After three of their properties were hit with receiverships back in May, Ottawa-based residential developer Ashcroft Homes commenced proceedings to have the receiver discharged upon securing additional financing — proceedings that ultimately failed in late-November.
The proceedings surrounded three properties known as 111 Richmond Road, 101 Richmond Road, and 108 Richmond Road located in Ottawa's Westboro neighbourhood that consist of over 600 residential condos and 38,000 sq. ft of commercial retail space.
Due to “the high cost of borrowing,” “an increase in property taxes and condo fees,” and “carrying costs associated with unleased commercial space," according to court documents from Ashcroft Homes, the developer experienced cash flow issues that led it to default on an $8.8 million loan from DUCA Credit Union, of which it still owed $6,537,579.
The properties were placed under receivership with BDO on May 16, but BDO's appointment was stayed until June 17.
Notably, Ashcroft Homes also saw one of its Ottawa development projects hit with a receivership in mid-October after delays and cost overruns pertaining to the installation of a stormwater sewer caused the developer to accrue over $80 million in debts.
The Proceedings
Sale Process Begins
Following BDO's appointment as receiver, they began looking into the sale of the properties. According to their First Report of the Receiver, dated August 21, BDO had engaged with Colliers Macaulay Nicolls Inc. Brokerage and was requesting the Court's approval to move forward with Colliers.
On August 28, DUCA expressed support of the sales plans and Justice Corthorn subsequently approved the sale process on September 3. With approvals secured, BDO and Colliers executed listing agreements and took steps to prepare the assets for marketing and sale.
Potential Financing Secured
On September 17, Ashcroft Homes emailed BDO informing them they had found a lender that would provide enough financing to payout the debt owed to DUCA and requested that BDO provide a summary of accounts. A few days later, Ashcroft shared an executed commitment letter between them and HP ABL Fund 1 Limited Partnership (the lender), which provided $8.5 million for the purposes of repaying DUCA. But because there was no proof of funds or confirmation of satisfaction of conditions laid out by the lender in the commitment letter, BDO decided to continue the sale process.
In a somewhat dramatic turn, on October 4 — the eve of the day the listing was to go live — Ashcroft’s counsel notified BDO that the developer held $7,451,783 in their trust account, with no conditions to release the funds, to cover the debts and requested a discharge statement from the Receiver.
It became clear that the funds had been advanced by the lender, meaning that Ashcroft was now in debt to them with interest accruing, a breach of the receivership order. But on October 10, the listing was taken down and BDO agreed to put the sale process on hold for one week.
The next day, Ashcroft’s counsel provided a second commitment letter in which the lender agreed to provide $8.75 million in financing, however, BDO was concerned that the loan would only just cover the costs of terminating the proceedings as well as any interest that would grow over time, and inquired if Ashcroft could obtain additional funding to cover any "shortfalls."
Discharge Requested
Following this exchange, there was some back-and-forth surrounding the exact amount of financing BDO required to move forward with a discharge statement, and tensions seem to have risen around BDO's ability to provide an exact number. Then, on October 16, Ashcroft requested an urgent hearing date for a stay of the sale process and the discharge of BDO.
BDO claimed that the developer’s counsel in their request letter “mischaracterized the discussions among counsel and contained various unfounded allegations against the Receiver," and in a motion on November 4, BDO requested guidance from the Court on whether or not to extend the suspension of the sale process or continue marketing the property.
On Ashcroft’s side, they alleged in a factum also dated November 4 that BDO consistently failed to communicate how much additional funding would be required to cover all the debts, interest, and accruing fees. At this point, Ashcroft was motioning for the sale process to be halted, the refinancing approved, and the receivership discharged.
However, on November 5, Justice C. MacLeod adjourned the motion, citing that “It is not clear if the refinancing is sufficient to clear the debts and permit the companies to resume operation but it is acknowledged that it is 'in the ballpark.'” BDO had proposed that the parties be given a few days to see if a consent order could be achieved. Meanwhile the sale process remained suspended.
Following that decision, a Second Report of the Receiver from BDO, dated November 13, raised concerns over Ashcroft's alleged inter-company indebtedness, lack of a plan to repay $470,000 in pre-receivership debt owing to unsecured creditors, and the repayment fees and expenses of the Receiver itself.
In response, in an affidavit from Ashcroft Homes President Manny DiFilipo, he outlined the company’s six-month post-discharge plan and cash flow projections "to demonstrate Ashcroft's ability to operate, generating positive working capital in addition to paying all of CRA and other unsecured creditors by the end of May 2025." As for the inter-company loans, a November 5 affidavit from DiFilipo stated that, "These inter-company loans are advances in normal course of business with no security attached to them," and shared that DiFilipo had sat down with BDO in early-summer 2024 to "look at our books" and that they had been "satisfied with my explanation."
Judge's Decision
Despite Ashcroft's rebuttals, according to their November 28 endorsement, Justice MacLeod dismissed Ashcroft's motion to discharge BDO and advised BDO to recommence the sale process, citing that, “Given the indulgences already provided to Ashcroft, the grace period originally ordered and the uncertainty surrounding the total amount of the debts, it would not be prudent to discharge the Receiver only to have Ashcroft face enforcement by another creditor or commit an act of bankruptcy.”
As a result, the sale process will now move forward but, as of now, the listing does not appear to be live. STOREYS contacted DiFilipo to inquire about the possibility for further attempts to discharge the receivership but has not received a response at the time of publishing.
