Toronto Artscape unsuccessfully attempt to sell Launchpad, located at 130 Queens Quay East, at a list price of $22.5-million in 2023 – nearly $8.5-million less than it had paid to build the facility.Fred Lum/The Globe and Mail
Toronto Artscape Inc., a long-time provider of affordable housing and studio space for artists, owed Toronto-Dominion Bank more than $21-million when it announced last summer that it intended to wind down, according to new court documents filed ahead of an impending court hearing that is expected to begin the non-profit’s receivership process.
The filings show the process was triggered in June, when Artscape failed to repay $4-million that came due on an operating loan that month. Its total long-term debt had reached $31.7-million by the end of 2022, and it ran a deficit from operations of $3.7-million that year.
Artscape and its former long-time chief executive officer, Tim Jones, initially cited the COVID-19 pandemic’s blow to the real-estate market and in-person events as the chief reasons for the Toronto non-profit’s financial failure. But a Globe and Mail analysis of Artscape’s long-term finances in the fall showed that much of this debt was tied to its flagship Launchpad project on the Toronto waterfront.
The Globe’s analysis was based on financial statements through 2021, because later financial statements had not been released. The new documents, filed ahead of the coming hearing at the Ontario Superior Court of Justice, reveal the extent of Artscape’s struggles in the two years leading up to its insolvency – including the size of its debt to TD, which had not been disclosed publicly. The filings say the hearing is scheduled for Friday, but Artscape told The Globe Thursday that the court date had been rescheduled to Jan. 11.
As it has prepared for receivership, Artscape has already begun to transfer management of some of its facilities to other organizations, with an eye to keeping them running.
The non-profit, which has operated for more than three decades, had worked throughout much of 2023 to cut costs across its staff and 14 projects. This included an unsuccessful attempt to sell Launchpad at a listing price of $22.5-million – nearly $8.5-million less than it had paid to build the facility a few years prior.
Launchpad was a major deviation from Artscape’s main business models. The new space offered shared facilities, under a co-working-style model, to promote entrepreneurship among artists.
In response to The Globe’s report last fall, Artscape CEO Grace Lee Reynolds acknowledged that Launchpad’s cost and debt were “the primary contributor to the financial challenge.” (Mr. Jones, the former CEO, who marshalled the creation of Launchpad and left Artscape in 2021, still cited the pandemic real-estate market when presented with the findings.)
The court filings show TD handed its relationship with Artscape over to its restructuring division in May, 2023, and that Artscape had by then already been working to restructure with the help of the accounting firm KPMG. Soon after, Toronto’s city government tried to intervene in Artscape’s financial woes by guaranteeing a $1.5-million addition to the non-profit’s TD operating loan.
TD says in the filings that the terms the city wanted minimized municipal risk but “put the Bank at risk of losing $1,500,000 in sale proceeds” once Launchpad sold.
Artscape told TD at the start of August that it expected to spend $500,000 by the end of that month. Despite talks throughout August, the bank demanded payment. Artscape publicly announced its financial plight at the end of the month, just as it processed payroll.
The receivership process puts a debtor’s assets under the control of a court, or a privately appointed officer, to ensure creditors are paid back. The filings show TD is asking the court to appoint the Toronto bankruptcy-relief firm msi Spergel Inc. as the receiver of some of Artscape’s assets and properties, including Launchpad, and also Artscape’s Youngplace hub near Trinity Bellwoods Park, as well as its Triangle Lofts affordable-housing live-work facility off of Queen Street West. (A successor organization, ArtHubs, will take over management of Artscape’s community space inside Youngplace.)
Artscape reiterates in the filings that keeping its legacy projects running, particularly its non-profit housing and studio space, is “vital to achieving the City of Toronto’s objectives to both ensure the availability of affordable housing and in the development of arts and culture in Toronto.”
On Aug. 30, the filings show, Toronto Mayor Olivia Chow convened an emergency meeting of city and Artscape staff, as well as “community leaders,” to find ways of avoiding a permanent shutdown of Artscape’s spaces. Members of this group spent the late summer and fall scrambling to find long-term solutions.
The group, the filings say, was led by former Artscape chair Robert Foster, founder of the investment banking firm Canada Capital Ltd. He has also chaired other arts boards, including TO Live and the Canadian Arts Summit. It also included Mitchell Cohen, CEO of The Daniels Corp., a developer that built the waterfront complex that houses Launchpad.
In November, Artscape and the city revealed that a new non-profit, ArtHubs Toronto Inc., would use funding from the city and private donors to take over operations at Artscape’s community hubs. Those include Artscape Gibraltar Point, on the Toronto Islands; its Regent Park community arts centre, Daniels Spectrum; and its Wychwood Barns facility, which hosts events and houses live-work studios and non-profit groups. The filings say that ArtHubs is “in negotiations with a non-profit arts institution to provide a working capital loan.”
Artscape is seeking court approval for that asset transfer. It is also seeking approval for its associated housing non-profit, Artscape Non-Profit Homes Inc., to take over operations of its rental-housing sites. Artscape Non-Profit Homes already ran Artscape’s social-housing operations at Wychwood Barns and a Queen Street West location, and under the new proposal would oversee other facilities, including the Parkdale Arts and Cultural Centre.
The court filings also show that the city of Toronto has bought Artscape’s Sandbox event space in the city’s entertainment district. And, in a letter to tenants in December, Artscape said that the housing units in its Bayside, Weston Common and Parkdale locations would be managed by a non-profit called ANPHI Affordable Homes Inc., an organization related to Artscape Non-Profit Homes Inc.
According to the filings, the $21-million owed to TD comes from four separate loans: $4.6-million from an operating loan, $2.4-million tied to Artscape’s Wychwood Barns facilities, $14-million that appears to be tied to Launchpad – its TD mortgage was valued at $14.4-million in 2021 – and a small amount of credit-card debt.
TD did not immediately respond to requests for comment on Thursday. Artscape declined to comment on the filings. First Ontario Credit Union, the non-profit financier Community Forward Fund, and Vancouver City Savings Credit Union are also listed as creditors.
With a report from David Milstead
Editor’s note: This article has been updated to add that while msi Spergel Inc. will serve as the receiver for some of Artscape's assets and properties, including Youngplace, ArtHubs, a successor organization, will take over management of Artscape's community space inside Youngplace.
Josh O’Kane