The Oak Bay Beach Hotel’s receiver plans to put the “trophy property” on the market next week with the goal of confirming a sale by March.
Ernst and Young Inc. will be in B.C. Supreme Court in Vancouver on Friday seeking approval to launch a marketing strategy starting Oct. 23.
The strata-titled hotel on 1.9 acres of Oak Bay waterfront will go up for sale in an effort to recoup at least some of the $140.8-million debt accumulated since it opened in November 2012.
The Beach Drive property has 100 hotel units and 20 luxury condominiums. Of those, 12 hotel units and six condos have been sold to owners who hold clear title.
The landmark hotel features a pub, a restaurant, coffee shop, theatre and spa with pools by the ocean.
Bison Properties, Walker Hospitality Ltd. and Kevin Walker, the sole owner of Bison, went into receivership in December 2014. Walker could not be reached for comment on the latest developments Wednesday.
Creditors are ranked in priority, beginning with the receiver’s borrowings charges and a reserve for any Canada Revenue Agency claims, pegged at $3.3 million in total, in the latest receiver’s report from Mike Bell, vice-president with Ernst and Young in Vancouver. After that, a five-member syndicate of construction lenders has secured debt of $71.6 million, the largest chunk owed.
With an assessment of $66 million for the entire property, the question is whether the sale price will bring in enough to cover the syndicate’s loan — let alone money owed to other debtors with lower payback rankings.
These include 49 bondholders owed $46.5 million, and trades creditors owed $2.1 million.
A total of 24 bondholders signed agreements with Bison Properties that they expected would eventually give them clear title to a hotel unit. But that did not happen. This is a separate group from the 18 who do hold clear titles.
Hotel-room owners are allowed to use the unit for 16 weeks of use per year. The receiver has suspended this arrangement for those two dozen bondholders who do not have title.
Another three bondholders, also without clear title, have moved into condominium units, each valued at more than $1 million. They remain there and that situation has yet to be resolved.
As for the planned marketing push, no price is set for what the receiver is billing as a “one-of-a-kind luxury hotel,” which has racked up numerous awards in this year’s TripAdvisor Travellers Choice awards.
“We are anticipating that it is going to be well-received” in the marketplace, Bell said. “Our goal is to realize as much as we can and to maximize stakeholder value.”
Most interest so far has come from North American hotel-related investors, he said.
The plan is to first canvass a spectrum of buyers and then create in a short list of qualified bidders. A sales agreement would be taken to court for approval on March 4 under Ernst and Young’s proposed schedule.
This is the right time to put the hotel up for sale, Bell said, pointing to strong performance this year, especially in the summer.
“The OBBH has achieved its budget to date for the current fiscal year and it is profitable.”
In the first eight months of this year, revenue rose by more than $1 million, occupancy climbed by 8.2 per cent and average daily rates moved up by 13.1 per cent compared to the same time frame in 2014, Bell said.
The hotel has the highest average daily rates, and highest revenue per available room among properties in this category in Victoria, the report said. The specific figures are confidential, Bell said.
After taking over, Ernst and Young fired five members of the previous management team, realigned its organization, completed a strategic review of operations and launched new initiatives, the report said.
They include preparing a detailed operating budget, assessing room prices, working to attract a broader segment of the travelling public, bringing in a sales manager with a focus on corporate bookings and instituting charges for services that were previously offered at no cost, such as valet parking and transportation to downtown Victoria.
Hotel management firm Icon Services Ltd. was brought in and remained until late September.
The anticipated sales process will not affect guests, Bell said. The hotel is heading into its winter season, with several holidays offerings available.
Ernst and Young is also asking for court approval to start a claims process which would see individual claims verified.