Details of province's secret agreement with Brightenview emerge as dispute about megamall boils over
Sask government threatens to evict megamall developer from its GTH office over unpaid lease
On the eve of the previous Saskatchewan election, Brightenview Development International and the Global Transportation Hub (GTH) celebrated their new land deal and partnership. They agreed to work together as a united team to promote Brightenview's immigration business around the world.
Four years later, that partnership has imploded.
The province is threatening to evict Brightenview from its GTH office because the company has failed to pay its lease for more than a year. Meanwhile, Brightenview's CEO says the province has "misled" him, broken its contract and abandoned his company.
He delivered a message to the province in an interview with CBC.
"You don't give a s--t about this live business you literally brought into [the GTH]," said Joe Zhou.
"There's a contract, right? You're not done yet. You have an obligation."
Brightenview alleges government flip-flop
In Feb. 2016, Brightenview agreed to purchase 30 acres of land at the GTH. Initially it purchased 10 acres and built its 80,000 square foot wholesale mall which was completed in the summer of 2018. The company agreed to temporarily lease a second 10-acre parcel, where it constructed its 4,000 square foot corporate office.
The GTH, a government-owned industrial subdivision, says Brightenview is $538,000 in arrears on that lease.
"Brightenview refuses to pay the rent it agreed to in the signed lease agreement and will not offer a suitable alternative," wrote GTH CEO Matt Schroeder in an email to CBC. "Therefore it is within our legal rights to seize the building on the leased premises until a suitable resolution can be found."
Zhou said he's facing financial troubles that stem in part from actions by the provincial government which harmed his business.
Zhou said that before the last election the GTH promised to be his partner and help promote his company's megamall to would-be immigrants in China.
He said the province did that for a time, even sending former Premier Brad Wall to China to help promote the project.
Zhou said the government is now acting like his adversary. Late last year, the province changed the rules and banned any new immigration applications tied to Brightenview's megamall.
The province said there was a fundamental flaw with Brightenview's business model that put immigrant investors at "undue risk."
Zhou said that decision "threatens and cripples our ability to sustain the project." He said 75 Chinese nationals have set up shop in the wholesale mall and the government has abandoned them too.
"You're the one literally in the agreement that attracted these investors. You played this major role, Right? You can't deny that."
Province promised to promote Brightenview's project
Four years ago, the two sides were all handshakes and smiles.
On Feb. 3, 2016, weeks before the launch of the election, Brightenview and the GTH signed a multimillion dollar land deal and a co-operation agreement.
By May 2017, Brightenview had broken ground on the first of three 120-unit wholesale malls it planned for the property. The Minister Responsible for Immigration and the GTH, Jeremy Harrison, was there.
"We're really optimistic. I think this is really going to be a very positive project," he said.
Called the Global Trade and Exhibition Centre (GTEC), the mall is intimately tied to immigration.
The company told Chinese nationals that purchasing and running a storefront in GTEC would qualify them to gain permanent residency in Canada through the entrepreneurial category of Saskatchewan's immigration program.
The company also told would-be immigrants that the entire project was supported and promoted by the Saskatchewan government.
Zhou said it was the province's promise of support and promotion that lured him into the 30-acre deal at a premium price of $7.6 million.
He said he didn't even negotiate the price, because for him this wasn't primarily a land purchase. His priority was to gain the government's endorsement of his project through a formal co-operation agreement.
Details from top-secret agreement revealed
For the past four years, Brightenview and the Saskatchewan government worked together to keep the details of their co-operation agreement secret.
The province has waged a two year battle in court against the CBC, arguing that releasing details of the agreement would show prospective tenants at the GTH just how much the organization was willing to do to attract them.
Zhou said that in light of the government's recent moves to harm his business, he's been forced to publicly talk about the agreement.
He said the GTH promised:
To work with Brightenview as "a united team" to promote the Brightenview project and Brightenview's business interests.
To co-ordinate general public relations activity and the promotion of the "Brightenview model."
To allocate internal resources to help promote, qualify and prospective clients to Brightenview — including two annual international trade missions.
To set up a co-operative governance model with Brightenview, including joint directions, plans, resources and ongoing performance management.
To arrange regular meetings between Brightenview and selected senior government officials.
To provide Brightenview with strategic advice and help in its dealings with federal, provincial and municipal governments.
