We’re Funding the Birches at Ben Eoin Expansion

What I will be watching for is to see if [Ben Eoin Development Group Inc] come back to the  public looking for further support — whether as a for-profit business or hiding behind the skirts of the not-for-profit Ben Eoin Recreation — because honestly, I think we’ve done our part. — Cape Breton Spectator, 19 September 2018

 

Unfortunately, I wasn’t watching closely enough, although in my defense, it never occurred to me the Ben Eoin Development Group (BEDG) would be so forward about seeking public money. Had I been watching, I might have spotted this 11 March 2019 ACOA disclosure:

 

Note that it’s a “disclosure” not an announcement, which is interesting, because I receive a steady stream of ACOA announcements — the agency is not shy about blowing its own horn when it feels the news will be well received by the public — but it didn’t send me a special email celebrating a loan to help the Ben Eoin Development Group (BEDG) turn the Birches into what sounds like the set of Dynasty (if Blake and Crystal were golfers):

Visitors to the new The Lakes at Ben Eoin Golf Club and Resort will walk into the main inn to see a grand foyer, high ceilings and a spiral staircase.

That, by the way, is the opening line in Cape Breton Post business reporter Chris Shannon’s story about the development. News that ACOA is pitching in to help fund these “private sector” developers is tucked away in the seventh paragraph. (And yes, it makes it to the sub-head on the story, but reporters don’t usually write the headlines and subheads.)

Shannon is working from a presentation BEDG made to Ben Eoin Golf Ltd in February — BEDG’s offer to take over The Lakes Golf Club from Ben Eoin Golf Ltd was accepted by 97% of shareholders on February 6 but is being contested by the board of the Ben Eoin Ski Hill which owns much of the land on which the golf course is situated and claims to have a right of first refusal on the sale of the club.

The presentation reveals details of The Birches expansion not previously been made public — like the six, two-bedroom duplexes and the helipad. And while some of us are, of course, delighted to learn that we’ll soon have our longed for helicopter access to Ben Eoin, others are no doubt curious as to how the same story can contain both these lines:

The Ben Eoin Development Group (BEDG) through their private financing have the capacity to invest, build and grow the region into a place people from all over the world will visit,” reads the document presented to golf shareholders.

And:

The upgrades to the facilities and grounds received a $500,000 loan from the Atlantic Canada Opportunities Agency on a total project cost of $3 million.

Surely the one advantage to selling Ben Eoin off piecemeal to these wealthy, wealthy men is that they can continue “developing” it without any further assistance from us?

But no, apparently they still need our help in constructing the Shangri-la-di-da Golf Course and Resort, a place for that special subset of people who can afford to travel by helicopter but who nevertheless choose to golf at The Lakes Golf Club (which doesn’t rank among the Top 100 courses in Canada) and ski at the Ben Eoin Ski Hill (vertical rise: 490 feet).

In essence, we are being told, once again, that the only people who can be trusted to spend public money wisely are private sector developers motivated by their own greed.

 

Jobs & Prosperity

So, is there anything in it for us? Well, the chance to work low-wage, seasonal jobs washing dishes, making beds, prepping food, serving drinks and scrubbing spiral staircases. Or as BEDG’s presentation to golf club shareholders put it:

By consolidating assets; accommodations; golf course; land for future development; etc., BEDG are creating an innovative way to bring jobs and prosperity to a rural area.

How is this “innovative?” Because of the helipad?

Does any of these directors have experience running a “four-season resort,” which is what BEDG president/secretary Rodney Colbourne told the Post they intend to transform Ben Eoin into over the next “five to 10 years?”

