A war of words over the insolvency of a luxury townhouse condominium project in Oakville has pitted a titan of Canadian business against a custom-home builder with anxious buyers caught in the middle.
On November 24, 2021, Timothy R. Price, former chairman of Brookfield Financial Corp. (one arm of the sprawling Brookfield family of companies), filed an affidavit in support of a Notice of Intention To Make a Proposal for bankruptcy for Boreal Capital Partners Ltd. claiming a indebtedness of more than $44-million million. Mr. Price co-owns Boreal with Oakville home-builder Jonathan Bowman, and the partnership’s most advanced project is a collection of 20 luxury townhomes at 331 Sheddon Ave. near Oakville’s lakeshore, which has been in the works since 2016 and has only recently begun to be occupied.
In addition to mismanagement and cost overruns on the Sheddon project, Mr. Price’s affidavit alleges “unauthorized co-mingling of funds as between the Boreal Entities, Bowman and Bowman-controlled entities” including alleged cash withdrawals without documentation, transfers and fees paid from Boreal accounts to Mr. Bowman. The claims have not been tested in court, Mr. Price did not respond to a request for comment and Mr. Bowman denies any wrongdoing.
“I am firmly confident that there was not a single act of financial impropriety in any of Boreal’s financial affairs while under my watch,” said Mr. Bowman in a statement. “There are two sides to every story and I will hopefully be given the opportunity to express mine. Of course I would have preferred to keep our partnership issues private but this action has precluded that from occurring.”
There are a handful of other sites in the Boreal partnership that were being prepped for development, but most of the action is happening at Sheddon. In 2016, the Sheddon lands were purchased for $5.7-million and in 2017 Meridian Credit Union registered a $24.2-million loan for construction costs. In 2018, a company controlled by Mr. Price called Roppongi Investments Ltd. extended another $2.7-million loan to the Sheddon site, and in 2020 Halmont Properties Ltd. lent 2.1-million to the project. Then, according to Mr. Price’s affidavit, Meridian said it was through waiting and demanded its money back, setting off a chain reaction that eventually saw Mr. Bowman pushed out of management of the project. Then, on Nov. 25, 2021 the court appointed Ernst & Young Inc. as Monitor for the insolvency restructuring of Boreal.
“After our lender and I lost confidence in Bowman, the general partner was replaced for all of the LPs [limited partnerships] with an entity not controlled by Bowman, being Kesmark Estates Ltd. (”Kesmark”). Kesmark is not a related party to any of the Boreal Entities,” said Mr. Price in his affidavit.
Kesmark’s business was not related to Boreal, but Mr. Price’s business connections to it and the lender Halmont run deep: the three directors of Kesmark include long-time colleagues of his, including current CEO of Brookfield Asset Management J. Bruce Flatt, as well as Brian Lawson (current vice-chairman of BAM) and Robert Harding (former BAM chairman). Kesmark hired Randall Froebelius to serve as its chief restructuring officer for the Sheddon project. Mr. Froebelius is also employed as a property manager by Halmont Properties Ltd., which took over Boreal’s Meridian loan in May, 2021, as a “lender of last resort” and is providing financing for Boreal to finish the Sheddon project. Halmont is a TSX-listed real estate investment company with strong ties to Brookfield and Mr. Price, who is currently a director of the company: Regulatory filings show Halmont has seen a variety of current and former Brookfield executives and directors rotate through its management ranks over the last 16 years and it once shared an office with Brookfield Investments Corp. and it now shares a different office address with Mr. Price’s Roppongi Investments. Mr. Froebelius and the Monitor have also been granted investigatory powers by the court to get to the bottom of the alleged financial irregularities.
At the still unfinished Sheddon site, there are signs of a project under strain.
For one, construction crews are still working to prep two unsold units for sale, even though more than a dozen buyers – many of them the cream of Oakville’s business and professional class – have already moved in to the complex on interim occupancy agreements. For another, inside the occupied units the list of “deficiencies” buyers are waiting to get fixed have mounted.
“Some in the building moved in a year ago, and still have no use of some of their bathrooms; there are people who have issues with insulation,” said Andrew Zawadowski who bought into the project in 2016 when he was told it would be ready for move-in by 2018. Now, after living in the unit for the last three months he says he’s frustrated with the list of things left undone in his multi-million-dollar unit. “We have missing doors from our kitchen, LED lights that never go off, others that never go on … We waited six weeks for a doorknob to our storage locker” he said.
No one is saying the building is poorly built. But those close to the project describe a huge degree of customization offered for each unit – from structural elements to materials – that some believe may have contributed to delays.
“He used building technology like core-slab and steel, which you don’t use in residential building, and the HVAC system looks like out of the Starship Enterprise,” said John Piercy, another buyer. “I feel sorry for Jon, he’s not a bad guy, he’s a nice guy … maybe more of a dreamer than a manager.”
The buyers – who have joined a social circle that includes weekly cocktails – are nervous the Monitor may come back and ask them for more money to finish the project. Some units sold in the early days for $2.5-million to $3-million, but units sold more recently were in the $4-million to $5.5-million range. Even if all the units in the building had sold for the lowest price, the projected revenues would exceed $50-million.
“We worry it will not be finished,” said Mr. Zawadowski. “You could say ‘You guys are rich folks … nobody’s going to feel sorry for you.’ But on a human level, I’ve had no other place to live: I lived six months with my sister in law. We worry we’ll be homeless.”
Your house is your most valuable asset. We have a weekly Real Estate newsletter to help you stay on top of news on the housing market, mortgages, the latest closings and more. Sign up today.