Exactly two months to the day after the Urban North Townhomes project by Pace Developments was placed under receivership, as first reported by STOREYS, the court-appointed Receiver has provided an update on the case that reveals the developer's debt far exceeds what was previously known.

The application to appoint a receiver, which was granted by the Ontario Superior Court of Justice on March 21, was initiated by KingSett Mortgage Corporation, who claimed that Pace Developments owed them $47,099,842.63, plus interest, as of February 1, pertaining to several loan facilities the two parties agreed to in September 2022.

A report prepared by the Receiver dated May 21, however, states that Pace Developments — through Mapleview Developments Ltd., Pace Mapleview Ltd., and 2552741 Ontario Inc. — actually owes a total that exceeds $250M.

The $47.1M owed to KingSett is pertaining to a first-ranking charge, but the other big secured creditor is MarshallZehr, which holds the three subordinate charges.

"Aggregated Investments Inc., through MarshallZehr Group Inc. as the bare trustee of its rights under the charges, is the sole beneficial owner of the second-ranking mortgage charge registered on title to certain of the Real Property," the Receiver noted. "MarshallZehr also holds two other charges. As at the date of the Receivership Order, MarshallZehr was owed approximately $99M in respect of its second, third, and fourth-ranking mortgages."

While MarshallZehr is a creditor on the project, its Founders — David Marshall and Gregory Zehr — are also both listed as directors of Mapleview Developments Ltd., according to Home Construction Regulatory Authority (HCRA) records.

Other secured creditors include Westmount Guarantee Services for $5M and a number of parties who provided services on the project and have registered construction liens. The amounts of the liens are still unconfirmed.

Additionally, the Receiver says the debtors' "other pre-filing obligations" total to approximately $91.7M. That total consists of $57.3M owed to MarshallZehr for unsecured amounts and $34.4M owing to other creditors, including contractors and vendors.

Furthermore, the Receiver says the developer colllected HST on 266 of the townhouse transactions that closed, but failed to remit $7.3M to the Canada Revenue Agency, bringing the total amount owed to $250.1M.

RELATED: Pace Developments' 50-Acre Barrie Project Under Receivership Over $47M Debt

The Court-Ordered Sale

As is often the case with receivership proceedings, the case is now heading towards a sales process that will facilitate the creditors recovering the outstanding amounts.

The Receiver has proposed a sales process centered around a stalking horse bid that would serve as the "floor" transaction and would become finalized if no better offers are received.

The stalking horse bid the Receiver has secured was made by Dunsire Homes Inc. — also known as Dunsire Developments — which is based in Burlington, Ontario and is an affiliate of Aggregated Investments Inc., according to the Receiver. A dollar amount was not specified, but the Receiver noted that the purchase price is equal to the sum of the KingSett debt ($47.1M), receivership costs, closing costs, and other fees.

On the closing date, the purchaser will have the option to assume the existing mortgages or pay the outstanding amounts.

The proposed sales process would begin immediately following court approval, with the qualified bid deadline set at 45 days after the date the court approves the sales process. Any transaction will require final approval from the court.

The court will make a decision on the proposed sales process on Thursday, May 30.

RELATED: Colliers' Hart Buck & Jennifer Darling On The Uptick In Court-Ordered Sales

Homebuyer Agreements

The Urban North Townhomes project was set for a 50-acre site at 700-780 Mapleview Drive East, adjacent to the Barrie South GO Station, and was planned to consist of over 1,000 townhouses, delivered across six phases.

In its May 21 report, the Receiver noted that approximately 494 units have been pre-sold, but have yet to close. Of that total, 173 were for freehold units, where the deposits were paid directly to the developer. According to the Receiver, all of these deposits were spent by the developer. The remaining 321 were for stacked-townhouse units where the deposits were paid into a trust. According to the Receiver, portions of those deposits were released, but are fully insured by Westmount Guarantee Services.

Pace Developments — Mapleview Developments Ltd., specifically — is also currently under investigation by the HCRA after the developer "unlawfully terminated dozens of agreements of purchase and sale in 2021 and misled 33 purchasers to unethically extract over $3M from them." The HCRA also alleges that Pace Developments altered most of the pre-sale agreements and provided fake versions to the HCRA during the investigation. In November, the HCRA forwarded the case to the Discipline Committee, but a hearing date has yet to be set.

According to the Receiver, Pace Developments may have terminated more pre-sale agreements under questionable circumstances, in the weeks just prior to the receivership.

"On or around April 5, 2024, [the developers] advised the Receiver that it had terminated approximately 78 homebuyer agreements of purchase and sale related to pre-sales, primarily in Phases III and IV," the Receiver said. "Since its appointment, the Receiver has been contacted by numerous homebuyers and their counsel regarding the Terminated APSs, which appear to be in addition to the agreements under investigation by the HCRA. A substantial number of these parties have alleged that the terminations were done improperly, or were done based on minor defaults that were not communicated properly, or which defaults have since been addressed."

The Receiver says many of those buyers are requesting the agreements be reinstated and that it is in the process of reviewing the matter.

If you are a pre-sale purchaser on Urban North Townhomes who would like to share your experience, you can reach me at: howard@storeys.com or HowardChai.24 on Signal.