While the Earp residence sits waiting for its inaugural group of residents to move in, top brass at Brock wait for a report from auditors Ernst and Young, on how much the building will cost in the long run. Doubts first arose over the building’s actual long-term cost after the City of Waterloo launched a lawsuit against MFP Financial Services of Mississauga. The same company arranged a deal for Brock to receive a $42 million loan to finance Earp’s construction, refinance debt on other residence buildings and create a $10-million endowment fund. The debt was to be repaid over 28 years at 5.35 per cent.
The dispute between Waterloo and MFP started when MFP agreed to loan $48.3 million to the city of Waterloo, to finance a new park. MFP then sold the loan to Waterloo-based Clarica Life Insurance. Clarica is also providing the money in Brock’s MFP brokered loan.
The initial long-term financing for the deal between Clarica and Waterloo was worked out by the city according to a complex formula provided by MFP and the interest was figured to be a surprisingly low 4.73 per cent over 30 years. When Clarica took over the debt, they re-interpreted the formula to come up with an interest rate of 9.25 per cent, meaning that the city would be forced to pay more than $227 million over 30 years, approximately twice the projected cost.
The City of Windsor and Essex County, who jointly received a loan from an unknown investor in a deal brokered by MFP, are also speculating that their deal could cost more than double what they initially expected to pay. The money was used to create a new regional landfill site.
MFP is part of a new breed of non-bank financiers who arrange deals with governments and institutions to pay for large projects such as highways and recreation complexes. The financiers then find third parties, such as insurance companies and pension funds, to provide the money and reap profits off interest. MFP builds its fee-for-service into the cost of the loan.
When asked about the terms of Brock’s MFP brokered deal, university President David Atkinson declined to comment, saying that the school was still negotiating with Clarica and MFP. He also said that he would be making an official statement on Aug. 31.
— with files from The St. Catharines Standard, Kitchener-Waterloo Record and Windsor Star