The real estate foreclosures that have occurred across British Columbia in the past year or so generally all have one thing in common: the properties were the subject of a development proposal that failed to get off the ground.

That makes the foreclosure of the Olympic Villas building — a 75-unit affordable housing building located at 4010 Walters Street in Merritt, British Columbia — an outlier, as the project completed and opened its doors to tenants in November 2022, as announced by BC Housing.

Olympic Villas is legally owned by Olympic Villas Inc. who purchased the property for $912,570.17 in November 2018. It is unclear who the beneficial owner of the property is, but BC Housing's November 2022 announcement identified Irfan Sonawala as a Director of Olympic Villas Inc. Sonawala identifies himself as Director Professional Services for Tender Bid Supply on his LinkedIn.

Tender Bid Supply (TBS) identifies itself as a development management company and a company named TBS Procurement Interface Inc. is also listed as a respondent in the foreclosure proceedings, with the same service address as Olympic Villas Inc., and is identified as the company that served as the construction manager for Olympic Villas.

According to case documents, Olympic Villas achieved interim occupancy on November 29, 2022, full occupancy on October 24, 2023, and currently has 63 of its 75 units leased.

The Foreclosure

The foreclosure proceedings were initiated by BC Housing against Olympic Villas Inc. and TBS Procurement Interface Inc. — as well as a John Doe and Jane Doe — in November 2023.

In its petition to the court, which was later amended in January 2024, BC Housing said that it was owed $17,089,152.67 as of September 30, 2023, with interest. The mortgage was registered in March 2020 and saw BC Housing provide $16,595,028 in interim construction financing. Olympic Villas Inc. is the mortgagor, while TBS Procurement Interface Inc. is the covenantor.

The interest rate of the loan was described by the court as "exceptionally low," which was the result of the project being funded through BC Housing's HousingHub program, which provides low-interest financing to developers of affordable housing.

According to the developers, the budget for Olympic Villas was originally $19,715,133, with the developers contributing the remaining $3,120,205 themselves. Due to various reasons, however, the project saw a 19.8% overrun that ballooned the cost to $23,615,000, with the developer themselves paying for the overrun.

Those reasons include pandemic-induced supply chain issues, forest fires in the region that cause evacuations, and more, which delayed construction on the project, but the two sides ultimately reached an agreement to extend the repayment date three times, in May 2021, January 2022, and August 2022, the last of which set the final repayment date at November 1, 2022.

According to the borrowers, in mid-2022, BC Housing threatened to declare the borrowers in default of the mortgage agreement, while construction on Olympic Villas was ongoing, giving the borrower a choice between modifying the mortgage agreement to significantly increase the interest rate (to RBC Prime Rate) or face foreclosure proceedings.

According to the judge presiding over the case, the borrowers did not sign the modified agreement, seemingly by mistake, and BC Housing began charging the higher interest rate, which communications between the two parties at the time acknowledged.

After BC Housing discovered the error, the developer signed the amended agreement in July 2023, backdated to August 2022, after some complaints about the higher interest rate. BC Housing filed the modified mortgage title on September 7, 2023. However, it then sent a notice of default to the borrowers the next day, saying that the borrowers were in arrears on property taxes for 2022 and 2023, and subsequently initiated the foreclosure proceedings in November.

Since then, Olympic Villas Inc. and TBS Procurement Interface Inc. has tried to convert the foreclosure proceedings into a civil action instead, arguing that they have raised "triable issues which make it necessary to convert this proceeding into an action." One "triable issue" raised was BC Housing issuing the notice of default the day after filing the modified mortgage agreement, which was described as "unconscionable."

The borrowers' attempt ultimately failed, however, and the Supreme Court of British Columbia granted BC Housing an order nisi on April 24, confirming the outstanding debt at $18,040,130.72 as of April 11, 2024, with interest now accruing at $3,558.60 per day.

What Happens Next

The exterior of the Olympic Villas building in Merritt.The exterior of the Olympic Villas building in Merritt.(Olympic Villas)

The order nisi also set the redemption period — the date by which they debtors can pay the outstanding amount to halt the foreclosure — at November 20. If the outstanding debt is not paid by then, BC Housing can apply for conduct of sale, which would allow it to sell the property to recover the debt.

The borrowers say they have retained Colliers to assist them in soliciting offers for the property. BC Assessment values the property at $14,619,000.

The borrowers say they have also been actively trying to refinance the property, including exploring the possibility of funding from the CMHC.

"One of the options the borrowers have been actively pursuing is to have the Canadian Mortgage and Housing Corporation (CMHC) refinance the property," the borrowers said in a March 2024 court document. "However, as a federal Crown corporation, CMHC requires the borrowers to work through much red tape including a restriction on financing which requires the project to be 97% tenanted. Currently, [Olympic Villas] is 84% tenanted in a town with a population of approximately 7,000 residents. The borrowers are actively marketing the project for rent through a marketing agency and marketing campaign and are confident that the project will achieve 97% tenancy within the next year."

The borrowers say they are confident they will be able to secure either a sale or refinancing by no later than November 2024 and pay the outstanding debt off in full.