The receivership request is related to a 20-condo project known as 128 Hazelton, which is located in the Yorkville neighbourhood and is substantially completed.Fred Lum/The Globe and Mail
The senior lender to a luxury condo jointly built by Sam Mizrahi and Edward Rogers’s private real estate company is asking for a court-appointed receiver to take control of the project, marking the second receiver request for a Mizrahi real estate development since October.
Last fall, The One, a luxury condo development in Toronto’s upscale Yorkville neighbourhood co-owned by Mr. Mizrahi and road paving magnate Jenny Coco, was put in receivership at the request of its senior lender. The 85-storey project owed $1.6-billion to its lenders, is years behind schedule and faces multiple lawsuits, including litigation between Mr. Mizrahi and Ms. Coco, who each own 50 per cent.
The new receivership request is for a project known as 128 Hazelton, which is also located in Yorkville. Unlike The One, 128 Hazelton is substantially complete and was registered with the Condominium Authority of Ontario in February, 2023. The project consists of 20 condo units, three levels of underground parking and roughly 2,000 square feet of ground floor commercial and retail space.
The project’s senior lender, Duca Financial Services Credit Union Ltd., lent $35-million in 2017 and alleges its loan is now in default, according to a receivership request filed in Ontario’s Superior Court.
Duca alleges 128 Hazelton defaulted because a contractor, CEC Mechanical Ltd., filed a lien worth $863,657 against the project, and the claim was not discharged within 10 days, as required by its loan agreement. Duca also alleges the loan agreement entitles it to appoint a receiver in the event of a default.
According to the receivership application, 128 Hazelton allegedly paid CEC Mechanical $355,000 late last year, yet $508,000 remains on the lien. In December, Duca made a formal demand for repayment of its loan, of which $16-million is still owed. After doing so, the credit union “indulged the debtor’s request for additional time to refinance,” according to court filings, but ultimately determined that Mr. Mizrahi’s “efforts to refinance appear to have failed.”
128 Hazelton has two additional lenders that rank junior to Duca. Constantine Enterprises, which is a private real estate company co-founded by Mr. Rogers and Robert Hiscox, lent $21-million, and Aviva Insurance Co. of Canada lent $18.5-million. It was not clear from court filings how much remains outstanding on both loans. The names Mizrahi and Constantine are engraved in stone at the condo’s front entrance.
Lawyers for Mr. Mizrahi, Constantine and Aviva did not return requests for comment. CEC Mechanical declined to comment through its lawyer.
It is not clear why 128 Hazelton has yet to repay its original construction loans and mortgages even though the condo is at least partly occupied – Mr. Mizrahi’s company still owns eight units, according to court filings – and is fully registered. However, Mr. Mizrahi has kept outstanding debt on a completed project at least once before.
Mr. Mizrahi previously built a condo around the corner from 128 Hazelton known as 181 Davenport, and to get that project up and running he borrowed $16.3-million in 2012 from a lender known as Bridging Capital Inc. In 2014, this loan was assigned to the Sprott Bridging Income Fund, which was an investment vehicle that Bridging co-created with Sprott Asset Management.
In early 2022, The Globe and Mail reported this loan had been in default since 2018 and that its size had ballooned to $48-million, because the debt does not pay cash interest. Instead, accumulated interest was added to its principal, a structure sometimes used by troubled borrowers who are short on cash. 181 Davenport’s last unit was sold in July, 2020, according to court filings, and the building was registered in 2017, according to the Condominium Authority of Ontario.
Mr. Mizrahi continues to develop The One, which remains under construction even though it has defaulted on multiple loans. In a receivership application, the project’s lead lender said senior creditors “have gone to great lengths to accommodate the borrower … nonetheless, the project has been materially delayed, is significantly over budget and has been fraught with difficulties.” Aviva is also a lender to The One, with $130-million owed at the time of receivership.
The One was expected to finish construction in December, 2022, at a cost of approximately $1.4-billion, according to the receivership application. Total costs are now expected to exceed $2-billion.
Mr. Mizrahi also teamed up with Constantine to develop a four-tower condo project north of Toronto known as 180 Steeles, but the property was put up for sale by brokerage CBRE in March, 2023.
With a report from Stephanie Chambers
Tim Kiladze