A much-anticipated mixed-use tower set to scrape the sky over Yonge and Bloor has been placed into receivership.
The development known as “The One” began construction in 2017, promising 85 stories of residential and commercial space, including a Hyatt hotel and a flagship Apple store.
The slow pace of construction contradicts what many criticized as a fast-tracked start, when developer Sam Mizrahi had the old Stollerys building at the site torn down before City Council could potentially have it designated a heritage site.
While construction continues, it is moving at a snail’s pace, and on Wednesday court filings revealed the corporation co-owned by Mizrahi and fellow developer Jenny Coco was $1.6 billion in debt to its lender, South Korean KEB Hana Bank; a trustee for multiple funds managed by IGIS Asset Management.
Court filings posted online give a stark description of the project’s current state:
– The project was supposed to be completed by the end of 2022.
– Costs have ballooned above $2 billion; more than $600 million above early projections.
– Concrete walls have so far only been poured up to the 40th floor.
– The project likely won’t be completed until March, 2025.
– Apple pulled out of its deal to open up a flagship store in the space formerly occupied by Stollerys, and developers haven’t been able to find a replacement retail tenant.
“In short, it’s a mess,” said Toronto-based real estate lawyer Bob Aaron, who is not involved in the court proceedings.
“The project was overrun in terms of cost and delayed because the principles weren’t getting along.”
The court filings also describe the relationship between Mizrahi and Coco as “acrimonious.”
Going forward, receivers have $315 million to fund ongoing construction. The firm Alvarez and Marsal have been appointed to supervise the project and have retained Mizrahi’s development company.
In a statement to Global News Mizrahi Developments wrote:
“At the request of the project’s senior lender, the court has appointed a receiver to overcome an ongoing governance issue that has caused significant project delays. As part of this arrangement, the receiver has requested that Sam Mizrahi and his company remain as the Developer and General Contractor to oversee completion of The One. Mr. Mizrahi maintains his equity position in the project.
This is a welcome decision that will allow for the successful completion of The One under the continued leadership of Sam Mizrahi and Mizrahi Developments.”
Coco did not reply by deadline.
While it appears construction will continue, Aaron thinks the new supervisors have much to consider, and those who’ve put down deposits on future condo units should prepare for uncertainty.
“There’s a test between the buyers who want to close their deals at the price they signed for, and the building management, the receiver, who says ‘if we sell all the units at the contracted prices, we may not have enough money to finish the project.’ They could, I suppose, cancel all the deals, but then how are they going to pay the bank back? … Or they say to everybody ‘look, we need another 10 per cent, 20 per cent, and then half or three-quarters of (residents) are going to walk. It’s up to the receiver to figure out what they have to do to get this thing built. And at the back end they have to figure out is there going to be enough money to pay off the debt that was incurred to build the building?”
Aaron says prospective condo buyers should not take this situation as a sign that the condo market is in trouble though, calling this a “project-specific” issue.
