As expected, the BC Supreme Court has appointed Ernst & Young Inc. as receiver for the Sopa Square development in Kelowna, following a 30-day period as interim receiver.
The professional services firm has now released their first report into the project, outlining plans for development and touching on issues that had previously knocked it off course.
According to court documents submitted and signed by Senior Vice President Kevin Brennan, the main goal of Ernst & Young is to complete Phase 1 of the project as soon as possible. This first phase encompasses the office and retail components of the development, including the underground parkade.
The document states they are nearing ‘substantial completion’ and anticipate phase 1 will take nine more weeks at a cost of $1,260,000. They also owe $674,000 to trades and critical suppliers for the month of December.
Over the next three months they hope to complete phase 1, find more retail tenants (Silent Noise jewellery opened its store in December and TRU Frozen Yogurt is expected to open in February), suspend all non-critical activities related to phase 2, and other various tasks.
Ernst & Young estimates it will need to come up with $2.5 million in funding during that time, and have requested an increase on their authorized borrowing limit to reflect that figure.
An appraisal report for the SOPA Square project conducted in April 2013 pegged the developments value at approximately $28 million. That number was based on the assumption that the buyer/developer would incur the costs to complete phase 1, bring the retail component to full occupancy and prepare the office component for sale.
Since that time, Ernst & Young has not performed an independent valuation.
The full plans call for 40,000 square feet of ground level retail space, almost 19,000 square feet of second floor office space and 100 residential townhome and condo units.
At one point the development had entered into pre-sale agreements for approximately 35 per cent of the residential units and 90 per cent of the office components, but the venture ran into liquidity and financial issues.
These problems were blamed on the downturn in the Kelowna property market following the financial crisis of 2008, inaccurate financial reporting, management and technical challenges, and the excessive construction costs associated with the underground parking area.