“Lost Confidence”: Mizrahi’s Yorkville Condo Project In Receivership As Partner Alleges $47M Debt

Amidst (even more) drama surrounding The One development in downtown Toronto, receivership proceedings over a luxury condo project at 128 Hazelton Avenue in Yorkville have come to a head.

The nine-storey, 20-unit condo project comes from Mizrahi Developments — as in Sam Mizrahi, the developer who dominated headlines in February when he was forced off The One in favour of SKYGRiD Construction. Mizrahi partnered up with Toronto-based private real estate fund Constantine Enterprises Inc. for the Hazelton project back in 2015.

According to court filings from KSV Advisory, Constantine first made their plea for receivership on February 22, with Mizrahi (128 Hazelton) Inc. and Mizrahi 128 Hazelton Retail Inc. named as the respondents, and Sam Mizrahi identified as the principal of both.

READ: "A Difference In Vision": Mizrahi On Being Pushed Out Of The One

“CEI has lost confidence in Mizrahi and the Mizrahi Group’s ability to fulfill their financial obligations, past and ongoing,” Constantine’s April 26 affidavit explained, also citing a $47M debt and noting that numerous demands for payment have already been made. “The development of the Hazelton Project, a luxury condominium development in the heart of Yorkville, is at a standstill because of the lack of funding and the breakdown in the relationship between CEI and Mizrahi, to the detriment of stakeholders, including other lenders, and the occupants of the Hazelton Project.”

That same document also alleged that, “based on Mizrahi’s most recently delivered budget, the cost of the Hazelton Project will exceed Mizrahi’s initial budget by over $50M, and the estimated completion date is more than five years behind schedule based on Mizrahi’s current estimates. Additional funding is necessary to complete the Hazelton Project and the only viable lender is CEI. It is certainly not Mizrahi or the Mizrahi Group.”

Mizrahi Bites Back

The statements contained in Constantine’s affidavit are fighting words, no doubt, but when you consider what has been going on behind the scenes, the animosity makes sense. As stated in the court filings, Mizrahi has initiated legal action against Constantine and its co-founders, Robert Hiscox and Edward S. Rogers III, on the basis of “bad faith” and “breach of duties allegedly owing by the defendants.” Constantine maintains that these allegations are “bare” and “unparticularized,” and that they will be pursing a motion to strike if need be.

In any case, the civil proceedings ‘bear no weight,’ on the receivership proceedings, according to a May 13 endorsement from Justice Cavanagh. Circling back to the latter: after Constantine filed an application with the Ontario court for receivership on April 16, Mizrahi reportedly put forth allegations that Constantine attempted to block the sale and closing of certain units within the building, contributing to the “inability to pay down the secured debt.” This is an assertion which Constantine has vehemently denied.

READ: Lender Seeks Receivership For Mizrahi, Rogers Yorkville Condo Development

“There is no evidence that units subject to agreements of sale are in a position to close or that CEI used its position to prevent those closings. In fact, part of the reason why CEI urgently seeks the appointment of the Receiver is to facilitate closings of those units when it is practical to do so,” Constantine said in a May 8 statement.

“Even if the units subject to agreements of sale close, a significant amount of secured Indebtedness will remain owing to CEI. The debtors speculate that Hazelton will receive $27M from the sale and close of the units. Even accepting the values proposed by the debtors, almost half of that amount — $13M — relates to units that are not yet subject to agreements of purchase and sale and are not yet completed. It is unknown when those units will be sold or how much they will sell for.

“The debtors also do not account for how [they] will fund the additional costs to complete the Hazelton Project and carry the debt in the interim. The debtors’ argument that certain units may close absent a receivership is nothing more than a red herring.”

The Receivership

A receivership order that was granted just last week — on June 4, 2024 — appoints KSV Advisory receiver and manager over the property at 126 and 128 Hazelton Avenue in Yorkville. The order allows KSV to exercise control over the property moving forward.

Meanwhile, Constantine’s hope is that KSV will “facilitate the final phase of construction of the Hazelton project required for completion of the remaining units and, when appropriate, the closing of sold units and the marketing and sale of the unsold units” — all while preserving the value of the property in the interest of all stakeholders.

This marks the end of a long road for the Hazelton property. Back in January, the primary lender on the project, DUCA Financial Services Credit Union Ltd., petitioned the courts for receivership, saying that the developers were owing $16M. (The figure was roughly half of the initial $35M loan provided by Duca in June 2017.)

Less than a month later, on February 1, 2024, “DUCA assigned their rights, benefits, and interest in and to the DUCA commitment and DUCA Security to CEI pursuant to a debt purchase agreement,” according to the aforementioned May 13 endorsement from Justice Cavanagh.

“As a result, on February 9, 2024, DUCA obtained an order dismissing its receivership application without prejudice.”