Bill 40 Strata Wind Up - 100 Mile House

In December 2019, Klein Group Royal lePage Commercial successfully brokered and completed the sale of an independently owned, 33 unit strata building in 100 Mile House BC. 100% of the building interest was sold as a rental building to BC Housing Corporation.

The strata council of Sheridan Manor (KAS 2033) in 2017, was originally given the task from its owners to determine the best method of sale, market valuation, and brokerage representation. Proposals from three independent brokerages, with substantial strata sales experience were reviewed. Each brokerage was asked to submit their valuation, marketing strategy and experience profile. Once short listed, each brokerage answered a series of in-depth questions, followed by an interview. Klein Group Royal lePage Commercial was proud to be awarded the exclusive representation of the strata.

After a few members of the strata council, acting as individual owners, completed an independent legal review of the listing agreement, 32 of 33 owners signed the listing agreement to place their properties on the market, representing 97% of the building. The opportunity was fully marketed, both in Canada and internationally, as a cash flow investment opportunity. Three offers were received on the property all with a limiting condition to purchase 100% of the units.

Buyers were not prepared.

Given the market changes in 2018, investors and institutional buyers had the ability to be very specific in their buying choices. Buyers were not prepared to buy strata offerings with anything less than 100% interest in the building, thereby simplifying the purchase, reducing risk and avoiding any court process or legal costs. These potential buyers were not prepared to wait the 12 to 18 months required for the Bill 40 court process to potentially complete a strata wind up, even if the strata council was prepared to front the legal and court costs of application.

Aligning all owners to sell.

Under suggestion of Klein Group, Royal LePage Commercial, the strata council initiated a Bill 40 strata wind up. The strata council hoped that this action would align all owners to sell, and that the vast majority of unit owners were fully committed to proceed forward with the sale under the laws of the Strata Property Acy of British Columbia (BC).

Klein Group, Royal LePage Commercial referred a number of potential law firms, specializing in strata representation, including Clarke Wilson LLP which was ultimately selected. Clarke Wilson drafted the necessary strata resolutions and formal notice for the SGM. Owners voted in favor of the associated upfront and ongoing legal costs, the selection of the commercial brokerage: Klein Group, Royal LePage Commercial, and proceeding forward with a Bill 40 strata sale of their building.

With much effort and personal attention from the strata leadership and the brokerage, we were able to gain the support of the last unit in the building. Almost immediately a strong institutional buyer came forward and after several rounds of negotiations an accepted offer was reached. 100% of the units were individually contracted and thus the full process of the Bill 40 strata wind up, was not necessary.

There were no further legal fees, appraisals, liquidator, environmental assessments, court fees, court application fees or court timelines to worry about. Klein Group, Royal LePage Commercial was also able to negotiate a substantial portion of the Contingency Reserve Fund paid out to the individual owners, in addition to the purchase price, which is not typical within a voluntary 100% strata assembly sale.

Achiving maximum price & minimizing costs.

Klein Group, Royal LePage Commercial was successful in achieving maximum price and minimizing costs for our clients. The sale process began as a strata assembly, was strategically converted to a Bill 40 strata wind up at the midway mark and, given market conditions, ultimately concluded by a 100% individual-unit strata assembly sale - thereby avoiding the full set of court costs, court timelines and many of the upfront costs that the strata/owners would normally face. We were please to fully maximize our clients’ returns.

Delta Teachers Association

The Delta Teacher’s Association (DTA) represents the union of over 100 school teachers for the School District of Delta and Ladner. Klein Group, Royal LePage Commercial came referred to the Association leaders because of our background in assisting government entities, municipalities, corporations and institutional clients. The DTA was located in the historical downtown district of Ladner. They were leasing second story office space and were looking to purchase a new office, creating more stability and community orientation for their members.

One of the requirements for the relocation and purchase was to stay in the area as it was central to their service area, the school district and a familiar locale. They wanted to remain integrated with the community and not in an outlying industrial district. The mandate was to identify office space in the small area of downtown “historic” Ladner.

The Business Brokerage of Paper Ya – Granville Island

PROJECT OVERVIEW

Paper-Ya was established in 1986 as a retail stationary & gift store specializing in a curated selection of contemporary products that reflect trending lifestyles. The founders Denise and Sharon, were two artists who became partners and have owned the company since the beginning. The goal was to create a unique shopping experience for all that visited the shop and they decided the foundation of that experience would be reliant on paper. Not just any paper but handmade paper from all over the world. Realizing that expanding their product line would increase their business they used their extensive artistic talent to bring in a wide array of unique and ever changing merchandise. Paper-Ya is located in the Net loft building in Granville Island.

