Luxury condo The One put into receivership with $1.6 billion debt — presale buyers still waiting for news on units
Mizrahi and Coco, co-owners of the iconic project at Yonge and Bloor, locked in a bitter fight as receiver reviews presale agreements.
By Ana Pereira and Richard Warnica Staff Reporters
Thursday, October 19, 2023
The One, a skyscraper under construction on the southwest corner of Yonge and Bloor, has gone into receivership. The development broke ground in 2017 and was supposed to be finished construction in December 2022
https://www.thestar.com/1-web-the-one/image_9546d5f9-41cf-52df-9ed1-22335f22c418.html
Disgruntled lenders have forced a luxury condo development at Yonge and Bloor into receivership, casting a pall over a project once touted as the future of Toronto’s most iconic intersection.
The One, an 85-storey mixed commercial/residential skyscraper, was the brainchild of developer Sam Mizrahi and paving tycoon Jenny Coco. It should have been completed last year, with Apple as a flagship tenant, a luxury Hyatt hotel, and more than 500,000 square feet of upscale condo space.
Instead, more than eight years after the project kicked off, The One remains something closer to The One Half. Concrete columns and walls have only been poured up to the 40th floor, according to litigation filed this week.
The project is more than $1.6 billion in debt. Co-owners Mizrahi and Coco are locked in their own, increasingly bitter fight. Would-be tenants, meanwhile, have been left to wonder if their deposits are still good and when, if ever, they’ll be allowed to move in.
“Construction of the entire Project was expected to be completed by December 31, 2022,” a representative of the senior secured lender wrote in an affidavit filed this week. “Even on the Borrower’s revised timeline, construction is now not expected to be completed until March 2025.”
The 85-storey mixed commercial/residential skyscraper was supposed to have been completed last year, but more than eight years after the project kicked off, concrete columns and walls have only been poured up to the 40th floor, according to litigation filed this week.
The One project has been controversial since the start. But the current problems date back to at least 2019, when Coco and Mizrahi began publicly fighting over financing and control of the nascent skyscraper.
In one lawsuit, Coco, who shares ownership of The One through her family’s holding company, accused Mizrahi of behaviour “tantamount to a corporate coup” and blasted what she called his “unfair, prejudicial and oppressive” conduct. (None of Coco’s allegations have been proven in court.)
Financing for the multibillion-dollar project, meanwhile, has been shaky for years. One creditor, a Chinese state-owned bank, sued Coco and Mizrahi’s joint development company for $200 million in 2022, alleging “fraud and other misconduct.” Apple, meanwhile, pushed to get out of its main floor lease in The One, putting long-term revenue projections for the development at risk.
The One is the largest and likely the highest profile condo project in the country to hit financing trouble, in an industry grappling with rising interest rates and construction costs.
“The Project is heavily leveraged, behind schedule and over budget,” Coco wrote in one filing. “Sam and I have given personal guarantees to the Project’s senior lender, which has advanced close to a billion dollars.” That number has since climbed.
The receivership process, once initiated, happened fast. On Oct. 17, KEB Hana made an application in Ontario Superior Court, claiming both that Mizrahi and Coco’s joint company was in default of its loan obligations and that it no longer had the funding to continue the project.
KEB Hana told the court that lenders were willing to extend a revolving credit facility to keep the development going, but only on the condition that a receiver be appointed. On Oct. 18, Superior Court Justice Peter Osborne granted that request, placing the project under the supervision of Toronto firm Alvarez and Marsal.
As part of the appointment, the receiver now has access to $315 million to fund ongoing construction and development costs. Mizrahi’s company is continuing in its capacity as general contractor, under the supervision of the receiver. However, Alvarez and Marsal “will be engaging additional construction advisors, including a project manager, to assist with day-to-day operations and to oversee the ongoing construction of The One Project.”
“At the request of the project’s senior lender, the court has appointed a limited scope receiver to overcome an ongoing governance issue that has caused significant project delays,” a spokesperson for Mizrahi Developments wrote in an email. “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.”
Coco did not immediately reply to a request for comment.
Documents filed as part of the receivership process suggest a project beset by strife and delay.
Joo Sung Yoon, an IGIS vice-president, said in an affidavit that the original budget for The One was $1.6 billion with an expected completion date of Dec. 31, 2022. That budget has since climbed to over $2 billion, with an optimistic completion date now at least another two years down the line.
As of Aug. 31, the developers had pre-sold 346 units worth collectively $675 million — short almost $200 million of a February 2022 goal. At the time, seventy residential units, all above the 50th floor, remained unsold.
