One of the tallest skyscrapers coming to Canada is facing significant financial trouble as Mizrahi Developments' The One has been placed under receivership.
According to court filings, a total of $1.235B is outstanding on loans provided by KEB Hana Bank for the development of The One.
Further funds are owed to a number of other creditors, including over $201M to Aviva Insurance related to Tarion Warranty provision, $75M to Coco International, $213M to CERIECO Canada Corp. for a contractor's loan, and $55M to NongHyup Bank.
"The total secured indebtedness of the Borrower is therefore approximately $1.662 billion," the court filings read.
Alvarez & Marsal Canada Inc. has been appointed as the receiver.
The One, owned in a 50-50 split by real estate developer Sam Mizrahi and entrepreneur Jenny Coco, is an under-construction mixed-use tower at 1 Bloor Street West in Toronto that's set to house condos, a hotel, and commercial space. It first broke ground in 2017 and was initially expected to be complete by December 2022, but according to court documents, it had only been built up to the 40th storey as of October 4 of this year — less than half of its planned height.
"To say that the project has been delayed and faced challenges would be an understatement," says the filing. "The original construction budget has already been materially exceeded. The most recent budgets, based on the Borrower’s latest construction schedule and commitments and cost data to May 31, 2023, reflect anticipated gross project expenditures in excess of $2 billion, an amount that exceeds the costs projected in 2019 by more than $600 million."
The court documents allege that several loan defaults have occurred since 2019 and that on October 4, 2023, KEB Hana Bank delivered a formal demand letter seeking repayment for all debts related to The One.
STOREYS reached out to Mizrahi in late June of this year with respect to rumoured financing issues, at which time Mizrahi denied there were any problems whatsoever.
The ability to complete The One was brought into question, as the court documents note "the borrowers cannot continue construction of the project without further advances under the Credit Agreement or alternative financing." However, it was requested that the receiver make $315M available as a non-revolving term credit facility to fund the remainder of construction costs.
In a statement emailed to STOREYS on Thursday, Mizrahi Developments said, “At the request of the project’s senior lender, the court has appointed a limited scope receiver to overcome an ongoing governance issue that has caused significant project delays.
"As part of this arrangement, the receiver has requested that Sam Mizrahi and his company remain as the Developer and General Contractor to oversee completion of The One. Mr. Mizrahi maintains his equity position in the project. This is a welcome decision that will allow for the successful completion of The One under the continued leadership of Sam Mizrahi and Mizrahi Developments.“
The receivership news comes just a few months after The One was approved for even more height than initially planned, now set to rise 91 storeys.
In an interview with STOREYS just last month, Mizrahi said The One was over 81% sold. "In The One, we sold over $600M in, basically, the first 90 days of the launch," Mizrahi said at the time. As of August 31, 2023, court documents say, 70 condominium units remained unsold.
The documents also allege that The One "has not been able to complete a sale or mortgage of the commercial component nor has it completed a severance of the commercial component lands." It goes on to say that the development "recently lost its anchor retail tenant and has yet to find a replacement."