The ambitious high-rise project in Vancouver’s West End is facing a multitude of challenges, as developers find themselves in receivership, according to recent filings in the Supreme Court of British Columbia. The venture, located at the intersection of 830-850 Thurlow Street and 1045 Haro Street, was designed to feature a striking 55-storey strata condo tower alongside a 15-storey counterpart, comprising a total of 450 strata condominiums and 66 rental units. The project, as outlined on its website, also included provisions for 42,000 sq. ft of retail space, a 49-space childcare facility, and a brand-new public plaza, making it a significant addition to Vancouver’s skyline.
However, the grand vision has hit a roadblock, with the Bank of Montreal, a secured creditor of the project, submitting a receivership application citing an outstanding debt of $82.2 million in principal and interest. The legal ownership of the development site rests with Harlow Holdings Ltd., while the beneficial ownership falls under the Haro-Thurlow Street Project Limited Partnership (HTLP), which is itself owned by various entities, including 11044227 BC Ltd. (45%), Forseed Haro Holdings Ltd. (45%), and Terrapoint Developments Ltd. (10%). Interestingly, notable Vancouver-based developer Intracorp Homes is involved in the project as the development manager but is not directly implicated in the receivership proceedings.
The roots of the financial crisis lie in the developers’ struggle to meet the City of Vancouver’s stringent requirements for the project, an issue persisting for the past five years. A Council report from June 2022 highlighted concerns about the project’s encroachment on several view cones, prompting the ongoing review of the city’s view cones policies. Despite substantial efforts, the owners failed to secure a development permit, leading to a series of negotiations with creditors, primarily the Bank of Montreal.
The owners, facing mounting challenges, negotiated multiple amendments to their credit agreement, the latest of which occurred in September 2022. This extension pushed the “outside date” for the project to August 31, 2023. However, in early 2023, the Bank of Montreal informed the owners that no further extensions would be granted, compelling them to explore a potential sale of the property.
A significant development in this saga came when CBRE was engaged to facilitate the sale, leading to the reception of six offers by May 2023. These offers, ranging from $81.5 million to $100 million, fell substantially short of the property’s acquisition cost, leading to internal tensions among stakeholders. Notably, an offer by Chard Development for $93 million was not universally accepted, with Terrapoint supporting the offer, while Forseed and 11044227 BC Ltd. rejected it.
This internal discord, coupled with the owners’ resistance to accepting a considerable loss on their investments, led to an impasse. Terrapoint, a minority stakeholder, accused the majority partners of lacking “good faith” reasons for rejecting Chard Development’s offer. In response, the majority partners claimed they were actively seeking to refinance the debt, a claim met with skepticism due to the lack of supporting evidence.
The situation worsened when the owners defaulted on their interest payment in July 2023, prompting the Bank of Montreal to demand payment of $95,520,027.39 by August 29. Despite presenting a forbearance agreement, the owners declined to sign, leading to the initiation of the receivership application by the Bank of Montreal.
In a December affidavit, Kang Yu Canning Zou, a director of the entities under the receivership application, mentioned that the owners had identified three lenders willing to provide loans for debt repayment. However, the Bank of Montreal disputed this claim, stating that no evidence of such lenders had been provided.
The financial intricacies of the project involve a monthly interest cost of $620,000, while the existing rental complex on the site generates only $175,000 in monthly income. This considerable shortfall, combined with the owners’ failure to meet their obligations, eroded the Bank of Montreal’s confidence in their commitment to debt repayment.
In the receivership application, the Bank of Montreal sought the appointment of a receiver with the mandate to arrange a prompt sale of the property. An appraisal conducted by LW Property Advisors in July 2023 pegged the property’s value at $192 million, based on its development potential. However, concerns were raised about whether lenders would recognize this valuation.
Evan Allegretto, President of Intracorp Homes, expressed pessimism about the property’s current value, suggesting it might be even lower than the $93 million offer from Chard Development. Allegretto cited factors such as higher interest rates, tightening credit, rising construction costs, and the limited pool of potential purchasers for a property of this magnitude.
The owners, seeking more time to settle their debt, engaged in another dispute with the Bank of Montreal. The court ultimately ruled in favor of appointing Deloitte as the receiver as of January 12. However, Deloitte is restrained from undertaking any sales efforts until after February 23, and approval of sale offers is prohibited until after April 26.
If a sales process is initiated, the receiver is likely to collaborate with a commercial real estate brokerage for listing and marketing the property. The subsequent offers would be scrutinized, and the selected offer would require final approval from the court, adding an additional layer of complexity to the resolution of this intricate financial and legal quagmire.