Developer Sam Mizrahi files lawsuit against Edward Rogers and his real estate fund, alleges $30-million loss – The Globe and Mail

Real estate developer Sam Mizrahi has filed a lawsuit against Edward Rogers and Constantine Enterprises Inc., the real estate fund Mr. Rogers owns, escalating a battle between the businessmen amid an alleged $30-million loss on their flagship condo project.

In a lawsuit filed this month in Ontario Superior Court, Mr. Mizrahi alleges Mr. Rogers and his business partner Robert Hiscox, who co-own Constantine, blocked multiple attempts made by Mr. Mizrahi to salvage more value from the two real estate ventures they were jointly developing. After Mr. Mizrahi’s efforts were denied, Constantine requested court-appointed receivers for both projects.

Mr. Mizrahi is suing Mr. Rogers, Mr. Hiscox and Constantine for breach of contract, negligence, and breach of fiduciary duty, among other allegations, and is seeking $100-million in damages.

Mr. Mizrahi alleges his 20-unit luxury condo project developed with Constantine, known as 128 Hazelton in Toronto’s Yorkville neighbourhood, has incurred losses totalling more than $30-million, and that Constantine wants him to share 50 per cent of this loss. Because Mr. Mizrahi has refused, he alleges Constantine blocked his attempts to sell undeveloped land at their other project, known as 180 Steeles or 180 SAW, and also blocked other financing initiatives he put together.

“The defendants refused to realize the profit to be garnered on the 180 SAW project based upon offers Sam solicited, because Sam asserted his legal rights and could not be coerced to agree to indemnify Constantine 50 per cent of its losses on the 128 Hazelton project as a condition of accepting the offers on the 180 SAW project,” the lawsuit alleges.

In an e-mail to The Globe and Mail, Constantine’s Mr. Hiscox disputed Mr. Mizrahi’s narrative, claiming that “in December 2021, Sam, through one of his entities, had agreed, as a 50-per-cent partner in Hazelton, to share equally in the losses of that project. This was documented in the ‘contribution agreement.’”

Mr. Hiscox also wrote: “We are about to enter the 10th year of what Mizrahi represented would be a three-year project,” adding that the project has exceeded Mr. Mizrahi’s original budget by more than $50-million, or almost double the original estimate.

Mr. Mizrahi filed his lawsuit after two major developments. In January, the senior lender to 128 Hazelton, Duca Financial Services Credit Union Ltd., alleged default and requested a receiver for the project.

A month later, Constantine bought out Duca’s debt, then filed its own request for court-appointed receivers for both 128 Hazelton and 180 Steeles, with the hope that a third party would complete sales for each. In an interview with The Globe at the time, Mr. Mizrahi referred to the action as “predatorial” behaviour.

As of January, Constantine and Mr. Mizrahi owned eight units in 128 Hazelton, and in its receivership application Constantine alleged Mr. Mizrahi’s company “failed or neglected to provide its share of the required additional funds necessary to complete and sell the remaining Hazelton project units.”

As for the 180 Steeles project, Constantine alleged it was owed $29-million by Mr. Mizrahi, but had lost confidence in his ability to repay the debt. Constantine was also concerned that Mr. Mizrahi’s company “will continue to fail or neglect to make its required capital contributions to the partnership.” 180 Steeles is located on Toronto’s northern border but is in the preconstruction phase and was put up for sale a year ago.

As the legal battle escalates, both sides have alleged the other has acted in bad faith. In February, for instance, Mr. Mizrahi told The Globe he tried to arrange financing from Third Eye Capital, or TEC, a private lender, to buy out Duca’s loan and sought Constantine’s approval, but later learned Constantine had struck a private deal to do the same itself. “They didn’t tell me, they weren’t transparent,” he said.

In his e-mail Wednesday, Mr. Hiscox wrote, “There were a number of issues with that financing proposal, not the least of which was the cost of the TEC debt being much higher than the existing Duca debt.”

Mr. Mizrahi also brought in Hyundai Asset Management, a South Korean entity, as a potential buyer for the 180 Steeles project, but Constantine would not agree to the transaction, he alleged in his lawsuit.

Mr. Hiscox wrote in his e-mail that the potential buyer “walked from the deal because of the current status of the zoning approval.”

While Mr. Mizrahi battles Constantine in court, another of his Yorkville condo projects, known as The One, is operating under a receiver. The 85-storey project was put into receivership last fall because it owed $1.6-billion to its lenders, is years behind schedule and faces multiple lawsuits. Mr. Mizrahi was recently replaced by Skygrid Construction Inc. as the project manager.

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