Businessmen made millions on Regina land that wound up in taxpayers' hands

In 2014 the minister of the economyasked a Crown corporation to buy 204 acres of landfor two to three times more than government appraisals said it was worth, resulting in a $5-millionprofit for a Regina company.

Minister Bill Boyd defends the decision to have the government-owned Global Transportation Hub buy the land on the west side of Regina for $103,000 an acreeven though the Ministry of Highways hadan appraisal saying the land was worth $30,000 to $35,000 an acreand the GTH's own appraisal said the land was worth between $51,000 and $65,000 an acre.

"I think it's important to note that this was a critical part of the infrastructure piece," Boyd said. The land is in the path of the planned West Regina Bypass and Boyd said the government needs to build an interchange on it.

"I think the axiom in real estate is location, location, location. If you have the right parcel of land it becomes quite valuable," said Boyd, who added the seller had his own appraisal of the land which indicated it was worth much more.

• Sask. politicians call for review of puzzling land transactions uncovered in iTeam investigation

Just one year before that transaction there was another puzzling sale involving the very same land, in which an Alberta businessman made almost $6 million in a single day.

The curious and breakneck escalation in price is confusing to Ruth Eisworth and to an order of Catholic sisters, both of whom owned some of the land that went on this wild ride.

Eisworth pointed out that less than three years earlier the government paid her company, McNally Enterprises, just $11,000 an acre for adjoining land, under threat of expropriation.

It just stinks to me. The whole thing stinks.- Ruth Eisworth, President of McNally Enterprises

"They were paying us $11,000.Why someone would get $103,000 an acre from the government of taxpayers money? It just stinks to me. The whole thing stinks," Eisworth said.

"I'm a taxpayer. I'm concerned."

The Saskatchewan politician who first brought this matter to the CBC's attention said he's deeply troubled by what the iTeam has uncovered.

"So there's a whole pile of questions here that there are no reasonable explanations [for] and as a taxpayer I'm appalled," said Rick Swenson, the leader of the Progressive Conservative Party of Saskatchewan. "I think most taxpayers would be appalled that their money is being spent in this way."

Alberta businessman buys land near Regina

The complex series of transactions began almost four years ago, when Robert Tappauf, an Alberta businessman went shopping for land in the Regina area.

"I sold a bunch of land in Alberta and I needed something to reinvest [in]," said Tappauf. He told CBC his family owns about about 80,000 acres of farmland in Saskatchewan and about 30,000 in Alberta.

He said early in 2012 he noticed an 87-acre parcel of land up for sale on the west side of the city, right beside the Global Transportation Hub,an industrial park owned by the provincial government.

Tappauf said he had heard the Hub "was a going concern." So he offered McNally Enterprises, the owner of the land, what it was asking for the parcel; $45,000 an acre.

Then, through his realtor, he approached the Sisters of Our Lady of the Missions, who owned 117 acres just north of McNally's land. It wasn't listed for sale, but after some negotiation, Tappauf and the Sisters agreed on $55,000 an acre.

Tappauf said he thought he might eventually be able to turn the properties into an industrial subdivision.

The agreements for the 204 acres were signed in March 2012 and Tappauf's company registered an interest on the properties. But the sale wouldn't actually close until February 2013. Tappauf said he needed that time for "due diligence."

Government planning to build bypass interchange on theland

While Tappauf was negotiating his land deals, the Ministry of Highways was drawing up plans that involved this very land.

Both parcels sit in the path of the planned West Regina Bypass and as early as 2011 the ministry was considering building an interchange that would swallow up large pieces of the land.

The minister responsible for the GTH and the chair of its board, Bill Boyd, told CBC's iTeam that an interchange was always seen as essential to the future of the Hub, making this land crucial.

"Having direct access without lights and all of those kinds of things into it is very,very important in a transportation and logistics centre," Boyd said.

Threat of expropriation was looming over land

Sister Veronica Dunne, who is the head of Sisters of our Lady of the Missions, said she was surprised Tappauf was interested in the land at all.

That's because since 2010 the government had been buying up property through expropriation, or under threat of expropriation, along the path of the bypass.

In 2010, the ministry had offered just $9,000 for what the Sisters considered the best part of their land and Dunne said they had reluctantly agreed, in order to avoid an expropriation battle in court.

Ruth Eisworth, the president of McNally Enterprises, tells a similar story. In 2011 the government bought part of her land for $11,000 an acre; far less than her appraised value of $38,000 an acre. She said she agreed to the deal under threat of expropriation.

Shortly after that sale she listed the remaining land with a realtor in order to avoid losing any more property to the government at what she considered to be an unfair price.

Government warns McNally and Sisters may want more land

Just three months after the McNallys and the Sisters signed the agreements with Tappauf's company, but before hetook possession,they both received emails from the Ministry of Highways warning that the government might need more of their land for the interchange.

While there was no legal obligation to tell Tappauf, Sister Dunne asked her lawyer to notify his attorney.

"I would sure want someone to do it for me so I wanted to do it for them," Dunne said. "Just that they had all the facts; that we weren't trying to pull a fast one."

