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If no bid meets the threshold, senior lenders will finance the project until completion.
Published 04 June 2024 • 3 minutes reading time
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Creditors are demanding a minimum bid of $1.2 billion for “The One,” Sam Mizrahi’s unfinished skyscraper at the corner of Bloor and Yonge in Toronto. Photo by Peter J. Thompson/National Post
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The One, an ambitious residential tower in downtown Toronto, now faces a possible sale in court-ordered bankruptcy proceedings. The unfinished skyscraper by Sam Mizrahi, which he co-owns with partner Jenny Coco, has prompted creditors to demand a minimum bid of $1.2 billion for the troubled project, which is $1.5 billion in debt due to outstanding loan payments.
The sales process, set to begin Thursday, will have to contend with the building's turbulent history, high borrowing costs and a sluggish condo market. If no bid reaches the $1.2 billion threshold, senior lenders, including KEB Hana Bank and a South Korean bank acting as trustee for private placement real estate fund IGIS Global, have pledged to finance the project through to completion.
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After The One was placed into receivership by the Ontario Superior Court of Justice last October, management of the project was transferred from Mizrahi's development company to Alvarez & Marsal Canada Inc. The new management has since revised the project's budget, schedule and design to make it more attractive to potential buyers.
According to a report filed by Alvarez & Marsal with the Ontario Superior Court of Justice on May 28, the bankruptcy trustee asked the court to set a minimum bid of 80 percent of creditors' claims, and senior lenders are determined not to support any bid below that amount.
“Will attract interest in the opportunity to either acquire or invest in the Project … in one or more sale or investment transactions that individually or in the aggregate have a purchase price or investment amount of at least $1.2 billion. This is the minimum bid threshold required by the senior secured lenders,” the report said.
The insolvency administrator has proposed using Jones Lang LaSalle Real Estate Services as the selling agent. The first round of bids is to be submitted by July 30 and the second by September 24. The aim is to obtain court approval for a successful bid “no later than the week of October 14, 2024,” the report said.
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Despite the weakened condominium market and the scarcity of large commercial real estate transactions in the current high-interest environment, Alvarez & Marsal is pushing ahead with marketing and hopes to close a sale before the end of the year.
Under development since 2015, The One is considered Canada's tallest residential building with 85 floors of condominiums, hotel rooms and retail space on the iconic corner of Yonge and Bloor Streets.
However, the project has suffered numerous setbacks. Over 70 percent of the large condominiums on the upper floors remain unsellable, and of the 19 units sold, nine buyers are behind on their payments.
“There is an extremely limited market for units of the size and selling prices of the upper floor units,” the report said. “And the time frame that could be required to sell the amount of units still available would be significant, as demonstrated by the high number of upper floor units that are currently unsold.”
As a result, a new design was submitted for the project, which would increase the number of units per floor from two to four and add 88 new units on the upper floors.
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Construction has progressed up to the 57th floor, but the project is well behind schedule. In the Alvarez & Marsal report, the company acknowledges that the previously planned deadline and cost are unlikely to be met.
“Due to the revised budget, schedule and cost to complete the work undertaken since the appointment date, the Receiver believes that the project cannot be completed within the originally planned timeframe (March 2025) and that the cost to complete will exceed the maximum funding provided,” the report said.
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