ANNAPOLIS COUNTY CAO JOHN FERGUSON GIVES MUNICIPAL COUNCIL A CHRONOLOGY OF EVENTS LEADING UP TO PRESENT DAY REGARDING THE GORDONSTOUN NOVA SCOTIA PROJECT

The evolution of Gordonstoun Nova Scotia

I wanted to start, really, how this all came together, so people can get a general idea of how this evolved and where it is now. Originally, it was about five years ago Edward Farren contacted me. He was contacting me about the Annapolis Royal, the ARRA building, in Annapolis Royal, and he was curious what they were doing with the school. At that time, as people know, that they were looking at doing condominiums in the ARRA building and I told him that’s really I think what they’re doing but if he wanted to contact them then he could. He said ‘no, fine,’ then I let him go.

Probably a year later, I think it was, he contacted me again and he asked how they were doing with the project, and I had basically conveyed to him that it’s gone well. The condominiums are almost sold out and it’s turned into a successful project. And I asked him why. He said, no, he was working on something. And I said, well there’s another school in the county, it’s in Bridgetown, and it’s going to be torn down but you might be interested in that. He wanted to see a couple of pictures of it. I sent him a couple of photographs. And what I didn’t know at the time, and what it would mean to him, is that the Bridgetown school has round corners and a square section in the middle of the building. What he said after he saw the building was the Gordonstoun concept was the Round Square Movement. And so the building had an initial interest to him because of the round/square aspect of the building.

The entrance to the Former Upper Clements Park is the future location of one of the Gordonstoun Nova Scotia buildings. That building will be owned by Annapolis County. LAWRENCE POWELLSo then he began to tell us a little bit more about what he was intending to do, and he was looking to do a private school development. He wanted to use an old facility and bring it up. And then he wanted to meet with Gordonstoun about their ethos and talk to them about that. He asked myself and Timothy (Habinski) if we would go to Scotland. We went back to council. They okayed the greenlight to go, so we went over. We were also at the High Commission office in London related to recruitment of international students and some discussions that were held there. But ultimately the discussion at Gordonstoun went very well. It was at that time that they reached out to Ed and asked him if he would consider being the franchise. So he was excited about that.

We came back and we followed up with Premier (Stephen) McNeil. Actually we met up with Premier McNeil before we went the first time back in 2017. We met in Bridgetown and at that particular discussion the Premier was interested in the project, communicated that there was a policy about guarantees, but wanted to hear more about the project. So when we got back the Premier was asked by Mr. Farren if he would go to Gordonstoun Scotland, so on the second trip it was Warden Habinski and Councillor (Alex) Morrison, the Premier. They went and they met and I guess really had really good discussions about what this could mean and how this would unfold. The group came back. The Premier was impressed by the project and so we began, you know, to seek further follow-up with the Premier on a potential guarantee.

In October of 2018, after we had several meetings with government – intergovernmental affairs, municipal affairs – in the interim, and in that process it was suggested by our warden ‘is the province thinking that the municipality may take a lead role in this?’ And the Premier at that time indicated that, ‘well you’re getting warmer’ so to speak, as they tried to figure out how this could proceed.

We announced the project to the community in December 2018, and at around that time period the province was actively looking to see what they could do to give the authority to a municipality to move forward. The big difference in all this was the original request was a guarantee, which is a different investment instrument than what the municipality’s putting together. The municipality cannot give a guarantee the same way the province does. Whatever they build, and whatever they invest in, it has to be on municipal land. So the municipality would invest $7.2 million into this project, the condition that the $7.2 million as a part of the consulting arrangement and lease agreement -- the lease agreement is what you voted on today – but the consulting agreement was signed back in August. Those agreements basically lay out the process in which Mr. Farren can move forward, by council’s approval, on these documents, and Mr. Farren had received an advance originally of $188,000. Mr. Farren put personal property security on that money, right from the get-go.

The second phase was Upper Clements was coming to an end and they were in a bit of a hurry because their situation, if they had to go bankrupt they could lose all their assets and it may not even get transferred or been potentially a project that Gordonstoun could move on. So we moved quickly to get the land purchased. The land was purchased for $600,000. There were a lot of loans on that property, including one from the municipality. And Annapolis County wrote of $300,000 that was owed by Upper Clements back to the county. It was a loan that was given back in 2007 and the county had not received any payments for it or any interest on it. So they wrote it off.

