128 Hazelton Ave.

Another One? Mizrahi’s second Yorkville condo project now in receivership

A receivership order granted last Tuesday, June 4, has appointed KSV Advisory as the receiver and manager over the property at 126–128 Hazelton Avenue in Toronto. The order effectively allows KSV to exercise control over the property moving forward.

Constantine Enterprises Inc. (CEI), which has a 50 per cent stake in the condo project at 128 Hazelton Ave., first made a plea for receivership back in February, with court documents showing that CEI filed for KSV to manage and possibly sell the project to recover debts, identifying Sam Mizrahi as the principal of both Mizrahi 128 Hazelton Inc. and Mizrahi 128 Hazelton Retail Inc.

According to CEI’s April 26 affidavit, the company lost confidence in Mizrahi Developments’ ability to effectively manage its financial and property obligations regarding the nine-storey, 20-unit luxury condo project in the heart of Yorkville.

“CEI has lost confidence in Mizrahi and the Mizrahi Group’s ability to fulfill their financial obligations, past and ongoing,” the affidavit claimed, adding that the development of the Hazelton Project was—at the time of filing—at a “standstill” due to the lack of funding and the breakdown in the relationship between CEI and Mizrahi.

“In addition, based on Mizrahi’s most recently delivered budget, the cost of the Hazelton Project will exceed Mizrahi’s initial budget by over $50,000,000 and the estimated completion date is more than five years behind schedule based on Mizrahi’s current estimates. Additional funding is necessary to complete the Hazelton Project and the only viable lender is CEI. It is certainly not Mizrahi or the Mizrahi Group,” the document stated.

Court filings show that instead of filing responsive evidence to this application, Mizrahi instead initiated an action against CEI and its principals. Although Mizrahi’s Amended Statement of Claim doesn’t dispute the fact that debts were incurred or that demands for payment were made, Mizrahi accused CEI of acting in “bad faith” and breaching certain duties.

CEI responded that the “bad faith” allegations are “bare and unparticularized”, and if pursued, would be vigorously defended and the subject of a motion to strike”.

After Constantine filed an application for receivership on April 16, Mizrahi reportedly alleged that Constantine attempted to block the sale and closing of some units within the building, which contributed to their inability to pay down the secured debt—although CEI denied the allegations in a May 8 statement.

“CEI Has Not Blocked the Closing or Sale of Units” the court document states. “Contrary to the Debtors’ unsupported allegations, there is no evidence that units subject to agreements of sale are in a position to close or that CEI used its position to prevent those closings. In fact, part of the reason why CEI urgently seeks the appointment of the Receiver is to facilitate closings of those units when it is practical to do so.”

“Even if the units subject to agreements of sale close, a significant amount of secured Indebtedness will remain owing to CEI. The Debtors speculate that Hazelton will receive $27 million from the sale and close of the units. Even accepting the values proposed by the Debtors, almost half of that amount—$13 million—relates to units that are not yet subject to agreements of purchase and sale and are not yet completed.

“It is unknown when those units will be sold or how much they will sell for. The Debtors also do not account for how the Debtors will fund the additional costs to complete the Hazelton Project and carry the debt in the interim. The Debtors’ argument that certain units may close absent a receivership is nothing more than a red herring.”

Now that receivership has been granted, CEI hopes that the receiver will take steps to complete the sale of units already subject to agreements of purchase and sale, facilitate the final phase of construction of the Hazelton Project required for completion of units, and manage the marketing and sale of the remaining condo units (all while preserving the value of the property and repaying creditors).

According to city of Toronto documents, the development was approved back in 2016 for a nine-storey mixed-use building at 126-128 Hazelton Ave. with a total of 21 residential units.

Mizrahi Developments dominated local media coverage in February when it was announced that the company was ousted from the development of the Yonge and Bloor skyscraper The One, a few months after the building was put into receivership.

Article exclusive to STREETS OF TORONTO