Muskoka To-DAILY

Muskoka Centre ‘impasse’ ends talk of Chinese bilingual school in Gravenhurst; town to appeal to premier

Mark Clairmont | MuskokaTODAILY.com

GRAVENHURST — Bad news for Gravenhurst.

The province wanted assurance that the 70-acre Lake Muskoka property wouldn't be flipped or become for-profit centre for 20 years - a contract clause the proponents refused to agree to.

The province wanted assurance that the 70-acre Lake Muskoka property wouldn’t be flipped or become a for-profit centre for 20 years – a contract clause the proponents refused to agree to.

The province has rejected a second offer for the Muskoka Centre, says a Town of Gravenhurst release Monday.

And it looks like the 70 acres on Muskoka Lake could go to the open market to the highest bidder.

It’s a big blow to the town and its residents, who were counting on the sale to be catalyst for change in Gravenhurst.

The town calls it an “impasse,” and not a total collapse of the deal.

Infrastructure Ontario (the provincial property management arm) recommends talks “cease” and the property goes to the highest bidder who would provide the most money for  the land.

That could actually mean housing — but at a higher cost of the land; and thus more money for the provincial treasury in a competitive bidding process.

Which, while many locals wanted jobs, could ultimately lead to more long-term financial injections and fiscal security for the town.

That’s the quick summation following a report from Scott Lucas, director development services and Glen Davies, CAO, for the Town of Gravenhurst, which has been negotiating to buy the property for almost a year.

The province wants to prevent any threat of a flip in the property from a non-profit Chinese bilingual high school to a for-profit venture, such as housing.

That happened once before with a previous sale — and the province cancelled the deal.

The province wanted the “anti-flip” clause for 20 years, which the proponents rejected.

The town says the firmness of Infrastructure Ontario (I.O.) late in negotiations not to be flexible, is “perplexing.”

The report claims I.O. was aware of the possibility early on and still continued to talk.

They sayome sort of housing was always openly mentioned and even shown in the proposed drawinngs by Knightsbridge Capital Management and Maple Leaf Education Systems.

A public meeting in February clearly showed housing on the west side beach area of the coveted property.

The project proponents couldn’t agree to the stumbling clause, which the town says in its report Monday was about the only sticking point to a final sale.

The town report seemed to indicate the price was not the obstacle — but did not mention a negotiated price.

Prices on Lake Muskoka can easily run between $3,000 and $4,000 a foot.

And the proponents were prepared to pay “fair market value,” or what I.O. estimated it was worth.

Now, the town, which was negotiating the deal, is recommending in the report going to council for a closed door meeting Thursday, that they appeal directly to Premier Kathleen Wynne to intervene and over-ride the clause or suggest an alternative to obtaining the property.

See the town’s full report below:

In February 2017 plans were unveiled for a Chinese school on the property, that included room for housing on the left side of the drawing overlooking the beach on Lake Muskoka.

In February 2017 plans were unveiled for a Chinese school on the property, that included room for housing on the left side of the drawing overlooking the beach on Lake Muskoka. The town says that was always in plain site and says it’s “perplexing” why the I.O. continued talks, then lately seemed opposed to any initiatives that would involve a profit centre.

RECOMMENDATION

The Chief Administrative Officer recommends:

THAT as a result of an impasse in negotiations to acquire and transfer the Muskoka Regional Centre lands, that the Mayor advise the Premier accordingly, and ask that the Province provide an alternate solution to allow the project to proceed.

PURPOSE

The purpose of this Report is to advise Council of the status of negotiations with Infrastructure Ontario, which appear to be at an impasse, and to discuss next steps in the process.

BACKGROUND AND ANALYSIS

Council will recall passing a Resolution on June 21, 2016 (Report No. ADM 2016-05), providing direction to the Chief Administrative Officer to enter into negotiations with Infrastructure Ontario to acquire the lands for the purposes of transfer to a private entity that has the financial (and other) means of developing the site. The context of this direction involved a desire to grow employment and economic opportunity in the community (directly and indirectly).  Specifically, the Resolution read:

“THAT the Town of Gravenhurst enter into negotiations with the Province of Ontario through Infrastructure Ontario to acquire the property known as “The Muskoka Regional Centre; and,

THAT the Town enter into a non-disclosure agreement with Infrastructure Ontario to facilitate the negotiations; and

THAT the Town undertake a public process to secure a partner to acquire and ultimately develop the property; and

Report to: Council Report Title: Muskoka Regional Centre  Status of Negotiations Date: October 5, 2017

THAT the Mayor and Clerk be authorized to sign the Non-Disclosure Agreement on behalf of the Corporation.”

