The insolvent, out-of-town landlords who plunged $144 million into debt after buying up hundreds of rental properties in Ontario have had their court-ordered protection from creditors extended until the end of November.
Ontario Superior Court Justice Peter Osborne granted the extension last week after KSV Restructuring Inc. — the court-appointed monitor overseeing the insolvency proceedings under the Companies' Creditors Arrangement Act (CCAA) — sought more time to work with stakeholders to finalize the liquidation of the majority of the group’s property holdings.
If all goes according to plan, the insolvent landlords will hemorrhage a total of 323 properties through a credit bid process, which allows those with first and second mortgages to bid the face value of their secured debts on the properties being liquidated.
And if those credit bids are approved, there will be just 84 properties remaining in the landlords’ portfolio — a small fraction of the rental properties that a group of corporations acquired amid falling house prices during the COVID-19 pandemic.
The landlords — Dylan Suitor, Ryan Molony, former YTV child actor Robby Clark and his wife, Aruba Butt — collectively own more than 600 rental units across Ontario, including the Sault, Sudbury and Timmins. The group owns 200 rental units in the Sault alone, with 65 of those remaining vacant.
A total of 11 now-insolvent corporations are part of a complex corporate web closely linked to SID Developments, which Clark founded with the goal of building a real estate empire by acquiring hundreds of properties in distressed real estate markets in Ontario. Court documents have revealed that the majority of the group’s real estate holdings were made possible with 500 mortgages and 800 promissory loan notes.
The landlords filed for protection from numerous lenders in January, claiming tens of million dollars in debt and less than $100,000 in the bank. The court-ordered protection also extends to more than 30 civil lawsuits against the group of insolvent corporations, with eight of the suits filed in the Sault.
A subsequent investigation by the monitor concluded the landlords “diverted, misused or misappropriated funds” borrowed from lenders — with some of it covering a number of extravagant purchases such as private jets, luxury hotels and a $5,000 tab at a Miami strip club — while struggling to pay municipal taxes, utility bills and contractors.
KSV Restructuring Inc. also expressed “serious concerns” about continued borrowing from investors — in part to finance interest payments on previous debt — and millions of dollars in transfers to both the landlords and their affiliated companies. The court-appointed monitor also disclosed that lenders took “significant issue” over the landlords shuffling around millions of dollars in borrowed funds among their many companies during a call with investors in April.
The landlords have disputed those conclusions, calling them "incomplete and at times, inaccurate or misleading," according to court documents.
Over the summer, the monitor assumed complete control over the financial and business aspects of the insolvent corporations after being granted expanded powers in its role as court-appointed monitor. The new powers were granted in court this past June after lenders reportedly “lost all confidence” in the management practices of the landlords, court documents show.
Now, the monitor has been granted more time to finalize financing and other arrangements tied to the credit bid process, which could see more than 300 properties liquidated in the coming weeks.
While the group of landlords have fully drawn on the $15 million available under a line of credit known in CCAA proceedings as a debtor-in-possession (DIP) facility, the monitor has noted a total of $428,558 in their bank accounts, in addition to $1.1 million tucked away in the monitor’s trust account.