Over the past 28 years, the owners had helped the business adapt and grow, successfully remaining both current and trend setting. Both Annual Revenues and Net Income of the business were at the highest levels. Sales per Sq FT were the 2nd highest in Granville Island.

In 2016, the original owners of Paper Ya, Denise and Sharon finally decided that it is finally time to retire. After interviewing several commercial brokers, the owners hired Klein Group, Royal LePage Commercial to help them find a new owner.

THE CHALLENGES

Challenging retail trends and strict landlord requirements proved challenging.

The stationary and paper products industry was in decline. Many franchise and chain stores of in the industry had closed. Although the financials of the business were very strong and the reputation of the store was strongly admired, both buyers and banks had doubts about the future demand of the industry and were somewhat conservative in their valuation of the business.

The original owners were the brain behind the business, and over a 3-decade period had developed a distinctive and unique product offering which had made the store a favourite with customers. Many buyers wondered if they could not only successfully continue the procurement strategy but be able to adapt to new trends with time as the owners had done in their time of ownership.

Granville Island’s approval criteria included requiring the new owners to have local experience, similar retail type work/ownership experience, non-chain/non franchise ownership, and to be hands on and not investors. These criteria significantly decreased the potential buyer pool.

The asking price of the business, including the value of inventory, exceeded $1.1M. Although the financials supported the valuation, the price range was out of reach for the majority of hands on buyers with local retail experience. Most business owners who could afford a $1M+ business, were of the investor type profile and many had or wanted to have multiple locations/stores.

Klein Group RLP Commercial not only had to source a hands-on buyer with a proven record in local retail management/ownership who had a very strong financial power, but one who also had an artistic background, vision, and passion. This created and extremely narrow and unique pool of buyers to target.

Those who had the funds, were not typically artists with similar business type experience. Those buyers who came with passion for the store and an artistic background either did not have the retail management/ ownership background or did not have sufficient financial backing or both.

In the initial phase of marketing the store, one of the buyer who agreed to terms with seller, was approved for the funds, and provided a relatively acceptable retail ownership/mgt background and had some artistic passion/background was rejected by landlord based on not being local or having sufficient local retail experience and not having similar enough use type related background.

SOLUTIONS AND OUTCOMES

In order to provide the solution, our brokerage had to re-visit and recreate the marketing plan and develop and develop a unique approach to target and qualify the distinctive buyer profile. This was developed through:

Additional discussion and time with CMHC’s leasing department and the Paper Ya owners to better understand the required tenant criteria and the ideal buyer profile
Redefining the buyer screening and qualification process which included creating a Buyer’s Application that incorporated the landlord’s criteria and qualified the buyer financially.
Redefining the target marketing strategy and process
Increasing networking and direct marketing to
- existing retail owners in GVRD with businesses generating between $700,000 and $1.5M annual revenues
- Local small business consultants
- Small business bank/financial advisors
- BDC
- Local BIAs
Using specific social media advertising targeting at small business retailers with a passion for arts
Revisiting the target marketing of existing similar type business owners
New Buyer Screening for the confidential sale of the Paper Ya business is summarized as below:
- Execution of the Non- Disclosure Agreement
- Submission and execution of the Buyer’s application Owner
- Qualifying criteria:
  - operators/hands on
  - No investors
  - Retail related experience (we ask them to provide detail on their role in previous businesses or related employment)
  - Passion for Granville Island
  - Passion for Paper Ya
  - Creativity/artistic side
  - Business Structure with family composition
  - Right personality: As per Denise and Sharyn’s advice. Creative, people, non-conservative, passionate, …)
  - Verified financial capacity
- Profile of applicants who qualified as per the above were presented to Paper Ya owners. Their opinion and criteria key as they had created and owned the business for 29 years and had an excellent understanding of Granville Island being one of the original retail tenants.
Including the landlord in vetting of the last 2 candidates before finalizing commercial terms between the buyer and seller.

THE RESULTS

Over time, the new marketing plan brought forward seven potential candidates. These candidates were carefully interviewed and qualified.

