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Posted Oct 19, 2023, 10:20 PM
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Registered User
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Join Date: Jun 2009
Location: Aylmer, QC
Posts: 6,892
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Holy Shit...
https://www.thestar.com/real-estate/luxu...1dc26b4-2fb3-57be-a982-f6ac0d0705e2.html
Luxury condo The One put into receivership with $1.6 billion debt — presale buyers still waiting for news on units
Mizrahi and Coco, co-owners of the iconic project at Yonge and Bloor, locked in a bitter fight as reciever reviews presale agreements.
By Ana Pereira Staff Reporter
Thursday, October 19, 2023
Disgruntled lenders have forced a luxury condo development at Yonge and Bloor into receivership, casting a pall over a project once touted as the future of Toronto’s most iconic intersection.
The One, an 85-storey mixed commercial/residential skyscraper, was the brainchild of developer Sam Mizrahi and paving tycoon Jenny Coco. It should have been completed last year, with Apple as a flagship tenant, an 11-storey hotel, and more than 500,000 square feet of upscale condo space.
Instead, more than eight years after the project kicked off, The One remains something closer to The One Half. Concrete columns and walls have only been poured up to the 40th floor, according to litigation filed this week.
The project is more than $1.6 billion in debt. Co-owners Mizrahi and Coco are locked in their own, increasingly bitter fight. Would-be tenants, meanwhile, have been left to wonder if their deposits are still good and when, if ever, they’ll be allowed to move in.
“Construction of the entire Project was expected to be completed by December 31, 2022,” a representative of the senior secured lender wrote in an affidavit filed this week. “Even on the Borrower’s revised timeline, construction is now not expected to be completed until March 2025.”
Coco and Mizrahi have been feuding over financing and control since the early days of the project. In one lawsuit, Coco, who shares ownership of The One through her family’s holding company, accused Mizrahi of “attempting to affect a corporate coup” and blasted what she called his “unfair, prejudicial and oppressive” conduct.
In an affidavit filed in one lawsuit, Coco alleged that Mizrahi put none of his own money into the development, had taken millions in fees and had even engaged in “self dealing,” by selling luxury units to family members and associates with below market deposits. (None of Coco’s allegations have been proven in court.)
She also alleged that Mizrahi had unlawfully prevented her from participating in or exercising control over the development after Mizrahi abandoned his efforts to buy out Coco’s shares in 2022.
Financing for the multibillion dollar project has been shaky for a while. One creditor, a Chinese state-owned bank, sued Coco and Mizrahi’s joint development company for $200 million in 2022 alleging “fraud and other misconduct.” Apple, meanwhile, sued to get out of its own lease in The One over what it characterized as excessive construction delays.
The court filings released Wednesday, however, reveal just how dire the situation has become. According to the documents, the development corporation co-owned by Mizrahi and Coco is more than $1.6 billion in debt and has failed to make payments as scheduled to its senior secured lender, IGIS Asset Management, a South Korean investment fund.
What’s more, the documents say, Mizrahi and Coco have both personally guaranteed the more than $1.2 billion IGIS is owed, a claim backed up in Coco’s own litigation.
“The Project is heavily leveraged, behind schedule and over budget,” Coco wrote in one filing. “Sam and I have given personal guarantees to the Project’s senior lender, which has advanced close to a billion dollars.” (That number has since climbed by more than $200 million).
On Wednesday, the Ontario Superior Court ordered the project into receivership under the supervision of Toronto consulting firm Alvarez and Marsal.
“At the request of the project’s senior lender, the court has appointed a limited scope receiver to overcome an ongoing governance issue that has caused significant project delays,” a spokesperson for Mizrahi Developments wrote in an email. “As part of this arrangement, the receiver has requested that Sam Mizrahi and his company remain as the Developer and General Contractor to oversee completion of The One. Mr. Mizrahi maintains his equity position in the project.”
“This is a welcome decision that will allow for the successful completion of The One under the continued leadership of Sam Mizrahi and Mizrahi Developments.”
Coco did not immediately reply to a request for comment.
According to the documents filed as part of the receivership order, the development corporation has repeatedly failed to make scheduled payments on its loans. On Oct. 4, IGIS issued a formal letter demanding it be repaid in full. As of Oct. 19, that has yet to happen.
Joo Sung Yoon, an IGIS vice-president, said in an affidavit that the original budget for the project was $1.6 billion with an expected completion date of Dec. 31, 2022. That budget has since climbed to over $2 billion. The affidavit says that The One recently lost its anchor tenant (Apple) and has yet to secure a new one. Seventy condo units, meanwhile, remained unsold as of Aug. 31 of this year.
“Over the past several years, Coco’s and Mizrahi’s relationship has become increasingly acrimonious and dysfunctional, and their disagreements have impeded the ability of the Borrower to complete the Project and impaired the relationship with the Senior Secured Lenders,” the application for receivership says.
For prospective condo owners who have already paid deposits on units in the building, Wednesday’s order brings more questions than it does answers.
In an FAQ about the process on its website, the receiver, Alvarez and Marsal, said that it “has not yet had an opportunity to review any of the existing condominium sales agreements.” In other words, if you’re a buyer, all you can do is wait and see.
“The receiver will do what it can to maximize the amount of money that it gets out of this project,” said Bryan Gelman, a licensed insolvency trustee at Albert Gelman Inc. That means that it can choose to close or cancel deals as it sees fit.
As for the deposits buyers have already paid, they are insured up to $20,000 by Tarion Warranty Corporation. Excess deposits, meanwhile, are protected by Aviva Insurance Company of Canada, which is listed in the litigation as the senior secured creditor for condo deposits.
Although The One is perhaps the largest and highest profile condo project to hit financing trouble, it is by no means the only one. More than 8000 condo units are currently delayed in the GTA, market research firm Urbanation said in August.
What’s more, that trend isn’t likely to improve any time soon. “Given the rise in construction costs, increase interest rates on borrowing, and potentially lower selling prices, this is not going to be the first or the last condo to go into receivership,” Gelman said.
Ana Pereira is a Toronto-based general assignment reporter for the Star. Reach her via email: [email protected]
Richard Warnica is a Toronto-based business feature writer for the Star. Reach him via email: [email protected]
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