Waldorf Hotel owner and leaseholder differ over recent history of site

The Waldorf Hotel story took an unusual twist today with a revelation that the entertainment-company leaseholder, Waldorf Productions Inc., contacted developers last year to get housing built on the property.

The building owner, Marko Puharich, told the Georgia Straight by phone that he received an email on August 15 from Ernesto Gomez, a partner in Waldorf Productions Inc.

Gomez informed his landlord that he has "begun working with a very important and connected architect and urban planner who has done lots of research in City Hall both in the planning department and the administration".

According to Puharich, Gomez also stated in the email that this architect and urban planner was looking into "our idea to make your block a mix of residential, affordable housing, mixed artist–live work, industrial studios, and commercial-retail on your land. The city has had a very positive reaction to our ideas."

Puharich then read out the next two sentences written by Gomez: "Furthermore, through him we have been meeting with one of the biggest developers in the country and they like our ideas and are very interested in moving forward and potentially making a proposal to you. These people are real heavyweights and have done a lot of innovative and famous projects. They believe they can get the zoning changed to accommodate this change of use."

Today, a large crowd showed up at the hotel to show their support for Waldorf Productions.

Waldorf Productions will leave at the end of the week

The entertainment company has announced that it will vacate the 63-year-old hotel on January 20 because the East Hastings Street property has been sold to the Solterra Group of Companies, which develops condos.

There was a distinctly antidevelopment mood among many in the audience. As the Carnival Band entertained people near food carts, the frontman, Ross Barrett, declared that many Vancouver buildings "are made of cardboard and chalk and particleboard".

Media coverage has focused on the possibility that after Solterra takes over the property later this year, the city may lose an important cultural venue.

Gomez readily acknowledged to the Straight that he contacted several developers and architects last year—including Westbank Projects, which built the Shangri-La Hotel, redeveloped Woodward's, and is proceeding with the Telus Garden project. The head of the company, Ian Gillespie, organized a fundraiser for Vision Vancouver before the 2011 municipal election.

"We had one meeting with Ian Gillespie," Gomez said. "One meeting with him, you know, and that was it. Then there were many other people. These are respectable people. These are people who do a good job in the community."

Gomez emphasized that in meeting developers and architects, his goal was to save the hotel and his entertainment business, plus facilitate the development of affordable housing for artists on the parking lot adjacent to the building. He said that he never met with anyone from Solterra. 

He declared that he did this because every month, he hears good artists tell him that they can't afford to live in Vancouver anymore. So he took it upon himself to find someone who might develop housing that was inspired by what Waldorf Productions is doing inside the hotel.

"This talent that's leaving—this is the soul of our city," Gomez stated. "Our idea as socially responsible businesspeople was to find someone who would develop this property for that."

He readily admitted that he doesn't know a lot about development.

Gomez emphasized that Waldorf Productions is in the "making people happy business" by providing cultural programming and entertainment. He also claimed that Puharich, who's in his 60s, was going to retire eventually.

"So we said, 'What if we, you know, started working on this project where there would be a component of commercial...a really cool place of micro restaurants with a community market, with maybe even performance spaces outside, where we could do the food-cart festival'," Gomez recalled. "And there could be, you know, an affordable mix—artists, live-work spaces—with another mix of residential. I mean...just a very general kind of discussion."

Landlord wasn't receptive to the email

Gomez said that after he sent his email to Puharich, he received a "very angry" response from a lawyer representing Waldorf Hotel Ltd.

"So I never mentioned it again," Gomez revealed. "And that was it."

Puharich read out part of his lawyer's August 29 reply over the phone. It included the following sentences:

When I met with a representative of Waldorf Productions a month ago, our clients received a representation that outstanding Productions financial information would be produced forthwith. It was finally received on Friday afternoon. The financial information established that Productions is insolvent.

Since Productions has occupied the Waldorf Hotel, it has consistently been in default to the landlord and to its numerous creditors, including the government of Canada. The financial information shows that these creditor liabilities have continued to increase.

With respect to the landlord, Productions has failed to make rent payments when due. It has failed to keep the hotel premises in a proper state of affairs....Our clients have suffered severe economic consequences from the repeated failure of Productions to make required rent payments. Our clients have granted every indulgence to Productions notwithstanding the ongoing economic harm caused by Productions' monthly tenancy.

Gomez claimed that Puharich and his former real-estate representative, Scott Primrose, were aware that he was contacting developers and architects.

