The court-approved monitor overseeing the League group of companies’ restructuring process says a report that aims to answer the key question — where did the money go? — will be released next week.
According to a message released Monday by PricewaterhouseCoopers, which is overseeing the process under the Companies Creditors Arrangement Act, the “waterfall report” will cover such topics as what happened to the money raised from investors, what League founders Adam Gant and Emmanuel Arruda were paid and the estimated recovery that stakeholder groups can expect.
But the key report investors have been waiting for since the restructuring process started last fall is unlikely to offer much good news.
League’s 4,280 investors have pumped about $370 million into the company’s investments.
During the process, the monitor has repeatedly warned investors they are likely to face huge losses as the company owes secured lenders $186 million and it has 460 trade creditors, considered unsecured lenders, who are owed $19.5 million.
Some investors contacted by the Times Colonist believe their money is gone, while others hold out slim hope they will get some return.
That hope was likely further diminished late last week after the court approved the sale of League’s Residences at Quadra Village. Like the other property assets League has been selling, Quadra, a 64-unit complex in the 2800-block of Quadra Street, was mortgaged to the hilt. League bought the complex in 2011 for $6.65 million and did an extensive renovation. It was listed for sale at $14.1 million, and was reduced to $12.5 million.
It is being sold for $11 million to Primex Investments, but there is a mortgage on the property for $10 million, meaning after costs there will be about $50,000 left to be distributed to creditors.
“Frankly, the price is disappointing, but we really had to move the sales process along and that’s what the market was willing to pay,” said League chief executive John Parkinson, noting sales so far have suffered because of a weak commercial real estate market.
Also, a court-imposed deadline for sales means buyers know they can get properties at a discount, he said.
As for the small return on the sales, Parkinson said assets that had low mortgages and offered good cash flow for the company were held back.
“But the bottom line is [the ones being sold now] were highly leveraged and that probably reflects the fact that the model in League seems to have been a highly leveraged model,” he said. “There was probably additional debt put on some of these properties as I guess cash flow became scarcer.”
Many investors believe next week’s report will show money invested in other League projects was used to support the massive Capital City Centre project at Colwood Corners. Parkinson said the real estate market moved against League and the development — 3.8 million square feet in nine building phases over 15 years that included 2,000 condos — became less feasible as the process stretched out.