As part of the arrangement with E. A. Farren, Mr. Farren said that he would pick up that loss – that the county wrote off that loan for Upper Clements – and said that he would pick it up and he’d pick it up in Year 5 of the Gordonstoun project. With that said, Mr. Farren also, in order to build this building, there are certain requirements under the franchise arrangement – I can’t get into that detail because it’s between him and Gordonstoun – but he was required to pay fees for the operational plan that has to be incorporated with the actual design of the buildings. So this is all required as part of how the design of the buildings could lay out on the property at Upper Clements Park , but also how the school is supposed to flow from an academic use perspective, and then ultimately he needs to get the design of the buildings, the layout of the campus as part of the entire investment package.

Mr. Farren has been in discussions with the people involved with the investments. This is all a necessary process of finalizing those arrangements. So we have advanced to Mr. Farren to date about $1.5 -- $1.6 million if I’m not mistaken, and that’s all that’s been advanced. He’s entitled to other fees that relate to architectural work, fees for work that he’s performed as part of a letter of intent that was agreed to a year and a half ago, and for security and other things that relate to making sure the property’s looked after and maintained as you get ready for development. So that’s been advanced. The advance of that portion was done under a demand notice prepared by our solicitor and the demand notice means that becomes part of a mortgage on the property and the property is the security. So where we are sitting right now  the property value by  Nova Scotia Assessments, by the PVSC, is about $1.4 million for the entire property. As a part of our arrangement we are subdividing about 25 acres of land out of the Upper Clements properties that will remain as Annapolis County’s, and the building that we’re putting the $7.2 million towards, will be on municipal property—period.

As part of moving the project forward the other properties will be transferred to E. A. Farren as the franchise holder and as part of the Gordonstoun Nova Scotia project and ultimately that aspect is to further the project. If the Gordonstoun Project were not to proceed, for example, the property would have to revert back to the county. But this is to further the project.

The original business case is slightly different from the business case that has been updated in the last year or so, but a lot of it is similar and ultimately the investment package requires all the curriculum pieces to be finalized, you know the networks of the High Commission offices and embassies around the world that deal with international students. The governing body and the people that will be involved with moving this project forward are very capable people and it’s exciting, frankly, to hear what is forecast for the future. So we haven’t advanced any money to build the facility -- to go towards that. Our goal was to wait for the other investments to come in and that’s part of our risk mitigation.

These agreements, for example, Mr. Farren will be required to pay the municipality a fee equivalent to when we issue a debenture with the Province of Nova Scotia for the $7.2 million and they come back and they specify the terms – the principal and interest payments – then the municipality (that’s a direct order for the municipality to pay) then Mr. Farren has to pay a fee equal to what the Municipal Finance Corporation stipulates to the county. The project is meant to be re-embursed completely. There’s no more than $7.2 million being advanced as a part of this project and as part of any agreement we have in front of us. There’s nothing further with respect to the arrangements that we have with Mr. Farren in respect to $7.2 million. We will also have a process of how that will be vetted when we get into the building and verification for project management. Those pieces will be put in place. The terms for amortization for a municipal facility are determined by FRAM, and FRAM has the ability to give terms up to 40 years , not exceeding. In most cases the process for borrowing requires the decision to be made after 15 years to be paid off completely. You can make a combined of paying it off and refinance, or you can refinance. And ultimately those decisions get made once we know what the debentures issues call for and what type of interest rates are involved.

The idea is to manage the payback that would allow the proper cash flow to occur for the school and for the money to be paid back to the county. So this is an investment, so to speak, but our security is … the building that gets built. My understanding is that the value of all the buildings -- let me phrase it better – none of the buildings being developed are valued less than $8 million, is my understanding right now. So the building that will be secured for the municipality will be a building valued at approximately $8 million and that will forever be on municipal property as security for the building that we have invested in. And then the leasing agreement really permits Gordonstoun Nova Scotia – E. A. Farren – to use the school as if were its own, and has to look after the operation and maintenance of it, and ultimately that … building will form part of the entire rest of the build of the Gordonstoun campus. In order for us to make it work and make legal for a municipality, we’ve had to take this a approach. We’ve just finished the lease agreement.

We haven’t been able to release any of this information up until now because we were in negotiations over many aspects of it and but this is where we are today and council instructed that this be put together and be brought forward today and ultimately there’s an agreement – a consulting agreement – and a lease agreement. It’s been thoroughly vetted. It’s been thoroughly gone over with council and I just wanted to describe it for you and for the public. And perhaps Larry (Powell) could do a follow-up write-up of what this entails and how this is being designed so that we can move the project forward, get the return on the investment for the other aspects of the project, and then work towards the economic benefits that a project of this nature can bring to the community. So that’s just a brief background from stem to stern, very quick. I just thought I’d pass that along. That is what is occurring here today and that’s how these agreements were put together.