Cancelled sale of Okanagan Falls property signals more trouble for Sunniva
July 6, 2020 By Jean Ko Din
Sunniva Inc. is facing huge financial challenges as it announced that another sale agreement of its cannabis production facility in Okanagan Falls, B.C. has fallen through.
According to a public statement issued on July 6, the buyer, which was identified as “an independent real estate investment fund,” has notified the company on July 3 that it no longer intends to proceed with the purchase of the property. This is the second time the sale of the Okanagan Falls facility has fallen through.
A company statement on June 8 indicated that cannabis real-estate investment company, CannaPharmaRx Inc., has terminated a $9-million deal to purchase Sunniva Medical Inc. along with the 114-acre property.
“We are working through this termination letter and carefully weighing our options,” said CannaPharmaRx CEO Nick Colvin in a statement to shareholders. “We have various other agreements that we are cautiously optimistic of consummating. We will update our shareholders as soon as we close an acquisition.”
In an earlier letter, the Calgary-based company already warned its shareholders of a delay in the property purchase as a result of the pandemic.
“As a result of the current pandemic, we, like many other companies, have experienced certain delays with closing the financing for this acquisition. These impediments are completely out of our control,” the CannaPharmaRx letter said. “That said, we believe those issues have been resolved and expect to close on this investment during the current quarter.”
Sunniva was relying on the sale of its property to help boost its annual filings as the company faces cease trade orders from Ontario and British Columbia Securities Commissions for failing to file its financial statements.
Sunniva had been seeking a buyer for the property since June last year. As sale negotiations extended, the company has since defaulted on its mortgage for the property and even faced a court petition in May.
According to a company statement on May 8, Shuttleworth Properties Ltd. filed a petition to the Supreme Court of British Columbia, seeking a legal order to fix a time limit for payment of the amount payable under the mortgage plus certain legal costs associated with the proceeding.
In the event that the amount has not been paid by the expiration of the redemption period, then Shuttleworth gains the right to apply to the court for an order to foreclose on the property.
The Okanagan Falls facility, which the company first purchased in June 2018 for $7 million, is currently half built. The property was to house a greenhouse, a production facility and an administrative building. Sunniva had originally planned to invest $124 million in the site and it was estimated to create 220 full-time jobs.
The company was named in a lawsuit, along with its wholly-owned subsidiary, 1167025 B.C. Ltd., in connection with loans made by Matrix Venture Capital Management Inc. to Sunniva on Aug. 28, 2019 and Oct. 11, 2019 in the aggregate amount of $7 million.
The remedies sought by Matrix Venture Capital include a mortgage over Sunniva’s Okanagan Falls property to secure payments of the amounts of the loans owed by Sunniva. Sunniva, through its subsidiary, entered into a $3.4 million mortgage to finance the purchase of land for the greenhouse facility in Okanagan Falls. The company has repaid $400,000 as at Sept. 30, 2019 but is in default on the remaining balance.
On May 14, Matrix has filed a notice of motion with the Supreme Court of British Columbia seeking a bankruptcy order for Sunniva.
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