Having consulted with Infrastructure Ontario (I.O.), the Town undertook an open and transparent international search and process, which included site visits to the MRC property under the supervision of I.O.  This process resulted in the selection of the Joint Venture Group of Maple Leaf Education Systems and Knightstone Capital Management.  Council subsequently approved the following Resolution (or excerpt thereof), whereby staff was directed to prepare and negotiate a document that details the nature of the relationship of the parties as negotiations for the property moved forward:

“AND THAT the Chief Administrative Officer be authorized to enter into negotiations with Maple Leaf Education Systems for the purpose of creating a partnership to acquire and develop the MRC lands;

AND FINALLY THAT once the partnership agreement is prepared in draft form, the Chief Administrative Officer report back to Council on the proposed terms and conditions to seek Council approval.”

A Memorandum of Understanding was then signed between the Joint Venture Group (JV) and Council on February 28, 2017, and the Town began formal negotiations with Infrastructure Ontario in an attempt to acquire the lands, always with the intent to transfer a large portion for the development of a mixed use, for- profit development, inclusive of institutional, residential, recreational and open space elements.  It was, and remains, the belief of Administration that this development concept fits well within the community, meets the intent of the Official Plan and guiding provincial documents, and fulfills Councils direction/mandate of enhancing employment and increasing direct/indirect economic impacts.

More specifically, and without limiting the scope of potential benefits, the proponent had indicated that the proposed project would create 200 construction jobs over three years; $40 million in labour income and a GDP contribution of over $50 million to the Province of Ontario for the construction of the facilities. Including indirect and induced impacts, once operational, the project estimated to stimulate 370 jobs, $66 million in labour income and provincial GDP of $100 million.  One of the more important components of this proposal is that it represents yearround employment, and represents an extremely significant non-cyclical economic driver for the Town, as well as the District of Muskoka.

Alan Perlis, left, and Howard Balloch, spokespersons for the two partners, gave a 30-minute slide public presentation then went to town hall for the signing of a memorandum of understanding to purchase and build the Chinese boarding school at the former Muskoka Centre site on Lake Muskoka in Gravenhurst earlier this spring.

Alan Perlis, left, of Knightsbridge Capital Management and Howard Balloch, a spokesperson for Maple Leaf Education Systems, gave a 30-minute public presentation in February at the Opera House, then went to town hall for the signing of a memorandum of understanding to purchase and build the Chinese boarding school at the former Muskoka Centre site on Lake Muskoka in Gravenhurst earlier this spring.

Report to: Council Report Title: Muskoka Regional Centre  Status of Negotiations Date: October 5, 2017

Negotiations for the property to facilitate this project have been ongoing since late 2016 and were close to being completed until a particular clause resulted in what appears, at this point, to be an insurmountable impasse.  The clause relates to the Province wanting to restrict the ability of the end owner (the Joint Venture) to make profit from the property for a 20-year period.  For a number of reasons, the Joint Venture Group is not prepared to accept (as a forprofit entity) such a constraint.  Understood throughout the process as an “anti-flip” or “antispeculation” clause, Administration and the Joint Venture understood this to be an attempt to ensure the property was not acquired on speculation and subsequently transferred in short order for a profit.  There may have been merit in this expectation early in the process as the Town wished to achieve the purchase on the basis of a nominal fee ($2.00).  As negotiations progressed, however, the Town and Joint Venture agreed to pay what has been established to be “appraised fair market value” as determined by Infrastructure Ontario appraisers.  This was further confirmed through the Town retaining an independent appraiser.

In essence, Infrastructure Ontario’s position is that this “anti-flipping” clause relates to any profit from the property inclusive of the sale of units from the residential component of the property for a period of 20 years.  In any case, the ability to build and sell a small residential development on the property was integral to the overall project.  The proponents also did not want to be constrained in their ability to undertake other land/ownership changes in the future.  For the Joint Venture, the restriction was not reasonable for economic reasons and for flexibility in their corporate structure.

