- What An Eglinton West development site slated for a 10-storey mixed-use building by Morgis Corp. has been placed under receivership
- Why Lenders allege that Morgis owes more than $53m in unpaid loans and interest
- What next Morgis is appealing the receivership decision and seeking creditor protection
A Toronto development site owned by Morgis Corp. was placed under receivership earlier this month, with lenders alleging the firm has more than $53m of unpaid debts.
The site, comprising four properties from 350 to 378 Eglinton Avenue West, was intended for a 10-storey residential building with ground-floor retail space.
Morgis, an affiliate of Morgis Group Canada, took out loans totaling $15.5m, $33m and $4.5m from various lenders. Those mortgages were set to mature on Sept. 1, 2023, but were extended three times at Morgis’ request, with a final maturity date of Feb. 1.
When the date passed with no payments made, lenders issued demand letters. The receivership application was then filed on April 19. TDB Advisory was appointed as the receiver on July 5.
According to the lenders — all groups of Ontario numbered companies and individual Ontario residents, including TriLend — Morgis had asserted that the development was “in the advanced stages of planning approval.” However, the project remained “in the initial plan approval stage with the City of Toronto,” the lenders said.
Interest on the loans, which accrues at nearly $465,000 per month, has not been paid since September 2023, the lenders said. Morgis did note, however, that operating costs of the existing two-storey commercial building on the site are covered by current rent revenues.
Refinancing issues
The lenders notified Morgis in May 2023 that the loans would not be renewed past their maturity date, but no refinancing was ever completed.
“The Lenders, understandably, have lost any confidence in the Debtors ability to refinance and simply want the return of their money,” the lenders said in a document to the Ontario Superior Court of Justice. “There is no reason why this Court should further entertain the refinancing efforts of the Debtors as it will only serve to increase costs, particularly where the ‘as-is’ value of the Real Property has depreciated by $6 Million between June 2023 and December 2023.”
Morgis argued that it has been left to obtain replacement financing “at a time when the development financing market is experiencing extraordinary dislocation.” The company noted that it has a financing commitment in place for up to $75m that is expected to close in August, but the court stated that the commitment did not appear firm, being “highly conditional” with fees needing to be paid, for which Morgis does not appear to have the funding.
Receivership over creditor protection
In their response to the receivership application, Morgis requested that creditor protection under the Companies’ Creditor Arrangement Act be granted, rather than a receivership. The developer cited a better opportunity to maximize value and limit the losses that would come from liquidating under receivership.
This request was denied, and Morgis is now seeking to appeal that decision.
