One of the largest owners of residential real estate in Ontario –with large holdings in northern Ontario – has filed for creditor protection after accumulating more than $144 million in debt.
The company would buy homes and apartment buildings, mainly in northern Ontario, renovate them and make a profit by renting them out at higher rates.
But rising interest rates ate up much of the cash that was supposed to be used for renovations, causing revenues to tank.
The group of companies, which filed for insolvency under the Companies’ Creditors Arrangement Act (CCAA), owns residential properties in Timmins, Sault Ste. Marie, Sudbury, Kirkland Lake, Capreol, Val Caron and Temiskaming Shores. The properties total 631 units – including single family homes and apartments — of which 424 are occupied.
Collectively known in court documents as “the company,” the group of companies is made up of Balboa Inc., DSPLN Inc., Happy Gilmore Inc., Interlude Inc., Multiville Inc., The Pink Flamingo Inc., Hometown Housing Inc., The Mulligan Inc., Horses In The Back Inc., Neat Nests Inc., and Joint Captain Real Estate Inc.
They all filed for creditor protection under the CCAA last month.
Among the creditors are northern municipalities, including Timmins (owed $793,352.09), the Sault ($645,125.05), Greater Sudbury ($283,704.36), Kirkland Lake ($92,099.62) and Temiskaming Shores ($11,391.23).
“The company renovates the residential properties it acquires by performing restorations with a view to reviving such properties and providing sustainable and affordable single or multi-family housing,” said court documents filed in support of the CCAA process.
“The company has acquired, renovated, leased and/or sold over 800 underutilized properties across Ontario, and the applicants have raised and invested approximately $100 million to acquire and renovate the properties.”
Only had $100,000 in cash on hand
While the group owns hundreds of properties worth millions, when it filed for creditor protection, it had less than $100,000 in cash on hand.
Before the CCAA filing, the company defaulted on numerous mortgage loans, leading to dozens of court actions by creditors.
To turn a profit, the company has to renovate its properties in order to raise rents above the limits set by the province. But when rising interest rates consumed much of the cash, a crisis followed.
“The applicants’ lack of liquidity has prevented them from undertaking approximately $4.1 million of renovation needed for certain unrenovated rental units, which the applicants estimate is resulting in approximately $350,000/month in lost rental revenues,” the court documents said.
The group tried to ease the pressure in 2022 when it sold 223 properties. But problems persisted so they tried to attract financing from 60 financial institutions, all of which turned them down.
With “unsustainable losses” getting worse, the company hired a financial advisor in August 2023 to come up with a long-term solution.
“To date, the applicants have not been able to find a comprehensive solution,” the court documents said, prompting the CCAA filing in January.
Would cause prices to plunge
“If the properties were immediately liquidated, the supply of units available for sale in these communities would increase by approximately 36 per cent, including by approximately 70 per cent in Timmins,” the court documents said.
“As a result, there would likely be a significant reduction in sale prices, resulting in losses for investors and other home sellers in these communities.”
To prevent that, the monitor is suggesting the properties be sold 15 per cent of the time, so the Timmins properties would be sold over four years, while it would take about two years to sell properties in the Sault and Sudbury.
Under the CCAA process, lawsuits against an insolvent company are ‘stayed’ — put on hold — until the restructuring process is complete and the company strikes a deal with creditors to resolve the debts.
The company can also access $4 million in temporary loans so it can keep operating as it restructures.
The company is seeking to extend the stay on court actions until March 28 to give it time to reorganize. It was granted an extension until Feb. 15, when it will return to court to make its case for the full extension until the end of March.
KSV Restructuring Inc., is the court-appointed monitor for the CCAA process. The court documents detailing the process can be found here.
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.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
