Dozens of members of the Spirit Ridge Owners’ Association (SROA) are threatening legal action against Bellstar Hotel and Resorts and their affiliate company after the developer of the resort recently closed down the conference centre, restaurant and check-in lodge. Bellstar management says the price they are asking for those assets is reasonable, but Delwen Stander, spokesperson for the owners, strongly disagrees. (Keith Lacey photo)
Dozens of property owners at one of Osoyoos’ most prestigious vacation resorts are threatening legal action against the Alberta-based development company that built Spirit Ridge resort a decade ago.
Members of the Spirit Ridge Owners’ Association (SROA) are angry that management from Bellstar Hotels and Resort Ltd. have closed down “central facilities” that include the convention centre, check-in lodge and restaurant.
“In the opinion of our owners’ association, what has taken place is unnecessary and very unprofessional,” said SROA spokesperson Delwen Stander, in a phone interview from Vancouver last week. “The owners association, on behalf of hundreds of investors at Spirit Ridge, is struggling to deal with this situation.”
The luxury resort was named Spirit Ridge Vineyard Resort and Spa up until a few weeks ago, when a new management team brought in by the SROA renamed the facility to Spirit Ridge Nk’ Mip Resort.
Bellstar, based out of Canmore, Alberta, owned 75 per cent of Spirit Ridge, while the Osoyoos Indian Band, who owns the land where the resort is located, were 25 per cent owners, said Stander.
Between 2005 and 2015, Bellstar sold hundreds of leased units to purchasers in the range of $80 million, with the assistance and permission of the federal government, that is officially the landlord, said Stander.
Bellstar was also hired as the rental and property manager for the resort and remained in both roles until recently, he said.
“In communications between the owners and Bellstar, and pursuant to sales and disclosure documents each owner received on purchasing a long-term sublease (99 years), it was inferred that the head lease would eventually be transferred to the owners’ association once all of the leasehold units were sold,” said Stander.
Phase I of Spirit Ridge was 100 per cent sold several years ago, but the head lease over this portion of the resort was not transferred to the owners, he said.
Phase 2 has only 13 units left unsold, but all 13 are owned by principals or affiliates of Bellstar, he said.
“In other words, every single unit that could be sold to the public has been sold,” he said. “Nevertheless, the Bellstar affiliate still holds the head lease.”
On the 10th anniversary of the rental management contract with Bellstar, close to 90 per cent of the owners – they needed 75 per cent – exercised their legal right to terminate Bellstar’s rental management of the resort, he said.
It was after being terminated as rental manager in late January that Bellstar management elected to shut down the convention centre, restaurant and check-in lodge at Spirit Ridge, said Stander.
The closure of these facilities occurred despite Bellstar having taken bookings and deposits for weddings and other functions at Spirit Ridge, he said.
“Despite provisions in the head lease, which made it a default to vacate or abandon any part of the premises, neither the federal government, who is the landlord under the head lease, nor the OIB, have rectified the situation,” said Stander.
Dale Hodgson, Chief Executive Officer of Bellstar, said his company invested millions of dollars to build and manage the conference centre, restaurant and check-in lodge and they simply want fair return on that investment.
“Bellstar Hotels & Resort Ltd. is proud of the Spirit Ridge Vineyard Resort and Spa that we developed, managed and provided support amenities,” he said in an email response to questions from the Osoyoos Times late last week. “The development has created a vibrant addition to the tourism industry in the Osoyoos region of British Columbia.
“Over the past year, we have attempted to negotiate the sale of the central facilities at the Spirit Ridge Resort which include the convention centre, check-in lodge and restaurant. Despite our sincere desire to come to an agreement in a formal matter, this has not been achieved.”
Hodgson confirmed that on Jan. 27, in conjunction with the termination of Bellstar’s rental management agreement, the company decided to shut down these facilities until such time as they can be sold.
“We continue to be in negotiation to sell these facilities,” said Hodgson. “We currently have in front of the owner’s association an offer that we await their response.”
The SROA have made public a number of matters he and management dispute, said Hodgson.