Puharich, however, adamantly denied to the Straight that he was aware of Waldorf Productions reaching out to developers prior to receiving the email. His lawyer's August 29 letter included the following sentence:

It was exceptionally disturbing to our clients to learn that during the same period it was not receiving rent and granting indulgences to Productions, this continually defaulting tenant was secretly conducting due diligence on redeveloping property owned by Puharich family companies.

Waldorf Productions claimed in a news release issued today that it has invested $1.6 million into the rehabilitation of the hotel. In the first year, the company took on another $400,000 in debt.

"There has been some speculation that our business model is financially unviable and we would like to dispel that myth," Gomez's partner, Thomas Anselmi, said in the news release.

The landlord, Puharich, maintained to the Straight by phone that the leaseholder painted the exterior, renovated the beer parlour—which was done two other times since 1980 by the owner—and actually destroyed some of the Polynesian themes inside the hotel.

Waldorf Hotel Ltd. forgave rent

Puharich also claimed that his family-owned company, Waldorf Hotel Ltd., forgave $311,876.46 in unpaid rent from Waldorf Productions before a lease was renegotiated in September.

Puharich characterized this as "$311,876.46 that Waldorf Hotel Ltd. and the Puharich family contributed to the arts community in the city of Vancouver".

For his part, Gomez said that his company had a good relationship with the Puharich family. He credited the landlord with being quite sympathetic to the difficulties he and Anselmi faced after launching their business in 2010.

Gomez emphasized that both the landlord and the leaseholder recognized it would take some time for the business to get up and running.

"They were actually very glad—happy—to support us, and they gave us six months' free rent, which was agreed by them in the spirit of helping us," he stated.

When the Straight asked Puharich if Waldorf Hotel Ltd. will sue Waldorf Productions, he replied: "A long time ago, somebody once told me that you can't get blood out of a stone. These guys are broke. They owe so much to the government."

Last week, Puharich revealed to the Straight that his company has four liquor licences: two liquor primary, one food primary, and one special retail store for the beer and wine outlet.

Despite the letter from the lawyer at the end of August, the Puharich family company renegotiated a four-month lease with Waldorf Productions in September. According to both Puharich and Gomez, Waldorf Productions met its financial obligations.

Entertainment company sets conditions for staying

So why is the entertainment company leaving this month when Solterra won't take over until later this year?

Gomez explained that Waldorf Productions signed a 15-year lease, recognizing that it would take some time for the business to prosper.

Generally speaking, he said that the business is slower in January and February, picks up in March, and tails off a bit before improving in summer. He claimed that the company generates profits in spring, summer, and through the autumn.

He added that the landlord had told him that if Waldorf Productions met the terms of its most recent lease, it could get a longer-term deal.

However, Gomez said he learned only recently that the property had been sold to Solterra. Waldorf Productions is now on a week-to-week lease.

He said the company wants to avoid "going through the slow season, losing money, and then having someone terminate our lease with a week's notice when there's plane tickets to be paid [for entertainers]".

"We're dealing with international, respectable booking and talent agencies that require contracts," he said.

The only way Gomez could see Waldorf Productions remaining at the hotel beyond January 20 is if Solterra and Waldorf Hotel Ltd. can work collaboratively on a solution.

That would entail the Puharich family granting a lease until the Solterra takeover.

"Then we need another longer-term lease with Solterra in which they give us security," Gomez added. "Of course, we've already had a lot of people reaching out at this point....This has been an expensive situation for us. So we would need some fresh capital to put back into programming and into, you know, rolling back the machine, because obviously, we've closed the restaurant. We've lost a lot of money."

Gomez noted that people have stepped forward with offers to help finance his company and that there has been a great deal of community support.

"I'm sure we could do fundraisers," he noted. "We could do a lot of things. We're very creative. We have a good team."

Comments (31) Add New Comment
Trank
Art or no art it's a beautiful wonder of the city. Chances are it's going to be lost in the usual Vancouver fashion. Rot, fire, bulldozer, over-priced condos. What a shame. I have family who went there in the 50's-60's. I went there, now my kids are there. Not too many places left in Vancouver were you can say that.
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Rating: +14
Sandy Garossino
The Waldorf situation must be understood in relation to its economic and market context.

As the Economist pointed out this last week, Canada's property valuations are 78% over-valued relative to rents--the highest ratio in the developed world. That's for the country as a whole, and we know Vancouver is the worst in the country.

