Project has faced numerous delays and costs have ballooned to more than $2 billion
A high-profile Toronto condominium project that has been plagued with delays and setbacks for almost a decade has been placed into receivership by its biggest lender, refusing to foot the bill for $1.6 billion in unpaid debts until someone else is in charge.
The One, a proposed skyscraper at Yonge and Bloor, was taken over by a court-appointed receiver this week after the project's financiers defaulted on more than $1.2 billion in loans on the project.
The land at the intersection of the two main thoroughfares in downtown Toronto was first purchased by developer Sam Mizrahi for $300 million almost a decade ago, with plans to develop the site into a mixed-use retail, hotel and residential skyscraper with 85 storeys and 416 residential units — a nod to the city's area code.
The project broke ground in 2017 with a planned completion date of 2018 for the retail portion on the lower floors, with the hotel and condos above ready by 2022 at the latest.
Since then, however, the project "has been plagued by delays and cost overruns," the lenders said in a filing. "Not to mention continual infighting between the principal investors in the project, both in and out of court."
That's a nod to a rift between Mizrahi and his partner on the project, investor Jenny Coco.
Mizrahi is a well-known developer in the city with multiple projects on the go, but Coco is perhaps best known for being the financier for Bridging Finance, an investment firm that was itself placed into receivership in 2021 by Ontario's securities regulator.
The main lenders for The One are a division of South Korean bank KEB Hana Bank, who have asked a court to assign someone to step in and take over the project to get it completed, or they won't extend their next payment on the project, for more than $315 million.
Earlier this month, the project's developers failed to make payments on more than $1.23 billion in loans, and hundreds of millions of dollars more are due soon, which prompted the legal action.
"To say that the project has been delayed and faced challenges would be an understatement," a court filing reads.
In addition to the more than $1.2 billion in loans already in default, another $130 million is owed to Canadian insurance company Aviva, filings show, while the China-East Resources Import & Export Corporation — a state-owned Chinese bank that was among the project's first lenders — are owed $182 million.
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A dispute between the project's two backers, each of whom has a 50 per cent stake, is a major factor.
"Over the past several years, Coco's and Mizrahi's relationship has become increasingly acrimonious and dysfunctional," the lenders allege in court filings. "Their disagreements have impeded the ability of the borrower to complete the project."
"All of these problems are jeopardizing the Project, which is already delayed by at least two years beyond its original estimated completion date and still requires hundreds of millions of dollars of additional financing to complete," filings say.
Deal with Apple Store fell through
On the ground floor of the project, the original plan was to have the space be taken up by a massive 19,000-square-foot Apple Store, which would be the tech giant's flagship Canadian location.
But that agreement fell apart in 2021 and "to date, the Borrower has not secured another tenant to lease the space that would have been occupied by Apple."
The price tag for the project has ballooned from $1.4 billion to begin with to more than $2 billion today, with an opening planned for 2025 at the earliest.
Currently, construction has stalled at about 40 storeys, and while 346 residential suites have been sold so far — at a collective price tag of $675 million — the other 70, all of which are for the 50th floor or above, have not. The remaining ones face tepid demand as the outlook for real estate in the city has significantly changed due to higher interest rates and a slowing economy.
At the request of the South Korean bank, restructuring firm Alvarez & Marsal has been appointed as the monitor for the proceedings. "The situation requires the assistance of an experienced court officer to bring stability to the project for the benefit of all stakeholders," a spokesperson for the bank said in an affidavit.
Mizrahi supports move
Mizrahi, for his part, supports the move.
"This is a welcome decision that will allow for the successful completion of The One under the continued leadership of Sam Mizrahi and Mizrahi Developments," his company, Mizrahi Developments. said in am an emailed statement.
"At the request of the project's senior lender, the court has appointed a receiver to overcome an ongoing governance issue that has caused significant project delays.
The receiver has requested that Mizrahi and the company remain the developer and general contractor to oversee completion of the project, the statement said. Mizrahi maintains his equity position in the project, the company said.
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