Zhou said the company never would have done the land deal without this agreement.
He said having a western government vouch for the credibility and authenticity of his project is crucial when attempting to do business in China, where potential investors are wary of scams.
Zhou sought high-level support
Zhou said he had been in discussions with the GTH for years, but when the deal finally came together it happened quickly and was approved at the highest level.
On Dec. 18, 2015, he and his team were summoned to a meeting they had been seeking for a long time. Then-Minister of the Economy Bill Boyd, who was responsible for immigration and the GTH, had agreed to discuss the terms of a co-operation agreement.
Zhou said Boyd's presence and support were crucial, because the GTEC project required the full backing of the provincial government.
Zhou said he wanted assurances that the Saskatchewan Immigrant Nominee Program (SINP) would be comfortable with the Brightenview model so he could tell prospective investors that "this program, the model, what it does, is number one, recognized by the [SINP].
In early February 2016, just before the deal was signed, Boyd confirmed in a letter that the "GTH is the lead agency empowered by government to work with Brightenview on the proposed projects," and he instructed the GTH to "engage the relevant resources within government and any external agencies to assist as necessary."
Intersecting land deals
On Feb. 3, 2016, Zhou was invited to the GTH office to sign the final agreements.
That very morning, CBC broke a story about another series of land agreements at the GTH.
The story outlined how politically well-connected businessmen made millions on a series of transactions that saw 204 acres of land at the GTH wind up in taxpayers' hands for far more than it was worth.
The government had an appraisal that said the property was worth $30,000 an acre, but they paid a politically well-connected businessman $103,000 an acre.
With weeks to go before the provincial campaign, the NDP called for a police investigation and the premier called for a provincial auditor review.
- No charges laid in GTH land deal investigation: RCMP
- Government paid too much for GTH land: Sask. provincial auditor
Boyd defended the deal but others said they thought it stinks.
The Brightenview land sale ended up forming the foundation of the Saskatchewan Party's campaign response to the story.
'They were very eager'
On Dec. 16, 2015, a month and a half before the Brightenview deal was signed, Boyd gave CBC his one and only interview about the GTH land deal transactions.
Two days later, on Dec. 18, Boyd and other senior government officials met with Zhou to hammer out the details of the co-operation agreement.
Zhou said he had no idea CBC was working on a story about the GTH at that time, but that he did notice the government has a new sense of urgency toward his proposal.
"They were very eager," he said.
That suited him just fine, because he wanted to get a deal done quickly too.
Zhou said because his priority was to get the co-operation agreement, he just agreed to what the GTH said was the set rate: $256,000 an acre.
That's the most anyone has paid for land there.
Internal documents obtained by CBC show that before the deal was signed, the premier's office thoroughly evaluated Brightenview and its business. The documents also show that the province knew the Brightenview's business model was tied to Immigration.
On March 1, 2016, days before the election call, the province sent out a news release.
That $256,000/acre price tag was in the opening sentence and was often mentioned by the premier in the election campaign whenever the GTH land deal controversy was raised.
When reporters would ask why the government paid so much more than their own appraisal, Wall said land prices were going crazy.
"The GTH had their lower appraisal and they agreed at $103,000 and land is now selling at $256,000," Wall said, noting that in the end "taxpayers are making money."
Not long after Wall won that election, he was in China speaking at a GTEC event.
Government support lends credibility overseas
In September 2016, Wall and an entourage flew to China, where the premier spoke at an event organized by Brightenview and attended by 3,500 Chinese investors.
Zhou said images of that event were so widely publicized that his project had instant credibility.
A GTEC brochure features photos of this trip. A caption reads, "Premier Brad Wall strongly supports and promotes the GTH-GTEC project in person."
That message got through.
For example, a Feb. 22, 2017 article on a high-profile China-based finance website says "GTEC is an immigration project managed by the Saskatchewan government… it provides a fast and efficient way to immigrate to Canada."
Zhou said many Chinese people who invested in his project came here because of that Saskatchewan government endorsement.
So far, about 75 Chinese-owned businesses have set up shop inside. They sell a wide range of products from electronics to flooring to furniture.
A controversial project
GTEC and Brightenview have been shrouded in some controversy.
CBC reported that some Chinese nationals have claimed to have been cheated and filed lawsuits against Brightenview.
