After nearly facing the bulldozers two years ago, the historic 100-year-old Heriot Bay Inn on Quadra Island is getting a second chance thanks to a new group of shareholders – the island’s residents.
In November 2008, a group of 12 Quadra Island residents acquired the failing inn for $2.85 million.
Since then, 10 additional islanders have bought shares in the inn, swept up by the community-oriented spirit that has rejuvenated its business – which has grown to record highs in the past few years.
The inn, which was rebuilt in 1912 after the original 1895 inn was destroyed in a fire, has always been one of the focal points of Quadra Island life.
But major renovations were needed for the inn, which includes a restaurant, pub, 10 rooms, three cabins, one suite, a marina with 1,400 feet of moorage, a 40-site campground, a gift store and a meeting/banquet centre.
The last owner had nearly completed a major million-dollar overhaul before costs got out of hand and she was forced to put Heriot Bay up for sale in 2006.
Lois Taylor, who was previously an accounts manager at the inn, began showing it to potential buyers on behalf of the owner.
“Their vision for it was not for the Quadra community,” said Taylor. “Some people wanted to tear it down and build anew. Others wanted to split up its different businesses.”
She and Paul Mortimer, who is a business partner of hers, examined the books and thought they may be able to buy the inn using a co-operative model similar to one used in a five-shareholder real estate business, of which Taylor and Mortimer are a part.
“[The former owner] took it to a place where it was just poised for success,” said Taylor.
“She came in and fixed a lot of the physical things that need fixing in a 100-year-old building.”
Taylor and Mortimer began courting other Quadra Islanders as potential investors. Interest was high until the financial crisis hit. More than half of 30 would-be investors balked.
“We lost most of our investors because they lost most of their portfolios,” said Taylor. Twelve investors remained.
They had enough to buy the inn, but not enough for their $3.9 million capitalization plan.
“We decided to take the risk,” said Taylor, who, along with Mortimer, has been designated a co-manager of the inn by the shareholder group – Community Custodial Concepts (CCC).
The name reflects the fact that the owners consider themselves custodians of a community asset.
Today, with 22 shareholders, CCC is seeking at least another 15 people to buy a $100,000 share in the inn.
CCC is using a creative investment tool to encourage potential shareholders who may not have the capital required to invest in the inn: escrow shares.
Investors can, if needed, receive a loan from the inn to buy an escrow share. The loan carries the same interest rate as the inn’s mortgage.
The inn’s shareholders are an eclectic mix – which is not unusual on many of the islands in the Georgia Strait. What most CCC shareholders have in common is that they each have a particular skill set that can contribute to the inn’s business.
Mortimer, for example, owns a construction firm, so he has taken a lead role in the inn’s renovations. Another shareholder is an electrician, another is a building inspector. The inn’s bar manager and dining room manager are both shareholders.
Some of the shareholders are working off their share loan as the inn’s employees.
“Before we bought it, it was losing hundreds of thousands of dollars a year,” said Taylor.
“In the first year we were here, sales went up 26%.”
In 2008, sales at the inn were $1.8 million. In 2009, sales were $2.3 million. CCC is projecting sales of $2.6 million in 2011. The inn has been profitable since 2009, the first full year that CCC owned it.
The shareholder group has generated new business by opening up the inn and its various businesses seven days a week year-long.
CCC has also begun marketing things like spa packages, girls-only getaways and theme parties.
The group is hoping to turn the hotel into a popular retreat for business conferences.
The inn has approval for five new cabins, and is also looking to add an additional four new hotel rooms.
Heriot Bay employs about 25 people in the winter and 80 in the summer.
Christi Edwards, who runs a small business on Quadra Island and owns part of an escrow share in Heriot Bay, occasionally works part time at the inn’s front desk during summer.
“I didn’t have $100,000 but I definitely wanted to be part of what was going on at the inn,” said Edwards, who was born and bred on Quadra Island.
She said that shareholders almost always agree on the business direction of the inn.
“CCC is a made-on-Quadra idea,” she said. “The lawyers aren’t really quite sure how to do all the paperwork, but every single shareholder of the inn believe in how great she can be.”
Added Edwards: “It’s hard to explain the heart that goes into it.” •