Financial projections for Westin Grand Hotel were overly optimistic and negligently prepared, judge rules
Neal Hall
Sun
A 1999 photo shows Westin Grand Hotel developers Scott Cressey and John Evans. Photograph by : Glenn Baglo, Vancouver Sun files
VANCOUVER – The developers of the Westin Grand Hotel have been found liable to pay compensation to investors as a result of false financial projections that were overly optimistic, a judge has ruled.
The 1996 financial projections for the hotel, which opened in 1999 on the northwest corner of Robson and Homer, were not reasonable and were negligently prepared, B.C. Supreme Court Justice John Truscott found in a ruling released this week.
The judge found the developers and their directors liable to pay compensation to investors for making a material false statement under Section 59 of the Real Estate Act.
The financial statements projected occupancy rates for the hotel would be 72 per cent, at an average room rate of $167, during the hotel’s first year of operation. They said it would reach 80 per cent occupancy by 2003, when average room rates would climb to about $200 a night.
The 207-room hotel, jointly developed by Trilogy and Cressey Development, sold out every strata unit offered — a total of $42 million, at an average price of $225,000 — in less than a week.
“This hotel has never performed anywhere near what had been projected as reasonable,” said Brad Dixon, the lawyer representing half the plaintiffs, who are unit owners collectively known as Strata Plan LMS 3851.
“The false comparisons were based on the hotel outperforming its competitors,” he said.
Some investors were from Asia but most were local people investing for retirement income, Dixon said.
Still to be proven in court during the next phase of civil trial is whether the investors relied upon the unreasonable financial projections to purchase strata units, the lawyer said.
The next phase of the trial may be delayed because the defendants plan to appeal the liability ruling, Dixon added.
The court found liability against the defendants Homer Street Development Limited Partnership (formerly Cressey Homer Limited Partnership), Trilogy Robson Development Limited Partnership and 455322 British Columbia Ltd., carrying on business as The Grand Development Partnership, Cressey Development Corporation, and 511953 British Columbia Ltd., formerly Trilogy Pacific Enterprises Corporation.
The directors — Norman Cressey, Joan Cressey, Scott Cressey, John Evans, Jonathon Wener and Douglas Pascal — also were found liable.
The judge found the unreasonable occupancy projections were done by MM&R Valuation Services, Inc., doing business as HVS Hospitality Valuation Services Canada.
“The defendant HVS owed the plaintiffs a duty of care in preparing its opinions and the standard of care was that of reasonable care and skill of a hotel valuator,” the judge said in a written judgment. “The projected occupancy rates for the Westin Grand Hotel for the period 1999-2003 were unreasonable and … were negligently formulated by HVS.”
The judgment is available online at: http://www.courts.gov.bc.ca/Jdb-txt/SC/08/15/2008BCSC1564.htm
© The Vancouver Sun 2008