New homes to rise out of ashes of collapsed builder Stateview

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As the fallout from the collapse of real estate developer Stateview Homes continues to work its way through the courts, some of its unfinished townhouse projects are about to spring back to life under new owners.

Left outside of this rebirth are hundreds of buyers who initially placed deposits with Stateview in the years before the company filed for insolvency in May, 2023. In all, more than 765 homebuyers gave the company more than $77-million in deposits for unbuilt townhouses and detached homes across the Toronto region.

With that deposit money spent, the court order approving the sale of Stateview’s former assets pre-emptively cancelled the contracts of all those buyers. That includes three sites that were purchased by Delton Acquisitions Inc., a company controlled by James Circosta, CEO of Camcos Living, which is redeveloping those sites now.

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“We really understand how difficult and stressful that must have been, and we’re committed to helping,” said Mr. Circosta, who will be bringing a 48-unit townhome project in King City back to market under the name Canterbury Lanes. “For returning customers, we will offer some special incentives and support. We’re certainly going to be reaching out to all affected customers first providing them first right of refusal. We’re not obliged to, but every one of those customers deserves a fair shot.”

The three sites in King City and Markham Mr. Circosta bought were known as High Crown, Minu and NAO. According to filings from court-appointed monitor KSV, the High Crown project – which will become Canterbury Lanes – owed $28-million in loans to Stateview’s former finance partners at Dorr Capital Corp. and had 47 buyers who had placed $5-million in deposits (all of which were cancelled).

At NAO, there were 96 purchasers who placed $7.6-million in deposits, and Minu had 147 purchasers who placed $19-million in deposits. The debts owed on the sites were also significant: At Minu there was $51-million owed to Kingsett Mortgage Corp. in a first mortgage, while NAO had more than $24-million first mortgage with Kingsett; between the two sites, there was another $35-million in second mortgages, also from Kingsett.

These amounts represent just a slice of the $349-million in land and construction loans owed to Stateview’s major lenders at the time of its collapse.

Cancellation of the buyer contracts was part of the request for proposal his company bid on according to Mr. Circosta, and wasn’t a request they made to the court. Ironically, the existence of those now-cancelled contracts helped convince him the sites were viable: “There’s a clear track record of a high level of interest. These projects were sold out,” he said.

In recent legislative changes, the Ontario government announced it was adding a cooling-off period to freehold home purchases, similar to what already exists for condominiums. One thing the government didn’t do was copy condo rules that mandate buyer deposits be held in trust by a builder, which would have offered more protection to the Stateview buyers.

“I’m not against the notion of secured deposits for any product type,” said Mr. Circosta. “The market cancellations have shaken the industry, shaken consumer confidence. I don’t believe the status quo can continue.”

Loophole means buyer deposits with insolvent builder unprotected

While buying up another developer’s failed projects is common in the real estate business, having the court cancel the contracts is by no means automatic when projects go insolvent, according to Pauline Lierman, vice-president for market research with real estate analyst Zonda Urban.

“Some people get offered deals to stay, or pay extra to stay, or they just cancel all the contracts outright. It’s all over the map; every project is a little different,” she said.

Ms. Lierman said that, while the apartment preconstruction market has been crushed in 2024 by high interest rates and high-cost buildings, Camcos has a good chance of finding buyers for its townhouse project. Townhouses have maintained a steady market of about 1,000 pre-construction sales through the first six months of 2024, and are trending to maintain volume similar to 2023.

Mr. Circosta’s company is new, formed in January, 2023, but he personally has more than 20 years as a site manager for one of Canada’s largest builders, Mattamy Homes. In a vote of confidence, as part of the deal, Kingsett is providing financing to Camcos to finish the projects.

While he said he’s not looking for any more sites at the moment, Mr. Circosta believes there may still be more opportunities to buy distressed developments in the future.

“There’s no question, as an industry, we’ve been going through some recent uncharted territory,” he said. “A lot of the difficulties we’re seeing are the result of the culmination of the perfect storm: high acquisition prices, unexpected cost escalations, high leverage on lending. It’s really causing some turmoil for those organizations.”