The Ontario Superior Court has placed Stateview Home's Hampton Heights project in Barrie under receivership, according to court documents obtained by STOREYS, bringing the total number of projects the embattled real estate developer has under receivership to nine.
The receivership application was filed by Toronto-based commercial lender Firm Capital Mortgage Fund -- also known as Firm Capital -- in early June. The receivership was granted on June 15, with RSM Canada appointed as the receiver.
According to a pre-filing report by RSM Canada, Stateview Homes -- Stateview Homes (Hampton Heights Inc.), specifically -- defaulted on a loan and owed Firm Capital, as of May 5, $6,434,805, an amount that includes principal, accrued interest, costs, and other amounts payable under the terms of the loan. Firm Capital notified Stateview Homes of the default on April 17, then issued a notice of intention to enforce its security on April 21.
Hampton Heights Construction Had Already Begun
Plans for the Hampton Heights project called for 18 single-detached homes ranging from 1,962 sq. ft to 2,498 sq. ft., located at 39 Auburn Court and 2-8 Teck Road in Barrie, at the intersection with Wright Drive.
All 18 homes had already been pre-sold to individual purchasers.
The project is in early construction stages, with the land cleared, concrete foundations set, and framing of the homes commencing but not completed, according to the receiver. Construction was halted in early May, "amid the uncertainty caused by a $37M [cheque] kiting scheme involving [Stateview Homes]."
The receiver says Stateview Homes "does not appear to have the ability to see the project to completion" and that the Hampton Heights property is "at high risk of potential calamities that could jeopardize its completion and/or significantly erode value."
The homes are currently exposed to the elements and "require substantial work to enclose them and protect them," the receiver says. Because the homes are uncompleted, the wooden framing is exposed and intended supports and trusses are not in place, "creating various immediate risk" such as a fire erupting and spreading across the site -- a not uncommon occurrence.
The receiver consulted Northbridge Insurance to conduct a risk observation, who found that fire hydrants on site are inoperable because the water supply to the site has been shut off. There is also an "insufficient distribution of fire extinguishers" around the site, and the homes are susceptible to collapsing due to "structural integrity issues or high winds," the receiver found.
RSM Canada adds that because there are currently no subcontractors or other personnel on the site, such risks are further amplified.
An Expedited Sale Process
Due to those potential risks, Firm Capital simultaneously applied for approval to begin the sale process of the Hampton Heights properties in order to solicit expedited offers, getting the project back up and running again before calamity strikes.
The sales process application was granted simultaneously with the receivership application on June 15, by Justice Robert Centa.
"The expedited sale process is commercially reasonable given the need to move quickly to put a purchaser in place in order to complete the project," wrote Justice Centa in an endorsement. "I find that the sale process strikes a reasonable balance between the need for moving quickly and the need to obtain the highest possible price. The sale process appears to be in the best interests of all creditors."
The bid deadline was set for 30 days after the commencement of the sales process, which means a sale could be secured before the end of the month and finalized by fall. A sale would require final approval from the Ontario Superior Court.
Stateview Homes Owes Millions To Various Creditors
Aside from the $6,434,805.80 owed to Firm Capital, Stateview Homes (Hampton Heights) Inc. also owes nearly $5M to various other secured creditors, most notably $3M to MCO Management Inc., $530,735 to 1890292 Ontario Inc., and $506,325 to Tamarack Lumber Inc.
Amounts Stateview Homes (Hampton Heights) Inc. owes to secured creditors.
Stateview Homes (Hampton Heights) Inc. also owes a total of $1,793,525.09 to approximately 50 unsecured creditors, which include two amounts owed to REMAX and various construction companies and contractors.
In early June, about a week prior to the receivership and sales process approval for Hampton Heights, the Ontario Superior Court approved the sales process for seven other Stateview Homes projects -- the result of five separate receivership applications filed by four creditors.
The bidding periods for those projects are similarly expected to conclude before the end of the month, with sales also requiring court approval.
For presale buyers of the 18 Hampton Heights homes, their situation is somewhat unclear. According to Tarion Warranty Corporation, which provides deposit insurance and administers Ontario's new home warranty program, what happens with the presale transactions will remain uncertain until the court-ordered sales of the projects are finalized.