Getting any housing project from the planning and approvals stages to actual construction is a feat these days, and it’s one that has become insurmountable for many developers who are increasingly struggling to pencil things out.

This is the reality in major urban hubs like Toronto, as well as smaller outskirt towns like Ajax.

On April 22, 2024, the Ontario courts granted a receivership order over a real estate holding company known as Ajax Meadows, appointing TDB Restructuring Limited as the receiver.

The company in question owns a 27-unit, 59,600-sq.-ft townhome development off of Rossland Road in Ajax. As for the receivership proceedings: they were initiated by Vector Financial Services Limited.

In the receivership application, Vector alleges that Ajax Meadows has racked up over $4M in debt, and that construction on the project, to date, “has not been commenced in any material fashion.”

‘Lender Remained Patient’

The court documents show that the story of Ajax Meadows started sometime around October 2022, which is when credit facilities were first made available by Vector. According to that letter, Vector advanced the principal amount of $4M in support of the townhome project, with Sameer Khan as guarantor. Skipping forward a few years to February 2024: Ajax Meadows ended up indebted to Vector in the ballpark of $4.13M.

But there was quite a bit that happened between those two points in time. According to Vector’s application, all parties had agreed that that initial $4M would be repayable by “no later than” November 10, 2023.

After Ajax Meadows missed that deadline, the lenders “agreed to informally forbear from demanding on the loan for a limited period of time, in their discretion, provided that interest was kept current at the ‘step-up rate.’”

Despite that leniency from the lender — the court documents specifically say that the lender “remained patient” — Ajax Meadows breached the agreement again in December 2023, and then again in February 2024 “by failing to remit a monthly interest payment.” After that, the debtor was informed that Vector intended to take “enforcement steps” unless payment was issued to Vector “immediately.”

Long story short: Ajax Meadows never managed to cough up what was owed — despite being informed on multiple occasions of the indebtedness, including with respect to interest.

A (Failed) Attempt To Sell

Around mid-March in 2024, it came to Vector’s attention that Ajax Meadows had entered into an agreement of purchase and sale in respect of the development property off of Rossland Road. According to the April 22 factum of the applicant, the proceeds of that sale were to be used to repay the indebtedness owing to the lenders, as well as the subordinate mortgagee.

That sale was contingent on a number of conditions, which were not met when push came to shove. According to Vector’s receivership application: “during discussions between Vector and Mr. Khan with respect to [Ajax Meadows] it became clear to Vector that, in Vector’s view, Ajax Meadows has an unrealistically high perception of the value of the Mortgaged Property, and that this misconstrued (and unsupported) valuation was likely to frustrate any attempts by Ajax Meadows to either sell the mortgaged property or refinance the Indebtedness in the near term.”

Now that the receivership order is officially in effect — as of April 22, 2024 — what typically comes next is the sale of the property, which would be managed by the receiver. This would be in an effort to recoup some costs and repay the debt to the lender. The court order specifies that the receiver is permitted to sell or collect revenue from the property as they see fit.