Russell Precious says a few things that have me scratching my head. Being a numbers guy, math skills and all. Don’t get me wrong: I, like most, I expect, would like nothing more than the successful completion of the Nelson Commons. I might like to live there in my waning years. But I wonder about the financial viability.
To wit: Mr. Precious takes issue with Maurice Rhodes’ letter questioning the viability. He states: “I ask him how he thinks for one minute the co-op has been able to raise $27 million without a credible business plan. Has he any idea the extent to which the banks, the key players and the investors have scrutinized our plans and run us through the ringer frontwards and backwards before giving us the green light?”
Well, I have an idea and my recollection is that the original pre-sales target was 43 of 54 units, roughly 80 per cent, which is in line with the usual requirement for financing on projects like these. After struggling for nearly two years to sell only 28 or so units the original lenders (I believe there are two) were about to pull out. The project only continues at this day because I believe the Nelson and District Credit Union agreed to backstop the original lenders and provide something like an additional $5 million of loans. So the project proceeded with 33 of 54 units as a pre-sale target, roughly 61 per cent, which is unusually low.
I guess the biggest question on my mind is what contingency Mr. Precious has in the event that the remaining units, 19 at the time of writing according to the Commons website, are not sold by the estimated completion/occupancy date? The market looking forward is anything but positive. Those units represent an almost $8 million shortfall. I suspect that all falls back onto the Nelson and District Credit Union and the carrying charges on that amount for this type of loan would typically be around a half million per year. That will probably have to come out of the co-op as the developer. Or perhaps I’m missing something?
Lastly, the original cost of the whole project was $26 million. That was about three years ago yet there hasn’t been any update or increase provided thus far. This is amazing, three years holding the line. Contrasts pretty starkly with the Nelson and District Community Complex pool reno where the project couldn’t be held off for a couple of months without incurring serious, order of 10 per cent cost increases. I’m thinking that the team doing the Commons really ought to talk with the team doing the complex.
Kevin LePape, Rural Nelson