A small group of landlords who own hundreds of rental properties across the province have run out of money, owe over $144 million in unpaid loans and face dozens of lawsuits from creditors, according to documents filed with the Ontario Superior Court of Justice.
Dylan Suitor, Ryan Molony and Aruba Butt are behind 11 now-insolvent corporations that face a “liquidity crisis” with only $100,000 in the bank, the documents say.
The three received court-ordered protection, under the Companies’ Creditors Arrangement Act (CCAA), from over 300 lenders until the end of March 2024, wrote Justice Jessica Kimmel in her decision this week.
Also known as bankruptcy protection, it means any legal action taken by lenders to recoup their money has been paused so the landlords can attempt to save their business. Documents say 32 lawsuits are currently filed against the corporations in courthouses across Ontario.
The landlords and their corporations are based in the Hamilton area, but specialize in buying, renovating and in some cases relisting “distressed residential real estate in undervalued markets,” said a court factum.
Those markets are in Timmins, Sault Ste. Marie and Sudbury, as well as smaller communities, including Kirkland Lake, Temiskaming Shores and Val Caron.
The landlords currently own 406 properties where 1,000 tenants live, making them “one of the largest holders of residential real estate in Ontario,” Kimmel wrote.
They did not respond to a request for comment sent through their lawyers.
Over 200 rental units sitting empty: documents
Suitor is a Hamilton investor who made headlines last year for shutting off tenants’ water for nearly three months at 1083 Main St. E. after a pipe burst. At the same time, he was trying to evict them through the Landlord and Tenant Board to renovate their units, which is an ongoing process, lawyers representing the tenants have said.
The corporation that owns the building — which sits across from Hamilton’s picturesque Gage Park — is not among those in financial trouble that require creditor protection.
Suitor is also a realtor with over 200,000 followers on Instagram, where he shares business advice as a “self made” entrepreneur and real estate investor.
Last August, Suitor hosted a “Business Results Training Seminar” in Burlington, Ont., promising attendees would learn to grow their business up to 150 per cent over 12 months, according to his social media posts.
Butt is a director of some of the corporations under creditor protection, which own dozens of properties in Sault Ste. Marie.
Molony is president of SID Developments, according to the website of the company, which provides renovation and management services to the corporations.
SID Developments was founded by Robert “Robby” Clark, a former child actor known for his starring role in The Zack Files. Clark described the corporations’ unravelling in an affidavit filed in court.
“To reduce the [landlords’] significant interest expense and improve their free cash flow, the company began exploring refinancing and sale opportunities in 2022,” Clark said.
Robby Clark, left, and Dylan Suitor are shown here in a photo posted on Jan. 3, 2020. Clark is the founder of SID Developments, which provides renovation and management services to corporations owned by Suitor and now under bankruptcy protection. (Facebook/Robby Clark)
Their efforts were “hampered” by the Bank of Canada’s interest rate hikes beginning in March 2022 and falling home prices.
They ran out of money to finish renovating some units, which now sit empty, and represent $350,000 a month in lost revenue, Clark said. More than 200 of the 631 rental units they own are currently empty, documents show.
Along with owing $144 million for mortgages and other loans, they owe:
$2.8 million in unpaid municipal taxes, utility bills and corporate income taxes.
$600,000 to contractors, trades and service providers.
$55,000 in payroll deductions to the federal government.
Links between companies can be ‘hard to unravel’: lawyer
With the creditor protection order, the landlords have access to a $12-million loan to pay for the cost of the court proceedings and complete renovations. They’ll also pursue “comprehensive refinancing or restructuring,” and a “consensual plan of compromise” with lenders to continue operations.
Filing for creditor protection is often used as “a very last resort” for companies on the brink of bankruptcy, said lawyer Karen Fellowes, based in Calgary and Vancouver, who specializes in restructuring and insolvency and is not involved in this case.
Other times, companies use it strategically if they predict a looming “liquidation crisis” and need to restructure over several months, she said.
Suitor made headlines in Hamilton in 2023 after tenants at 1083 Main St. E. went three months without running water. (Eva Salinas/CBC)
Whether the landlords will be successful in saving their business depends on if the 300 lenders agree to support them, Fellowes said. They will likely get an extension for creditor protection and try to sell some properties, she added.
Tenants have rights that would allow them to stay in their homes even if there’s a new owner, unless lenders want the units vacated and it’s ordered by the court, Fellowes said.
For tenants living in properties not part of the proceedings, like the one at 1083 Main St. E. in Hamilton, it’s unlikely those buildings would be directly impacted as they’re owned by other corporations, she said.
Real estate investors often try to “limit liability” by creating multiple corporations.
“It’s not that uncommon, but it does create this really complicated corporate structure where you have multiple companies, multiple lenders, and sometimes the links between them are hard to unravel,” Fellowes said.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
