CN Station heritage building goes on the market for $1.75 million; Keg for sale too

By MEL ROTHENBURGER

NEWS — Five months after the City sold the CN Station heritage building to a developer for $1, it’s on the market for $1.75 million.

But Kelowna developer Mike Culos, who acquired ownership of the building in the deal with the City, says the $1 sale doesn’t tell the real story and he’s put several million dollars into leasing, restoring and renovating the historic station, built in 1927.

Transfer of the building to Culos’ development company was approved by Kamloops City council by a 5-4 vote at a closed meeting in December and announced in January. The transaction was carried out by converting a lease held by Culos to fee simple interest.

The $1 selling price was a legal requirement.

Now, the property is listed by Re/Max realtors Ross Spina and Frank Rossi for sale for $1,750,000. The listing on their website states “downtown land lease and building for sale, current tenant is the KEG restaurant.”

Culos said that when he took over the building in 1996, a 99-year prepaid lease was the most practical way to do it, and also made it possible to get federal heritage funding.

Culos built condos on Lorne Street and offices across from the station with Station Plaza between.

In order to get people into the area, Culos put a Keg restaurant in the building but the intention “from the get-go” was for the company to eventually divest itself of the CN building and restaurant.

“We were happy enough with it but the banks were making it more difficult” for interested buyers to get financing because of the lease, he said.

While the Keg has done well in recent years, “we’re not restaurant people,” said Culos.

The restaurant franchise is listed separately for $250,000.

Any perception that he got the building for a dollar and is now getting a big profit from the sale is wrong, he said. “That’s not the case at all.”

He couldn’t put a number to the cost of prepaying the long-term lease but between that and all his investment in restoring the building, “We’ve paid for it twice.”

Culos said a buyer could acquire both the building and the Keg, buy the building and put something else in it, or buy the Keg and lease space in the building.

He said his company put about $350,000 into the station at the beginning, with a federal heritage grant contributing $250,000. Another $3 million was spent on the Keg.

“If I hung onto it another 10 years I might get my money out of it.”

If the station sells, he’ll keep his leases on two adjacent 2,500-sq. ft. lots for the time being, with an eye to possibly putting up a 1.5-story building on each one, architecturally compatible with the station.

They would add further to the use of the area as a people place, he said, recalling the challenges of developing that part of town. “Lorne Street has become quite a vibrant street.”

Rossi and City real estate manager Dave Freeman concurred with Culos that converting the lease to clear title will make it easier to attract interest in the Keg franchise and the building.

“They need to get the Keg restaurant into the hands of a good restaurant operator,” said Freeman.

He said the 99-year lease on the CN building was tied into the overall development of adjacent condos and Station Plaza. “All the components went into the balance sheet,” and the project was heavily dependent on restoration of the CN station.

He said the City has been involved in a couple of other 99-year leases in order to get properties developed.

As for protecting the heritage status of the building, “There is no real advantage to us (City) owning the building to ensure the heritage protection.

“We’re better off as a City to have the private sector spend their money on it.”

Under the agreement between the City and Culos, a heritage tax exemption was reduced from the years 2010-2019 to 2010-2015, a difference of $105,000 in taxes.

Freeman said the transfer of title to Culos should be completed within a few weeks.