Geoff McKay: Accumulating Assets

The following letter is from Geoff McKay, a General Partner with Forstmann Little & Co., 1985 BC High School Athlete of the Year, and former captain of the Canadian Jr. National Basketball Team.

As a former Penticton resident with many friends and family still living in the community, I was surprised and dismayed to recently learn that plans are in place to demolish the Pen-Hi North Gym. I attended Pen-Hi for five years in the early 1980’s and it is scarcely an exaggeration to say that I lived in that gym: countless hours playing basketball and volleyball, taking physical education classes, eating lunch every day in the stands. These experiences helped shape my life and the lives of many others, so I admittedly carry a sentimental view of the gym that makes it much more than four walls and a hardwood floor to me. However, I recognize that nostalgia (even if dressed up as “tradition” or “history”) can only be, at best, minor considerations in a decision such as this.

That said, I find it difficult to believe that the North Gym, even with an additional new facility being built, would not be a very valuable asset to the community. I understand it was recently upgraded, which would suggest it is not a “white elephant” that is dramatically outdated. If the city had to spend the capital to build this gym from scratch, would it be a priority? Undoubtedly not, but of course in this case that capital has already been expended; the issue is the operating costs. And, as someone who works as an investor on Wall Street, I assure you that it is the shrewd who salivate in situations where owners are willing or need to give up valuable assets because they cannot afford relatively modest operating costs. Fortunes have been built (and expanded) on exactly this premise. This situation is not perfectly analogous, but it seems to me that a city advertising itself as vibrant and growing would be seeking to accumulate rather than sacrifice valuable assets.

The problem is that unlike the operating costs, which are black and white, many of the benefits of a facility are hard to quantify. Said another way, they do not directly generate revenue. The organized activities that I derived so much benefit from – Lakers basketball, etc. – will always be a school priority and will be more than adequately covered by the new gym. However, there are dozens of other activities, both school and community-based, that are starved for gym time. The participants derive tremendous benefit from this. And how many articles have we read about the importance of exercise in relation to aging baby boomers, or juvenile obesity? Given that these are the people who get squeezed when gym time is scarce, isn’t this exactly the type of facility the community should be supporting?

Of course, the devil is in the details, and I confess I am not particularly familiar with many of those. However, it seems that at the very least the issue should be fully vetted by interested parties before a rash decision is made.