British Columbia

B.C. government gave developer $211M interest-free loan in Little Mountain land sale

After 13 years of questions and uncertainty surrounding the privatization of the Little Mountain lands, details of the deal are finally public.

Purchase and sale agreement sheds light on 2008 deal that saw Holborn Properties acquire lands for $334M

The Little Mountain lands in Vancouver sit between Queen Elizabeth Park and Main Street, just south of Nat Bailey Stadium. The six-hectare site has been empty since the controversial demolition of the existing buildings in 2009. (Gian Paolo Mendoza/CBC)

After 13 years of questions and uncertainty surrounding the privatization of the Little Mountain lands, details of the deal are finally public.

CBC News has obtained the purchase and sale agreement between the provincial government and developer Holborn Properties after protracted efforts through freedom of information processes.

The B.C. Liberal government that was in power at the time of the 2008 deal gave Holborn $211 million in interest-free loans on an 18-year term, the agreement shows. Interest will not accrue on that loan until Dec. 31, 2026.

The contract shows that the sale price was $334 million, but the province says only $35 million has been paid by Holborn. When an $88-million credit given for social housing and the initial down payment are subtracted, the developer still owes the province $211 million.

Vancouver real estate lawyer Michael Drouillard said the loan is one aspect of the deal that stands out.

"It does seem unusual on its face to have an interest-free loan for that long period of time," he said.

"When I think of a traditional construction lending context, it usually calls not only for the owner/contractor to commit a certain amount of money to the project but to be committed to a schedule by which the work is going to get done."

Also in the deal was an additional $88 million in low-interest loans for non-market housing, repayable by 2050.

A chain-link fence surrounding the Little Mountain lands is seen in 2021. The land was sold to Holborn Properties in 2008 and has remained largely empty ever since. (Gian Paolo Mendoza/CBC)

The Little Mountain lands sit between Queen Elizabeth Park and Main Street, just south of Nat Bailey Stadium. The six-hectare site was home to 224 units of social housing that existed from the 1950s until the land was sold in 2008.

Holborn initially pledged to build 1,400 market value homes and 234 units of social housing.

But the site has remained relatively untouched ever since the existing buildings were demolished in 2009. 

Where is the social housing?

The contract lacks specific details about deadlines for rebuilding social housing units that were demolished, displacing about 700 people.

Only 53 of the promised 234 replacement units have been built so far. 

David Chudnovsky, a former NDP MLA for the area, said he's concerned by what the agreement shows.

"There's nothing at all in the contract that requires anything to be built with any kind of end date," he said. "The entire risk is borne by the people of British Columbia."

Chudnovsky thinks that the deal gives Holborn incentive to leave the site empty. 

"They got an 18-year holiday on the loan ... and they're sitting on the land and letting it appreciate and get more and more valuable as the years go on," he said. 

The current assessed value of the land parcel is more than $316 million.

Why have payments been so slow?

The contract has details on the payment schedule that could explain, at least in part, why Holborn has only paid $35 million, 13 years after the deal.

In essence, the rate at which Holborn was required to pay the province under the contract was linked to the progress of development on site.

Therefore, less development on the site meant smaller payments. More development on the site meant larger sums. 

With a hefty interest-free loan in hand and a lack of specific building deadlines, that means Holborn not only controls the speed of development, but in large part, the speed of repayment too. 

Real estate lawyer Drouillard admits that the size and scope of the Little Mountain redevelopment makes it unique and difficult to generalize about, but he is still left with questions. 

"Typically, you would see some framework for schedule so that the lender has an exit plan to get their money back in a way that's profitable," he said. 

What's next?

Former MLA Chudnovsky wants the release of the contract to lead to further action surrounding the still mostly empty plot in East Vancouver.

"We should be asking for them to take back the Mountain. This deal has been a colossal flop," he said.

"It should be government's responsibility to move in and start over again and build the kind of model community of affordable housing that people need and deserve in Vancouver." 

Chudnovsky also wants a public inquiry into the contract and sale. 

CBC News requested interviews with Holborn Properties, the B.C. Liberal Party and former housing minister Rich Coleman. Holborn and Coleman did not respond and the Liberals declined to comment. 

An interview was also requested with Attorney General and Housing Minister David Eby. He was not available, but said that he'd have an announcement on the Little Mountain lands some time after Labour Day. 

Read the purchase and sale agreement between the B.C. government and Holborn Properties:

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Corrections

  • A previous version of this story said Holborn Properties had paid the province $89 million to date. In fact, new information provided by the office of the attorney general says the company has only paid $35 million.
    Sep 01, 2021 10:39 AM PT

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