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‘Once all the properties have been sold, there will be no other business’: Saskatoon landlord has ‘limited life,’ around 60 jobs in danger

About 60 people are likely to lose their jobs as almost 1,300 apartments in Saskatchewan are sold out from under a financially troubled landlord, which went into creditor protection last year after telling a British Columbia court it could not continue operating and pay its debts, according to its court appointed monitor.

Unless the new owners of 942 apartments in Saskatoon and an additional 318 in Regina choose to retain Block 1 Management Ltd. — one of 45 closely related companies that make up the landlord group — the property management firm will be forced to “discontinue operations” and lay off its roughly 40 employees, said PricewaterhouseCoopers Inc. (PwC) partner Neil Bunker.

Five of the group’s 15 properties will be sold — the price is the assumption of debt owing on the buildings — to the Toronto-based real estate investment company KingSett Mortgage Corp. in the coming weeks, according to a court order. The properties include two buildings in Stonebridge, “The Crossing” on Idylwyld Drive and complexes on 108th Street and Lenore Drive.

A sixth building, the Nutana Tower on Main Street, could also be sold to KingSett if a deal signed with another third party last month cannot be closed, according to PwC. Bunker said the landlord group’s remaining nine properties, which are under renovation, are expected to go up for sale “almost immediately.”

“I think the … group of companies have a limited life. Once all the properties have been sold, there will be no other business being conducted by these companies,” Bunker said of the landlord group, which has been buying property in Saskatchewan since 2010. At the time it entered creditor protection, it owned seven per cent of Saskatoon’s apartment stock.

All but two of the entities in the landlord group are holding companies; only Block 1 and Cisask Construction Ltd. have employees. Block 1 laid off 10 people in January, about a month after the landlord group was granted protection under the federal Companies’ Creditor Arrangement Act(CCAA) after claiming its plan to renovate the apartments and profit from higher rents was in danger.

Like Block 1, Cisask — which has about 20 employees in Saskatoon and Regina — is expected to cease operations and lay off its workers once it completes the outstanding work on the nine properties that have not been listed for sale, Bunker said. Cisask staff will continue that work even if the properties change hands, he added.

Tim Clark, the sole director of all 45 companies in the landlord group and head of Vancouver-based New Summit Partners Corp., which supports and sometimes finances the group but is not in credit protection, did not respond to multiple requests for comment. A KingSett representative also did not respond to a request for comment.

A Saskatoon-based electrical contractor, meanwhile, questions the usefulness of builders’ liens after learning that his company is unlikely to see any of the money it is owed for work done on the landlord’s properties. According to PwC, Stein Electric Ltd. is owed $942,448; the landlord group as a whole owes $12.7 million to creditors, including many local companies.

“That just proves that any lien in Saskatchewan is a bunch of bull—t, because it meant nothing,” Stein Electric Ltd. owner Trevor Stein said of the common construction industry tool, which is used to guarantee payment by allowing anyone owed money to register an “interest” on a property title that must be paid before the building can change hands.

“Anyone can get any work done by any contractor, and I have no idea if I’m ever going to get paid. Now with this (situation), knowing that I’m never getting paid, it’s (almost) $1 million. Where … does that come from? You don’t make that in a year.”

Bunker said the liens are being eliminated because interests on a land title are ranked, and “the value of the building(s) has not been sufficient to satisfy the mortgage lenders, who registered their security before the lien holders did.” Contractors who have been engaged since Dec. 31, 2016 will still be paid for their work on the remaining properties, he added.

Stein and other industry representatives want the Saskatchewan government to introduce legislation similar to Ontario’s Bill 142, which aims to protect contractors from late payments. He said while the loss his company will sustain is a “speed bump,” more needs to be done to ensure construction firms are paid on time and in full.

The Saskatchewan Party government is “monitoring the progress of Ontario’s bill with interest” and its lawyers are reviewing the possibility of prompt payment legislation, government spokesman James Parker wrote in an email. The government cannot, however, confirm when a decision on the issue will be made, Parker added.

Written by:  Alex Macpherson amacpherson@postmedia.com twitter.com/macphersona
Original Article: leaderpost.com 

Interest(s): Date: June 27, 2017

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