Surrey city council is dissolving its quasi-public real estate corporation, the Surrey City Development Corporation, in favour of in-house transactions, following a secret vote in April that was announced to the public Monday.
SCDC is a for-profit real estate development company and is separate from the City of Surrey with independent finance, operations and governance. But its sole shareholder is the city and it pays annual dividends from the sale and leasing of deemed surplus city-owned land.
Since incorporating in 2007, under direction from former mayor Diane Watts, SCDC was most notably involved in the development of 3 Civic Plaza in the city centre and the Campbell Heights industrial land.
“Council believes the time is right to bring these activities back under the purview of the City and have the work done in house,” said Mayor Doug McCallum in a written statement.
McCallum provided no reason for dissolving SCDC.
The transition to bring all of the corporation’s assets under the direct control of the city is expected to conclude in 2021, but transactions identified in the latest five-year business plan are expected to continue. That business plan has not been made public.
SCDC issues shares to the city in exchange for beneficial ownership of land in trust. It takes that land and partners with private developers.
“On the financial side, SCDC’s business strategy has two primary components; firstly, to generate profits from real estate developments, and secondly, to generate net income from investments and an income-producing portfolio of properties,” states its 2018 annual report.
After construction of a development, as in the case of 3 Civic Plaza, SCDC sells its portion of the project. SCDC reported a net gain of $7.3 million from 3 Civic Plaza. In some instances, as in Campbell Heights, it leases city land to companies. SCDC showed a total net lease income of $605,814 in 2018.
The market value of the SCDC portfolio was appraised at approximately $250 million at the end of 2019, according to the corporation’s website (but this figure is not disclosed in its 2018 financial statements).
SCDC states it has a current cumulative surplus of $46 million. That’s down from $63 million on December 31, 2018, according to the most recent financial statements.
In an online statement, SCDC said it “has provided consistent revenues for the City to support its goals.
“Since 2013, SCDC has paid a $4.5 million annual dividend to the City. By the end of 2019, had paid it a total of $31.5 million.
“The corporation is on track to pay another $4.5 million dividend by the end of 2020, bringing the total of dividends provided by SCDC to the City to $36 million.”
Questions such as, why the surplus dipped so much in the past year; why $1.73 million worth of salaries and benefits is not disclosed in more detail; exactly how much land has been sold in 13 years; and what assets are to be transferred were redirected from senior SCDC management at the direction of city communications manager Oliver Lum, who would then pose the questions back to SCDC management and take the answers and provide them back to Glacier Media. Lum did not reply in time for publication.
Couns. Steven Pettigrew and Linda Annis have both voiced concerns about the transfer of assets to the city, believing they may be absorbed into the police transition budget, particularly as the city faces financial uncertainty and a slough of cancelled capital projects.
No council member may disclose how they vote in an in-camera meeting, said Pettigrew, however they may express their opinions on said vote.
“I am not happy with the decision to dissolve SCDC,” said Pettigrew via email.
“I am concerned about several things regarding the dissolution: the potential loss of our reputation with the business and the developer community; the loss of momentum on SCDC-sponsored projects; the possibility of SCDC assets being absorbed into the City and then being sold off to provide additional funds for the [Surrey Police Department],” added Pettigrew.
Annis said, “SCDC has been an incredibly valuable arms-length agency of the city as we ensure we’re making the best possible use of city land and leveraging it for our community’s future.
“Doug McCallum has a long history and habit of selling off city lands and it worries me that scrapping SCDC will put our land at risk.”