyer would operate the hotel or try to sell it.
Two secured creditor groups are vying to maintain a stake in the hotel.
Justice Paul Walker said in a ruling released Tuesday that the complexity of the case meant he could not make a decision during a five-day summary procedure earlier this month in court in Vancouver.
No witnesses address the court in a summary matter. A trial with witnesses remains an option.
Secured and unsecured creditors of hotel development company Bison Properties, headed by Kevin Walker, are claiming $126 million in total.
The next court date is March 30, when the receiver will apply to sell the hotel as planned, said David Gruber, lawyer for a group of bondholders who invested a total of $18 million, believing they would receive legal title to a unit in the project. Some are already living in their units, but could lose them if the sale goes through.
“Some of the bondholders put their entire retirement savings into the investment and some are currently at retirement age,” Justice Walker said.
Gruber took part in a case-management conference in Vancouver on Tuesday afternoon. These meetings involve the participating parties discussing how to handle a case.
“We are going to apply to adjourn that [sale] application in order for the balance of our claim to be determined,” Gruber said.
If Justice Walker does not adjourn the sale, “there will be lengthy arguments about whether the sale should be approved,” he said.
“My clients are opposed to it because they say that the hotel should only be sold if there is enough property still held in trust in some form by the receiver to satisfy their claim.”
Gruber said the prospective buyer is offering to pay the bondholders cash at a later date, if the bondholders are successful in court in the future. But the bondholders do not believe that proposal is adequate, he said.
Construction creditors have debts of more than $65 million. Construction money came in at different times, as costs climbed in the lengthy construction process, Justice Walker said.
Bondholders who expected to receive residential units also invested at different times, some before and some after an agreement was struck between Bison and the construction creditors regarding priority in security.
