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This is the third in a three part series examining the career of Kamloops developer Mike Rink and New Future Group: A year after lenders sold his foreclosed Victoria Landing and Terravista projects in Kamloops to a new buyer for a deeply discounted sum, Mike Rink was already making new plans. The Kamloops developer was back, using his vision in a new arena. Supreme Court in October. “In 2003, I was introduced to representatives of Chartwell Seniors Housing. Within a year, Chartwell became the Chartwell Real Estate Investment Trust and I formed a company to joint venture. to develop seniors housing projects in Western Canada.” Rink was back from bank foreclosures on Victoria Landing and Terravista in Kamloops and the collapse of a deal he nearly made with the City of Kamloops to joint venture on a proposed Lorne Street convention centre. Rink exited that project, handing it over to a hotel operator. The project later withered as the economy worsened in the recession. During the next six years, Rink’s companies designed, developed and branded the trademark Renaissance Retirement Home, building properties in Regina, Chase, Kamloops and Squamish. In Regina, Rink obtained $2.1 million from the federal government, province of Saskatchewan and the municipality to support construction of publicly funded beds, adding two storeys to an abandoned office building downtown as part of the $14.5 million project. PROJECTS OVERBUDGET BUT HOLDINGS GROW While constructing the seniors’ projects, he was also in personal bankruptcy proceedings, according to federal bankruptcy and insolvency records. He entered bankruptcy in July 2006 and was discharged after filing a plan accepted by creditors in May the next year. While he was discharged, he continued to deal with the legal proceedings until as recently as January this year, according to court records. But as impressive as his rebound and development of the Renaissance projects was, they went over budget, said his sister and former business partner Ann Sheridan, who worked with him in 2004 and 2005. “They went over budget and Chartwell was furious,” she said in an interview from her home in Seattle. “He’s got these great plans.” Rink acknowledged in his affidavit “New Future has encountered significant cost overruns associated with certain projects.” Beginning in 2005 and over the next several years, his companies, all with his wife, Marnie McEachern on the title, purchased property and made development plans for two resort properties in the Shuswap, a major condominium project in Kamloops, a library building in Summerland, condos on the West Bank Indian reserve and on prime Nelson waterfront land as well as another condo project on Okanagan Lake. Veteran Kamloops small businessman Frank Walsh, who operates a plumbing and heating supply operation in Valleyview as well as a wholesale fireplace distribution business, said failures in business are common “and anyone can have their ups and downs.” But he said it appears from his outside view of Rink’s projects and problems that a large amount of leverage is at work. The company also needed to keep projects “in the pipeline” as others progressed. “People always say that when something goes wrong. When it goes right, you’re a genius. . We did get loaded up. We had lots of projects. (But) we’d turned down projects for three years.” Dan Thompson, an assistant professor of accounting at Thompson Rivers University, said leverage is commonplace in real estate lending. The concept is simple: Any homeowner uses leverage when they buy a $400,000 house, for example, using a $40,000 down payment. A developer may invest a small amount of money and borrow the rest to purchase land. He will negotiate with banks to obtain money for development and construction costs. With growing equity and cash flow, the developer may also use some of that money to buy another property, which hatches another development plan and more financing. “You can make a fabulous amount of money,” Walsh said. “That’s how a lot of guys get rich in the development business.” Sheridan said she counselled her brother to scale back and not extend his risks and credit. “He just kept on taking on more and more. . I said, ‘Mike, we can do anything but not everything. You have more projects than I do fingers.’ ” Documents also disclose that first mortgages, typically obtained by major lenders including Coast Capital, were secured at competitive interest rates of five per cent. But later, he turned to high interest mortgage investment companies, which loaned even more money in return for second or third mortgages, sometimes guaranteed by other New Future properties that were already heavily mortgaged. Rink was paying 17 per cent interest on one $3.4 million mortgage at Mission Hill, four times the rates charged to well capitalized companies. The same group, Wong Syndicate, that loaned his company $3.4 million for a second mortgage at Mission Hill advanced another $3.4 million for Tuscany Villas in West Kelowna, a second mortgage that charged 13 per cent interest. Using properties as collateral for others is known as cross collateralization. Documents filed as part of Companies’ Creditors Arrangement Act (CCAA) proceedings now underway for Rink’s companies show five of seven projects are cross collateralized, some with fourth mortgages. “You get too many loans going bad and the whole thing comes down,” Thompson said. Rink said he could not have foreseen what’s been dubbed the Great Recession late in 2008. Many projects, including Vancouver’s Olympic Village, have been caught in its wake. “How many people knew two years ago the whole market across the world would collapse? We had presales. Everything was moving along.” Kamloops developer Jim Thomson, one of the city’s other big players over the past two decades, said cross collateralization of mortgages is not common but does occur in the industry. “Given Mike’s track record he’s probably found himself as a high risk to lenders. . He’s in a highly leveraged zone. That’s why he’s not dealing with traditional lenders.” Walsh said business inevitably moves in cycles. The same banks that promoted borrowing and easy lending eventually become more cautious. “They (banks) see liens and shut everything down, putting a stop to everything.” That’s what happened on Oct. 22, when Mission Creek Mortgage, the lender for West Beach Village, demanded payment of more than $15 million and pledged to begin enforcement action if a cheque wasn’t in its hands within 10 days. Supreme Court, giving them breathing room to restructure and refinance under the watchful eye of a court appointed monitor. On Dec. 6 a comeback hearing is scheduled in Vancouver. New Future’s lawyers will ask for a longer period to restructure and assess its situation. New Future is also expected to apply for more special financing to complete the two condo projects, which can then be sold to bring in crucial cash to pay debt. Three years ago, in December, 2007, New Future Group put 60 presale units in the Mission Hill project on the market. Capitalizing on proximity to shopping on the South Shore and downtown, as well as the best views in town, there was strong demand. By the end of the weekend sales blitz, New Future sold the entire first building out in a multi phase development. The frenzied sales activity set a local record, which merited mention in a story in the Globe Mail newspaper. Jay Barlow was one of those buyers. He and his spouse lived most of their lives on the North Shore, where they own a home and another rental property. But the prospect of living at the third floor of the Mission Hill complex, with views to the west and north, as well as an end to yard work, was enticing. “We’d be overlooking the river and watching the sunsets. We’d be looking up the valley to the North Thompson. It would have been beautiful.” Barlow put down a 10 per cent deposit on a two bedroom unit priced at $350,000. Last month, following months of demands to New Future Group, he got his money back. New Future developer Mike Rink told The Daily News last month that buyers who qualified because their unit was not delivered on time would get refunds. Work is now underway at Mission Hill’s two incomplete buildings to winterize them, under a court ordered process. A monitor, Vancouver based Bowra Group, is in the midst of obtaining estimates to complete construction and estimating market value of completed units. Barlow said if he were to look again at purchasing a unit at Mission Hill, it would have to come at a big discount. “I figure it would have to be $100,000 cheaper to be on par with the rest of the market,” said the small businessman. Documents filed for the Companies’ Creditors Arrangement Act (CCAA) hearings don’t detail how many, if any, of the presales for the two buildings remain as binding contracts. That means the market may have to bear an additional 94 apartment style units. Kamloops realtor Vince Cavaliere said Barlow’s price revision is too severe, but acknowledges prices will have to come down for units to sell. “There’s no doubt prices are different today than they were three years ago.” He estimates roughly the same two bedroom unit today, based on lower construction and property costs, might range between $275,0000 to $300,000. There are 144 resale condominium units currently available on the MLS system. That number doesn’t include competing developments, including Library Square and Talasa. Another building is also under construction at Landmark One, beside Thompson Rivers University. “If another 100 units come on it will take two years to sell, minimum,” Cavaliere said. The veteran Kamloops realtor noted Mission Hill faces a similar scenario to Olympic Village marketing in Vancouver. That project is in receivership and another marketing effort is being mounted, with discounted prices, in a bid to sell them into a crowded market. Despite the near term prospects, Cavaliere said a potential buyer of the two buildings could profit over the long term. “You might eat it in the first couple of years. But there’s a good opportunity for somebody.” MCEACHERN SOLE DIRECTOR OF COMPANIES Marnie McEachern, Mike