Apple, which had planned to build a flagship Apple Store on the ground floor, has permanently pulled out, according to the documents, following a legal battle over delays. The developers have yet to secure a new anchor tenant.
The documents, meanwhile, contain new details of the toxic dynamic between Coco and Mizrahi.
Coco had at one point ceded control of the project to Mizrahi, under the condition he buy out her family’s shares. That sale never went through, despite repeated planned dates for closure. Last year, Coco demanded an end to Mizrahi’s sole control — an event that, among others, precipitated the lenders’ demand that a receiver step in to take charge.
“Mizrahi and Coco’s relationship has become increasingly acrimonious and dysfunctional. They have been embroiled in litigation against one another in connection with the Project,” Yoon wrote in his affidavit. “The Senior Secured Lenders are not prepared to advance additional funds without the appointment of a receiver within this proceeding, under the supervision of the Court.”
For the more than 300 prospective condo owners who have already paid deposits on units in The One, Wednesday’s order brings more questions than it does answers.
In an FAQ about the process on its website, the receiver, Alvarez and Marsal, said it “has not yet had an opportunity to review any of the existing condominium sales agreements.” In other words, if you’re a buyer, all you can do is wait and see.
“The receiver will do what it can to maximize the amount of money that it gets out of this project,” said Bryan Gelman, a licensed insolvency trustee at Albert Gelman Inc., which is not involved in the proceedings.
Condo deposits are insured up to $20,000 by Tarion Warranty Corp., the Ontario agency that provides new home warranties and regulates the builders of those homes. Excess deposit insurance was obtained through Aviva Insurance Company of Canada in case the funds were used in the construction and development of The One, where some units have been listed for more than $8 million.
According to the judge’s order, the new credit issued under the receivership and the receiver’s own fees will have priority “over all other charges and security interests other than Aviva’s security interest in the Condo Deposits in the Condo Deposit Account.”
The One is the largest and likely the highest profile condo project in the country to hit financing trouble, in an industry grappling with rising interest rates and construction costs. As of August, more than 8,000 condo units were delayed in the GTA, market research firm Urbanation said. The trend isn’t likely to improve anytime soon.
“Given the rise in construction costs, increased interest rates on borrowing, and potentially lower selling prices, this is not going to be the first or the last condo to go into receivership,” Gelman said.
Mizrahi and Coco, co-owners of the iconic project at Yonge and Bloor, locked in a bitter fight as receiver reviews presale agreements.
By Ana Pereira and Richard Warnica Staff Reporters
Thursday, October 19, 2023
The One, a skyscraper under construction on the southwest corner of Yonge and Bloor, has gone into receivership. The development broke ground in 2017 and was supposed to be finished construction in December 2022
https://www.thestar.com/1-web-the-one/image_9546d5f9-41cf-52df-9ed1-22335f22c418.html
Disgruntled lenders have forced a luxury condo development at Yonge and Bloor into receivership, casting a pall over a project once touted as the future of Toronto’s most iconic intersection.
The One, an 85-storey mixed commercial/residential skyscraper, was the brainchild of developer Sam Mizrahi and paving tycoon Jenny Coco. It should have been completed last year, with Apple as a flagship tenant, a luxury Hyatt hotel, and more than 500,000 square feet of upscale condo space.
Instead, more than eight years after the project kicked off, The One remains something closer to The One Half. Concrete columns and walls have only been poured up to the 40th floor, according to litigation filed this week.
The project is more than $1.6 billion in debt. Co-owners Mizrahi and Coco are locked in their own, increasingly bitter fight. Would-be tenants, meanwhile, have been left to wonder if their deposits are still good and when, if ever, they’ll be allowed to move in.
“Construction of the entire Project was expected to be completed by December 31, 2022,” a representative of the senior secured lender wrote in an affidavit filed this week. “Even on the Borrower’s revised timeline, construction is now not expected to be completed until March 2025.”
The 85-storey mixed commercial/residential skyscraper was supposed to have been completed last year, but more than eight years after the project kicked off, concrete columns and walls have only been poured up to the 40th floor, according to litigation filed this week.
The One project has been controversial since the start. But the current problems date back to at least 2019, when Coco and Mizrahi began publicly fighting over financing and control of the nascent skyscraper.
In one lawsuit, Coco, who shares ownership of The One through her family’s holding company, accused Mizrahi of behaviour “tantamount to a corporate coup” and blasted what she called his “unfair, prejudicial and oppressive” conduct. (None of Coco’s allegations have been proven in court.)
