Only two years after opening, the Oak Bay Beach Hotel is in court-ordered receivership with debt estimated at more than $125 million.

The hotel’s local developers, Kevin and Shawna Walker, are no longer part of its operations. Receiver Ernst and Young took over as manager on Wednesday.

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“It’s business as usual. We’ll operate the hotel for a period of time until we have determined the appropriate time to start thinking about selling the business,” said Kevin Brennan, senior vice-president of Ernst and Young, on Thursday. From the perspective of guests, “nothing will change whatsoever,” he said.

It is too early to consider a sale price or the process that might be used to sell it, Brennan said.

A syndicate of lenders, who say they are owed more than

$60 million, went to B.C. Supreme Court in Vancouver to have the receiver appointed. A list of creditors and claims will be posted on Ernst and Young’s website within 10 days, Brennan said.

Kevin Walker said he hopes to line up new financing and return to the hotel.

The 139,000-square-foot hotel includes 100 guest rooms, 20 condominiums, a spa with pools overlooking the ocean, the Snug pub, a dining room, the David Foster Foundation Theatre, a conservatory and Kate’s Café, named after the Walkers’ daughter. An appraisal valued it at $124 million, Walker said.

It opened in 2012, three years later than planned. The project went through a lengthy public process with the municipality. It faced financing issues and construction delays.

The hotel was built to replace the 49-room Oak Bay Beach Hotel, which the Walkers closed in 2006 and then dismantled to build the replacement.

Kevin Walker’s connection to the property dates back to 1972 when his father, Bruce Walker, purchased the hotel with business partner Glenn Anderson. Kevin and Shawna Walker bought the hotel in 1995. The hotel side of the operation is successful, but a changed real estate market following the recession led to financial troubles, Walker said. There are millions of dollars worth of unsold condominiums and strata-title hotel rooms.

Lenders brought in their own sales and marketing people from Vancouver in June 2013 to try to move units, he said.

“It was a dismal failure. I think we just have to conclude that market conditions have shifted dramatically from when we started this project.”

Guest rooms were sold as strata-title units that owners lease back to the hotel company. Some buyers hold title to their units. Others joined a bond fund that allowed them to move in prior to taking title. About 30 per cent of rooms fall into one of those categories. Fewer than half the condos have been sold. Two condos, priced at $3.5 million each, are unsold.

About 20 guest rooms and condos are part of the bond group, Walker said. It is unclear how they will be affected. Also unknown is whether the relationship with the David Foster Foundation will continue.

Tourism consultant Frank Bourree, of Chemistry Consulting, praised the hotel operation, saying: “The Walkers did a fabulous job and my heart goes out to them.” The hotel is ranked eighth among the top hotels in Canada on the TripAdvisor website.

Walker said the hotel is expected to finish the year with an average daily room rate of $220, surpassing the average of other high-end hotels locally, and an occupancy rate of 60 per cent. Revenue for this year is expected to reach $11 million.

Community support for the hotel has been overwhelming, Walker said. He said his and Shawna’s “hearts are breaking.” Walker broke down in tears when praising staff for their dedication.

Shawna Walker said: “We are very aware that we are not the only ones hurt.”

cjwilson@timescolonist.com