Discliamer: Focus is a free magazine available online, and no copyright infringement is intended by posting this easy-to-read non-pdf version. I don't think the editor minds. Remember to pick up your copy next time you're downtown for more great stories, and support all their fine advertisers, etc.
From the January 2010 issue of
Focus magazine.
Bear Mountain is facing the music—and it’s sounding like a dirge. We offer a brief review.
TRISTIN HOPPER
Bear Mountain CEO Len Barrie once boasted that his Skirt Mountain development was going to top $3.5 billion in value—the same price as two space shuttles.
But now things don’t look so good. Bear Mountain’s construction cranes are motionless; the sound of hammering is gone from the hillsides; its controversial Spencer Road interchange continues to sit unfinished; and Langford’s Bridge to Nowhere, well, goes nowhere. And now, adding to Mr Barrie’s woes, Revenue Canada auditors are said to be combing through Bear Mountain’s finances.
On the surface, Bear Mountain’s sad state may seem a predictable fate for a project thrown together by a CEO completely devoid of any development experience. A professional hockey player for 14 years, he recently told the National Post, in explaining a critical auditor’s report, “The only thing I know in life is hockey.”
Remarkably, a tanking multimillion dollar development is only the latest of Barrie’s worries. To buy the Tampa Bay Lightning in 2008, Barrie took out a $7 million second mortgage on his $3 million house.
Another $20 million mortgage came courtesy of Palace Sports and Entertainment—the team’s former owner. With a whopping interest rate of 20 percent per year, it’s likely Barrie was expecting to round up the $20 million pretty quickly. And then, of course, he wanted to buy out his partner in the Lightning team. Such needs explain why Barrie called Siraj Capital (Dubai) Inc, an Islamic investment firm registered in the English Channel Island of Jersey.
As a rule, Siraj doesn’t have any money, they just agree to go look for it—for a price. In July, the Dubai-based firm announced that they were going to try and raise a $350-million Islam-friendly bond in return for 25 percent ownership in Bear Mountain. After all, if there’s anybody that understands sprawling, risky real estate developments, it’s Dubai. Islam doesn’t believe in charging interest, so at least Barrie wouldn’t sink into any more debt. But Barrie’s deal with Siraj appears to have come to nothing.
Short years ago, banks and investors trusted Barrie with hundreds of millions of dollars, but now it’s likely the best they’re hoping for is to keep Bear Mountain alive long enough to get their money back.
Bear Mountain’s main lender, HSBC, is feeling the most painful pinch, with a reported $139 million tied up in the project (2007). It also lost one of their top executives to the Bear Mountain boardroom. Phil Leedham was HSBC’s senior manager of commercial banking while the deal with Bear Mountain was being inked. In December 2007, with six months to go before the global financial collapse, Bear Mountain brought him aboard as its chief operating officer.
Bear Mountain’s sinking ship of creditors and lenders could blame their woes on the bear market—and they have—but cracks in the development’s veneer started showing up long before a booming world economy started to tank.
For one thing, Bear Mountain was never as successful as its leaders let on. Robert Quigg, developer of the now-cancelled Capella condo project at Bear Mountain, sued the project in early 2008, alleging that he was misled about the pace of development and the sale price of units.
Bear Mountain is “not everything it was made out to be by its management,” said Quigg to the National Post in October. “We bought land there based on certain promises that were made to us. Information that we receive from Bear Mountain is not always correct.”
In late 2005, Bear Mountain reported that its St Andrews Walk condominiums were completely sold out, and this was widely reported by media outlets—no doubt helping to create an impression of success. By spring 2009, however, Bear Mountain announced they were selling St Andrews Walk condos at a 40 percent discount.
What happened? Part of the explanation may lie in Bear Mountain’s target market. “Predictably, the people willing to pony up for a piece of paradise are coming from outside of BC,” states Bear Mountain’s website. The development’s sales boom came thanks to middle-aged Albertans snapping up pieces of the mountain as a second home or investment. When the market collapsed and the tar sands went into pause mode, dozens started walking away from their deposits.
Besides hyping sales figures, it seems Bear Mountain was doing some fancy footwork with its books. In September, The Globe and Mail’s sports department broke the story of an auditor’s report raising questions about the use of $25.8 million by the Bear Mountain partnership. (The Times Colonist picked up the story two days later, emphasizing that the Bear Mountain executive committee still supported the development.) The auditor, Victoria’s Norgaard Neale Camden Ltd, claimed close to $2.5 million in construction costs for Barrie’s own home and a similar amount for the Tampa Bay team had been charged to the partnership.
The auditors stated Bear Mountain’s executives had carried out activities that “were improper and, in some cases, illegal.” Norgaard Neale Camden Ltd resigned, citing concerns about financial transactions.
Meanwhile, Scott Bye, a member of the Bear Mountain executive committee, described Barrie as having a “voodoo math” approach to finance in a story in the Tampa Bay St Petersburg Times. “He pulls out a white board, and we all are baffled how he comes up with things,” he said. By November a source told The Globe and Mail that Canada Revenue Agency had launched an investigation into the firm’s finances.
The misappropriation charges are “b***s***,” said Barrie to the St Petersburg Times.
The former hockey player has never been known to mince words and seems to like a fight. He told the The Globe and Mail he repressed an urge to start throwing punches at a Tsartlip longhouse. He told the National Post he wanted to fight his auditors.
And therein lies another problem. Bear Mountain may have pissed off one too many people. Maybe having Langford Mayor Stew Young on board, Barrie didn’t think he had to impress anybody else. So he proceeded to antagonize local First Nations concerned about sacred sites and others worried about suburban sprawl, red-legged frogs and quickly disappearing Garry oak meadows.
These days everybody seems to have a beef with Bear Mountain as evidenced by the long list of civil lawsuits piling up in BC supreme court. Everyone from window manufacturers to Canadian Western Bank to Royal Bank are looking to sue the project. Small claims court, meanwhile, has seen Bear Mountain coming up against a host of Victoria construction trades.
And now even the City of Langford has admitted Bear Mountain defaulted on taxes for two of its properties. It also failed to come through with a promised $4.79 million payment for the Spencer Road Interchange.
Bear Mountain was born and bred in good times. Anybody can look good during a boom — and get financing. But now, more than a year after economic reality jolted the planet, hundreds of belt-tightening Albertans are realizing that fly-in second homes just aren’t in the cards. Victoria’s banks are realizing that sprawling, suburban projects don’t have staying power. And Len Barrie is realizing that taking out $27 million in mortgages on a $3 million dollar house is no way to finance a hockey team. The houses-around-a-golf-course, bulldozer-friendly model for subdivision development may have been entrancing when this project was conceived back in 2001, but times, apparently, have changed.
###
Tristin Hopper has recently returned to Victoria after a two-year stint with the Whitehorse-based Yukon News.
Sob, sob, sob...they elected Stew 'log and pave it' Young and Denise 'the finger' Blackwell, so now they can wear it - and elect better in the future.
Linear Mode