Financing for the multibillion-dollar project, meanwhile, has been shaky for years. One creditor, a Chinese state-owned bank, sued Coco and Mizrahi’s joint development company for $200 million in 2022, alleging “fraud and other misconduct.” Apple, meanwhile, pushed to get out of its main floor lease in The One, putting long-term revenue projections for the development at risk.
The One is the largest and likely the highest profile condo project in the country to hit financing trouble, in an industry grappling with rising interest rates and construction costs.
“The Project is heavily leveraged, behind schedule and over budget,” Coco wrote in one filing. “Sam and I have given personal guarantees to the Project’s senior lender, which has advanced close to a billion dollars.” That number has since climbed.
The receivership process, once initiated, happened fast. On Oct. 17, KEB Hana made an application in Ontario Superior Court, claiming both that Mizrahi and Coco’s joint company was in default of its loan obligations and that it no longer had the funding to continue the project.
KEB Hana told the court that lenders were willing to extend a revolving credit facility to keep the development going, but only on the condition that a receiver be appointed. On Oct. 18, Superior Court Justice Peter Osborne granted that request, placing the project under the supervision of Toronto firm Alvarez and Marsal.
As part of the appointment, the receiver now has access to $315 million to fund ongoing construction and development costs. Mizrahi’s company is continuing in its capacity as general contractor, under the supervision of the receiver. However, Alvarez and Marsal “will be engaging additional construction advisors, including a project manager, to assist with day-to-day operations and to oversee the ongoing construction of The One Project.”
“At the request of the project’s senior lender, the court has appointed a limited scope receiver to overcome an ongoing governance issue that has caused significant project delays,” a spokesperson for Mizrahi Developments wrote in an email. “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.”
Coco did not immediately reply to a request for comment.
Documents filed as part of the receivership process suggest a project beset by strife and delay.
Joo Sung Yoon, an IGIS vice-president, said in an affidavit that the original budget for The One was $1.6 billion with an expected completion date of Dec. 31, 2022. That budget has since climbed to over $2 billion, with an optimistic completion date now at least another two years down the line.
As of Aug. 31, the developers had pre-sold 346 units worth collectively $675 million — short almost $200 million of a February 2022 goal. At the time, seventy residential units, all above the 50th floor, remained unsold.
Apple, which had planned to build a flagship Apple Store on the ground floor, has permanently pulled out, according to the documents, following a legal battle over delays. The developers have yet to secure a new anchor tenant.
The documents, meanwhile, contain new details of the toxic dynamic between Coco and Mizrahi.
Coco had at one point ceded control of the project to Mizrahi, under the condition he buy out her family’s shares. That sale never went through, despite repeated planned dates for closure. Last year, Coco demanded an end to Mizrahi’s sole control — an event that, among others, precipitated the lenders’ demand that a receiver step in to take charge.
“Mizrahi and Coco’s relationship has become increasingly acrimonious and dysfunctional. They have been embroiled in litigation against one another in connection with the Project,” Yoon wrote in his affidavit. “The Senior Secured Lenders are not prepared to advance additional funds without the appointment of a receiver within this proceeding, under the supervision of the Court.”
For the more than 300 prospective condo owners who have already paid deposits on units in The One, Wednesday’s order brings more questions than it does answers.
In an FAQ about the process on its website, the receiver, Alvarez and Marsal, said it “has not yet had an opportunity to review any of the existing condominium sales agreements.” In other words, if you’re a buyer, all you can do is wait and see.
“The receiver will do what it can to maximize the amount of money that it gets out of this project,” said Bryan Gelman, a licensed insolvency trustee at Albert Gelman Inc., which is not involved in the proceedings.
Condo deposits are insured up to $20,000 by Tarion Warranty Corp., the Ontario agency that provides new home warranties and regulates the builders of those homes. Excess deposit insurance was obtained through Aviva Insurance Company of Canada in case the funds were used in the construction and development of The One, where some units have been listed for more than $8 million.
According to the judge’s order, the new credit issued under the receivership and the receiver’s own fees will have priority “over all other charges and security interests other than Aviva’s security interest in the Condo Deposits in the Condo Deposit Account.”
The One is the largest and likely the highest profile condo project in the country to hit financing trouble, in an industry grappling with rising interest rates and construction costs. As of August, more than 8,000 condo units were delayed in the GTA, market research firm Urbanation said. The trend isn’t likely to improve anytime soon.
“Given the rise in construction costs, increased interest rates on borrowing, and potentially lower selling prices, this is not going to be the first or the last condo to go into receivership,” Gelman said.
