Given our forecasted cash position at the end of 2021 of $1,400,000 operating reserve, the $2,750,000 in the capital reserve, and considering the carrying costs of the mortgage (as noted in the figure above), the Club can support this obligation without significantly affecting any near-term capital requirements at the Club assuming breakeven operating income each year and projected deferred entrance fee payments.
When the original Richmond farmland was purchased, the structure was set up through a holding company (444422 BC Ltd.) to avoid any potential adverse effect on the not-for-profit status of the Club. Similarly, 5451 No 7 Road would be acquired the same way and held within 444422 BC Ltd.
BENEFITS TO ACQUISITION
The Real Estate Advisory Committee, Strategic Planning Committee and the Finance Committee have recommended exercising the right of first refusal and purchasing the property for the following reasons:
- It acts as protection of our Richmond lands asset with respect to potential rezoning opportunities to another use which could include residential, commercial, industrial or Golf course use (East parcel).
- Should none of the previously mentioned rezoning options materialize, the property in question could still be re-sold on its own and likely at a similar price or higher given its current zoning allowance for a single-family dwelling.
- It is believed to be in the best interests of the Club to mitigate any potential risks and preserve the existing asset and investment that initially cost approximately $22 million. This includes any potential opposition to rezoning the Richmond Lands from the current potential buyer.
- The purchase aligns with the original rationale of the Richmond Lands – the use of the asset as a chip for a potential future beyond 2032.
RISKS OF ACQUISITION
The Real Estate Advisory Committee, Strategic Planning Committee and the Finance Committee also considered key potential risks from exercising the right of first refusal and purchasing the property, which includes:
- Potential interest rate risks, given the future economic and political environment following the pandemic.
CONSIDERATIONS OF ALLOWING RFR TO LAPSE
Should the Club not wish to exercise its right of first refusal, the following effects to be considered are:
- The new owner of 5451 may present an opposition should the Club, or a future purchaser, wish to develop the Richmond lands further.
- The right of first refusal will expire with this sale, by which the Club will then have no advantage in future acquisition of the property.
- A potential buyer may view the Richmond lands to be less valuable due to this irregular property line.
MEMBER FEEDBACK
While the relevant advisory committees are in favour of exercising the Club’s right of first refusal, and despite the short timeline to make this decision which is driven by the short deadline in the right of first refusal agreement, the feedback of the membership on this issue and decision is of great importance to the Board of Directors. As a result, we ask members to please provide their feedback by email to gm@shaughnessy.org on or before 8:00 a.m. on Monday, July 12th, 2021. In making its decision on Monday, July 12th, 2021, the Board of Directors will review the recommendations from the Real Estate Advisory, Strategic Planning and Finance Committees, and the feedback provided by members. All information and feedback will be considered prior to making a final decision on whether or not to exercise the right of first refusal on the property.
Sincerely,
Gord Chan
Club President
Brian Mossop
General Manager and Chief Operating Officer