However, Dunne said,despite the notificationthe transaction went ahead.

Tappauf says he didn't know about the bypass

Tappauf told CBC's iTeam that at the time he had no idea the government was planning to build a bypass through his newly acquired land or an interchange on it.

"I didn't have any info on the bypass," said Tappauf.

And he said he was unaware that some land from these sections had been purchased by the Ministry of Highways in recent years under threat of expropriation, at $9,000 and $11,000 an acre.

I didn't have any info on the bypass.- Robert Tappauf, Alberta businessman

He acknowledged he should have done a bit more research first.

"I never finished up my due diligence," Tappauf said. "My realtors really didn't do their job [either]. Cause I think afterwards, if I never sold it, I would have had a road going through it and it would have been a mess probably."

Sudden and surprising resale

The sale of the land from McNally and the Sisters to Tappauf's company, 139 Land Corporation, concluded on Feb. 26, 2013.

That's the day something quite unexpected happened, from the perspective of McNally and the Sisters

Tappauf's company bought and sold the land in a single day, though 139 Land Corporation doesn't show up as the buyer or seller on Saskatchewan's land titles system.

139 Land Corporation purchased McNally Enterprises land for $45,000 an acre, and sold it the same day to a numbered company ownedby Regina developers Anthony Marquart and Harold Rotstienfor $71,000 an acre.

And Tappauf's company bought the Sisters land for $55,000 an acreand then sold it to Marquart and Rotstien'sfirm for $84,000 an acre.

Marquart, the president of the company, told the iTeam he was excited to learn of this land through his business connections.

Though the land was not listed for sale, and Tappauf didn't technically own it, Marquart explained "I had heard about it in the real estate world that there could be an opportunity to develop some industrial land."

And so, in one day, Tappauf made almost $6 million.

However, the land titles record makes it look as though McNallyand the Sisters sold directly to Marquart's company.

McNally Enterprises shockedby resale

McNally Enterprises' realtor, Bill Babey, said he found that shocking.

"It is unusual," said Babey who has since become a developer."I've been in commercial real estate for 30 years and that's the first time I ran into it but I've heard of it lots before."

Eisworth said she had no idea the land had been instantly sold to Marquart's company until she got a "terrifying" letter from taxation officials with the City of Regina.

It said she had received $6.3 million for the land when in fact she had been paid $3.9 million, and she feared tax implications.

"When that's not how our transaction was represented on paper, I don't like it," Eisworth said. "I don't like having the city call me and say I received something different than I received." So she sent the city paperwork proving she waspaid the lower price.

"I've never been given an answer as to why this happened," Eisworth said.

Tappauf defended his approach to purchasing the land, saying it's perfectly legal and financially beneficial.

"If I would have closed and then [sold] it again there would be extra legal fees," Tappauf explained. "So it's a cost saving thing."

Marquartsays he didn't know about interchange plans

Marquart said he was aware the land was in the path of the West Regina Bypassand "I certainly knew that [the Ministry of Highways] may need it for their bypass. But I didn't concern myself with that."

"At the end of the day being able to have land adjacent to a new bypass and having it accessible for industrial purposes, in my mind that trumped any concerns with expropriation," Marquart said. "I viewed it as an opportunity."

Marquart told CBC's iTeam he didn't know about a possible interchange when he bought the land on Feb. 26, 2013.

"I'm not sure what plans were involved or not involved in terms of an interchange other than the City of Regina identified it as the West Regina Bypass in the Fall of 2010," Marquart explained.

On Feb. 28, two days after Marquart purchased the land, the Ministry of Highways held an open house about the interchange on the West Regina Bypass. It unveiled three proposed designs for theinterchange; all of which would have required a large piece of Marquart's newly-acquired land.

I thought he had paid quite handsomely for it; like way more than it was worth.- Bill Babey - McNally'srealtor

Babeyexplained that in his view the interchange devalued the rest of the property because it made the land difficult to access.

"In our industry we have a saying for that land. 'Can't get there from here.' You can see it you just can't get to it."

That was one factor thatled him to conclude Marquartoverpaid.

"I thought he had paid quite handsomely for it; like way more than it was worth," saidBabey.

Report says Tappauf and Marquart overpaid

An appraisal of the properties completed in October 2013 for the Ministry of Highways concluded that both Tappauf's and Marquart's companiesoverpaid for the land.

It considered 27 comparable transactions and found that "there have been sales of superior land for less per acre than the $71,681 and $84,020 per acre paid."

The appraisal company said it asked six Regina land developers if they would pay what Marquart did for this land and "none said they would pay this price even if it was fully accessible for development."

The appraiser went on to say that the developers believed that the government's plans for the land made the property even less desirable.

All of the developers indicated that they would not have been interested at all after knowing how much land would be required by Saskatchewan Highways for the interchange- Appraisal commissioned by the Ministry of Highways

"All of the developers indicated that they would not have been interested at all after knowing how much land would be required by Saskatchewan Highways for the interchange."

The ministry's appraisal concluded the land was worth between $30,000 and $35,000 an acre.