As best I can figure (and I do stand to be corrected) Colbourne and Steve MacDougall are the founders of Offshore Technical Services (OTS), a “leader in pre-commissioning, commissioning and start-up services for the energy, mining and utility sectors.” Troy Wilson owns real estate and franchises (Tim Hortons, Wendys, Dooly’s). Glen Brann is the director of operations, NS outpatient clinic network for CBI Health Group. Siva Thanamayooran is a kidney specialist. Mike Kenny operates a chain of pizzerias. (True, Brann and Kenny were co-VPs of Ben Eoin Golf but given the dire financial straits they tell us the golf club is in, is that really a recommendation?)

Perhaps BEDG has consulted at length with industry experts. Perhaps it has hired people with experience in recreational tourism. Perhaps it is bringing a solid business plan to the table.

Or perhaps it is simply grafting a helipad and a spiral staircase onto Enterprise Cape Breton Corporation’s original, unsuccessful plan for a “four seasons” resort in Ben Eoin.

 

Cash calls

We’ll probably never get to peek behind the curtain at the machinations that led to BEDG forming and taking over so much of Ben Eoin, but one aspect of the situation is pretty clear: the federal government seems to be supporting their plan.

Why else sell the marina land to BEDG rather than to the (equally opportunistic) group that owns the marina?

Why else insist on repayment of the golf club’s $3.5 million loan when repayment is only required in the event of the club turning a profit and no serious bean counter would consider The Lakes profitable? The club, according to an earlier Shannon story, in the past couple of years:

…was able to make a profit largely [as] the result of “cash calls” from shareholders who would provide a designated amount of money to ease the financial burden on the golf club. Previous cash calls were in the $1,000 to $2,000 range from each shareholder.

This sounded so dodgy to me I reached out to a financial industry professional of my acquaintance and asked him how a company would record a cash call on its balance sheet. He told me:

It is either an equity offering or debt offering that would appear on the balance sheet, but not income statement.

If it is not considered “income” then how can it be used to calculate a profit, another term for which is “net income?”

Really, all you have to do to understand what’s wrong with this is flip it around: suppose turning a profit were a condition for Ben Eoin Golf accessing additional ACOA funding. If the club did a cash call and presented the results as a “profit” would ACOA say, “Yes, you are clearly doing well. Here’s another tranche of funding?”

Okay, let’s keep it 100: ACOA might. But it shouldn’t, because its personnel are surely sophisticated enough to know the difference between a “profit” that is the result of business activities and a “profit” that is the result of a cash call.

And consider this: according to Ben Eoin Golf Treasurer Jerry Redmond (who also works for a number of the BEDG directors), ACOA is open to renegotiating the repayment terms of that $3.5 million loan with BEDG. Here’s what Redmond told the CBC’s Tom Ayers back in February:

Tell you the truth, ACOA has said to me, and I’m sure they’ve said to other groups that may or may not have spoken to them, they would say that they’ll start talks over again with any party that is able to take over the golf course or thinks they can take over the golf course.

So they’re quite able and willing to talk to this particular group about…those preferred shares.

And finally, although Ben Eoin Golf shareholders didn’t approve the sale of the course to BEDG until February 5, ACOA made its “contribution” to The Birches on March 11. So either the agency is incredibly efficient — able to receive, evaluate and approve a $500,000 loan application in just over a month — or the application went in before the sale of the golf club was approved. Which suggests both BEDG and ACOA were pretty confident the sale would go through.

 

A Eoin For All Seasons

Finally, let’s try and get our heads around why BEDG’s plan for a four-seasons resort in Ben Eoin will work where ECBC’s initial plan didn’t. Remember, ECBC was equally certain it could secure jobs and prosperity for a rural community:

At a press conference last week, acting ECBC CEO Marlene Usher said that by building on Ski Ben Eoin, The Lakes golf course and now Ben Eoin Marina, they estimated that more [than] $58 million in new investment will be spent, with $30 million of that being tied to potential new residential development and construction of a hotel. [Cape Breton Post, 4 February 2013]

CBU Poli Sci Professor Tom Urbaniak actually revisited this plan in a recent column, noting:

ECBC loved big consultants and big schemes, many of which were wasteful failures. For example, it deemed affordable housing not to be part of its broad mandate, but Cape Bretoners were supposed to be grateful when the Crown corporation started building a high-end yacht club with public money and a luxury housing subdivision for the affluent.

