by Ida Koric
The fate of Rossland’s Esling Park Lodge has finally been decided after much debate; the interest-free ride comes to an end.
Esling Park Lodge was conceived of during a time when the “Life Lease” structure of real estate was at the height of popularity. A life-lease is designed for those 55 and over, providing condominium living with a combination of initial investment and low rent (“maintenance fees”). Life-lease buildings are usually run by non-profit organizations so that actual costs are covered by the investor, as opposed to inflated costs that result when a developer is turning a profit.
In the case of Esling Park, investors put forward $70 – $80,000 initially, depending on the size and amenities of their suite, with a monthly maintenance fee of $600-800.
In theory, residents were intended to remain in the suites for many years, allowing the property value, and maintenance fee pool, to accrue. With Esling Park, however, some residents left only a few years into their lease, and were unable to collect their investment because of cost over-runs for the development.
Once word got out that investors were not regaining their capital, it was difficult to attract new clients, and the building remained at low capacity – leading to the financial troubles that resulted in the Society’s approaching the City of Rossland for help.
Even though the City had granted the land for the building free of charge, council at the time agreed to borrow $450,000 to lend to the project, interest free for 20 years.
Bill Profili was mayor at the time of this decision, and is the current Chair of the Seniors Housing Society. The outstanding loan is currently at $270,000 with no interest paid to date.
Profili argues that the initial loan was interest-free in perpetuity, and is asking for an extension of the current interpretation of the agreement, or for outright forgiveness of the loan.
The residence was not designed as low-income housing, but rather as high-end apartments for affluent seniors who had no such options at the time. The building is currently a standard rental, with suites as large as 1200 square feet rented for far less than market value ($800). As a result of a loan restructuring in the year 2000, two of the suites are dedicated to low–cost housing, subsidized by BC Housing.
During recent council debates, City staff recommended an extension of interest-free status until 2039. Councillor Kathy Moore argued that tax payers should not be footing the bill for a private development, and the original agreement should be upheld, with the Society beginning to pay principal, with interest at current market levels. She went on to note that, in the past decade alone, tax-payers have lost $94,000 in potential interest payments.
Mayor Granstrom opposed the motion, stating he would prefer to see some negotiation with the Society before firm values and dates are put into place. A repayment structure would mean that rents at the properties would need to increase substantially, where current laws allow only a maximum increase of 2 per cent per year.
Leigh Harrison, a lawyer involved with the initial set-up of Esling Park Lodge, spoke to council, reminding them that the Society has known for over a decade that the interest-free ride was coming to an end, and should have adjusted rents to begin approaching market value years ago.
At the May 23 Council meeting, a presentation was made by the Rossland Senior Housing Society which led to a negotiated settlement. A recommendation was put forth that the Society be charged 2.2 per cent interest on the outstanding loan immediately, and be expected to begin payments on the principle in 2019. Council agreed with the recommendation, which gives the Society five years to increase tenant fees to a level that allows a balanced budget.