Sister Dunne said she was "taken aback" at how quickly her land escalated in value as it changed hands.

"I just thought that they had ways that weren't available to us in terms of dealing with some of these challenges," Dunne said. "And I guess they did."

Marquart sells the land to the Global Transportation Hub

Just one year after Marquart's company purchased the land, itsold the propertyto the government-owned GTH for $103,000 an acre.

Marquart's company paid Tappauf about $16 million for the land and sold it to the GTH for just over $21 million, making about $5 million in a single year.

Provincial cabinet approved the $21 million expenditure on Feb. 27, 2014.

The iTeam asked the president and CEO of the GTH, Bryan Richards, why the GTH bought the land and he said "It was asked that we procure that land." When probed, Richards said it was "the government" who asked him to make that purchase.

The iTeam asked Boyd, who's the minister responsible for the GTH and the chair of the Board, why he told the GTH to buy that land. He said land prices in the area were on the rise andthe GTH needed that propertyfor the interchange, which had been promised to the companies in the government-owned industrial park. And Boyd pointed out that the decision to buy was unanimously approved by the board of the GTH.

"The decision was made that we have to act. We have to be able to buy this property in order to be able to complete that value proposition,"said Boyd.

Lawyer says GTH land acquisition makes no sense

Adam Ailsby, a Regina lawyer with expertise in expropriation, said the government's decision to ask the GTH to buy this land makes no sense.

"It's unfathomable that [the GTH] would be involved in that process," said Ailsby.

He said for years the government has been acquiring land along the path of the bypass by expropriation. Ailsby has represented or advised about a dozen people in the area faced with the threat of expropriation, including his own parents.

Ailsby said the ministry "should have been acquiring the land through the process that they had been acquiring land with every other landowner in the swath of the West Regina Bypass."

The iTeam asked Boyd why the government didn't simply expropriate, seeing as the Ministry of Highways had an appraisal which concluded the land was worth between $30,000 and $35,000 an acre; three times less than the $103,000 an acre which the GTH paid.

Boyd explained that Marquart had an appraisal showing the land was worth $125,000 an acre, once developed as an industrial subdivision. And he said the GTH had commissioned its own appraisal which saidthe land was worth $51,000 to $65,000 an acre.

"So there's a pretty big risk to the taxpayer, I would say, that if we expropriated that it would be challenged at some point in the future in a court," Boyd explained. "That appraisal would be presented at that point and we could lose."

Boyd said the GTH arrived at the $103,000 purchase price by taking its appraisal and Marquart's appraisal and "kind of sawed off somewhere in between."

The government provided theiTeamwith copies of its appraisals but a request forMarquart'sappraisal, made toMarquartand the government, went unanswered.

'It's inappropriate to be doing it for one and not for all' says lawyer

Ailsby said Boyd's approach in this case is "diametrically opposed" to the way the government has handled every other landowner that he's aware ofalong the path of the bypass.

He said in every other case the message from the Ministry of Highways has been clear and consistent.

"We have an appraisal. That is the price. If you don't like it you have recourse through the courts," Ailsby said, recounting what he said he's been told several times by government officials.

He said on the one hand the government is "grinding landowners" to keep the price of land low, arguing "we are 'guardians of the public purse.'"

"But then [they] just willy-nilly decide that some landowners are excluded from that process, I mean I don't need to tell people what is and is not fair. They can make that decision for themselves."

He said it appears the minister has approved a "one-off" in this case.

"It's inappropriate to be doing it for one and not for all,"Ailsbysaid.

GTH sells land to Highways at half price

On March 31, 2014, just one month after the GTHpurchased the land,it signed an agreement to sell 58 acres of it to the Ministry of Highways for $50,000 an acre. That'sless than half the price the GTH paid a few days earlier.

That 58 acres is the land the ministry needs for the bypass interchange.

An August 2013 report prepared for the ministry identified that 58 acres as "land required for public improvement." Yet the ministrydidn't purchase it until March 2014,after the GTH had acquired the property.

It's a never-ending story for this parcel of land.- Ruth Eisworth

The ministry also paid the GTH $65,000 dollars an acre for 55 acres of land that it will strip for soil that it will use to build the bypass. The so-called "borrow pit'" will make that land essentially useless for development as in the end it will be a deep hole with a fence around it.

In addition, the ministry agreed to purchase a few stockpiles of soil scattered around the GTH.

Boyd defended the sale, arguing that even with the interchange and the borrow pitthe GTH would still have the remaining land to sell to industrial customers.

Ailsby said this final move is even more puzzling. "It doesn't make sense [for the GTH] to sell the property at a loss when the Ministry of Highways had the power to expropriate at what they felt was a reasonable price."

He said the entire thing raises a "red flag" for him. He believes there are only a couple of things that could explain the government's behaviour.

He said it's either "the guys that are buying the land are just really, really stupid" or "there's something else going on behind the scenes that I don't know about."

Eisworth said it's hard to believe everything that's happened with her property since she sold it.

"It's a never-ending story for this parcel of land," Eisworth said.

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