Klein Group was able to effectively finalize negotiations with the final buyer and work with CMHC’s leasing department to finalize the approval by the landlord. This final successful candidate, came though the small business financial advisor network and marketing campaign, and brought extensive local retail experience, with hands on family run operations, and with good experience in fashion retail management as well as strong background in arts. The buyer was fully pre-approved by the bank.

How A 9-Year Strata Land Assembly Crisis Was Quickly And Effectively Resolved Through Solution-Focused Practices

KLEIN GROUP CASE STUDY

How A 9-Year Land Assembly Crisis Was Quickly And Effectively Resolved Through Solution-Focused Practices
Taylorwood Place

PROJECT OVERVIEW

Taylorwood Place was a bare land strata consisting of 21 detached homes across 6.1 acres of land at the corner of Taylor Way and Keith Road in West Vancouver. Royal LePage Klein Group Commercial was retained by the Strata Council to sell the property, after multiple failed unrepresented attempts to work with developers and developers’ brokers directly. It required us to develop strategies for assembling Taylorwood’s owners and city officials, as well as provide legal frameworks and manage a variety of stakeholder interests throughout the project. The Klein Group successfully completed the sale through a competitive bid process.

THE CHALLENGE

Unfortunately, there were three failed attempts to sell Taylorwood by brokerages who were representing developer interests rather than those of the owners. In fact, the brokerages never initiated a competitive bid process in order to maximize Taylorwood’s sale price. Individual offers from developers were brought to owners with the enticement of no brokerage fees. As a result, the project – situated in a prime location with many potential benefits for the existing owners, developers and future owners alike – sat in limbo for nine years. Not surprisingly, the residents became quite frustrated, disheartened and worried about the ultimate outcome of their land assembly, as well as concerned about the value of their homes due to their gradually falling into disrepair. Owners were not able to make decisions about common property upgrades or improvements to their own homes.

SOLUTIONS AND OUTCOMES

The Klein Group has overseen many land and strata assemblies. And so, having been referred by members of another strata for whom we had successfully brokered a sale, we convened a project meeting with Taylorwood’s Strata Council. After interviewing multiple brokerages for representation, the Council selected Klein Group as a result of our extensive and detailed presentation, which began with two facets:

• A thorough risk assessment process, and;
• The creation, with a highly-experienced legal team, of a specialized framework to protect the interests of Taylorwood’s owners, cater to their individual needs, and provide for a quick turnaround.

As Eugen Klein put it, “Our vision for Taylorwood was to provide a strategy and project management system that would effectively deal with all the legal, financial and real estate related frameworks. To do that, a first-rate team was needed to represent the sellers’ best interests and provide excellent value at the same time. Land development can be extremely complicated and community stakeholders can affect land values and timing expectations as the process unfolds. Owners need a team beyond the brokerage, that we provide, that can mitigate those risks and work with them to ensure their interests are maximized.”.

The Klein Group then completed multi-scenario proforma analysis for detached homes, apartments, townhouses and mixed dwellings showcasing various density options. This was followed by an architect and the district planner taking a very close look at the property and providing detailed analysis of different building options. An implementation strategy was then developed in order to:

• Facilitate clear communications with the owners
• Set out clear expectations for building a successful assembly
• Custom-design a comprehensive marketing plan and create attractive collateral to garner the attention of developers

The key to selling Taylorwood was aligning the owners’ collective and individual best interests. As Dean Thomas, another highly-experienced Land Assembly and Commercial Real Estate specialist put it: “In land assemblies the more owners increase their willingness to work together, the greater the value we can find them in the market. In some cases we are able to negotiate a better option for the community and realize even greater value for our clients. Developers then perceive a greater stability in the project and professionalism in its representation. As a result they’re generally more interested and serious in their bidding”.

THE RESULTS

As well as being known for our high-quality, client-centric work, the Klein Group is also known for the speed and efficiency with which we can complete it. In the case of Taylorwood, we refined all the details, worked with our legal team, and spent two months aggressively marketing the property to more than 80 different local and overseas developers in order to secure the best possible price and terms for our client owners. Many of the developers were interested in the property ‘as is’, while others were interested on the condition of rezoning.

At the end of the day, our land development strategy ensured that Taylorwood owners’ investments were protected and that there were great incentives and further opportunities for any developer. The final result was that three above market offers were tabled and voted upon by the strata ownership. After a few rounds of negotations with all bids to maximize owners value, the best offer was chosen and the land was sold.

