Sunday, June 14, 2015

Is Hotel 'Extension" Just About A Hotel?

Site of SSS Manhao hotel
Does This Dictate The Conference Centre's Future?

The decision before Nanaimo City Council on Monday June 15 is not just about whether or not we will grant a hotel developer another year to get their financing and project together. It is also about what will be the future of the $75 million city asset known as the Vancouver Island Conference Centre. Make no mistake, the two are inextricably entwined.

If Nanaimo City Council decides to grant the SSS Manhao group a one year extension of the buyback option on their property they are also extending the 'Right of First Negotiation' agreement the city has with SSS Manhao for the operation of the conference centre.

It is highly unlikely that any business person who owned a $75 million asset (conference centre) would have entered into the agreement your city did with this hotel developer. I have yet to talk with anyone who has read this agreement that can see any upside for the Nanaimo taxpayers who own this $75 million asset. To read the agreement you can download a PDF copy HERE.

If your City Council agrees to extend the buy back option to SSS Manhao on Monday they are also extending the agreement which gives Manhao the right of first negotiation of our conference centre. If you ask some councillors and city staff whether there is any jeopardy that can flow to Nanaimo taxpayers as a result of this decision, many will say they do not think so.

I would ask people of that opinion, if they have ever read the agreement the city struck with Manhao in Dec. 2013, I doubt if they have, or if they have would have some doubts about their judgement.

One clause in that agreement that seems to pretty much seal our fate is:
Assignment by the City (page 4)
16. The City agrees not to sell, transfer, or otherwise convey or offer to sell, transfer, or
otherwise convey the Conference Centre unless the City first assigns this Right of First
Negotiation to the purchaser and in that case:
(a) the City and the purchaser must promptly provide Manhao with a copy o f the
assignment agreement;
(b) Manhao must release the City from all obligations under this Agreement; and
(c) the purchaser must enter into an assumption agreement with Manhao agreeing to
assume all of the City ‘s obligations under this Agreement.

In other words if this city council were to decide that perhaps this facility operating as a conference centre is not the best return for the taxpayer investment  and decide to see if the private sector has some better options, they would be restricted by the above to negotiate with Manhao which would likely be a deal killer stopping anything of value coming from the private sector. 

A Few Questions
  • How many conference centres does Manhao have experience running in Canada, or anywhere else for that matter?
  • If Manhao were managing the conference centre and their hotel business who would they be serving?
  • Manhao is being given a ten year tax exemption to provide extra rooms for the conference centre. They also claim to be bringing 75,000 tourists from Asia to their hotel. How many rooms could they possibly add to our conference centre pool of rooms at that rate?
  • How many rooms is Manhao required to make available for conferences?
  • How many delegate 'days' would Manhao be required to produce to fulfill their agreement
  • Why is the operation of the conference centre an inextricable part of this deal, if Manhao is planning to fill their hotel with Asian tourists via their tour business


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