In a somewhat surprising — but not completely unexpected — turn of events, the Lakeview DXE Club project by Vandyk Properties will be brought to completion while under the management of the court-appointed Receiver, KSV Advisory.
The Lakeview DXE Club project is set for 1345 Lakeshore Road East in Mississauga, where Vandyk Properties had plans for two mid-rise condo towers with a total of 478 residential units and commercial space on the lower floors.
The project is owned by Vandyk Properties under Vandyk – Lakeview-DXE-West Limited and was placed under receivership on November 14 along with several other projects, all at the request of KingSett Mortgage Corporation and Dorr Capital Corporation.
Since then, the Receiver has discovered that all of the pre-sale purchase agreements were held under a different entity, Vandyk – Lakeview-DXE-East Limited, which has since also been added to the receivership proceedings. According to the Receiver, 390 of the total 478 residential units have been sold.
The Receivership
For the Lakeview project, Dorr Capital is the first-ranking mortgage holder, pursuant to a loan agreement reached with Vandyk Properties on November 5, 2021 for the principal amount of $34,000,000.
Other subsequent secured charge holders on the property include — in order of priority following Dorr — Westmount Guarantee Services, 2471867 Ontario Limited, and Diversified Capital Inc., with approximately $20,639,000, $3,300,000, and $7,500,000 owing, respectively, as of mid-June.
KingSett also holds several subsequent charges as a result of loan agreements pertaining to other Vandyk projects and cross-collateralization. As collateral for the Lakeview project, Dorr was also granted charges on other Vandyk projects, all of which had KingSett as the first-ranking charge holder.
According to KingSett and Dorr, several events of default occurred pertaining to the Lakeview project, including Vandyk failing to make monthly interest payments in July, August, and September; failing to discharge construction liens that were registered; and "diversion or misuse of certain funds and/or purchaser deposits contrary to the purposes for which such monies were advanced."
In late-September, KingSett and Dorr issued notices of default and demands for payment, with the outstanding amount owed to Dorr on the Lakeview project at $35,370,358.62 as of September 28.
Several months after the receivership came into effect, the Ontario Superior Court approved the sales process for most of Vandyk's projects, but excluded the Lakeview DXE Club project at the request of the Receiver, who said in early-March that they were "in the process of advancing a realization strategy" for the project.
Moving Forward
The Receiver then returned in April with a recommendation to complete the project, "in order to maximize the potential benefits to stakeholders, including the secured lenders and the existing pre-sale home buyers."
The move is a relatively rare one for projects that have yet to begin construction and is more commonly seen with projects that have already had construction commence, such as with The One by Mizrahi Developments.
Since then, following a request for proposals process, the Receiver has selected PCL Construction to serve as the Construction Manager that will see the project through. According to the Receiver, PCL Construction was previously engaged by Vandyk prior to the receivership and it thus made sense to retain PCL, whom the Receiver recognizes to be a "highly experienced contractor" that is "widely recognized as the largest general contractor in Canada."
The construction budget is expected to be approximately $185.7M, including fees to PCL, but excluding soft costs, financing costs, or contingencies, the Receiver said. PCL Construction's construction management fee is 3% of the actual construction costs, plus a reimbursement for the actual expenses that it incurs, plus an administrative charge of 3% added to the cost of such reimbursable expenses.
KingSett has agreed to provide a construction loan to the Receiver for the project, including a $243,750,000 construction facility, a $10,000,000 overrun facility, and a $1,500,000 cash in lieu of letters of credit facility, with interest charged on all three at varying rates. The maximum project budget KingSett has agreed to is $330,935,051, which is an amount that includes costs already incurred to date. Finnegan Marshall will serve as an independent project monitor acting on behalf of KingSett.
STOREYS reached out to Vandyk Properties and PCL Construction for comment on June 28, but has not received a response by time of publication.
The Receiver and KingSett intend to honour the existing sales contracts and construction on the Lakeview DXE Club project is now expected to be completed by May 2027.
