Laurentian University, along with the court-appointed monitor, Ernst & Young, hired to see the school through its insolvency, filed a motion July 5 to appoint the firm of Cushman & Wakefield to review the university’s real estate holdings.
Presiding Justice Geoffrey Morawetz, however, took issue with the part of the motion that would allow the financial compensation for Cushman & Wakefield to remain confidential and fall under a sealing order.
After Laurentian’s lawyer, DJ Miller of the firm Thornton Grout Finnegan LLP, made her statements, Justice Morawetz asked for more information.
“Convince me this should be sealed,” he said.
Miller said sealing the amount Cushman & Wakefield (CW) stand to make from the deal has to do with trade secrets that might be disclosed, specifically, their rates.
In the motion as filed, Cushman & Wakefield advised that because commercial pricing plans are “commercially sensitive” or a trade secret, they requested the specific financial aspects be redacted and added a sealing order to the motion.
As this is also the first time a public institution has utilized the CCAA process and the costs to carry out the process will be integral pieces of trade information that they do not wish to share. A firm with a global presence, more than 50,000 employees and $7.8 billion in revenue in 2020, Cushman & Wakefield furthered the request based on the difference in their public and private company pricing and the way that would be harmful to their ability to do business.
After a brief recess for Laurentian to confer with the real estate firm to adjust what information they were hoping to seal, Cushman & Wakefield were required to disclose “the total fees, the total hours and the total rates.”
Miller said they would be happy to include broad information, but avoid showing, “how the sausage gets made.”
This fifth report was issued by the monitor on June 29 in support of the real estate advisor motion and to provide information to the court regarding the hiring and compensation to CW as an advisor for Laurentian’s real estate portfolio.
Both the monitor, Ernst & Young, and Laurentian University’s representatives supported retaining the firm. Miller, Laurentian’s lawyer, said Cushman & Wakefield were among six companies that applied who could attend to the complexities that the real estate evaluation requires.
“This is a complex process,” said Miller. “This is not a liquidation, this is not selling assets for the sake of selling assets.”
She noted Laurentian hopes “to monetize without selling anything.” In her mind, Cushman & Wakefield is a full service firm with an “extraordinary CV specific to the sector.” CW will be enlisting Education Consulting Services (an academic space planning and optimization consultant), Urban Strategies (an urban planning and design firm), Scion (a student housing consultant) and Mallette Goring (a Sudbury commercial real estate firm) as part of its work.
The university’s extensive real estate holdings are key to its ability to pay back its creditor pools, in effect all those owed money by Laurentian, which includes former faculty and staff. Beyond the sale of land, campus buildings and even off-campus holdings, Ernst & Young also notes further complexities in the report.
There are significantly more office, student and learning spaces after the layoff of more than 100 employees that could be otherwise used or monetized for the purpose of repaying creditors.
“LU has noted that with the academic programming changes and workforce changes recently implemented in connection with the CCAA proceedings, there may be opportunities to modify its utilization of space within various buildings and/or opportunities to monetize certain assets,” reads the report.
It also notes that the selection of Cushman & Wakefield was carried out “within a shortened timeline” and that the proposal they sent did not meet all seven of the requirements of the Public Sector Parameters. Ernst & Young, however, “is satisfied that the process was open, transparent and competitive and similar to processes conducted in other CCAA proceedings. The Monitor also notes that the abbreviated process is necessary in the circumstances to permit LU to advance its restructuring efforts on a timely basis.”
The next important step in the process comes July 27 with the employee claims process.
The real estate review is part of Phase 2 of the Companies Creditors’ Arrangement Act (CCAA) filed by Laurentian University on Feb. 1, a move that’s unprecedented in the post-secondary sector.
The university, which had $321.8 million in liabilities as of April 30, 2020, said it would have run out of cash to meet its payroll obligations by the end of this past February if it hadn’t secured a $25-million debtor-in-possession (DIP) loan through the insolvency process.
Under the auspices of the CCAA, Laurentian is undergoing court-supervised restructuring. That included massive cuts to its programs and employees, which were made public April 12, as well as the termination of the federation agreement.
After securing another $10-million DIP loan and another four months’ of creditor protection, Laurentian is now in phase 2 of its restructuring, which will last until Aug. 31. This motion regarding real estate holdings is a part of Phase 2.
