Stephen Avenue Place, the 40-storey office tower formerly known as the Scotia Centre, was placed under receivership in October, according to court filings in the Court of King's Bench of Alberta.
The receivership application was submitted on September 29 by Toronto-based Timbercreek Mortgage Serving Inc., also known as Timbercreek Capital. A second plaintiff on the application is Computershare Trust Company of Canada, which acts as an agent, nominee, and bare trustee for Timbercreek in regards to certain mortgage loans.
Stephen Avenue Place is owned by SCREO I 700 2nd Inc. and 58508 Alberta Ltd., both of which are part of Slate Asset Management.
According to court documents, Timbercreek, as the lender, and Slate Asset Management, as the borrower, reached a loan agreement on November 27, 2018 for an equity take-out facility — a take-out loan — of up to $93,400,000 and a repositioning facility — used towards "repositioning" the asset — of up to $67,900,000.
Shortly after acquiring the Scotia Centre, named after its anchor tenant Scotiabank, Slate Asset Management announced that it would be partnering with Oliver & Bonacini Hospitality and Concorde Entertainment Group to "create the city's most unique working, dining, and shopping destination," which ultimately took the form of award-winning bar and restaurant Major Tom on the top floor, a food hall, and a restaurant on the street level.
According to Timbercreek, the loan agreement had a maturity date of September 1, 2024, until which Slate Asset Management would pay the interest on the loan, on the first day of the month, with mortgages registered on the lands of Stephen Avenue Place.
In an affidavit dated September 29, Timbercreek's Chief Investment Officer Scott Rowland says Slate failed to make their interest payment on September 1. On September 6, Timbercreek informed Slate of the default, and gave Slate until September 13 to cure the default.
"The borrower did not make the missed September payment by September 13, 2023, or at all," Rowland swore. "Further, in or about the time that the September payment was missed, the borrower communicated to representatives of Timbercreek that the borrower did not intend to honour the terms of the loan agreement on a go-forward basis."
Thus, on September 15, Timbercreek issued formal demand for payment in full, for the amount of $134,916,934.89, with a deadline of September 25. Slate again did not pay the amount owed, which reached the sum of $135,288,424.79 as of September 25.
Timbercreek subsequently applied to place SCREO I 700 2nd Inc. and 58508 Alberta Ltd. under receivership, which was granted by the Court on October 5, with MNP appointed as the receiver.
In its first report to the Court, dated October 18, as well as an FAQ to creditors, the receiver said its intended course of action was to "stabilize and optimize the operations of the property."
Colliers was retained as the property manager in 2018 and remains in that capacity in the short-term, under an amended agreement, the receiver said, while a request for proposals has been issued to seek out a longer-term provider or property management and leasing services. Stephen Avenue Place's website lists Colliers as the agent for office leasing and Taurus Group as the agent for retail leasing.
Stephen Avenue Place's lobby and games room.(Slate Asset Management)
MNP says it has also retained Newmark to complete an appraisal of the property, but said in its FAQ to creditors, dated October 12, that they were not contemplating selling the property.
MNP says that Stephen Avenue Place is currently 52% occupied, not including one new office lease and one new retail lease that are under discussion, and both Colliers and Taurus are actively seeking out additional tenants. One existing tenant is WeWork, who filed for creditor protection earlier this month and terminated several of their leases, but not their lease at Stephen Avenue Place.
Since the receivership was granted, the receiver has returned to the Court seeking to increase their borrowing limit from $250K to $2M, in part to complete "three ongoing and one pending project for approved tenant improvements and landlord work under pre-receivership lease agreements."
Another portion of the $2M is going towards contractors, including ABM General Contracting, and the building's electrical infrastructure is also in the process of being replaced.
"Delays could have resulted in various claims being advanced by the tenants under the corresponding lease agreements and/or caused material hardships for those tenants by leaving them without a usable space," the receiver noted. "Additionally, a failure to complete these projects would likely result in reputational harm to the building and hamper future leasing efforts."
According to other case documents, the list of unsecured creditors, aside from ABM General Contracting, also includes various other contractors, consultants, and the City of Calgary's property tax division.
A source familiar with the situation tells STOREYS that negotiations between Slate and lenders have been ongoing and productive regarding new terms for the property debt.
Earlier this month, Slate Asset Management's Office REIT also announced a "portfolio realignment plan that will reposition the REIT's portfolio for long-term stability and performance and raise liquidity to reduce the REIT's borrowings." The company also said it would be suspending distributions, which would provide the REIT with $10.2M in cash annually that will be "used for the paydown of debt and the funding of ongoing business operations."
