The insolvent landlords who plunged $144 million into debt after buying up hundreds of rental properties in Ontario will have their court-ordered protection from creditors extended until the beginning of August — but not without a number of strict conditions in place amid allegations of mismanagement and financial misconduct.
KSV Advisory essentially has complete control now over the financial and business aspects of 11 insolvent corporations after being granted expanded powers in its role as court-appointed monitor during Companies' Creditors Arrangement Act (CCAA) proceedings. The new powers were granted in Ontario Superior Court June 25 after lenders reportedly “lost all confidence” in the management practices of the landlords, recent court filings show.
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 insolvent corporations are part of a complex corporate web affiliated with SID Developments, which Clark founded with the goal of building a real estate empire by acquiring hundreds of properties in distressed real estate markets. Court documents have revealed the vast array of 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 filed against the group of insolvent corporations.
A recent investigation by KSV Advisory 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 Advisory 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 since disputed those conclusions, calling them "incomplete and at times, inaccurate or misleading," according to court documents.
Legal counsel for the lenders said the results of that investigation have caused both the monitor and economic stakeholders to be “seriously concerned” about the landlords’ continued involvement in the business and the impact it would have upon CCAA proceedings: The monitor has been contacted by cities and municipalities to complain about the “lack of responsiveness and overall incompetency” of the landlords, while many letters of intent related to sales and refinancing are “expressly conditional on a change of management,” court filings show.
Lenders also believe the landlords should be slapped with cost orders in court after choosing to engage in “costly litigation” to oppose motions made by both the monitor and lenders during insolvency proceedings.
“These significant costs (likely measured in the hundreds of thousands of dollars), unless recovered from the principals personally, will be borne by the lenders, who are already facing catastrophic losses as a result of the principals’ misconduct,” lawyers for the lenders said.
Creditor protection has now been extended until August 1, with the caveat that the monitor oversees the business dealings and finances of the landlords.
The landlords have been ordered to provide KSV Advisory with keys to each of the rental units, copies of lease agreements and all outstanding property standards orders, in addition to the names and contact information for all tenants currently renting from the insolvent corporations.