Less than a year after pre-sale purchasers voiced frustration over the developer's decision to change construction materials, the Modus project in Vancouver has been placed under receivership, according to filings in the Supreme Court of British Columbia.
The Modus project is a collection of 17 townhouses set for 1488 Park Drive — 7576 Granville Street, legally — at the intersection of Park Drive and Granville Street in the Marpole neighbourhood of Vancouver. BC Assessment values the property at $9,293,000.
The developer of the project is Centred Developments, whose Horizon 21 project in Coquitlam remains the subject of foreclosure proceedings, as first reported by STOREYS earlier this year.
The property is legally owned by Grandlake Investments Corp, which is 75% owned by Ze Wen Zhong through 1132878 BC Ltd. Zhong is also listed as a respondent, as a result of being a guarantor of the loan, as he was for the Horizon 21 project.
According to the Land Owner Transparency Registry, the other owner of Grandlake Investments Corp is Si Heng He, whose principal city of residence is Toronto. He is not listed as a respondent.
The Receivership
The proceedings were initiated in mid-February by First Commercial Bank, who claimed that Grandlake Investments Corp owed them $10,445,412.99 as of February 14, with interest accruing at a daily rate of $2,460.97.
According to court documents, First Commercial and Grandlake reached a loan agreement on October 1, 2021 for a principal amount up to $15M, which would be provided through two individual loan facilities — a pre-construction loan facility and a construction loan facility — with different interest rates.
Around March 2023, the cost consultant on the Modus project — Butterfield Development Consultants — began identifying cost overruns in the project, and "adjustments" were made to cover the costs, perhaps alluding to the switch from concrete to wood-frame, which was reported in July 2023.
By September, First Commercial became concerned that the amount agreed upon under the loan would not be enough to complete the project, and began requiring monthly interest payments, which Grandlake was able to pay up until, and including, November.
By December, First Commercial agreed to extend the maturity date of the loan to December 14, 2024, conditional on the developer providing an updated interim budget. Grandlake was unable to provide this and also failed to make the monthly interest payment for December.
First Commercial made a formal demand for payment on January 15 and subsequently initiated the proceedings in February after Grandlake was still unable to pay the outstanding amount.
Construction Status
The Modus project at 1488 Park Drive (7576 Granville Street) in Vancouver.(Cornerstone Architecture / Centred Developments)
According to an estimate provided in November, the Modus project is approximately 43% complete, with an additional $5,028,681 needed to complete the project. Construction has now seemingly halted, however, with First Commercial's concerns arising even before then.
Around September, Grandlake informed First Commercial that they were changing the construction management team, including the project manager. The bank then started making site visits in December, observing that although the construction site was fenced off, there was no security on site. It also observed that construction was not progressing and that there were no trades on site, and that construction materials that had been delivered were left exposed to weather. At one point, the developer also wanted to change cost consultants, but it's unclear whether or not they ultimately did so.
In late-February, the bank then learned from the project manager that it was no longer being paid by Grandlake and was no longer working on the project.
In March, concrete contractor Fairbrothers Framework Ltd. also registered a lien on the property for the sum of $682,564.11.
"Given the cost overruns, significant amount required to complete construction of the Development, the builder's lien, and the lack of activity noted during recent site visits, the Bank has lost confidence that Grandlake will be able to complete construction of the development," the Bank said in an application document. "The property requires immediate attention given the apparent lack of project management, security, and appropriate storage of materials. The property is in jeopardy and the immediate appointment of a receiver is warranted to preserve and protect the property."
What Happens Next
In an affidavit dated April 19, Dennis Zhong — the son of Ze Wen Zhong whom the bank says was their primary contact on the project — said that Grandlake has been focused on securing financing to complete the Modus project and provided a term sheet from an unnamed investor.
Zhong said that the investor would provide Grandlake with $2M to repurchase four units within the project — which is 100% sold out, according to the project website — and to reimburse Grandlake for amounts it spent to repurchase two other units. He said that this would allow construction to restart and that they are also in the process of finalizing a loan that would see this same investor advance an additional $11M to finish the project.
Zhong says they have hired Ravi Hayer of R. Hayer Development Ltd. as the construction manager and that trades are ready to resume once the investor advances the funding. He also noted that the $11M greatly exceeds the $5M that was estimated to be needed to complete the project and that a portion of the excess amounts would be used to pay interest to First Commercial.
It is unclear whether or not this occurred, however, as the receivership order was granted shortly after, on May 6.
In receivership proceedings, the mortgaged assets are more often than not sold off so creditors can recover what they are owed. However, for development projects that are deep into construction, the work may be allowed to continue, under the management of the court-appointed Receiver.
Which direction the Receiver takes the Modus project will likely become clear once the Receiver completes its initial report.
If you are a pre-sale purchaser of Modus who would like to share your experience, you can reach me at: howard@storeys.com or HowardChai.24 on Signal.
