Structural issues forcing renegotiation of sale of BC Tree Fruits cold storage in Kelowna

Photo: Unison HM Commercial Realty

Unison HM Commercial Realty lists cold storage facility on Sexsmith Road as a value-add industrial assembly near Kelowna?s International Airport.

A company's plan to purchase a BC Tree Fruits cold storage facility in Kelowna has hit a snag after an engineering report revealed structural issues with the building.

Novem Pharmaceuticals took over the facility on Sexsmith Road in September on an emergency basis, pending a permanent deal, to provide farmers an option to store the season's crop.

Colin Davison, Novem Pharmaceuticals CEO, now says an engineering and environmental report they received on Nov. 29 indicates structural issues with the building including the roof.

"The reports and our observations while having the facility under lease is that there has been significant neglect of the building by BCTF in operating the building prior to the sale, including ignoring advice from various engineering and construction companies to make immediate fixes to the facility to make it safe to operate," Davison said.

He said the issues will requires remediation by the new owners of the facility. The engineering report revealed structural issues with the roof dating back at least a year, Davison noted.

As a result, Novem Pharmaceuticals has declined to move forward with the purchase and has not removed the conditions, but are still in the process of trying to purchase the building.

Novem asked the court-appointed monitor overseeing the sale for an extension of the Dec. 3 closing date but was denied. Davison says the monitor did encourage them to submit a final unconditional offer.

"We remain committed to purchasing this important asset in the fruit industry. We remain in contact with the monitor and expect to make our final unconditional offer the week of Dec. 9, the offer will be reflective of the significant issues within the structure itself, as well as the environmental report."

Davison says Novem has already begun engineering and construction within the facility to ensure its safety and ongoing operations.

The property remains listed for sale, per the court process, but the price has been reduced from $38 million to $28 million.

Fruit growers anxious

Amarjit Lalli, the court appointed grower representative, expressed concern over the condition and future of the apple crops currently stored at the facility partly because of the offer being rescinded.

He is also worried about an incident in October where a support beam at the building was damaged by a forklift.

"We don't know exactly how they resolved that issue with the support beam, but as far as the deal goes, the conditions weren't removed. So the deal is off," Lali said.

Davison says growers should not worry, as all current storage customers and their apples are secure and the facility is under lease by Novem until April 30 or until the deal to purchase the facility closes.

Novem is working with Farm Credit Canada, which supports entrepreneurs in the agriculture and food industry to secure financing. The FCC would have to sign off on the new restructured offer.

Novem intends to use the cold storage facility as part of its other pharmaceutical business, in addition to apple storage.

"I can tell you with 100 per cent certainty, no one will buy this facility to just store apples," Davison said. "The storage on its own does not even cover the mortgage. So anybody else will be potentially looking at it would be looking at some kind of a development."