Station Mall owner defaults on $18M mortgage, sparking court battle over plaza’s future

The southern Ontario company that owns Station Mall has failed to pay an $18-million mortgage that was due this summer, triggering a high-stakes court battle over the future of the Sault’s downtown shopping plaza. 

Court records obtained by SooToday reveal that the owner, Markham-based SM International Holdings Ltd., is on the brink of losing the city’s largest shopping centre — unless it comes up with the full amount owing by a court-imposed deadline of Jan. 16, 2025.

SM president Yeung Mou has promised to comply, writing in a sworn affidavit that he has “made arrangements to have family money” from China sent to Canada after a previous attempt at new financing fell through.

In a written endorsement dated Oct. 18, an Ontario Superior Court judge agreed to give the company 90 more days to produce the cash. But if the owner does not settle the debt by Jan. 16, the judge said he will make himself “available on short notice to grant the receivership application” — a step that could lead to a court-supervised sale of the waterfront property.

The clock is ticking.

News of the litigation comes as the 50-year-old mall appears to be on the upswing, highlighted by extensive roof repairs and the addition of some high-profile retailers, including the cosmetics giant Sephora. The new owner has also repeatedly trumpeted a planned $60-million revamp of the property — including a 50,000 square-foot entertainment complex, a dining sports bar and even potential condo developments — but little of that has actually materialized.

The lender that launched the court action is Algoma Central Properties Inc., a subsidiary of Algoma Central Corporation, the company that built Station Mall in the early 1970s and owned the property for the next five decades. 

As SooToday first reported, Algoma Central sold Station Mall to SM International in a deal that closed on June 30, 2022. The purchase price was $30 million: $12 million in cash and $18 million in what is known as a “vendor take-back mortgage” (VTB).

According to the terms of the mortgage, that $18-million loan was to be repaid to Algoma Central 24 months after the sale. Interest payments (5.5 per cent) were to be made at various points in the interim: a lump sum after year one, followed by monthly instalments during the second year of the mortgage.

But earlier this month, Algoma Central revealed in an interim report to shareholders that the mortgage deadline passed without payment. “The loan is now in default and the Company has commenced legal action to collect the principal amount on the secured mortgage,” the document reads.

SooToday retrieved the case file from the Ontario Superior Court in Toronto, where the litigation was launched in July.

The records show SM initially complied with the terms of the loan. Interest for the first full year — $990,000 — was paid to Algoma Central in June 2023, and over the next year the Markham-based company made monthly interest payments of approximately $82,000.

But this past June, when the full amount came due, the $18-million payment never arrived. It still hasn’t. Including unpaid interest, the outstanding balance is now $18.3 million and counting.

Algoma Central Properties filed its notice of application on July 29, requesting that the court appoint a receiver “to take control over Station Mall and to market it for sale.”

“The Lender has lost confidence in Debtor’s ability to manage the Property and does not believe that the Debtor will be able to satisfy its obligations to the lender,” reads a factum filed by Algoma Central’s lawyers. “The lenders’ security is at risk of deteriorating. There is a need to stabilize and preserve the debtors’ business.”

“Appointing a receiver will provide transparency and fairness to all stakeholders,” the factum continues. “It will ensure a fair and orderly liquidation process.”

In its responding court filings, SM International says there is no need to appoint a receiver because the mall is on solid financial ground. The company says it has increased the number of tenants since taking over the shopping centre and has spent nearly $5 million on roof repairs, a new HVAC system, updated closed-circuit TV monitoring and other upgrades.

When the mall was sold two years ago, the owners say the occupancy rate was 46.17 per cent. It is now 55.69 per cent.

“The Mall is not a wasting or depreciating asset,” SM argues in its factum. “On the contrary, the Respondent has spent considerable sums improving the Mall, leasing space to new tenants, and thereby increasing its value.”

In total, the owner says it now collects up to $700,000 in monthly rent from tenants.

Why did SM default on the mortgage? According to the court records, the owner says it asked Algoma Central on May 30 to extend the VTB mortgage for another year but the lender “was not willing.”

On July 2 — two days after the mortgage due date — SM says it informed Algoma Central that the company was in negotiations with a private credit fund in Hong Kong to acquire financing, but required an additional 60 days. When that funding fell through on Oct. 14, the company president says he “made arrangements to have family money made available to repay” the outstanding balance.

“As the money is coming from China, it will take approximately 60 days for the money to become available to Mr. Mou,” their factum reads.

In his Oct. 18 endorsement, Justice Peter Osborne says a 90-day grace period “strikes an appropriate balance.” However, the Jan. 16 deadline is not the only one contained in the ruling. The judge also ordered SM to pay arrears and accruing interest every month. 

By Oct. 29, for example, the company was to pay all arrears and interest for the period between July 1 and Sept. 30. By Nov. 4, the interest for the month of October was due. 

It is not known whether those deadlines were met. Lawyers for both SM International and Algoma Central did not reply to requests for comment from SooToday.

Should those payments not arrive, Justice Osborne was clear about the consequences.

“In the event of default on any of the above obligations, the Applicant shall be at liberty to immediately move for the appointment of a Receiver and do so expressly on the consent of the Respondent,” he wrote.