One of the speculative real estate ventures ABC CEF engaged in was “Shepherd’s Village Ministries” (SVM) (1) which, according to the KPMG Report:
SVM’s primary purpose was to build housing accommodations for mature adults, senior citizens, or the elderly. SVM built a seniors independent living facility in Valleyview, AB with that objective and the concept conceived by the local Lutheran church in Valleyview, Alberta. (KPMB p 2)
The only LCC church in Valleyview is Good Shepherd Lutheran, and, according to the Government of Canada “Charities Listing” webpage, their annual revenue has ranged from ~$45K to $75K (1). I also found an Apr 2015 youtube video where they held their final worship service in their church before it was decommissioned and near as I can tell they’re now holding services in another organization’s building .
A number of questions come to mind when reviewing this information.
- What, exactly was the business case for this venture?
- How, exactly was a church the size of GSL supposed to “conceive” of such a concept much less successfully implement and operate such a complex business venture?
- Given Valleyview’s small population base (2) – where did SVM expect to find enough people to buy into this venture to ensure it could at least pay its loans back? (3)
- If these residences housed 80 people, $17M / 80 = $212K per person. According to realtor.ca, this is roughly the going rate for a modest-size house in Valleyview. If you put two people in the same house for $425K you’re in the price range for a luxury home with all the trimmings. Granted that seniors housing would cost a bit more to meet their specialized needs, but not that much. Where did the money go?
Continuing on and paraphrasing the KPMG report – SVM:
- is not currently able to meet its liabilities as they become due,
- has no secure source(s) of funding,
- cannot afford full time management or employees,
- has nobody to manage the complexities of the life lease arrangements,
- construction / structural issues have arisen with a portion of the lands, which SVM is not in a position to address.
The Higgerty Law Statement of Claim (SoC) alleges that SVM
- Received ~$17M in funding from CEF between 1999 and 2014 (SoC p 100)
- Was under common control by people serving on both SVM and CEF (SoC p 102 for the list)
- That ABC District Officers and Directors were in a conflict of interest with respect to the ABC District’s dealings with SVML and failed to protect, or in the alternative adequately protect, the interests of the depositors to the CEF. (SoC p 103)
- The loan-to-value ratio in respect of the Shepherd’s Village CEF Loans was greater
than that which would be commercially acceptable; (SoC p 106 b)
- The Shepherd’s Village development was commenced and continued in the absence of any, or any reliable, financial projections; (SoC p 106 c)
- SVML lacked the experience and qualifications to bring the Shepherd’s Village development to successful completion; (SoC p 106 d)
- SVML had no ability to service or repay the Shepherd’s Village CEF Loans; (SoC p 106 e)
- The Shepherd’s Village CEF Loans were unsecured or alternatively inadequately
secured; (SoC p 106 g)
- Between 2011 and 2014, ABC District and/or ECHS, forgave $12,575,685.00 of the Shepherd’s Village CEF Loans, thereby depriving the CEF Trust and the CEF Quistclose Trust of those funds. (SoC p 108)
This latter point is particularly odious – where did the CEF BOD expect to find another $12.5M to give back to the CEF depositors?
Why did they do this? According to the KPMG June 8, 2017 “Notice and Statement of the Liquidator” report SVM’s total assets were worth ~$4.9M (5). Had CEF let those loans stand SVM might’ve had to declare bankruptcy back in 2011.
That also leaves the question open – where’d that $12.5M go?
SVM went into CCAA proceeding on Mar 8, 2017, KPMG was appointed as receiver, made an initial report, and then KPMG’s webpage on this matter has been silent ever since. Eventually curiosity got the better me and I enquired where things were – the response was that KPMG expects to go to court in Feb, 2019 with a plan of how they intend to proceed.
(1) You can see the SVM structures using a 2013 Google Maps satellite view of the development as well as a street view perspective. According to the 2011 ECHS report to Synod SVM housed ~80 residents at the time.
(2) A Jan 2019 check of Valleyview’s website reports it’s population as 1972 people.
(3) GSL’s filings back to 2000 can be viewed here.
(4) It can be done – Bethany Pioneer Village is next to Lucien Lake Regional Park near Middle Lake, SK – population ~250 people. The difference is that Bethany Pioneer Village started small and built up their operation as funding was available.
(5) $4.9M / 80 people = $61,250 of value per person – a considerable reduction from the original loan value of $212.K / person.