Rink’s wife, is the sole director of every New Future Group company involved in the financial crisis affecting banks, mortgage companies, suppliers and tradesmen. Early estimates filed in the Companies’ Creditors Arrangement Act (CCAA) proceedings place that debt at $87 million. Rink’s name is not listed on any company or property document as an owner. But an affidavit filed by Rink as part of the CCAA process declares he is in control of operations. “I am the controlling mind of all the petitioners. Supreme Court. Those petitioners are 10 New Future companies involved in seven projects that are in a liquidity crisis, a situation where the companies cannot pay bills and Rink and McEachern are unable to backstop them. Property and company searches conducted by The Daily News also found McEachern with an ownership in properties worth millions of dollars that are not part of CCAA proceedings. McEachern is part owner at three other properties, with assessed values of more than $15 million. All three seniors projects were designed and built by New Future Group. During the past four years, New Future Group built two seniors projects, in Kamloops and Regina, using Chartwell Real Estate Investment Trust as the managing operator. McEachern is part owner at Regina Retirement Renaissance Residence and at Kamloops Retirement Renaissance Residence. Both ownerships are through a holding company. A third property, Parkside Estate in Chase, was also built by New Future. McEachern owns one of the 17 strata title units. A numbered company, with an address at 348 Tranquille Rd., which McEachern’s other firms list as the principal address, owns another three units in the Chase seniors’ complex. The three retirement properties, in Kamloops, Regina and Chase, owned in part by McEachern, are not listed in CCAA court proceedings. McEachern is also listed as a director of Eyes International on Victoria Street in Kamloops. But amid the uncertainty surrounding New Future Group, there are a few guarantees. Dan Thompson, an assistant professor of accounting at Thompson Rivers University, said the law underpinning the Companies Creditors Arrangement Act (CCCA) promises a few people will be paid first, before any secured creditor already on the books. Employees of Rink’s companies owed back wages are guaranteed to be paid first, up to $2,000. Government, including WorkSafeBC, Victoria, Ottawa and local municipalities also move to the front of the line to collect taxes owing. And Rink’s lawyers, working for the Vancouver firm Fraser Milner Casgrain LLP, will also be paid ahead of companies that loaned his subsidiaries millions of dollars as well as before the contractors who supplied material and labour for his projects. The court appointed monitor, Bowra Group, will also be at the head of the line. And Rink himself will, so far, receive a wage to complete projects intended to salvage value from the tangled web of resort and housing developments. Lastly, the lenders who have provided debtor in possession (DIP) financing to winterize buildings and finish construction also are given “super priority” and move forward. Supreme Court judge continues to allow operation and reorganization under the CCAA. Major creditors banks and mortgage companies have a vote, generally six months to a year into the process after which property assessments are made and prospects are totalled. “Courts tend to favour reorganization,” said Thompson. “They want to save jobs and tax revenues.” On Dec. Supreme Court, at which time New Future’s lawyers will ask for a longer extension of operation under CCAA. At some point, a vote of major creditors will be held to determine whether they favour liquidating assets or continuing with restructuring. Thompson said creditors will be broken into classes and given a vote on a restructuring plan, one that typically delays payments owing. In a court filing, Rink acknowledged the financial problems facing contractors who have supplied materials and labour, due to the recession “and a collapse in real estate values. “Communities and families are hard hit when developers do not pay them.” To prevent that scenario, he told the court these trade creditors will share in any equity remaining in this development projects. For an example of New Future’s prospects, Thompson points to General Motors, which went into bankruptcy and emerged in November on the stock market as an initial success. GM’s original shareholders lost everything. The ultimate owner of all the companies is the 2004 Rink family trust, whose beneficiaries are Marnie McEachern, Rink’s wife, and the couple’s four children. Bond holders in GM received shares in the new company in return for canceling their debt. Similarly, Thompson said Rink’s lenders will likely be asked to take an ownership position in New Future’s companies in return for cancelling debt. “When it’s all over Mr. Rink won’t be the only owner. Lenders will turn loans into shares. . Ultimately, Mr. Rink doesn’t own it anymore it’s like GM. The original shareholders of GM are gone.”
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