In what may be one of the most high-profile real estate insolvencies of the year in Canada, both in terms of the amount of debt and the parties involved, the Edmonton City Centre mixed-use complex in the heart of downtown Edmonton has been placed under receivership, according to filings in the Court of King’s Bench of Alberta.
The Edmonton City Centre complex is located at 10025 102A Avenue and includes not just the mall, but also the Centre Point Place at 10205 101 Street NW that’s home to CBC, the 29-storey TD Tower at 10088 102 Avenue NW, and the 24-storey 102A Tower directly to the north that was formerly known as the Oxford Tower.
The mixed-use complex spans across 1.4 million square feet over three city blocks and was acquired by LaSalle Investment Management in November 2019 — through its LaSalle Canada Property Fund — alongside Frankfurt-based Universal Investment on behalf of Bayerische Versorgungskammer (BVK), North American Development Group (NADG), and Montreal-based real estate firm Canderel from Oxford Properties, the real estate subsidiary of the Ontario Municipal Employees Retirement System (OMERS). Financial details were not disclosed.
According to a press release announcing the acquisition, North American Development Group handles property management and leasing for the retail component, while Canderel handles property management and leasing for the non-retail components. According to court documents, the property is owned under Edmonton City Centre Inc. (ECC) and beneficially owned by LaSalle Canada Core Real Property LP (45%), BAEV-LaSalle ECC Holdings Inc. (45%), NADG (ECC) LP (5%), and Canderel ECC Participant Limited Partnership (5%).
The Receivership
Edmonton City Centre. / Canderel
The receivership application was filed by Otéra Capital Inc., which is the real estate finance arm of Caisse de dépôt et placement du Québec (CDPQ), the investment manager of pension plans in Quebec. Last year, CPDQ announced that it was integrating Otéra and its real estate arm Ivanhoé Cambridge into CPDQ. (The latter was renamed this year to La Caisse.)
According to CPDQ, Otéra entered into a commitment letter with Edmonton City Centre Inc. on August 30, 2019 and a formal mortgage agreement on November 7, 2019. The agreement consisted of two loan facilities: an acquisition loan in the principal amount of $128,500,000 and a capital expenditure/leasing facility in the principal amount of up to $27,000,000. Loan documents state that the loan was conditional on the borrowers acquiring Edmonton City Centre for a purchase price of $311,500,000.
CPDQ says that the owners had defaulted on both facilities after failing to make the required payments on December 1. Both loans were on an interest-only basis, but the second facility also matured on December 1 and the borrowers failed to repay all of the principal as well. The owners then also failed to make payments on both January 1 and February 1.
Both sides then entered into a forbearance agreement until July 1. However, prior to that, the owners committed defaults that were not covered by the forbearance agreement, including not properly maintaining the property.
“ECC acknowledged its inability to fund necessary maintenance and planned capital expenditures to maintain and protect the Property, and the Beneficial Owners confirmed they are unwilling to further fund ECC’s funding requirements, and, as a result, Otéra considered that its position was insecure and that its collateral had become further materially deteriorated or impaired,” said Otéra in its application.
As of June 1, Otéra was owed a total of $139,508,037.26, plus accrued and accruing interest, costs, and other expenses, and Otéra says it made a formal demand for payment on June 16. The owners have not made any payments since then, prompting Otéra to initiate the receivership proceedings. On July 7, the receivership application was granted and the proceedings are likely headed towards a court-ordered sale of Edmonton City Centre.