Court OKs Oak Bay Beach Hotel sale; many creditors receive nothing

The Oak Bay Beach Hotel has been sold for $62 million.

The B.C. Supreme Court approved the sale of the high-end hotel, which has been in receivership and under the management of Ernst and Young since December 2014.

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In his reasons for judgment, Justice Paul Walker said the sale represents “the greatest overall value” for stakeholders.

Receiver Mike Bell of Ernst and Young said the deal means construction creditors, who are owed about $79 million, will effectively be made whole, while bondholders, secured and unsecured creditors will recover nothing.

In total, creditors have claimed in excess of $130 million, including interest owed, against the hotel that was developed by Bison Properties, headed by Kevin Walker. The hotel went into receivership two years after opening.

The sale will see Noah Holdings Ltd., which is affiliated with construction creditor REV Investments, assume $19 million in construction debts owed to REV and construction creditor Metro-Can. It will pay out $37.5 million in cash plus interest to construction creditors Highland Park Financial and John and Bonnie Buhler Foundation Inc.

Noah Holdings has secured a first mortgage to cover the balance of the sale price.

Noah will be required to put $18.1 million in cash into a trust account to cover money claimed by a group of bondholders who had invested in the property.

“In case the court finds at a later date that the bondholders do indeed have security in priority to the construction lenders,” Bell explained. “That has not yet been determined.”

The group of bondholders is taking its case to court. They invested in the hotel believing they would receive a unit in the property, but never received legal title.

In his decision, Justice Walker said the sale he has approved, with the $18.1 million set aside, “balances the interests of competing creditors. In addition, the fate of the hotel and of its employees will be more certain.”

Bell said despite the complexity of the case, the receivership process has gone as expected.

“The dollar values in this are significant, we’re talking $50 million to $60 million and $130 million in creditors’ debt registered against the company,” he said. “It’s not uncommon with that large a dollar value that the insolvency proceedings get complex.”

In earlier interviews with the Times Colonist, Noah Holdings Ltd. director and REV Investments president Jason Ratzlaff said they were keen to start work at the hotel.

“We are looking forward to bringing our experience to the Oak Bay Beach Hotel and working with the tremendous group of employees and suppliers so that it can thrive and achieve its fullest potential,” Ratzlaff said.

Ratzlaff could not be reached for comment Monday.

aduffy@timescolonist.com

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