Maroc - STOREYS.COM - A La Une - 06/Sep 17:26

Two-Tower Office Property In Don Mills Hit With Receivership Over $60M Debt

According to recent filings in the Ontario Superior Court, a North York property owned by Visionary Holdings Inc., a NASDAQ-listed education, real estate, and tech investment company, was placed under receivership in late-August after being linked to mortgage loan debts nearing $60M.The property — a five- and 11-storey office complex located at 95-105 Moatfield Drive in Don Mills — was acquired by Visionary in September 2022 from Slate Office REIT for an "aggregate consideration" of $101M, according to a NASDAQ press release that followed the sale. The intention was to develop the "Visionary University Town," characterized as a "comprehensive university facility mainly focused on digital art and supplemented with film and animation production," says the release.The property, which once served as the Canadian headquarters for IBM and Kraft Heinz, was also supposed to be home to two student apartment buildings, dining facilities, and an expanded sports field. Currently, the property leases 100% of its units to 15 tenants, the majority of which are educational businesses related to Visionary, and one of the largest, in terms of square feet, being Hitachi Rail GTS Canada Inc.To help Visionary acquire the 95-105 Moatfield Drive property, the company was granted a loan of $60M by the Bank of China (Canada) (BOCC), of which it still owes the Bank $59,753,654 (as of July 4). The ReceivershipOn August 1, the BOCC filed an application requesting that Ernst & Young Inc. be appointed Receiver of the Visionary properties located on Moatfield Drive. Though the $60M debt does not mature until October 15 of this year, the BOCC issued a demand letter and a notice of intention to enforce security on July 5 on the grounds that they "do not believe that [Visionary] will be in a position to repay the Indebtedness [in time]," according to the affidavit of Donald Bridge, Deputy Manager of Risk Management at the BOCC. As of now, the Debtors have not repaid the loan.In their application, the Bank lists a number of grievances that also led them to pursue the receivership, the most notable being a charge of $5M that was registered on title to the Moatfield properties in favour of a company listed as 1000386642 Ontario Inc., without the BOCC'S consent. The existence of this unauthorized mortgagee was one of the main reasons for the Bank's urgency in having a receiver appointed, since, on May 24, solicitors for 1000386642 Ontario Inc. issued a notice of sale that demanded payment of the $5M, plus around $103,000 in interest, to be paid by July 5, or else they would sell the property.Following the notice of sale, 1000386642 Ontario Inc. entered into a forbearance agreement with Visionary, which pushed the potential sale to the end of August, hence BOCC's urgency in having a receiver assigned before then. The BOCC argued that it is important the property is "sold in a transparent, court-supervised process" to ensure the protection of multiple secured party's registered interests, and to help protect the rights and interests of existing tenants. On top of the unauthorized mortgage, the BOCC also found that Visionary failed to make certain tax payments to the CRA, which led to the CRA demanding $1.18M and registering a lien on the property — also without the Bank's consent — though this was eventually revoked. As well, the BOCC claimed the company failed to make any municipal tax payments and allowed a construction lien in favour of Mississauga-based construction company Arguson Projects Inc. without the Bank's consent. "It is very concerning to BOCC that it had to find out about these material defaults through its own investigations or from third parties," said Bridge. According to Bridge's affidavit, the BOCC also found that Visionary's sole income was sourced from tenant rent payments, which concerned them because, as Bridge attested, the Bank believes Visionary had been failing to remediate rent arrears of up to potentially 18 months from certain tenants — a shortcoming that could "seriously impair BOCC's collateral value," he said.According to the BOCC, an "escalating trend" of late payments also began shortly after the September 2022 purchase, in March 2023. Since March 2023, there have been late payments recorded in August and November 2023, and five between March and July 2024. And when Bridge swore his first affidavit on August 1, the payment scheduled for July 15 remained unpaid. Then there's the issue of the site's upkeep and maintenance. According to Bridge's affidavit, there seems to be structural and safety issues regarding the site's underground parking garage, which would require $700,000 to repair — funds that Bridge said "the Borrower does not appear to have [...] based on its inability to meet other financial obligations." The worry, he expressed, is that the decline in site maintenance due to low cashflow could impact the building's value, thereby further prejudicing the BOCC’s position.In her affidavit, sworn August 24, Executive Director of Visionary Fan Zhou claimed that the company paid all rents and "most, if not all" maintenance costs, but made no mention of the failed CRA and municipal tax payments, the late scheduled payments, the construction lien, or the $5M charge in favour of 1000386642 Ontario Inc. STOREYS reached out to Visionary Holdings Inc. for comment but did not received a response by the time of publication on Friday afternoon.Moreover, the (arguably lacking) materials provided by the Respondent on August 24 were originally due on August 12, putting them in breach of court orders, "despite being given ample opportunity to come to an interim resolution to the ongoing defaults by entering into a market-standard forbearance agreement," Bridge pointed out in his second affidavit.Zhou also expressed concern that the BOCC was trying to bypass Visionary by selling the property to one of the tenants, Hitachi Rail. In her statement, she says that the Bank wanted to sell the property for $65M — $15M less than the $80M that a Colliers Appraisal Report found the property to be worth. Her worry, she stated, was that "This disclosure would likely result in a significant drop in the company’s stock price, adversely affecting Canadian investors and benefiting the Bank of China at their expense."STOREYS also reached out to the BOCC for comment on this matter, but did not received a response by the time of publication.After taking the facts of the case into consideration, Justice Penny appointed Ernst & Young Inc. as receiver of the property at 95-105 Moatfeild Drive on August 27. EY will now be in charge of management and operation of the property, as well as facilitating its potential sale.