The president of the Vancouver company aiming to buy the Oak Bay Beach Hotel for $62.2 million is “excited about the opportunity to acquire this unique and beautiful property.”
Financing company REV Investments Inc.’s bid for the 1175 Beach Dr. waterfront property is being recommended by the hotel’s receiver, Ernst and Young. It is now up to the B.C. Supreme Court to approve the offer, which is set to close April 29.
“We are looking forward to bringing our experience to the Oak Bay Beach Hotel and working with the tremendous group of employees and suppliers so that it can thrive and achieve its fullest potential,” Jason Ratzlaff, president of REV Investments Inc., said in a Wednesday statement.
OB Hotels Ltd. is a new company formed to buy the hotel. The plan is to “continue to provide Victoria and the Oak Bay area a first-class resort property,” Ratzlaff said. No other details were provided.
The luxury hotel, which commands the highest daily room rates in the region, opened in 2012 and went into receivership in 2014.
Secured creditors — led by a group of construction lenders, including REV — have claims of $125.98 million on the property.
REV’s bid would cover the bulk of the $76 million owed to those construction creditors. Other secured creditors, including 53 bondholder claims totalling $49 million, would receive nothing. Unsecured creditors claiming close to $20 million would also be shut out. These include large companies and small local firms.
Ernst and Young put the hotel on the market last fall, eventually shortlisting eight potential buyers. All were kept confidential.
REV’s offer will see it put in $37.5 million cash. It also has a commitment from Timbercreek Asset Management, of Toronto, for up to $38.5 million in a first mortgage, secured by 88 unsold strata-title hotel units, 14 unsold condos, the restaurant, pub, cafe, theatre, and spa.
REV is willing to bear the risk of a legal battle over who is on top as secured creditors.
A group of bondholders, representing about $18 million, is going to the Supreme Court of B.C. on Monday to argue its claim is superior to the construction lenders.
Kevin and Shawna Walker developed the property with 100 strata-titled hotel units, 20 condos, and other amenities. But by the time it opened, the real estate market had crashed in the wake of the 2008 recession. Only 12 hotel units and six condos sold.
Tourism consultant Frank Bourree of Chemistry Consulting expects REV to hang onto the award-winning hotel, which is now turning a profit.
“They can now get beyond all of the controversy and just focus on building the hotel business up,” he said.
“In terms of its competitive position, I think the hotel is in pretty good shape,” Bourree said. “I really don’t think they need much. It’s not an old hotel. It’s quite nicely appointed.”
If REV tried to sell the hotel, “I think they would be hard-pressed to get a lot more money than what they just paid for it,” said Bourree, who had figured it would bring in $75 million.
REV is planning to buy at the right time of year because the tourism market is starting to take off, he said.
Bourree said it would make sense for the new owner to continue on the original plan of selling the hotel units as the region is now in a “red-hot” market.
“We are in a completely different market today than we were even two years ago. I really think there is going to be a lot of interest now that they are sorting out their legal arrangements.”
In an environment where land and construction costs are high, it is “often the second guy in” who is financially successful, Bourree said.
Bookings to date for this year have surged compared with the same time last year, the receiver’s report said. Victoria had a record tourism year in 2015 and this year is expected to be as strong.
The hotel’s bookings for this October, for example, are up by 628 per cent year-over-year, to 182 from 25. This month, bookings are up by 155 per cent, to 1,073 reservations compared with 421 the year before.
