Housing projects by Strategic Developments, a Calgary based development company, in Calgary, on Dec. 29, 2015.Chris Bolin/The Globe and Mail
Telus Corp.’s retirement fund is finalizing a deal to take full ownership of several buildings it co-owns across Canada with Calgary-based Strategic Group as a way to recover unpaid loans and extract itself from Strategic’s insolvency in Alberta.
The transaction, which requires court approval, is aimed at repaying creditors and preventing more legal action stemming from the receivership of Strategic’s operations in Alberta, where it has struggled with rising vacancies as the economy has suffered.
Under the proposal, Telus Pensions Master Trust (TPMT) would acquire Strategic’s stakes in a shopping centre in British Columbia, apartments in Edmonton and several rental properties in Atlantic Canada, none of which were included in the receivership. That package includes 45 properties in all, according to court documents filed this week.
Telus will also take control of Strategic’s interests in properties that are part of the receivership and co-owned by Telus and Strategic. No dollar value has been provided.
A total of 56 buildings are under receivership, and TPMT was Strategic’s partner in 25 of them. Specific terms of the deal are being kept confidential.
The insolvency case began late last year when the company’s founder, property developer Riaz Mamdani, sought to restructure the Alberta assets under creditor protection. Instead, a judge sided with creditors and placed the assets under the control of a receiver. All told, creditors are owed $708.5-million.
Telus has substantial exposure to Strategic, which has dealt with commercial tenants either shutting down or moving to other locations as the energy industry has slogged through five years of downturn. Oil patch woes have had a ripple effect, as oil and gas producers as well as businesses that support them have cut jobs.
In total, TPMT co-owns 95 properties with Strategic as part of the partnership that began in 2015. Its ownership stakes currently range from 6 per cent to 65 per cent. Telus has also lent a total of $123.8-million to Strategic, including about $44-million on the buildings in the receivership case.
Mr. Mamdani said in an affidavit filed in court that all the lenders have agreed to support the transaction, or are expected to do so. He described the deal as “an omnibus settlement of issues between Strategic and TPMT.”
“This settlement will benefit those parties as well as all of their respective stakeholders as it will avoid significant litigation which may otherwise occur amongst the various Strategic Group and TPMT co-owners and other creditors and enforcement actions by the numerous mortgage lenders on the co-owned properties,” Mr. Mamdani said.
In a statement to The Globe and Mail, he said Strategic would keep managing its remaining properties “with a strong focus on the residential marketplace.”
Among the major lenders are Canada ICI Capital Corp., Bank of Montreal, Vancity Community Investment Bank, ATB Financial, Sun Life Assurance Co. and Industrial Alliance.
TPMT declined to comment on the proposal.
Under the deal, a shopping centre in Duncan, B.C.; the 99-unit Claridge apartment complex in northeast Edmonton; and rental units in Dartmouth, Halifax, Sydney, Glace Bay and Kentville, N.S., as well as in Saint John, will be added to the receivership list before TPMT acquires them along with the other buildings that it co-owns.
Meanwhile, the court has given the receiver expanded powers to launch sale processes for the properties. The trustee for many of the assets, Alvarez & Marsal Canada Inc., said in a report to the court that it is finalizing a contract with a broker-adviser to seek buyers or investors, but it didn’t specify the buildings.
Many of the assets are office buildings outside Calgary’s premium downtown core as well as residential and commercial properties in the suburbs. “In no scenario do I see 56 properties coming on the market for sale all at once,” said Greg Kwong, Alberta regional managing director for commercial realtor CBRE.
It will be up to the lenders to determine the best courses of action, given their individual circumstances and the economic climate, he said.