The subdivision turned into a dud.

In fact, the whole “four seasons resort” plan could be said to have turned into a dud. So why will BEDG’s version not be? Because BEDG is improving the pro-shop and dining facilities associated with the golf club? Won’t that mean memberships, which are already expensive, will become even more expensive?

Because of the helicopter access? According to BEDG’s presentation to shareholders:

Active discussions with Cabot Links, Fox Harbour and local helicopter operator may result in the opportunity to transport golfers, their luggage and clubs from one course to the other on a scenic journey that showcases an aerial view of the natural beauty Cape Breton has to offer.

Okay, I’ll grant you there are golfers with money willing to pay for helicopter access to the Cabot Cliffs and Cabot Links courses (ranked 9th and 43rd in the world and first and fifth in Canada, respectively, by Golf Digest in 2018) but my guess is that these people are interested in the golf, not the helicopter ride. So the opportunity to continue on by helicopter to courses like The Lakes (which didn’t crack the magazine’s Top 30 Canadian courses or, as noted above, ScoreGolf’s Top 100 Canadian courses) and Fox Harb’r (which ranked 29th in Golf Digest’s list and 108th in the ScoreGolf list) might not be much of a carrot.

As for BEDG’s plan, noted in Saturday’s Post article, to construct “cottage/multi-unit rentals” on the marina land, I can’t make any sense of that at all. In its original “business plan,” the marina board promised to dedicate about 9% of berths to itinerant boaters, meaning most of the berths are seasonal rentals and I think it’s safe to assume those renters are locals who don’t need to rent cottages in Ben Eoin. (Marina board president Robert Sampson told a 2013 press conference that the marina would help the “hundreds” of locals who didn’t own boats because they had nowhere to store them.)

And anyway, whether they were locals or visitors, why would yachties need cottages? Don’t they spend hundreds of thousands of dollars buying and maintaining boats precisely so that they don’t have to pay for accommodations when they travel?

And didn’t Dundee try the resort/golf course/marina route without success? Again, what is different about BEDG’s plan for Ben Eoin?

Oh, you say, the winter season! Dundee has no ski hill. But BEDG’s first move was to undermine the financial viability of the Ski Hill by building its own pro shop and dining facilities rather than continuing to share facilities with Ski Ben Eoin. And it doesn’t seem overly anxious to make nice with the Ski Hill board, or else the board probably wouldn’t be going to court to block its purchase of the golf club.

Moreover, The Birches couldn’t fill its 12 original rooms through the winter months; in fact, it closed its doors during the entire ski season because while the Ben Eoin Ski Hill is a great community resource, it’s not a ski destination. Adding additional rooms to The Birches isn’t going to change that. And I’m going to go out on a limb here and say that nobody is going to rent a helicopter to go skiing in Ben Eoin.

And if BEDG actually has figured out how to make this four-seasons thing work, why can’t they arrange private financing? Why are they looking to us for interest-free money? (I know the $500,000 is interest free because ACOA spokesperson Chris Brooks told me so. He wouldn’t tell me anything else about the “contribution,” however, because because “[s]pecific information related to the repayment terms and conditions of a contribution is subject to client confidentiality and cannot be disclosed.”)

And finally, while we’re on the subject of realities that have not changed since 2013, how about the need for affordable housing in our community? If anything, it is probably more acute now than it was then, given the intervening influx of foreign students. If anyone had asked me whether I would rather put $500,000 into the privately owned Birches Country Inn Limited or into publicly owned affordable housing, I would have said affordable housing; an investment that, besides being just generally decent could also have positive economic impacts for our community.

Of course, nobody asked me — or you, dear readers.

 

 

 

 

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