The One, a luxury condo development in Toronto co-owned by real-estate developer Sam Mizrahi and road paving magnate Jenny Coco, is in receivership after its senior lender asked an Ontario judge to put a third party in control of the project.
Under development since 2015 at the corner of Yonge and Bloor streets, The One was marketed as Canada’s tallest condo building, with 85 storeys of condos, hotel and retail. However, the project is years behind schedule, owes $1.6-billion to its lenders and faces a growing number of lawsuits. Existing litigation includes a dispute between Mr. Mizrahi and Ms. Coco, who each own 50 per cent of The One.
In its receivership application, KEB Hana Bank, a commercial bank based in South Korea, said The One’s senior lenders were not prepared to advance more money without the appointment of an outside group to manage the project and oversee its development. At the moment, the interest accrued on KEB’s debt alone amounts to $166-million annually.
KEB said the senior lenders “have gone to great lengths to accommodate the borrower … nonetheless, the project has been materially delayed, is significantly over budget and has been fraught with difficulties.” KEB argued that a receiver would bring “much-needed stability to the project.”
Late Wednesday, Justice Peter J. Osborne of the Ontario Superior Court approved the request, and Alvarez & Marsal Canada Inc. has taken over. KEB has agreed to lend up to $315-million more to complete The One.
To date, The One has defaulted on multiple loans. KEB has advanced two types of debt, and The One defaulted on these in late August and late September.
China-East Resources Import & Export Co., or CERIECO, a state-owned Chinese enterprise and one of the project’s first lenders, has also sued Mr. Mizrahi and Ms. Coco, alleging default on its $213-million contractor’s loan that got The One up and running.
In total, The One has $1.6-billion in debt outstanding, with $1.23-billion owed to KEB. Aviva Insurance Co. of Canada is second in line to be repaid with $130-million owed. CERIECO currently ranks last in the pecking order, and in late August, the Chinese lender sued its Canadian legal counsel over concerns about the project. At the time, CERIECO alleged the total amount owed “is in excess of the project’s fair market value, even if construction is completed.”
In 2019, The One was expected to finish construction in December, 2022, at a cost of approximately $1.4-billion, according to the receivership application. As of Oct. 4, 2023, “concrete columns and walls had only been poured up to the 40th floor” and the borrower now projects that the project will not be completed until March, 2025. Total costs are now expected to exceed $2-billion.
In an e-mailed statement to The Globe and Mail, Mr. Mizrahi said the receiver requested that he remain as the developer and general contractor to oversee completion of The One, and added that he maintains his equity position in the project.
The receivership “is a welcome decision that will allow for the successful completion of The One under the continued leadership of Sam Mizrahi and Mizrahi Developments,” he wrote.
When Mr. Mizrahi first planned the development, he designed the skyscraper to reflect the city. The condo portion, for instance, has 416 residential units, the same number as Toronto’s area code. The building is also on prime real estate at the intersection of Toronto’s two major subway lines, at 1 Bloor St. W., a street known for its designer shops.
As of the end of August, 346 condos, or 83 per cent of available units, had been sold.
It is unknown what will happen to the condos that have been purchased. The receiver said it has not yet had an opportunity to review any of the existing condo sale agreements, but that it will determine “what, if any, steps will be taken with respect to these agreements.”
While the receiver will carry on with The One’s development, selling the remaining units could be challenging. “The world has changed for our industry,” said Scott McLellan, the chief operating officer of Plazacorp, a major condo developer in Toronto. Residential building costs are up 55 per cent since the start of the COVID-19 pandemic, and mortgage rates have more than doubled over the same period.
The One is also entangled in a number of lawsuits. In early 2022, tech giant Apple Inc. sued Mr. Mizrahi because of the project’s delays. Apple was supposed to be the retailer in The One’s ground floor.
KEB alleges in its receivership application that The One recently lost its anchor retail tenant, without naming Apple, and added that, to date, no other tenant has leased the space. A lawyer for Apple did not respond to a request for comment.
The One is also linked to Bridging Finance, the private debt lender that collapsed in 2021. Ms. Coco and her family own Bridging and a lawsuit filed by CERIECO, the Chinese lender, alleges Ms. Coco used investor funds to backstop the condo project.
None of CERIECO’s allegations have been proven in court, but if a judge rules that Bridging’s flagship investment fund is a guarantor, it could mean Bridging is responsible for covering the loan. Bridging’s investors, the majority of whom are retail investors, are already expected to lose $1.3-billion of the $2.09-billion they put in, and if the guarantee is upheld, it could result in even greater losses for them.
Mr. Mizrahi and Ms. Coco have since had a falling out, something The One’s lenders allege has impacted the building’s development.