Six months after 55 Dundas and its owner were placed under receivership, the case has come to a resolution as a result of the Bank of Montreal (BMO) agreeing to a settlement, according to Ontario Superior Court of Justice documents.
55 Dundas is a six-storey retail building that sits at 55 Dundas Street East, half a block east of Yonge-Dundas Square and one block east of CF Eaton Centre in the heart of Toronto.
The property is legally owned by 11603531 Canada Inc., with the directors of the company being Adnan Khalid and Usman Khalid.
The Receivership
The application to appoint a receiver over the property was initiated in September by BMO, who held a first-ranking mortgage and said that 11603531 Canada Inc. owed them $7,353,195.25, plus interest, as of August 31, 2023, pertaining to a loan from 2009 and a loan from 2022.
The guarantors of the loan were Usman Khalid, Gold Stock Corporation, and 10587699 Canada Corp., the latter two of which are entities related to the owners that occupied space within 55 Dundas.
BMO issued a demand for payment on April 5, 2023, but then subsequently reached a forbearance agreement that gave the owners until May 31, 2023 to repay the debt, or until June 30, 2023 if they obtained a term sheet or offer letter for the refinancing of the loans by May 31.
11603531 Canada Inc. was able to do the latter, and another forbearance agreement was reached on June 30, extending the deadline to August 31. By that date, however, 11603531 Canada Inc. was unable to repay the loans or secure a financing commitment that would enable it do so. It requested a forbearance agreement to October 31, but this time BMO declined and exercised their right to seek out a court-appointed receiver, with the Ontario Superior Court of Justice approving the application on November 14.
The case eventually moved towards a sale of 55 Dundas earlier this year, but faced complications as a result of a lack of cooperation from the owners, to the point where the receiver sought out an order from the court compelling access to the property and the owners' books and records.
According to the receiver, an appraisal done in March 2023 stated the building had eight tenants, but Usman said in the initial meeting with the receiver that there were only two, one of which was the aforementioned 10587699 Canada Corp. When asked about the discrepancy, Usman said that there were subleases, but refused to provide documentation of the subleases.
After Usman provided a copy of the 10587699 Canada Corp lease, the receiver found more discrepancies between the lease and the rent roll information provided by the bank, regarding the units occupied, rent rates, and rent terms.
"Usman appears to operate several different businesses from the units covered by the [10587699 Canada Corp lease], but the receiver is uncertain as to which tenants are in Usman's control or the terms under which those tenants operate."
The 55 Dundas Street East property in Toronto.(CBRE)
Usman also enforced a clause in the 10587699 Canada Corp lease that requires two-week notice in advance of access to the property, which delayed the receivership process, and also insisted on two-week notice for realtors showing the property to prospective buyers as well.
"Usman has refused to provide the receiver with access to the real property on certain occasions," the receiver said. "For instance, Usman refused complete access to the first and third floors of the real property when the receiver was performing an inspection related to potential maintenance, inspection, fire plan, and testing deficiencies."
The receiver also noted that Usman was storing "compressed gas cylinders" on site "without property authority."
The court granted the receiver's request for an order compelling access, but the owners still refused to comply, which impeded the sales process and impaired the value of the property, the receiver claimed.
The Settlement
The 55 Dundas property was listed by Mike Czestochowski, Lauren White, Arlin Markowitz, Teddy Taggart, Alex Edmison, and Jackson Turner of CBRE with an asking price of $10M.
The bid deadline was set at April 12 and records submitted to the court show that 21 parties showed interest by signing non-disclosure agreements. Those parties included Amdev Property Group, Cedar City Developments, and Harbour Equity, among others.
In the end, only three offers were made, and all three were declined due to the offers being "significantly below the appraised value" as well as "non-compliance with required terms."
Just before the bid deadline, however, on April 11, BMO agreed to discharge its security over the owners in exchange for a payment of $8M.
As of April 1, BMO was owed $8,354,997.09, which included $562,907.55 in property tax arrears that BMO paid to the City of Toronto during the receivership.
According to the receiver, "BMO is motivated to accept a reduction of its debt due to the ongoing defiant behavior of Usman and the questionable lease arrangements implemented by [11603531 Canada Inc.] that have impaired the value of the real property."
Counsel for 11603531 Canada Inc. confirmed that they had received the $8M in trust, but that the source of the $8M remains unclear, with counsel only saying that "the funds were cobbled together from all available sources in its circle of contacts."
The receiver recommended the settlement be approved and the receivership be ended, and the application was approved by the court on April 25.
