Ontario home developer agrees to place several GTA townhome projects into receivership

An embattled Greater Toronto Area home developer facing multi-million dollar allegationsof financial wrongdoing has agreed tothe appointment of a third-party receiver to manage the potential sale of several uncompletedtownhome developments, throwingthe future of hundreds of pre-sold homes into doubt.

More than a dozen lawyers representing the developer Woodbridge, Ont.-based StateView Homesattended a virtual hearing of the Superior Court of Justice of OntarioTuesday, along with three of its lenders,the proposed receiver and other stakeholders.

The purpose wasfor the lenderstoask the court to appoint KSVRestructuring Inc. asreceiver forsix residential townhouse developments and other properties after theylaunched civil lawsuits demanding repayment of almost $200 million in loans.

A lawyer representingStateView and its affiliated companiestold the hearing that the developerconsented to the appointment.

"We view this as the best way forward to make sure that these projects have the best chance of succeeding and that the purchasers get the homes they'vebought," lawyer James Renihan, representingStateView, told the court.

Justice Jana Steele, who presided over the hearing, signed four court ordersTuesday formalizing theappointment ofKSV as receiver. The orders were posted to KSV's website Wednesday.

Last week, CBC Toronto reported that lendersKingsett Mortgage Corporation, Dorr Capital Corporation and Atrium Mortgage Investment Corporation launched court actions after learning thatTD Bankhad accused StateView, 25 associated corporations, five directors and executivesof perpetrating an alleged year-long "cheque-kiting" scheme that cost the bank$37 million.

StateView Homes blamed the alleged fraud, which TD alleged involvedthe cashing ofthousands of bad chequesfrom both corporate and personal accounts at other banks,on itsformerchief financial officer.

Kingsett and Dorr alleged theyweren't informed that StateView had entered into a settlement agreement with TD to immediately begin repaying the $37 million. The lenders also alleged thatStateView had "effectively has no liquidity" and had missed monthly interest payments, among other financial issues.

"The StateView companies and their owners had no knowledge or involvement of the irregularities that led to these problems and are working hard to fix them, and we're working hard to do that through this receivership process,"Renihan reiterated in court Tuesday.

Future of homes still in question

A receivership is a way for secured creditors to recover debts they are owed bytakingpossession of assets or property and selling or liquidatingthem to repay the outstanding debt.

According to prior court filings, the three lenders were asking the court to appoint a receiver forsix residential developmentsfor which they lent money,some of which are already under construction and others that are in the pre-construction stage. In all,more than700 homes are planned for the sites, many of which have been pre-sold.

The StateView developments include:

• Minu Towns (147 homes), Nao Towns and Nao Towns II(172homes) and On the Mark (163 homes) in Markham, Ont.
• High Crown Estates (48 homes) in King City, Ont.
• Bea Towns (218 homes)in Barrie, Ont.

The lenders also asked in those filingsto appoint areceiver for two properties in Kleinburg, Ont., that areowned byHighviewBuilding Corp., a subsidiary of StateView Homes, and a commercial industrial property owned by TLSFD Taurasi Holdings.

Lawyer Sean Zweig, who represented Kingsettand Dorr at the hearing, said the three lenders agreed that the receiver would not sell anyproperties before May 29 soStateView has an opportunity to refinance and possibly pay back some or all of its lenders.

A hearing is scheduled for June 5 to grant the receiver approval to sell the properties, provided a refinancing isn't successful, Zweig said.

What about the buyers?

StateView Homes declined to comment on how the buyers will be affected, saying the matter is before the court.

However, founders Dino and Carlo Taurasi said in a statementthat they had no involvement in the "wrongful conduct" of the company'sformer CFO, Daniel Ciccone, whom they said was fired as soon as they learned of the situation.

"Since that time, Dino and Carlo have been working tirelessly with all affected lenders and stakeholders to find a mutually beneficial solution for all parties and to move forward with their business and projects," the statement said.

Insolvency lawyer David Schatzker, who is not involved in the case, previously told CBC Toronto that if thelenders succeeded in having a receiver appointed, there's not a lot buyers who have already paid deposits can do.

The receiver may allow the project to finish and the buyers wouldbe able to complete their home purchases, he said.However, if thereceiver ordersthe projects sold to repay the lenders, those buyers may never see the homes they bought because thenew developerswould beunder no obligation to honour the contracts StateView signed with its original buyers.

Under Ontario regulations, buyers'deposits are normally protected.