The chunk of downtown Toronto many call the best address in Canada – 1 Bloor – got a new owner this week as Bazis International handed the deed over to Great Gulf Homes. Behind that transaction is a tale of legal stick handling seldom (if ever) seen in Canadian real estate.
The men who brokered the deal and salvaged what they could for Bazis are a pair of real estate legal whizzes from Robins Appleby & Taub LLP: Leor Margulies and Sheldon Goodman. They co-chair the firm's real estate advisory group and have been Bazis' lawyers since the company's first solo project about four years ago.
Last week they walked me through a truly fascinating transaction.
But before getting into details of what happened during the past few years and the demise of what was slated to be Canada's tallest residential tower we should note where things stand.
The original plan for 1 Bloor East, created for Bazis International.
First, the 490 people who bought suites at 1 Bloor will get their deposits back, plus interest, the lawyers say. The paperwork has been mailed; most buyers have responded and cheques are being cut, they say.
Second, Bazis’ other projects are unaffected, say Mr. Margulies and Mr. Goodman. Crystal Blu on nearby Balmuto Street is nearing completion and Emerald Park at Yonge and Finch is 86 per cent sold and waiting for rezoning approval, a process delayed by the recent strike by City of Toronto employees.
While construction loan financing remains tight, the lawyers are confident Bazis will find a lender so it can proceed with Emerald Park.
Yes, Bazis has to swallow a hefty multimillion-dollar loss (some estimate it to be in the $30-million range) but the price paid by Great Gulf (according to the Ontario Land Registry Office it was $53-million, though none of the parties have made that public yet) clears the mortgage on the land plus a bit extra, the lawyers say, adding that Bazis also retains an unspecified participation in whatever Great Gulf builds on the site.
Third, Great Gulf Homes now owns the site and is working on plans for a mixed use condo-commercial project.
And finally the trio of canny real-estate veterans – more on them later – who tried to snap up the site through the back door by buying the $45-million in mortgages on it from Société Général of France are to get a cheque to pay off the loan plus $242,823 in interest arrears. (They asked for $2-million, but a judge dismissed that claim saying it would have represented a 35 per cent interest rate.)
That’s the situation now. Here’s the story of how the original plan to build an 80-storey condo tower at 1 Bloor came together – and fell apart.
Bazis came to Toronto in the early years of this decade. The Canadian company has three local partners – Michael Gold, who handles financing, his wife Veronika Belovich, director of sales and marketing, whose father owns the parent company in Kazakhstan, and architect Roy Varacalli, who is director of design and construction.
They started with joint-venture venturing projects and then launched Crystal Blu as their first maiden solo enterpriseproject. The parent company had made its name by creating huge signature projects in Eastern Europe and Mr. Gold wanted something of a similar scale here.
He learned that the southeast corner of Bloor and Yonge might be available. It was owned by the Kolter Group Developments and three private investors through a numbered company. Kolter decided to sell off all its commercial properties because chief executive officer company president Robert Julien had his eye on developing condos in Palm Beach, Fla.
A deal was struck in December, 2006. Kolter bought out its partners and Bazis, through a 50-50 partnership with U.S. mega merchant bank Lehman Brothers. It bought that property, plus another one abutting it to the south and owned by Bank of Nova Scotia for a total of $78-million.