“Over the past year we have been available to meet face to face and negotiate a final agreement, but the owner’s association has declined resulting in offers and counter offers being unsuccessful,” he said. “A professional appraisal jointly conducted with the owner’s association values the commercial assets at $3 million, but until Feb 25, 2016 we had only been offered $1.8 million and $2.2 million accompanied by unacceptable terms. We currently have a very favourable counter offer proposed to the owner’s association.”
A trust fund for the extension of the head lease is in place with Bellstar’s legal counsel, he said.
Bellstar has made voluntary payments to the two per cent hotel tax used to promote tourism in Osoyoos to Destination Osoyoos in the past, but have elected to redirect these marketing dollars specifically to sales and marketing of Spirit Ridge Resort, said Hodgson.
“Over the past couple of years, the owners’ association has been very vocal with their views. Sadly, they have challenged the reputation of Bellstar and that we will vigorously defend,” said Hodgson. “In view of the offer being negotiated with the association, it would be inappropriate for Bellstar to comment further on matters surrounding this potential sale.”
Stander said members of the SROA believed that central facilities would be transferred to them if Bellstar were removed as property manager.
“When this did not occur and faced with the possible closure of these facilities, the owners entered into extensive negotiations to purchase those facilities,” he said. “Eventually, a handshake agreement was entered into, but the Bellstar affiliate reneged on that deal.
“The owners have since arranged for a separate space for check-in and a different, but smaller restaurant and meeting place for guests.”
The SROA believe the current situation may affect more than 40 weddings in addition to many business meetings booked at the conference centre, said Stander.
“The Bellstar affiliate has also taken close to $200,000 in deposits for bookings and the owners believe those deposits have yet to be returned,” he said.
The two per cent hotel tax charged to customers in 2015 is approximately $100,000 and has not been paid to Destination Osoyoos, he said.
“The owners expectations certainly did not include the developer closing and locking the resort’s central facilities,” said Stander. “The owners have expended considerable time and money to ensure that room bookings and the resort as a whole continue to operate despite these closures by Bellstar.
“The owners are considering taking legal action against Bellstar, the Bellstar affiliate as well as the OIB and federal government.”
Stander believes Bellstar is being vindictive because they have been relieved of their duties as rental manager and property manager.
“Bellstar had a good 10-year run at the resort” and they’re not happy about no longer being the rental or property manager, so they’ve resorted to closing down amenities they know are crucial to the success of the resort moving forward, he said.
“The question remains, why would they do this after building such a quality resort and making such tremendous profits over 10 years?”
While the OIB has “helped us in some very small ways” by allowing the Nk’ Mip Desert Cultural Centre to be used as the new check-in area for hotel guests, neither Chief Clarence Louie or band council have spoken out against Bellstar for closing down these key amenities, he said.
The asking price for the restaurant, conference centre and check-in lodge “are wholly and fully unreasonable” and far beyond market value, he said.
Bellstar has issued statements since the SROA relieved Bellstar as property manager “suggesting the resort is now owner operated … and that could not be further from the truth,” said Stander.
The SROA has hired Global Orchard Hospitality Group as property manager and they are one of the most revered and established resort management companies in western Canada, said Stander.
“We have hired a professional management team with many years of experience and a team we know will continue to make Spirit Ridge one of the finest resorts in this province,” he said.
The SROA’s board of directors is also filled with “a long list of experienced and accomplished business professionals … who won’t be bullied and know the real value of the assets” being negotiated, he said.
“For the past several months, Bellstar has tried to treat our association like squabbling children and that has not been appreciated,” he said.
Stander is confident this controversy won’t dissuade people from visiting Spirit Ridge for the upcoming tourist season.
“Anyone coming to Spirit Ridge will have a wonderful experience because this is a beautiful place and wonderful resort,” he said. “We’re going to succeed because the owners will it so and it’s going to happen.”
If Bellstar management is willing to present a more reasonable offer to sell its remaining assets, the SROA is willing to listen and continue negotiations.
But that won’t happen unless the price drops significantly and if a reasonable deal can’t be finalized within the next few weeks, the SROA’s legal counsel will consider legal action.
Chief Louie of the OIB did not respond to a request for an interview for this article. Neither did Don Brogan, chair of the board of trustees with Destination Osoyoos.
KEITH LACEY
Osoyoos Times