- 'I never thought that I would get cheated': Chinese woman refused refund from Dundurn megamall developer
The provincial government has alleged that Brightenview's advertising of the project was misleading, in that it suggested Brightenview had a special relationship with the province's immigration program.
Zhou has argued that the company has followed all the rules and had a written commitment that the Saskatchewan government fully backed his project.
He said the media attention on the project has slowed sales of new units. He said it also appears to have attracted the attention of Immigration Canada, which is responsible for evaluating the applications of GTEC investors.
"We have found these people have experienced a large amount of rejections seemingly through... an extraordinary scrutiny," Zhou said.
He said in many of those cases, Ottawa rejected the application for the same reason — the proposed business was not deemed sufficiently beneficial to Canada.
About 30 applicants have been stuck in limbo for a couple of years, having purchased a GTEC unit but having been rejected by Ottawa, Zhou said.
Financial pressures building
Some GTEC applicants have asked for refunds because they've been waiting too long and have lost hope. Yet the bills have continued to pour in for Brightenview.
"Our losses are in millions," Zhou said.
Zhou acknowledges he still hasn't paid all the construction bills.
In April, Brightenview's electrical contractor placed a $380,000 lien on the megamall and launched a lawsuit.
In May, the general contractor that built GTEC placed $1.4 million in mortgages on Brightenview's properties.
At the same time, the GTH has been going through struggles of its own.
The organization has failed to sell any land since the Brightenview purchase. Every year it goes deeper into debt.
In the fall of 2019, the government turned the management and sales of the GTH over to a private sector realtor.
"The GTH notified Brightenview in person that our desire for their success hadn't changed, however the GTH would no longer be completing the contemplated actions pursuant to the co-operation agreement," said GTH CEO Schroeder.
Zhou said that since that time he has been treated like a tenant, not a partner.
Brightenview fails to pay lease
When the land deal was originally signed, Brightenview committed to purchasing 30 acres.
Zhou said that because of the Immigration Canada troubles, the company was unable to purchase the second 10-acre parcel, but it needed some of the land for its corporate office building, so he decided to temporarily lease the parcel and construct his $1-million corporate office there.
The leasing fee was steep, $29,000/month, but he figured it would only be for a short period of time and he would need that land for phase two of his project.
He was wrong.
In early November 2019, the provincial government banned all immigration applications tied to Brightenview, effectively ending plans for phase two.
Zhou said that rendered the leased land "purposeless and useless," because 97 per cent of it is vacant "with no evident opportunity to be put to business use."
The bill keeps going up every month, now totalling $538,000. Zhou said soon it could equal the $1 million he paid for the building.
He said he feels trapped, unable to move the office building from the leased land.
"My body is shaking."
He said he doesn't want to simply walk away from what he has built or from the entrepreneurs he has attracted to the province.
"I'm trying to be a responsible business for the sake of the tenants," he said, adding he would still like to make the business work somehow.
Brightenview ask for debt forgiveness
In a series of letters to the province, Zhou has implored the most recent Minister Responsible for the GTH, Don Morgan, for mercy in light of the cooperation agreement and the COVID-19 crisis.
He asked the province to forgive the lease arrears in their entirety and rewrite the lease for just one acre of land instead of the current 10.
"This worries me, this lease. Alright? Can you please dissolve that?," Zhou said. "I did not demand or claim. I simply outcry to ask for assistance."
Zhou said he has been met with silence for months.
CBC asked the GTH about Zhou's request. In an email, Schroeder said the organization isn't bound by the co-operation agreement because it is not a formal contract.
"While the document signed between Brightenview and the GTH is labelled an agreement, the absence of consideration, termination date, remedies for breach and other standard contract clauses indicate that this is not a formal contract but instead a memorandum of understanding," he wrote.
He added that the GTH's partnership with Brightenview "did not absolve Brightenview of meeting their contractual commitments or adapting to changing business climates."
Zhou said Schroeder is wrong about the co-operation agreement.
He said that agreement was signed at the same time as the land sale and they were a package deal.
"This is a bonafide contract with significant monetary considerations," he said, noting that his company invested millions in purchasing land and building the GTEC facility.
He said he hopes he and the province can come to some sort of resolution. He said it would not be good for anyone if his company suffered a high-profile failure.
"I would be very sorry if after all of this Brightenview and the project mission should end up being a victim, a casualty of the making and shaping of GTH and the government," he said.