BC Court of Appeal judges ruled that the sale of a financially distressed townhouse project in 91原创 will go forward, after the original builder couldn't firm up an alternative offer that would have paid back more creditors.
Quarry Rock Developments (QRD) had a number of projects underway across the Lower Mainland, including several in 91原创, but ran into financial trouble last year due to rising interest rates and construction costs.
On July 10, a B.C. Supreme Court judge approved the sale of QRD's project dubbed The Willoughby, in the 20300 block of 70A Avenue, for $35 million to a new developer, Redekop Ferrario Properties. The 87-unit townhouse project had only seen 10 units completed and more were mid-construction when money ran out in late 2023, and creditors pushed the project into court-ordered receivership.
But QRD and its key principals, Richard Lawson and Matthew Weber, appealed the Redekop sale. They had argued during the first court hearings that another, better deal was possible, with a non-profit called Foundation Residence Society, in partnership with the province's BC Builds program, purchasing the entire site and project for $64 million.
In the first hearing, Justice Paul Walker found the FRS and BC Builds sale to be too speculative in nature, and rejected it in favour of the Redekop bid, which was ready to go.
However, the Redekop offer was so low that only some of the creditors would get any money back. MCAP Financial was owed more than $33 million by the time of the summer court hearings, and would get paid out from the Redekop sale. The next creditor in line, Canada Mortgage Servicing Corporation, was owed $8 million and would receive only a partial payout.
Two more major creditors who had mortgages against the property, Overland Capital and Wubs Investment, owed $8 million and $4.5 million respectively, could likely wind up with nothing.
QRD, Overland, and Wubs all argued before the Court of Appeal judges in favour of giving more consideration to the FRS and BC Builds sale, with the creditors hoping to get some or all of their money back from the $64 million buyout.
Meanwhile, MCAP Financial argued for the original Redekop sale, noting that interest charges and the cost of maintaining the site and protecting the half-finished buildings from the elements was burning up almost $400,000 a month.
BC Appeal Court Justice Mary Newbury, writing for the three-judge panel, found that the original ruling had potentially been too hasty.
In a case where a larger offer was on the table, the court could have ordered a pause of a few weeks to a month to investigate the possibility of an FRS sale.
"The potential of a bid being made at $64 million should have led the receiver 鈥� and ultimately the court 鈥� to consider whether a longer marketing period was necessary to allow all the parties to have confidence that the process had likely elicited as good an offer as could be realistically expected," Newbury wrote.
If fresh evidence had come before the Court of Appeal showing progress on the FRS bid, Newbury could have ordered a delay of two to four weeks and for the bidding to be reopened.
But during the time between the original ruling in July, and the Court of Appeal's ruling in September, no evidence came forward that the FRS and BC Builds sale had been firmed up at all, Newbury wrote.
"This is indeed unfortunate, especially for the personal guarantors, but the realities of the case must now be recognized as leading to the sale to Redekop," Newbury wrote in the decision, dated Sept. 9.