What is rather perplexing is that fact that this development concept has been unchanged from the inception of this process.  Infrastructure Ontario and other Provincial officials were aware of the proposal and its concepts from very early on in the process and at no time were the proponents or the Town advised that the ownership and development model proposed would not be acceptable.  The aforementioned clause effectively makes the model impossible.

Through discussions with the Joint Venture over the last couple of weeks, a more prototypical “anti-flip” clause was prepared and offered to Infrastructure Ontario, but after their consideration, was rejected. Infrastructure Ontario administration has made it quite clear that they are unwilling to consider other alternatives to deal with this matter.  Their policies prohibit a direct sale (a sale that has not gone through a competitive process) resulting in ownership by a for-profit entity that might make what may be perceived as windfall profits.  Thus the resultant impasse.

CONSULTATION

The following individuals were consulted in the preparation of this Report:

Report to: Council Report Title: Muskoka Regional Centre  Status of Negotiations Date: October 5, 2017

  • Russell, Christie, LLP • Director of Development Services • Manager of Economic Development • Joint Venture Group (MLE & KCAP) • Infrastructure Ontario

CONCLUSIONS

It is concluded that the negotiations have arrived at an impasse, whereby Infrastructure Ontario has indicated there is no flexibility in a clause that the Joint Venture Group is unwilling to accept.  There is no administrative avenue to continue negotiations, and Infrastructure Ontario has indicated that they are up against a timeline that will soon see them put the property on the open market.

At this stage, Infrastructure Ontario has recommended that based on this impasse, negotiations could cease and the property would be put on the open market, whereby the Joint Venture Group could place a bid on the property without the limitations described above.  The risk of course is that Infrastructure Ontario has made it clear that their interest is, first and foremost, highest short term return financially.  Therefore, there is no guarantee the Joint Venture would be successful in acquiring the property if they chose to pursue it.

As a final point, Administration is recommending that the Premier be advised by the Mayor of the conclusion to the negotiations and the nature behind it, and further that the Premier find an alternative way to allow this important project to proceed.

All of the old buildings from the mental health and TB centres will be torn down, save the gazebo, would have been paid for by the new owners.

All of the old buildings from the mental health and TB centres would have been torn down, save the gazebo, and those costs would have been paid for by the new owners.

ECONOMIC IMPACT

While continuing negotiations would not have immediate direct financial impacts, the potential termination of this deal as a result of this impasse has extensive detrimental economic implications.  Not only do the Town, District and Province potentially lose a community-changing redevelopment opportunity, but uncertainty around the Province’s intentions moving forward from a marketing and land use permissions perspective raises significant concerns.  The Province has been overt in indicating that they feel the “highest and best use” (which coincidentally is the basis of their current appraisal value) is a residential unit or family compound.  Comparatively, the resultant economic impact would be minimal.

Report to: Council Report Title: Muskoka Regional Centre  Status of Negotiations Date: October 5, 2017

COMMUNICATIONS PLAN

A significant commitment has been made to consultation throughout this process.  In addition to the consistent news coverage and dialogue with our community partners, there has been substantial social media attention given to this project.  The Chamber of Commerce initiated a letter writing campaign to the province, during which over 500 letters of support for this project were sent to the Premier and relevant Ministers.  In addition, the Joint Venture held a wellattended public meeting on February 28, 2017 at the Gravenhurst Opera House and conducted focus group discussions with a number of agencies that may have concerns early on in the process.   The successful redevelopment of the property would remain a focus of Administration who would continue to provide updates to Council and the community as the process unfolds.

RELATION TO OTHER FORMAL PLANS OR GUIDING LEGISLATION

  • Provincial Policy Statement • Municipal Strategic Plan • A more diverse economy with more year round employment opportunities (retain existing and attract new businesses to Gravenhurst) • Lobbying for the expedited redevelopment and optimal use of key Gravenhurst properties • Official Plan • Economic Development Strategic Plan • Municipal Budget

RESPECTFULLY SUBMITTED BY:

Author: Scott Lucas, Director, Development Services Approved By: Glen B. Davies, Chief Administrative Officer

Short URL: http://www.muskokatodaily.com/?p=28678

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