Many new homes at risk, as major Vancouver developer files for insolvency

Feb 9 2023, 1:54 am

In what could be the first sign of the start of a new phase of the turbulent period in Metro Vancouver’s housing market, Coromandel Properties is insolvent, based on its new filing in the Supreme Court of British Columbia seeking protections.

In a statement to Daily Hive Urbanized, the major local real estate developer, which primarily pursues condominium projects, says it is looking to reposition itself through the stream of the Companies’ Creditors Arrangement Act (CCAA).

“If the court grants their request for protection, Coromandel will work towards restructuring its finances and advance its operations,” reads the statement following an inquiry made by Daily Hive Urbanized on Tuesday.

Since being active with acquiring properties a decade ago, the developer has amassed a significant portfolio, with 16 active real estate projects — all located within Vancouver — now in possible risk. Many of these projects are located within the Cambie Street Corridor, including near Oakridge.

The petition, retrieved by Daily Hive Urbanized, states there is a combined total of about $700 million in outstanding debt secured against these projects, with each project subjected to various secured loans registered against the lands.

The redevelopment potential of these sites could generate a combined total of 2,000 condominium, rental, and social housing units, based on projects with an already identified scope — proposed, planned, approved, and/or under construction. This is a highly conservative figure as it does not include proposed projects that have yet to enter the formal application stage with the municipal government — projects that currently do not have a defined scope at their early stage of the proposal process — nor do they include long-term, lease-generating property investments, and projects with non-residential uses, including several future hotel properties.

The company’s leaders include Zhong Zhen Yu, who is the director, and former Vancouver city councillor Raymond Louie, who is the chief operating officer.

In the petition, the developer asserted the City of Vancouver’s expensive and slow approval processes are at least partly at fault for the firm’s precarious situation, including years-long, uncertain rezoning application reviews that involve lengthy negotiations with City staff on the allocated community amenity contributions (CACs).

“The process to develop real estate in Vancouver is complex, expensive, and slow,” reads the petition. “The process to obtain the required approvals from the City prior to commencing a Project is also slow and can take many years. It includes, but is not limited to, the Petitioners preparing proposals and plans, submitting applications for zoning and development permits, and negotiating with the City.”

“The pace of developing the various Projects has been slower than anticipated due to the lengthy application process, and the discussions with the City surrounding density potential and social housing requirements.”

The filing also states the developer has had difficulty servicing its secured debt due to the rise of interest rates since 2022. Their financing over the years to buy properties, fund the design and application processes, and perform construction has depended on a combination of secured loans, unsecured loans, and equity financing.

It is noted that eight secured lenders have issued default notices, and made demands on their loans, with the largest secured debts being $40 million for Cambie 45, $53.6 million for Laurel 57, and $80.6 million for Southview Gardens.

“The Petitioners have insufficient cash flow to complete development on the Projects, have been unable to refinance their existing debts and liabilities, or sell assets at sufficient prices to avoid loss, all in the face of demands for payment by their secured creditors. As a result, the development work on the various Properties is in jeopardy,” continues the filing.

If Coromandel Properties does not receive the protections as outlined under the CCAA, the petition warns the outcome will be an inability to explore restructuring opportunities, which may lead to the developer being “forced to liquidate their assets on a fire sale basis” — given that soaring interest rates have led to a decline in real estate prices.

Cambie 45 has yet to reach the application stage due to a lack of funds. It is located at 6012-6088 Cambie Street — a full city block at the northeast corner of the intersection of Cambie Street and West 45th Avenue. The developer was looking to build a 21-storey market residential tower and 11-storey hotel tower, with the podium containing office space.

The site for Cambie 45 is immediately north of the similar mixed-use development approved for 5910-5998 Cambie Street, which is a project jointly acquired by Coromandel Properties and Peterson Group from Wall Financial Corporation in 2021. Referred to as Cambie 43, there will be a 29-storey condominium tower and 15-storey hotel tower.

The properties that form Laurel 57 on Laurel Street, just north of West 57th Avenue, are envisioned for a future high-density residential development.

Southview Gardens located on East 58th Avenue near Kerr Street is a 6.6-acre property. The developer was eyeing to redevelop the existing townhouses 140 apartment units into four six-storey buildings with 1,150 rental homes.

Coromandel Properties is currently in the midst of building 23 townhouses at 957 West 52nd Avenue. Construction is about 66% complete and expected to take about one more year, but the costs to finish for occupancy demand an additional $12 million in construction financing. The petition notes there have been cost overruns that have been difficult to finance, and this project requires the funds and time to reach completion.

The developer also owns land assemblies near SkyTrain Nanaimo Station for their future high-density, transit-oriented development potential.

In late 2022, Coromandel Properties, in partnership with Peterson Group, submitted an application to redevelop 5392-5472 Manson Street — located a block north of Oakridge Centre — into two 18-storey towers with 248 condominium homes.

The petition also notes Coromandel Properties is the owner of the Pacific Burrard complex at the northeast corner of the intersection of Burrard Street and Pacific Street in downtown, which is a mixed-use complex that is best known for being home to one of Lululemon’s corporate office locations. The process to proceed with an application for a major mixed-use redevelopment, potentially including a hotel, has stalled due to a lack of funds.

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