A sprawling real estate investment enterprise in Northern Ontario run by a former child actor has filed for creditor protection as it struggles to pay off debts of $144-million, largely from hundreds of individual private lenders including some who used retirement funds.
Court records show that Robert (Robby) Clark – a U.S.-born actor who as a 13-year-old began starring in YTV’s The Zack Files, which aired between 2000 and 2002 – used a network of companies with names such as Balboa Inc., Happy Gilmore Inc., Horses In The Back Inc., Joint Captain Real Estate Inc. and The Pink Flamingo Inc. to build up a rapidly expanding real estate portfolio beginning in 2020. The enterprise owns 405 rental properties in Northern Ontario cities and towns such as Sudbury, Sault Ste. Marie and Timmins.
Mr. Clark recently applied to Ontario’s Superior Court for protection under the Companies’ Creditors Arrangement Act. The application says the companies are facing “a severe liquidity crisis, have less than $100,000 of cash on hand, [and] are in default of substantially all of” their loans.
A Superior Court judge issued an interim order on Jan. 23 that provided a stay of proceedings and also appointed KSV Consulting Inc. as a monitor to explore ways to refinance or reorganize the companies.
Mr. Clark and his legal counsel did not respond to requests for comment.
The enterprise’s financial troubles have tied up millions of dollars loaned by hundreds of private lenders and prompted concerns that a rapid sell-off of Mr. Clark’s holdings could unleash chaos on the rental and resale markets in the small cities where he operates.
In an affidavit filed with court, Mr. Clark describes the companies as “specializing in the acquisition, renovation and leasing of distressed residential real estate in undervalued markets throughout Ontario.” Court documents claim that the companies purchased and sold more than 800 properties, many of them single-family homes. The enterprise’s current portfolio includes 631 individual rental units, 424 of which are rented.
Mr. Clark services all of the properties and collects fees using companies operating under the names SID Development, SID Renos and SID Management, court records show. Three other people are listed in the filing and corporate records as key owners and directors of the holding companies: real estate agent Thomas Dylan Paul Suitor, who is with Keller Williams Signature Brokerage in Oakville, Ont.; Aruba Butt; and Ryan Molony.
Mr. Suitor, Ms. Butt and Mr. Molony did not respond to requests for comment.
To finance these purchases, the companies obtained more than 390 mortgages worth $89-million; 120 second mortgages worth $8-million; and 802 unsecured promissory notes worth $54-million.
The interest rates on these loans and promissory notes vary between 8 per cent and 20 per cent.
The majority of the lending was brokered by one company – Hamilton-based Windrose Group – that paired many of the more than 300 private lenders with Mr. Clark’s companies. Windrose Group’s principal broker, Claire Drage, did not respond to a request for comment.
One private lender who spoke to The Globe and Mail said she feels misled and she wasn’t kept in the loop on the scale of the operation she was lending to.
“At no time were we told that they are part of this conglomerate of all these companies. … We would never have done that,” said Cathy Hugh, 57, a retired bank employee living near Ottawa.
Ms. Hugh loaned $184,000 at 8-per-cent interest in 2022 to what she believed was a sole operator to purchase a single-family home in Sault Ste. Marie. “I only wanted to do individuals, I felt more protected because I could have gone in for a repossession.”
However, the stay of proceedings issued as part of the creditor protection process means lenders cannot turn to repossession, or power of sale, to recoup their money.
The stay period was set to last until Feb. 2, but has been extended to Feb. 16.
Some of the affected lenders extended mortgages for as little as $65,000 or as much as $600,000, describing in court documents that they used retirement funds to do so. There are so many claimants that the court appointed Chaitons LLP as representative counsel to lenders to help co-ordinate the welter of claims and demands.
The quickest way to pay back lenders in such a situation is typically to sell the properties. But according to a KSV report to creditors, the scale of the real estate portfolio suggests a “sale of the properties will result in depressed recoveries for Investors and/or will take several years to complete as a result of current depressed market conditions.”
For example, the report cites data from Canadian Real Estate Association that in December, Timmins had 285 active listings and only 39 sales, while Sault Ste. Marie had 125 sales on 425 active listings. Mr. Clark’s companies own 199 rental properties in Timmins. If they were all liquidated at once it would increase available inventory by 70 per cent, which in turn could both depress sale prices and cause the sales to take longer. The report estimates a “controlled” sale process where 15 per cent of the properties were listed at a time would take 49 months to complete in Timmins, and 23 months in Sault Ste. Marie (where the companies own 152 properties).
The companies do collect significant revenue from rents: The report contains an updated cash-flow estimate filed with the court for Jan. 27 to March 28 that shows rental collections of $1.062-million and operating costs of $959,000. However, the net loss is projected to be $8.87-million with $3-million being spent on renovations, $2.2-million being paid to property tax arrears and $2-million for “professional fees” related to the insolvency, which include fees to the monitor, lawyers and a financial adviser that’s been hired for $75,000 a month.
Mr. Clark’s business model of buying and renting mainly single-family homes bears resemblance to one employed by Toronto-based Core Development Group Ltd., which has promoted plans – in the face of significant controversy – to spend $1-billion buying single-family homes for the rental market. According to Mr. Clark’s affidavit, his network of companies offloaded 223 of his rental properties to Core in 2022, which represents about half of Core’s current portfolio of more than 550 homes.
Core’s chief executive officer, Corey Hawtin, said his company may explore options to buy some or all of the Balboa/Happy Gilmore properties out of the receivership.
“We hope to be part of the solution, we hope we can acquire the portfolio and keep the tenants in place,” Mr. Hawtin said in an interview. Mr. Hawtin noted that when Core purchased the group of homes from Mr. Clark’s companies in 2022, it paid off the mortgage lenders.
Editor’s note: A previous version of this article incorrectly referred to Windrose Group as Windrose Capital. Windrose Capital Inc. is a related trust company with some of the same principals and loans to the some of the same parties. This version has been updated.