A damning report by the monitor overseeing the League group of companies’ restructuring efforts cites inexperienced, inept management and the poorly executed Capital City Centre in Colwood as the reasons for the death of Victoria-based League.
In his 120-page report, Mike Vermette, a vice-president at monitor PricewaterhouseCoopers, noted League will be winding down all operations, liquidating all assets and cease to exist after the first quarter of 2015.
The blame for that appears to rest on the shoulders of League founders Adam Gant and Emanuel Arruda. Both were dismissed from the company early in the restructuring process.
“[League] did not have meaningful experience in key areas of real estate management, property development, financing and administration management,” Vermette wrote, noting the reins of the company were clearly in the hands of Gant and Arruda.
They started League in 2005 to pool funds to invest in the kinds of commercial real estate normally available only to institutional investors. And at one point League had six offices across Canada, employed 135 people, held 170 legal entities and $418 million in assets.
But League also had $233 million in liabilities, owed $369 million to investors and had serious cash-flow problems, Vermette said.
He said the League dream all but died with Capital City Centre, which now comprises a sales centre, strip mall and a half-finished parkade at Colwood Corners.
“The Colwood project was a high-risk venture, poorly executed and is the single largest contributing factor to League’s insolvency and liquidation,” he wrote.
There was little good news in Vermette’s report. In fact, the outlook for many stakeholders involved with League is bleak.
While secured lenders, who are owed $199 million, will get virtually all of their money back — there will be $193 million available after asset sales — other creditors and investors will be getting pennies on the dollar.
Some creditors with security will get $1.8 million of the $7.5 million owed to them; the general creditors, which include employees and trade creditors that are owed $23 million, stand to split $2.1 million.
By far the biggest losers will be the investors.
From the time League started in 2005 until it filed for creditor protection under the the Companies’ Creditors Arrangement Act in late 2013, League raised $493 million from investors.
While some of that has been returned over the years, investors are still out $369 million and can look forward to just $37 million coming back to them.
“It was hoped the CCAA proceedings would provide an opportunity for the company to restructure its affairs and emerge as a viable business that would provide investors with a chance to recoup the value of their investments,” Vermette wrote in the report.
“Despite the tireless efforts and commitment of interim management … League determined an orderly liquidation of assets would provide the greatest return with the most certainty to all stakeholders generally.”