Under leadership of CEO David Hahn and Board Chairs Elizabeth Harrison and Don Hay, in a deal negotiated before completion of construction, BC Ferries lent a real estate developer almost $25 million for The Atrium, a Victoria commercial development. The loan was secured by a second mortgage, even though, when it negotiated the deal, BC Ferries did not know the final terms of first mortgage financing that would rank ahead of its own security.
Years ago, I wrote Luxurious new offices and enduring gratitude about BC Ferries:
In 2008, the company announced plans to move into 90,000 square feet of a building at 800 Yates Street then under construction by Jawl Properties. BC Ferries sold its long time head office building — 53,000 square feet at 1112 Fort Street — to the Jawls. By sheer good fortune, the new owners quickly found a government funded tenant: Elections BC.
The deal was made when David Hahn was riding high, enjoying uncritical coverage, particularly from the Legislative Press Gallery, some members of which he courted with studied generosity. Subordinates in Hahn’s executive coterie were also treated well and the new head office was to provide luxurious quarters, far superior to the 35-year-old Fort Street head office owned by BC Ferries until they sold it to Jawl. After Hahn was pushed out the door by the Clark government, ferry executive ranks were trimmed but I have no word on whether space sits idle or has been sub-let.
CEO Hahn ensured complete mortgage and lease details were confidential and BC Ferries declined to provide the rate of return earned since money was first lent to Jawl Properties. Pre-completion construction financing is usually among the most costly business financing.
Deborah Marshall, Executive Director, Public Affairs, did report the rate of interest BC Ferries earned during fiscal year 2012-13 was 3.4%. (Later, she declined to update the mortgage returns after 2013.) More than three years after the loan was advanced, the $24.5 million principal remains outstanding. When it lent this money, the publicly owned company was paying its own long term lenders almost double the rate of interest it receives from Jawl Properties.
2021 Update: the 2nd mortgage financing provided by BC remains outstanding with an unpaid balance of $24.515 million.
The questions remain:
- Since the provincial government has numerous departments and agencies renting space from Jawl, did and does that developer have a special relationship with BC Liberals ?
- Should BC Ferries, which is supposedly under financial pressure, be a low interest lender to a private company not at arms length?
- Should BC Ferries, a public company, engage in secret deals with one private landlord for a deal worth in excess of $100 million over the rental term and renewals?
- What are the complete terms of the mortgage and the BC Ferries head office lease?
- What are the terms of the Jawl / Elections BC lease of the former BC Ferries Fort Street property?
- What are the terms of all business arrangement between Jawl Properties and publicly funded agencies and government operations?
Categories: BC Ferries