What this means is that rents cannot compete with what developers will pay for a property. Almost any landlord could get a significantly higher return on investment by selling to a developer over renting to tenants, and this effect is amplified where re-zoning potential boosts the profit margin even more significantly.

Developers have come to expect re-zoning as a matter of course, which suppress the perception of risk and raises the price they are willing to pay. Creating even more land value inflation.

As a consequence of this dysfunction Vancouver has witnessed the demise of the Pantages Theatre, Granville 7 (VIFF), 901 Main, Red Gates, the Ridge Theatre, and in a related way W2 and now the Waldorf.

Add to this the Playhouse and Musicfest and this is a city in a full-bore failure cascade in its arts sector. Like Tolstoy's unhappy families, each of these failures has its own story. Yet the relentlessly increasing body-count tells us we should start looking for suspects.

I'm not surprised to see Waldorf Productions make an overture to Westbank for discussions. Its pretty obvious a further cash injection was needed (and by the way, there is nothing unusual about this in the first 24-36 months of operation--it's probably the norm). Waldorf was not in a position to be puritanical about where that injection might come from. Their best hope undoubtedly was to attempt to leverage a larger land agreement with a sympathetic partner.

Waldorf Productions are no less trapped by the land value/affordability paradox than their landlord, who made (it must be acknowledged) a financially sound bargain. They have to play the cards they've been dealt.

What "Vancouver Loves the Waldorf" and so many of the hope for is not for the clock to be wound back (well we do, but so much for that). Rather, we urge all parties to recognize the very special magic that Waldorf Productions created, and to make the every good faith effort to reach an accommodation that preserves this special Vancouver gem.



Rating: +32
Gary Serious
Hey, don't be so hard on Ernesto and the Waldorf people. It's hard to deal with menial tasks like paying rent, paying taxes, and paying suppliers given the demands of being a hipster/scenester/complainer/doofus. I mean, it takes research - a lot of research - to know what the "right" shoes are to wear this month.Do you think that is easy? And rent? Shment! rent is such a...bourgeois notion. The fact the landlord even expected rent proves he is clearly anti art. The gall!
Rating: +72
GD
Leaseholders shopping a property around to developers without the knowledge or consent of the landlord is weird, right?
Rating: +92
Weston
Well that is an ugly building, if those hipsters are so intent on keeping it buy it and then pay your mortgage, and then see what happens when you dont pay a mortgage, they aint gonna forgive you thats for sure
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Rating: +36
James Jones
I think this article truly shows the patience of the Puharich family. Forgiving $300,000+ dollars is pretty impressive. If I were a landlord and the tenant was shopping around the property, I would have been angry. Very presumptuous of the tenants. This is at the same time as they are accumulating debt and not paying bills to the landlord. The shopping around could have had a detrimental effect on the landlord's own ability to shop the property around. Especially if the developers were under the assumption there was deals being made already.

I don't know how the business plan is viable? Fundraisers - really? Why would a business do fundraisers? Because their business plan doesn't work. I am sure that Waldorf Productions was creating an atmosphere of culture and arts, but was their vision sustainable. It appears no.

If the landlord had evicted them in September for being $300,000+ behind in payment, would there have been an uproar? I think not. Perhaps the new owners will have a purpose and fix the Waldorf. Perhaps they will build condos on the adjoining properties. The likelihood of Waldorf Productions being involved appears to be non-existent. Why would the new owners want to put up with tenants who have a weak business plan and can only survive if they are given breaks like a lower than market lease. Maybe the next company will be more honest and forthcoming and not try to sell a property that isn't theirs.
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Rating: +50
Notasheep
I can't believe the news reported a false story haha wait yes I can. The Waldorf was never going to be demolished and it is not going to close. The people that leased it had a terrible business model and couldn't pay the bills so they are leaving. That is all that is happening. So all of you idiots that went to the rally were there to support a few terrible business people, not the Waldorf.
The Waldorf will continue on under new management.
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Rating: +45
James Hatori
Pull it!
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Axel
This is very similar to W2, no?

Beloved arts group, behind on the bills, trying to continue their work while struggling with generating funds? Where W2 is attempting to restructure, The Waldorf has no available plans of action other than to attempt financing from larger conglomerates.

An appeal to Westbank is an appeal of desperation.

Regardless of how it happened, The Waldorf was going to change hands in some form or another eventually.

