Richard Homburg, chair and CEO of Homburg Invest Inc., and Elizabeth Beale, president and CEO of APEC, discuss the agenda at the Atlantic Provinces Economic Councils annual business outlook conference in Charlottetown Monday. Guardian photo
The provincial government has backed out of a deal that would have seen the Holman Grand hotel sold to Richard Homburg and all of the hotel’s contractors paid, says a source connected to Homburg.
The source, who asked not to be identified, told The Guardian the deal included the Holman Grand, the land the hotel is on, the Homburg financial tower and the Confederation Court Mall with Homburg Canada assuming all of the debt owed to the province for the properties.
Under the deal, there would have been no write-down on the hotel’s value but the loan repayment period would have been extended, the source said.
“There was no loss involved.”
Word of the failed deal came a few days after Premier Robert Ghiz confirmed the province had numerous offers from parties interested in buying the hotel, although he provided few details about any potential sale.
The Holman Grand has been closed for several weeks after its owner Homburg Invest Inc. shut it down because of unsustainable losses.
Homburg Invest Inc., which has been under creditor protection for more than a year, owes the province about $16 million it borrowed to build the hotel.
The provincial government has a mortgage guarantee on the hotel.
But it’s not just the provincial government that is owed money and the source said Homburg Canada was ready to pay the hotel’s contractors who outstanding bills for their work.
Homburg Canada has $3.7 million ready to pay the 39 contractors who are owed money and the company was ready to start writing cheques as of Dec. 1, the source said. It also would have re-opened the hotel as soon as possible and the source said Richard Homburg would still follow through on the deal if the government changes its mind.
The latest deal is not the first time Richard Homburg has tried to buy the hotel.
The source said Homburg has been trying to buy it for about a year, but various issues with the real estate investment trust that was involved, including a change in ownership, led to delays before the shutdown.
Although both companies bear his name, Homburg Invest Inc. and Homburg Canada are two separate companies.
Homburg Invest Inc. is a public company, and although Richard Homburg owns the majority of its shares, he has no input in its operations.
Homburg Canada is a private company through which Richard Homburg unsuccessfully tried to take over Homburg Invest Inc.
A takeover would have made the hotel and the land it’s on part of Homburg Canada, which would have avoided the creditor protection process.
When it comes to the hotel’s sale, Homburg Invest Inc., the provincial government and Cominar REIT, which owns the land, are all involved because they all have a stake in it.
On Friday, Innovation Minister Al Roach was asked about the province pulling out of a deal with Richard Homburg.
Roach said any deal would have to go through Cominar and he couldn’t discuss any of several offers that have been made.
“It’s a time when negotiations are delicate and I certainly don’t want to get involved in that. That’s for the people that are directly involved to deal with,” he said.