Surrey Mayor Brenda Locke denies ‘bailing out’ developer on arena deal

Surrey mayoral candidate Doug McCallum is accusing Mayor Brenda Locke of “bailing out” a land developer in a celebrated land swap that was publicly revealed on June 30 where land owned by the City of Surrey was traded for what’s to be the site of a 10,000-seat arena in Whalley, to be built where a Safeway grocery store was on 104 Avenue and King George Boulevard.

McCallum, the former mayor leading the Safe Surrey Coalition into the October 17 civic election, says city hall has paid $116.6 million worth of public assets for a site that according to BC Assessment is worth $86.8 million, “crashing” from the $108.5 million the developer paid for the site in November 2022 to build four towers there (40, 42, 49 and 50 storeys).

“Land in City Centre currently trades at $8 to $10 million an acre,” McCallum noted. “Brenda Locke paid $23.3 million.”

Locke is standing her ground on the deal.

She told the Now-Leader people are excited about it and the only “negatives” she’s heard are from people seeking public office. “So I think those negative comments are primarily politically driven.” She denies any “bail out.”

“We double-checked, triple-checked, we had Ernst & Young (accounting firm) do all kinds of breakdowns,” she said. “We are very confident in the numbers. All of those negotiations are done by SCDC – our Surrey city development corporation – we’re very confident in the deal that was made; it was made to be fair for both the owner of that property and for the City and especially for our taxpayer.”

The former Safeway grocery store site – at 10355 King George Boulevard just east of Surrey City Hall, is a five-acre parcel of land owned by Wesgroup Properties, which will receive three city-owned parcels — at 2750 194A Street and 19165 39 Avenue in Campbell Heights and Campbell Heights East, and part of the Cedar Hills Shopping Centre at 12820-12842 96 Avenue — as part of a deal to construct the City Centre Arena and Cultural Event Centre.

Locke said it’s “probably one of the most iconic” pieces of property in the region. “All the transit lines go there,” she noted. “We are getting so much interest, so much positive feedback from that particular piece of property.”

The City of Surrey, city-owned Surrey City Development Corporation real estate office (SCDC) and Vancouver Giants hockey team are among partners in the projected $360-million development, which could be built by 2030. Giants owners plan to move their team to Surrey from Langley Events Centre.

McCallum said of the “behind closed doors” deal that Locke credited Wesgroup nearly $30 million over assessed value “for land that is going down in value.”

“The developer bought at the top of the market. The condo market crashed. His project does not pencil. His land has lost a third of its value. And Brenda Locke handed him $116.6 million in public assets, more than he paid at the very peak of the market. His condo project failed, and the taxpayers of Surrey are paying for it. That is not a land deal. That is a bailout,” McCallum charged.

EY-Parthenon Corporate Finance Inc. provided a report to city manager Rob Costanzo on June 2 assessing the real estate exchange, summarizing four appraisals and a broker’s opinion of the value completed for the SCDC and four appraisals completed for the propery owner.

Its findings suggest the proposed transaction values “are within a reasonable range of the appraised values or broker opinion of value which suggests that the City is achieving market values for the assets.”

The report noted that as Wesgroup had not been offering the former Safeway property for sale and had the four-tower project in the works, “it is reasonable to assume that in a scenario like this, it would be very challenging for the City to secure a discounted transaction price especially when it is understood that the location is strategic for the Arena and Entertainment Hub development.”

The consultant’s report addressed market conditions wherein the “feasibility” of high-density market housing development is “currently challenged” in Greater Vancouver. In Whalley there are just over 100 completed and unsolved condominiums but more than 5,500 under construction and developers have reported “muted demand” for presale units.

McCallum translates this into the City Centre’s condo market “crashing under a glut of supply.” The site’s assessed value has crashed from $141 million to $86.8 million, he noted, “and it is still falling.”

Of the properties Surrey “gave up,” McCallum said, Locke took $12 million less “than the City’s own appraisers said they were worth. The developer got full price for a failed project. Taxpayers took the loss. That is a bailout, and taxpayers are Brenda Locke’s bank.”

Meantime, he noted, the Cedar Hills Shopping Centre is 100 per cent leased with 17 tenants “and has risen in assessed value every single year for five years” while the Campbell Heights lands, at nearly 19 acres, “sit in the region’s strongest industrial market, up an average of six per cent a year.

“These were the city’s trophy assets. A working, income-producing shopping centre. Prime industrial land. Property that pays the city every year, goes up in value every year, and belongs to the taxpayers,” McCallum said. “Brenda Locke traded the assets that keep appreciating for a condo site that keeps falling. She rescued a developer from his own bad bet and made Surrey eat the loss. And she did it behind closed doors.”

Locke retorted that councillors Doug Elford and Mandeep Nagra, McCallum’s SSC running mates, voted in favour of the in-camera deal.

“We voted to have the vote released,” she said. “It’s important to know that the very person that’s making the political hay of it, or one of them, two of the councillors on his team voted in favour of the project because it’s going to be a game-changer.

“The only negatives, as were predicted, councillor Annis and Bose, who don’t seem to have a vision for the growth of this region,” she said, getting a political poke of her own in.

McCallum is calling for an “independent, public review” and says the deal’s status is only agreement in principle only and can still be reversed. “The transaction has not closed,” he said.

On June 29 council approved setting up a policy governing the sale of city-owned land with an aim to ensure compensation remains based on fair market value and passed a bylaw aimed at maintaining “appropriate oversight of significant transactions.”

Surrey council voted on two corporate reports on June 29 related to land transaction rules and passed the bylaw at third reading.

– with file by Tom Zillich.