Although a written order has not yet been issued, an Ontario Superior Court gave Concord Pacific until midday Wednesday to pay the debt to the main mortgage holder on the Clover Condos, one of three luxury condominium projects by Cresford Developments that went into receivership in late March.
Court documents posted on receiver PricewaterhouseCoopers (PwC) website show that Cresford owed a mortgage of $158 million and a subordinate loan of $21 million to bcIMC, a west coast investment company whose real estate portfolio is managed by Vancouver-based QuadReal.
“Concord has had a legally binding deal to acquire ownership of (Cresford) before the receivership order was made on March 27,” according to a court affidavit filed by Concord vice-president Cliff McCracken.
“Because it has the exclusive right to acquire ownership …. Concord is presently the only party that is able and entitled to profit from a successful restructuring,” says the statement.
Cresford fell into receivership following allegations that it failed to report construction overruns, misallocated expenses among its projects.
It followed a suit against Cresford president Daniel Casey by former chief operating officer Maria Athanasoulis. In court filings she accused Casey of firing her for insisting that he make equity payments. She also accused him of secretly borrowing high-interest funds from a third-party lender.
Cresford denied the allegations in a counterclaim and none of the accusations have been proven in court.
According to court documents, Concord is using its own capital to secure the 499-unit Clover, which is closest to completion of the three financially troubled Cresford projects.
Buyers in the Clover, who had been expecting to move in this year, said they received calls and emails from Concord leading up to the Thursday court hearing. One buyer said that the developer had told real estate brokers that it intended to re-offer the Clover condos at about $1,500 per sq. ft. but it would give the original purchasers a $200 per sq. ft. discount.
That is still well above the $800 to $900 per sq. ft. that most of the original condo buyers paid, said three other buyers, who contacted the Star.
“The only losers are us,” said one.
On Tuesday, a statement from Concord referred to “rumour-based misinformation” about a plan to re-sell the condos at higher prices than purchasers originally paid, which could interfere with the court process.
“The final arrangement with the purchasers has not been determined yet and will be reviewed by the court in a CCAA process in the next couple of months,” said an email to the Star attributed to McCracken. (The CCAA, or Companies’ Creditors Arrangement Act, refers to the federal rules under which companies in financial peril can restructure to avoid bankruptcy.)
McCracken said the receiver found Cresford ran into “significant construction cost overruns and, as a result, it will take a significant investment to complete the project.”
“Under the Friday decision, we believe we have helped to avoid a costly receivership process that would have further increased the cost overrun and likely reduce the prospects of any arrangements being made with purchasers,” said the statement.
“We are a responsible, long-term builder and we will commit to a transparent and fair process for purchasers,” McCracken said.
Under the receivership, PwC had planned to solicit a stalking horse offer for both the Clover and the 388-unit Halo building, a couple of blocks south on Yonge Street. A stalking horse is a bidder that establishes a minimum price for the assets of a company that is in receivership or bankruptcy. PwC indicated there were interested bidders.
But a note from Justice Markus Koehnen on Sunday to lawyers representing the creditors, including the original condo buyers, said there would be no stalking horse for Halo if the Clover debt was paid off.
A June 1 affidavit from Jason Chiu, vice-president of OTB Capital, a third-party lender, said that QuadReal had been planning a stalking horse bid that could give it a profit of between $41 million and $103 million on the Clover.
The third and largest affected Cresford property, 33 Yorkville Residences, was supposed to have more than 1,000 units and was only in the excavation stage of construction when it fell under receivership in March and is being treated as a separate entity in the restructuring process.
As of March 2, Cresford’s senior secured creditors on the three projects claimed they were owed a total of $421.4 million, according to court documents.