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1001 Broadview Ave., Toronto, site of the former Whistler's Grille and Cafe Bar, since demolished.

D'Arcy McGovern/The Globe and Mail

A failed condominium development project in Toronto’s east end has laid bare a multimillion-dollar dispute between the sons of a former banker who fled charges of embezzlement and fraud in Iran and a family of Saudi Arabian investors.

At the centre of the insolvency proceedings for 1001 Broadview Avenue Inc., initiated in early 2020 by private lender Centurion Mortgage Capital Corporation, is restaurant investor Khashayar Khavari. The report from receiver BDO describes a series high-interest loans and a string of missed payments connected to a land-assembly deal in 2017 by Mr. Khavari and his brother Ardavan for a site at the corner of Mortimer and Broadview Avenues in Toronto’s East York neighbourhood.

Centurion is the first-ranking lender on the file and is owed $8,067,628 after agreeing to lend $44-million for construction of a seven-storey condominium building. Despite receiving planning permission for the condo, almost no work has been done aside from the demolition of a popular local eatery and banquet hall known as Whistler’s Grille and Café Bar that formerly anchored the site.

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“What this community has ended up with is an empty lot full of grass, weeds and garbage, while these millionaires are fighting,” said Councillor Paula Fletcher, who voted with Toronto council to approve the project’s rezoning. “It should never have happened,” she said. “What the hell are these big money investors doing at this little corner in East York?” The company also owes $146,291 in unpaid property taxes to the City of Toronto.

Some explanation about what went wrong can be found in a set of affidavits connected to a second unsecured mortgage on the property held by a company called 1001 Broadview Investment Inc. The investors in that company include a high-net-worth family from Jeddah, Saudi Arabia led by Amr Abdulwahab Attar, who brought an unsuccessful insolvency application for the property in 2019.

Mr. Attar’s affidavit provides an intimate look at how wealthy foreign investors came to participate in an investment in Canada’s real estate market. He describes meeting Michael Decauni, an executive at the small Canadian investment company Callian Capital Partners Inc. (of which the Khavari brothers were equity partners), in Geneva, Switzerland in 2015 that led to an investing relationship. “For the past few years, my family and I have been interested in investing in the North American real estate market, and possibly immigrating to Canada. In June of 2017, Decauni told me that he and his partners, Khash, Ardavan Khavari and Khalid Khashoggi (”Khalid”), had placed a deposit on [1001 Broadview] using $2.1-million of their own money, and a further US$10-million was required to purchase the land.”

Mr. Attar said he had turned down an offer to get an 18-per-cent return on a $3-million investment when the condo project was complete, but he agreed to invest if his money would get a 15-per-cent return, paid semi-annually, after being promised his investment would be safe in the event of an insolvency. “Decauni informed me that, more likely than not, the land would be sold at a premium of no less than 25 per cent within the first year, and the Project would not be developed,” Mr. Attar said. In August, 2017, Mr. Attar, his father and sister each pledged $1-million to the project, and in November his mother and a cousin named Walid added another $5-million (the Walid investment would be structured to be compliant with Sharia law). Mr. Attar himself subsequently joined Callian Capital as an executive.

In 2018, the Attar family members received their scheduled returns: US$75,000 twice that year as the project continued (except for Walid who’s $4-million contribution earned him US$300,000 payments). But in November, 2018, the payments were delayed until January, 2019, after which no further payments were made.

In a responding affidavit Mr. Khavari agrees with most of those events, but he and Mr. Attar disagree as to why the payments stopped. Mr. Khavari alleges demands from Mr. Attar for extra payments for financing fees and legal fees drained the project’s budget, while Mr. Attar points the finger back at Mr. Khavari and his brother alleging instances of improper invoices. The affidavits also show that the $2.1-million the Khavari’s pledged to the project as equity was actually a high-interest loan from a third party, and funds were also taken out of the project budget to repay that loan.

None of the allegations have been tested in court.

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Ultimately, the application to appoint a receiver by Mr. Attar was postponed and his family syndicate must now wait for Centurion’s loan to be paid back through the sale of the land before applying to receive any remaining funds.

Missing from the Attar and Centurion filings is some context for the Khavari family. Khashayar Khavari is the son of Mahmoud Reza Khavari, who in 2011 resigned his job as managing director of Iran’s state-owned Melli Bank and fled to Canada amid allegations of embezzlement and financial fraud. Iran accuses the elder Mr. Khavari – a dual citizen of Iran and Canada – of helping embezzle US$2.6-billion out of the country. In 2014, billionaire businessman Mahafarid Amir Khosravi was executed in Iran for his role in the scheme. In 2017, according to Iranian state media, Mr. Khavari was convicted in absentia by an Iranian court and sentenced to 30 years in prison. Bank Melli and another bank Mr. Khavari led have been accused by the EU and U.S. of laundering funds intended to finance international terrorism and support Iran’s nuclear and missile programs. The allegations have not been tested in a Canadian court, and while Iran has demanded Mr. Khavari’s return Canada has no bi-lateral extradition treaty with the Islamic republic. There is no indication that Mahmoud Reza Khavari is himself involved in the Broadview project.

It’s not the first time the family has been involved in court actions in this country. In 2016, details about the Khavari family’s business dealings in Canada came to light in lawsuits between them and Sam Mizrahi, a Toronto real estate developer constructing Canada’s tallest residential building at 1 Bloor St. Mr. Mizrahi’s testimony in those cases described feeling pressured to conceal the Khavari connection to two luxury condo projects on claims that the family’s bank accounts in Canada had been frozen following the embezzlement allegations, Mr. Mizrahi also alleged that he was later threatened with financial and reputational ruin by the Khavari brothers.

The court ruled in Mr. Mizrahi’s favour, denying the Khavaris the $35-million they were seeking. Despite the public and acrimonious dispute, Khashayar Khavari continues to tout the connection, describing Mr. Mizrahi as a former “general contractor” on the website for his H&CO Developments website.

Mr. Khavari and Mr. Attar did not respond to requests for comment from The Globe and Mail; Dominique Michaud, a partner with Robins Appleby LLP who is representing Centurion said his clients declined to comment on the decision to lend money to Mr. Khavari.

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