A group of insolvent, out-of-town landlords are alleged to have spent millions of investors’ money on luxury items and extravagant expenses — flying on private jets, staying in luxurious hotels and racking up a $5,000 tab at a Miami strip club, among other things — even as their struggling real estate business was freefalling into a state of financial turmoil.
That’s one of the revelations brought to light by KSV Advisory, the court-appointed monitor overseeing insolvency proceedings involving 11 corporations that entered bankruptcy protection last year after falling $144 million into debt to numerous lenders.
The landlords — Dylan Suitor, Ryan Molony, former YTV child actor Robby Clark and his wife, Aruba Butt — collectively own 632 rental units across Ontario, including the Sault, Sudbury and Timmins. In all, 456 of those rental units are occupied, generating an average of more than half a million dollars in gross monthly rent collections.
All of the landlords’ insolvent corporations are part of a complex corporate web that is affiliated with SID Developments, which Clark founded with the goal of buying up hundreds of properties in distressed real estate markets across Ontario.
In its 92-page report, KSV Advisory claims the landlords “diverted, misused or misappropriated funds that were borrowed from investors” while struggling to pay municipal taxes, utility bills and contractors — after initially acquiring hundreds of real estate holdings in Ontario with more than 500 mortgages and 800 promissory loan notes.
The monitor expressed “serious concerns” about continued borrowing from investors — in part to finance interest payments on previous debt — and transfers to both the landlords and their affiliated companies. KSV Advisory also disclosed that lenders took “significant issue” over the landlords shuffling around millions in borrowed money among their many companies during a call with investors in April.
“The funds that were used to purchase and renovate the applicants’ properties do not appear to have been used for an improper purpose,” the report said. “However, significant funds advanced by Investors to a specific entity with reference to a specific property were regularly diverted from the applicants to the principals and their corporations.”
In total, the monitor identified more than $12 million in transfers among the 11 corporations, seemingly without investors receiving “any or adequate disclosure” of the practice.
It also found transfers totalling roughly $7.4 million in “inadequately explained” payments made to corporations owned or controlled by the landlords that are not in bankruptcy protection.
A number of the transactions also reveal a series of extravagant purchases that appear to be personal in nature. More than $1 million was used to buy jewellery and rack up lavish travel expenses — including private jets, luxury hotels and private chefs — in addition to payments made to nightclubs, social media influencers and marketing companies “with no apparent connection” to the corporations the monitor noted.
Nearly $5 million in transfers made to the landlords have been found by the monitor, including a $2.7-million transfer to Butt’s personal bank account and more than $628,000 transferred to Suitor’s bank account to pay down his credit cards.
In a statement provided to SooToday, a spokesperson for the landlords said the vast majority of payments made to them were “reimbursements for standard business expenses such as renovations, utilities, and other operational costs.”
“This approach was necessitated by the limited access to traditional credit options for companies in this sector,” said Steven D’Amico, who handles crisis communications for U.S.-based firm JConnelly. “Allegations of excessive luxury expenditures are likewise inaccurate because they were related to company retreats and capital-raising activities, constituting an extremely small portion of the companies' overall expenses.
“The principals are committed to defending their lawful and appropriate business practices and look forward to addressing these matters in a suitable legal forum.”
The monitor found the applicants continued to borrow funds and renew loans “when they knew or ought to have known that there was no reasonable chance of repaying them,” the report said. “Despite that knowledge, the applicants appeared willing to borrow more to pay interest on prior debt obligations.”
KSV Advisory also claimed a lack of proper record keeping may have led to inappropriate promissory note loan renewals. In one instance, a loan was renewed on a property in the Sault’s downtown core that had already been sold without the investors’ knowledge. In another instance, two loans were renewed after a property in Timmins had burned down, said the monitor.
The report also said the monitor's efforts to investigate the landlords’ finances have so far been complicated by their lack of record keeping — or failure to provide KSV Advisory with adequate records — which has led it to expend “significant additional professional resources” to conduct its investigation.
For their part, the landlords “strongly dispute the findings of the report,” which D’Amico says contains “significant deficiencies and misleading conclusions, including omissions of key evidence provided to the monitor that contradict the report's assertions.”
The matter will return to Ontario Superior Court in the coming days in order to determine whether or not court-ordered protection from lenders will expire June 24. The landlords have since applied for an extension of that protection until July 8.