Failed Sale, $49M Debt Push Slate-Owned Burnaby Office Towers Into Receivership

Just a few days before Toronto-based Slate Office REIT revealed on June 25 that it had received notices of default from its senior lenders, receivership proceedings had been initiated against a property in British Columbia owned by Slate Asset Management, the REIT's manager.

The asset consists of two vacant office buildings located at 4330 Kingsway (formerly 5945 Kathleen Avenue) in Burnaby, a few blocks west of the Metropolis at Metrotown shopping centre.

The property is legally owned by SCREO I Metrotown Inc. and beneficially owned by SCREO I Metrotown LP, which is itself owned by Slate Asset Management, founded by UBC graduate Blair Welch and his brother Brady Welch in 2005.

The office complex consists of one 19-storey office building and one 10-storey office building, which were originally constructed in 1983 with a unique golden sheen that resulted in their "Golden Towers" nickname. The two towers have been vacant since Slate launched its plans to convert the property into a new strata office complex called Capital Point Metrotown, which was ultimately cancelled, as first reported by STOREYS in May 2023.

The application to appoint a Receiver over the property was initiated by the United States Life Insurance Company in the City of New York (known as American General Life Assurance outside of New York) and the American Home Assurance Company, both of which are wholly-owned subsidiaries of Corebridge Financial.

On March 12, 2019, the lenders and SCREO I Metrotown Inc. entered into a loan agreement for the principal amount of $88,308,000 that would allow Slate Asset Management to acquire 4330 Kingsway and commence with the Capital Point Metrotown project.

The loan had a maturity date of April 1, 2022, but just prior to that date, Slate informed the lenders that it would be unable to repay the loan and the two sides agreed to an extension to September 1, 2023. As part of the extension agreement, Slate had to devise a sale or realization process that was satisfactory to the lenders by February 1, 2023. Slate was unable to do so until July 2023, then failed to make an interest payment on August 1, 2023, defaulting on the loan agreement.

Around this time, Slate retained the RBC Capital Markets Real Estate Group along with Cushman & Wakefield to list and sell the property. After marketing the property to over 150 organizations and 300 individuals, Slate received a non-binding letter of intent from an interested buyer with the proposed transaction scheduled to close in Q2 2024. As a result of this, the lenders entered into a forbearance agreement with Slate to allow them to pursue the proposed transaction.

The proposed transaction became binding on December 7, but included a June 7 date by which the diligence conditions had to be satisfied or waived. The proposed purchaser, who is unnamed in court documents, did not waive the diligence conditions and instead requested a waiver deadline extension to Q3 2025. The request was not granted and the purchase agreement has since been terminated.

As a result of the failed sale, the lenders say they have "lost confidence in the Respondents' ability to conduct a sale process and repay the loan with a reasonable timeline" and initiated the receivership proceedings, which was granted by the Supreme Court of British Columbia and came into effect on July 8.

The 4330 Kingsway property and Capital Point Metrotown marketing material in May 2023.(Howard Chai, Storeys)

As of June 20, the outstanding amount is $48,962,830.73. Additionally, Slate also owes the City of Burnaby $817,479.73 in property taxes, which fall into arrears if unpaid by July 3. It is unclear if Slate was able to pay the property taxes.

Reached by STOREYS on Wednesday, Slate Asset Management declined to comment.

The Receiver will now retain a commercial real estate brokerage to list and sell the property. It's unclear what the sale price was in the failed transaction, but BC Assessment values the property at $87,760,000. However, there remains great uncertainty around office assets, and the Golden Towers — formerly home to the Metro Vancouver Regional District before it relocated to a nearby office tower — are aging and vacant, although the land it sits on is in a prime location. Once a buyer is found, the sale of 4330 Kingsway will require final approval from the Supreme Court.

This is also not the first office asset owned by Slate Asset Management to be placed under receivership in the past year. In September, the 40-storey Stephen Avenue Place in Calgary was also placed under receivership, as first reported by STOREYS, but Slate and the lender in that case — Timbercreek Capital — were able to reach a forbearance agreement to extend the repayment deadline to September 1, 2025 and terminate the receivership.