The great news is that the owners of Taylorwood received value well above their expectations and the property closed within one year of contract acceptance. For most real estate teams, the work would have stopped at the accepted offer – but not with the Klein Group. Our residential division was also able to provide effective relocation services across BC to most of the owners, many of whom chose to stay in West Vancouver. Others were provided with 4 months of free rent back while they waited to reinvest. Still others asked us to source other older stratas where above market gains could be realized over time. The result – a stress-free offer, relocation, and a significant increase in the value their received through the Klein Group’s work.

So How Much Money Can A Strata Owner Unknowingly Leave On The Table?

KLEIN GROUP CASE STUDY

So How Much Money Can A Strata Owner Unknowingly Leave On The Table?
1075 Barclay St

PROJECT OVERVIEW

The strata owners of 1075 Barclay Street were faced with some very lucrative possibilities due in part to a new West End Plan which changed the legally allowed density of their building from 90 feet (i.e. nine storeys) to 500 feet (i.e. 50 stories).

At the same time, the building needed significant repairs so the owners decided to put $1,000,000 into a special assessment.

THE CHALLENGE

Without knowing it, some of 1075 Barclay Street’s owners were taken advantage of by a few developers who understood the potential value of the building units and were able to purchase units at a price that ultimately proved to be greatly under market value. Specifically, those developers, under the guise of numbered companies and affiliates, secretly started buying units in the building at a little more 1/3 of their value, with an additional cash bonus if sold within seven days, and no real estate commissions. In short, although the developers seemed to be offering the owner’s a great opportunity, the units actually had a much higher market value.

After getting word of these secret, off-market unit sales, the Strata Council – with the help of its building committee – decided to request proposals from a variety of commercial brokerages to: 1) Protect their interests, and; 2) Market and sell the remaining 85% of the units at their maximum market value.

SOLUTIONS AND OUTCOMES

The Strata Council, on the basis of a detailed and well-delivered proposal, ultimately selected Royal LePage Klein Group Commercial to represent the remaining owners’ best interests from a group of six national brokerages that applied. Klein Group immediately sprung into action, engaging the law firm of Hakimi & Ridgedale LLP to create a legal framework that would discourage developers from purchasing single units without bidding on the whole. This framework was successful and the individual unit sales to developers ceased at 18%.
(NOTE: If over 20% had been successfully purchased, it would have created a blocking position for the developers under the Bill 40 strata legislation. Our clients, the remaining majority of units, would have seen a significant decrease in value.)
Klein Group then assembled the units, explained the process over multiple meetings to owners and took the units to market. Stantec, our architectural partners, provided an extensive and precise review of the site and its buildable size, including a shadow analysis – all to ensure that 1075 Barclay Street owners did not leave any additional density (or negotiated density) on the table. Lastly, as is Klein Group practice, we implemented a coordinated strategy to:

Once again, central to getting the best deal for the owners was aligning their collective and individual best interests. Working together provided the unified front required to ensure that the developers were very interested, serious and competitive throughout the bid process. Information to owners is then provided in written format, clear and transparent – even in multiple languages as the case may be.

THE RESULTS

No less than 85 different developers received a Klein Group marketing package, most during face-to-face meetings. As a result, 13 submitted offers or expressions of interest. Ultimately, three developers competed with multiple bids to push a record price for a West End development site. The good news was that the units which the Klein Group took to market sold for top market value, whereas the owners who sold prior to being represented by Klein Group unfortunately left very large, six-figure sums of after-tax money on the table (i.e. all profits to the developer for a smart purchase.

ADDENDUM TO THE STORY

Directly to the east of 1075 Barclay Street, a 4-townhouse site was required to complete the 130’ x 130’ floor plate required for a high-rise site. Unfortunately, the owners decided to represent themselves as a FSBO (For Sale By Owner), which resulted in in a similar financial losses as those described above. In one case a developer purchased a single townhouse for a fraction of what the other sellers got. Moreover, an even more lucrative offers than what the other sellers got was never even presented. This is another example of large equity losses to owners in the sale!

THE CONCLUSION

To reiterate, in order to get the top dollar for their properties, owners must work together and be well-aligned. Professional representation, executed correctly, will add far more value than it costs. Maximum value is created by the largest ownership group being professionally represented by a commercial real estate brokerage with specific expertise in strata land assembly and Bill 40 strata dissolutions.