While the space is great, I question artists desires to provide their value and product to a locale/group who treats them as nothing more than grist for the mill.

Big money doesn't care about art or community unless it's creating a positive perception of it's company or contributing to the bottom line.

Create something new. Something that someone can't just buy or sell.

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Rating: +4
BS in The City.
This is hilarious!

'Waldorf was not in a position to be puritanical about where that injection might come from'.

Oh, but Ms. Garossino, they (and you) presented themselves as above-the-fray types who were in it almost purely for the love of the arts.

You must feel a little silly now, knowing that this was but another real estate play. To recoup their own stoopid, self inflicted business losses.

Surely, you're not suggesting that it was cricket of them to NOT pay the rent to the landlord? Maybe ensure that the owner might have financial problems (like, being unable to pay his property taxes?). Hmmm.

Unless...

This was a real estate play, all along...
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Rating: +22
Blue Hawaiian
I just hope they save the tiki bars. They're the last of their kind. Hard to reproduce and a snapshot in time. What else are all these new condo owners going to do in their new east side hood?
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Rating: +10
notahippy
People are sheep. Someone sells them the idea that the big, bad developers are coming for the place they like to drink. They got all excited, held a rally, called the media, raised awareness and then the truth comes out.

The Production company has a money losing business. They spend what, $2million?, to renovate the building but then sign a lease that doesn't prevent the owners from evicting them? Perhaps they should have got some legal advice first, eh?

The property owners want to sell and can do what they want as it's THEIR property. These activists should better inform themselves as they look pretty silly now. Maybe lay off the bong a little bit you sheep.
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Rating: +21
tedelec
hey Vancovuer...what do you people do for fun?? sip latte's in cold rain and stare at the mountains and ocean all day
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Rating: +8
KaptainCulture
Maybe Moonbeam or his trusty sidekick Heather "The Dealmaker" Deal will come to the rescue. Deal's a specialist in spending other people's money. Let's try her
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Rating: -4
Dylan Jones
BS in the City has his name about right.

There's a brilliant plan for you--spend $1.6 million renovating a property to improve its value for the real owner to sell out from under you, thus destroying the amazing arts centre you painstakingly created.

Or just maybe it's the same as it ever was. Follow the money.

Who really scored on this deal? The guy who could have saved the Waldorf by selling to a sympathetic buyer, but instead sold to someone who destroyed it.

Right. Marko Puharich, our poor victim. A rich landlord. Well played, Marko.
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Rating: -16
Rogets book
Destroyed the Waldorf?Last time I looked it was still there.And the group who renovated it had never made an offer to purchase the building.All they did was break their lease.Something is happening here,but you don't know what it is,do you Mr Jones?
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Rating: +24
Rolf
Sounds like they are trying to generate a buzz to sell this property to develop condos. Probably keep the name and call it the Waldorf condos. Have a couple of bars on the ground floor. Everyone wins.
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Rating: +7
You Have To Be Kidding Me
Dylan Jones,

How brilliant were the Waldorf productions people to sink $1.6 mil into a building---that wasn't theirs?! Without negotiating any payback due to leasehold improvements?

AND THEN---go behind the landlords back and get developers to look at property THAT WASN'T THEIRS? And don't you think that once these guys told the developers the place was 'available' that this might not harm the owner's ability to do a deal? Nerve!

Wow--if you are an example of a great business mind in this city, we are screwed. These guys didn't pay their rent (amongst other outstanding bills), and now they try to 'negotiate' in the media?

The building may be worthy to be saved. But these WO guys don't seem to have the ability to run it.
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Rating: +21
Curious
What about all the other cultural entrepreneurs in this city who pay their taxes, pay their rents, make their tenant improvements?

Is the Mayor going to come out and help us with our 'problems?' What is really going on here?
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Rating: +17
Landlord and Lawyer Spin.
I don't think they can say the Renters tried to sell the property behind the Landlords back when he was kept in the loop via email. It seems that the Renters were trying to find a developer who would be interested in keeping them there (and giving them a proper long term lease) as well as someone who would want to build to continue reinvigorating the area. The Renters must have been aware that Mr. Puharich was looking to sell (Which can't be denied now because he ended up selling to Solterra...) So if Mr. Puharich and his Lawyer were looking for a buyer for his property why would he be so offended and angered by his tenants for suggesting potentially interested parties? No matter who bought the property the 20 million dollar check would go into the same pocket... Mr. Puharich's!
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Rating: -10

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