According to recent filings in the Ontario Superior Court, an Eglinton Avenue West preconstruction project from Toronto-based developer Morgis Group Canada that was hit with a receivership order this summer after failing to pay over $53 million in debts, was officially appointed a receiver in early September.
The debts accrued during the planning approvals stage for a midtown property intended for redevelopment. Comprised of four parcels of land located at 350, 356, 366, and 368, 378 Eglinton Avenue West, the site was to play host to a 10-storey mixed-use residential building with retail at grade.
According to the council for the 38 individuals and corporations who applied for receivership of the property they had invested in (the Lenders), the project remains in the initial plan approval stage with the City of Toronto, despite Morgis' claims of it being in "advanced stages of planning."
The loans, of which there are three, total $53 million, plus interest and interest arrears. The first of the loans totalled $15.5 million and was granted in April 2021, with another $33 million loan following in April 2022, and a final loan of $4.5 million being granted in March 2023.
STOREYS contacted Chris Morgis — owner of the Ontario corporations involved in the receivership as well as Morgis Group — for comment on the situation, but he declined.
The Receivership
On September 1, 2023, all three loans expired but were extended three times at the request of Morgis, with a final maturity date of February 1, 2024 — a date that came and went without payment.
In response, the Lenders issued a Demand Letter and Notice of Intention to Enforce Security on February 4, after which, Morgis acknowledged they had defaulted on their loans. On April 19, the Lenders applied for receivership in hopes of appointing TDB Restructuring Limited as Receiver.
Simultaneously, Morgis submitted a Companies Creditor Arrangement Act (CCAA) application in hopes of acquiring more time to secure refinancing on the grounds that the lenders "pulled out of the project," leaving them to secure replacement financing "at a time when the development financing market is experiencing extraordinary dislocation," according to Morgis' Factum. Though, the Lenders denied agreeing to act as ongoing partners in any binding manner.
As a part of the CCAA, a Sales and Investment Solicitation Process (SISP) would have ensued in the event that Morgis failed to secure refinancing by September 30, 2024, where a court-appointed monitor would look for a buyer as well as other refinancing alternatives.
After considering the receivership and CCAA applications separately, Justice Cavanagh ordered TDB be appointed receiver on July 5. Afterwards, Morgis appealed the order, asking that it be set aside on the grounds that allowing a CCAA would grant them more time to secure financing with a $75 million loan from Caerphilly Capital LTD — among other measures intended to ensure the success of the Eglinton project — and on the grounds that the receivership and CCAA application were not heard together, as well as a number of perceived "errs" on the Judges' behalf.
But despite what sounds like a promising investment proposal, the Lendors argued that the commitment letter from Caerphilly was subject to "significant deposit obligations and onerous conditions precedent." As well, they said Morgis had been "generously afforded an entire year to complete any refinancing." During that time, they pointed out, the Lenders also extended $53 million in loans with monthly interest totalling $464,791 per month and interest arrears reaching $4 million.
"The Lenders, understandably, have lost any confidence in the Debtors ability to refinance and simply want the return of their money," said the Applicant's Factom.
In early-September, Justice Cavanagh denied the appeal and sided with the Lenders, citing that they were not satisfied that Morgis will be able to secure financing in order to pay out the Lenders' mortgages and that the sale process under the CCAA will not be more efficient or less costly than a receivership.
TDB Restructuring Limited has now been officially appointed Receiver and will be in charge of management and operation of the property, as well as facilitating its potential sale.
