A power of sale transaction for the Port McNicoll Holding LP development site — acquired three years ago by Milborne Group, CIM International Group Inc. and a private Chinese investor — is scheduled to close on Aug. 17.
Skyline Investments Inc. originally sold the 850-acre property on the southern shore of Georgian Bay, about a 70-minute drive north of Toronto, to the investment group in July 2017 for $42 million.
Toronto-based Skyline (TASE: SKLN) had purchased the so-called Port McNicoll Resort Village property in 2006 and had ambitious plans to build more than 1,400 homes, a yacht club and marina, shops and entertainment facilities. Little work was carried out, however, and the property largely remained empty lots and undeveloped land.
The new purchaser, which hasn’t been publicly named, will waive its due diligence condition. The sale price will be $33.5 million, of which $1 million will be used to cover legal and sale brokerage fees. The buyer has paid Skyline $300,000 in non-refundable deposits and will need to pay an additional deposit of $700,000 on closing.
After completion of the transaction, Skyline said in a media release no material gain or loss will be recognized. It will extend a $32.5-million vendor take-back loan to the buyer that must be repaid by Dec. 31, 2023.
“Is it a bargain?” Skyline chief financial officer Rob Waxman pondered during an interview with RENX. “It might be. Our obligation is to our shareholders, not to somebody else, and we’re going to do what’s right for our shareholders.”
How things got to this point
CIM International and Milborne group made an initial 2017 payment of $4.2 million, with the balance to be paid over the next six years as part of a vendor take-back mortgage. The purchasers defaulted on their payments, which prompted Skyline to take action.
“It became increasingly difficult for groups to get money out of China,” Milborne Group president and chief executive officer Hunter Milborne told RENX.
“We started out with a plan where the two Asian groups that we had as partners were going to fund and it became difficult for them.”
There were plans to build up to 1,500 homes on the site over seven to 10 years, but nothing was ever developed.
Milborne’s company is a marketer of urban, master-planned, multi-phase communities. He said his firm lived up to its obligations, but it had a smaller financial position in the investment.
He added CIM was the main operating partner and that his firm maintains a good relationship with it despite the financial setback.
CIM is a diversified company involved with real estate development, mining, technology development, merchant banking, mergers and acquisitions, international investment banking and advisory services, and corporate finance.
“I think the important thing for people to know is that sometimes people buy a deal and then find out there’s an environmental problem or a market problem, or it’s not what they thought, and they walk away,” said Milborne. “There was nothing like that (in this instance).
“There was nothing wrong with the deal. It was good, it is good and it will be good. It was really just the financial circumstances of international markets.”
Interest from multiple investors
Waxman, who joined the company in 2018, said the power of sale process was launched in the spring of 2019 and attracted interest from multiple investors with different ideas for the site.
The location offers year-round recreational opportunities, including boating, fishing, skiing, snowmobiling and hiking, as well as the nearby Casino Rama.
Skyline wasn’t interested in taking the property back, according to Waxman.
“We’re not developers. When the company bought this, it had way more development assets. As a percentage of its asset base, development was a bigger piece of the pie.
“We’ve changed that over the last couple of years, where development is less than 10 per cent of our asset base.
“We own 18 hotels and resort properties around North America, and that’s our business. We’re not interested in building single-family homes or whatever’s being built up there. It’s just not our business anymore.”
Waxman isn’t at liberty to comment further until this latest sale closes. He said the purchaser does have a plan for the site, though he is not privy to all the details.
Skyline is a Canadian company which trades on the Tel Aviv Stock Exchange and specializes in hospitality real estate investments in the United States and Canada.
It owns 18 income-producing assets with 3,301 hotel rooms and 89,869 square feet of commercial space, and development lands with rights for approximately 2,315 residential units in three main areas north of Toronto.