Developer Sam Mizrahi was officially taken off The One on Wednesday, as new construction manager SKYGRiD took over the embattled project.
A weeks-long transition culminated this week in SKYGRiD fully taking over after the project's receiver, Alvarez & Marsal, sought to bring the builder on in February to finish construction of the 91-storey skyscraper at 1 Bloor Street West.
Despite a new construction manager taking the reins on the development, which was placed under receivership in October after its owners, Mizrahi and entrepreneur Jenny Coco, were found to have defaulted on $1.6B in loans, there is still no confirmed anticipated completion date of the project, according to a recent report filed by the receiver.
SKYGRiD declined to comment on an updated construction timeline on Friday.
Construction on The One has been a years-long saga that began back in 2017 when the project first broke ground. Originally, the tower was to be completed by 2022 at the latest, but a number of delays, cost overruns, and infighting between the owners made that goal unachievable. As of the end of February, the tower had been built up to the 53rd floor.
In the weeks since, according to the receiver, construction has continued "as scheduled," noting there has been "no material disruption among the trades, suppliers or project employees."
"These parties have generally been supportive of the transition and many have expressly advised the Receiver that they will continue to work with Skygrid to ensure that the transition goes smoothly," the report reads.
SKYGRiD has held meetings with every project employee and, as of last week, had offered employment to 15 of them, which represents about 60% of all project employees. Meetings are still being held with the remaining workers and "additional offers of employment may be extended." SKYGRiD declined to comment on which contractors and subcontractors will be retained for the project.
"While it’s early to speak to specific details, SKYGRiD is working collaboratively with all parties involved to ensure a smooth transition of The One’s construction management into its care," SKYGRID said in a statement to STOREYS. "Once complete, The One will be a significant addition to the fabric of Toronto and SKYGRiD is happy to be moving development forward and seeing it through to completion.”
Not everyone has been happy with the choice to bring SKYGRiD onto the project, namely Mizrahi, who feels that SKYGRiD does not have appropriate experience with luxury buildings like The One.
"[The receiver] wanted to strip costs and make it cheaper, and that's fine, but that's not the type of building I would build," Mizrahi told STOREYS at the end of February. "They brought in SKYGRiD, but SKYGRiD doesn't build high-end, luxury buildings. They've never built a high-end luxury building like the ones I built, and they do it for a cheaper cost, for cheaper fees than me."
A report released by Alvarez & Marsal on Monday confirmed that SKYGRiD was chosen, in part, because their costs were lower than current construction manager Mizrahi Inc., describing Mizrahi Inc.'s fees as "above comparable market rates." SKYGRiD's construction management fee came in at 3.2%, compared to Mizrahi Inc.'s 5%, which equates to roughly $200,000 per month in savings. Add this to the reduction in monthly labour costs, $800,000, and total monthly savings from the switch to SKYGRiD's overall management of the project from Mizrahi Inc.'s should result in approximately $1M per month.
Mizrahi says that under SKYGRiD, the interior finishes of the building will be of lesser quality than what was originally planned. SKYGRiD declined to comment on this claim.
Who Owes Who?
The same day the receiver released its initial report, revealing that SKYGRiD had been tapped to take over construction of The One, Mizrahi filed a claim stating that he was owed in excess of $5M for unpaid work.
In the initial court order appointing Alvarez & Marsal as the receiver, they were directed to pay Mizrahi Inc. for amounts owing related to construction management services performed prior to August 31, 2023 and for fees "properly incurred on or after September 1, 2023."
In their report, however, Alvarez & Marsal say that "the amounts paid to [Mizrahi Inc.] were not in accordance with the [general contractor] agreement, or any other agreement between [Mizrahi Inc.] and the Debtors." As such, they "determined that continued payment of all costs included in the General Contractor invoices was not commercially reasonable." Mizrahi and the receiver engaged in negotiations, but were unable to reach a mutually acceptable arrangement.
Alvarez & Marsal say they continued to pay Mizrahi, but only in respect to hard costs, recoverable costs, and Mizrahi Inc.'s actual out-of-pocket direct and indirect labour costs — something that resulted in a monthly reduction of approximately $1M in payments to Mizrahi Inc.
In their supplemental report, the receiver argues that Mizrahi has oversimplified the issue, and that an investigation needs to be done to determine whether Mizrahi's payment contracts were "properly authorized" and "appropriate."
"Those contracts required that [Mizrahi Inc.] receive payment based on the progress of the Project against an agreed-upon budget," the report reads. "Based on the Receiver’s review, [Mizrahi Inc.] did not produce a reliable Budget or Schedule."
Turning the claim back on Mizrahi, the receiver argues that the developer may, in fact, owe them roughly $4M in commissions that were collected on condo sales from purchasers who defaulted on their purchase agreements "by paying no deposit or failing to pay the full deposit required."
"The Receiver is assessing whether these [sales agreements] should be terminated on that basis. If these [sales agreements] are terminated, then [Mizrahi Inc.] must promptly repay the related commissions," the receiver writes.
The receiver also claims that there are outstanding payments to project suppliers that Mizrahi is responsible for covering, as the vendor invoices were funded to Mizrahi Inc. "via loan advances that have not been paid on to those vendors" by Mizrahi Inc. The developer has expressed its intention to pay these invoices, but the receiver notes that if they are not, those amounts could form a claim against Mizrahi Inc.
Although Mizrahi has asked the court for an expedited hearing to take place in May, the receiver is asking for more time to review all related records and has requested a September hearing.
