The One, a luxury condo development in Toronto co-owned by real-estate developer Sam Mizrahi and road paving magnate Jenny Coco, on Oct 19, 2023.Fred Lum/The Globe and Mail
Sam Mizrahi is being replaced as the general contractor of his luxury condo project known as The One, after the court-appointed receiver overseeing the troubled development discovered project management deficiencies.
Under development since 2015 at the corner of Yonge and Bloor streets in Toronto, The One was marketed as Canada’s tallest condo building with 85 storeys of condos, hotel rooms and retail spaces. Mr. Mizrahi owns 50 per cent of the luxury project, and road-paving magnate Jenny Coco owns the other half.
The One is years behind schedule and has defaulted on multiple loans. In October, the project’s lead lender asked an Ontario judge to put a third party in control of the project, alleging that the development owed $1.6-billion to its lenders and was hundreds of millions of dollars over budget.
A judge granted the request, and the receiver that was installed, Alvarez & Marsal Canada Inc., initially determined there was no immediate need to replace Mr. Mizrahi as the project’s general contractor. The receiver has since changed its mind, and in a report released Monday announced that “retaining Skygrid Construction Inc. as the new construction manager was in the best interests of the project.” Skygrid will take over effective March 13.
The receiver also disclosed that it has initiated a sale process for The One and has asked brokers to bid on facilitating a potential sale.
Explaining its decision to replace Mr. Mizrahi as the construction manager, Alvarez & Marsal said it assessed Mr. Mizrahi’s construction management “and identified several areas of control deficiencies.”
The alleged deficiencies include: a lack of a formal procurement process, no formal tracking of progress against the construction schedule, unreliable monthly construction management reports and delays or the inability to formalize fixed price subcontracts.
“Although construction of the project has continued to progress, and Mr. Mizrahi has generally continued to cooperate with the receiver, there has been an increasing strain on the working relationship between Mr. Mizrahi and the Receiver relating to the above-noted deficiencies, and more recently because of, among other issues, the inability of Mr. Mizrahi and the receiver to agree on terms for Mr. Mizrahi’s post-receivership work,” Alvarez & Marsal wrote in its report.
The receiver also cited two sticking points in negotiations: the payment terms for Mr. Mizrahi’s work managing the project, and potential changes to the project to maximize its value. The receiver considered changes to how The One should be completed, but Mr. Mizrahi “remained focused on completing the project as originally envisioned.”
In an e-mailed statement to The Globe, Mr. Mizrahi alleged that project-management deficiencies played no role in his replacement as project manager. Instead, he alleged the decision was made because Skygrid is a lower-cost contractor.
Mr. Mizrahi also said he refused to settle for a different vision for the project than the one he initially dreamt up. “Mizrahi would never compromise or change the vision we have built and developed to date on The One. We have never compromised our values on high end finishes on any of our projects and refuse to have our name associated with a luxury building … that would not be completed to the same high standards of all of our other buildings to date.”
The One remains under development and tower slabs have now been poured through level 53. However, Alvarez & Marsal noted the project will not be completed by March, 2025, which was the timeframe it previously projected.
Despite the delays, The One’s senior secured lenders have told the receiver they are “committed to facilitating the completion of the project,” which may include a transaction identified through a sale process or otherwise.