Several months after the District Northwest project by Thind Properties was placed under receivership, the Receiver is set to return to court with a proposed sales process as well as a stalking horse bid.
The District Northwest project is set for 13438 105A Avenue in Surrey, a two-acre site located southeast of Whalley Athletic Park, about midway between the Expo Line SkyTrain’s Gateway Station and Surrey Central Station.
For the site, which is legally owned under 105 University View Homes Ltd. and beneficially owned under District Northwest Limited Partnership, Thind Properties was developing two high-rise towers with a total of 1,023 units, of which 873 (85.3%) had already been pre-sold by the time the project was placed under receivership on November 8.
As first reported by STOREYS, the project was placed under receivership at the request of Toronto-based KingSett Capital, pertaining to a first-ranking mortgage agreement the two sides entered into in February 2022. The principal amount was $55,750,000, with interest accruing at the RBC Prime Rate + 4.55%, with a floor rate of 7.00% per annum. The loan agreement was then amended in October 2023, with the principal amount increased to $79,912,500 and the interest rate increased to the RBC Prime Rate + 7.04%, with a floor rate of 9.49%.
KingSett Capital is now owed $88,681,620.18 as of January 6, 2025, with interest accruing at the latter rate. KingSett is also owed, as first reported by STOREYS, an additional $220 million pertaining to two other Thind projects.
The Proposed Sales Process
Once approved by the court, the sales process would unfold relatively quickly, with a deadline for letters of intent set for May 9 and a final bid deadline set for June 13.
Although it is not always the case, the sales process is set to commence with a stalking horse bid — a default bid conditional on no better offer being received — of $86,000,000 by 1419195 BC Ltd., an entity controlled by Coquitlam-based construction company BM Group (BMG).
The Receiver entered into a sale agreement with BMG on March 12 and the $3,000,000 deposit has already been paid. The transaction would be carried out via a reverse vesting order (share sale), avoiding the property transfer tax, and is set to close 10 business days after court approval, with an outside closing date of September 10.
A rendering of the two District Northwest towers. / Thind Properties
With a stalking horse bid in place, any bidder looking to buy the property will have to beat the offer by a minimum of $500,000 and also cover the $1,000,000 break fee, meaning bids have to exceed $87,500,000.
If more than one such offer is received there will be an auction.
The Presale Purchase Agreements
Critical to the insolvency and sales process are the presale purchase agreements for the 873 units that have already been sold. The District Northwest project was being marketed by Rennie. Sales launched in December 2021 and approximately $78 million in deposits has been collected. According to the Receiver, all of those presale contracts have an outside closing date of December 31, 2027.
There is often uncertainty around what will happen to presale contracts when a project becomes insolvent, but there is much more certainty with District Northwest, as the stalking horse bid includes the assumption of the existing presale contracts. According to the Receiver, the deposits are currently being held in trust and they are proposing the deposits be transferred to Bennett Jones LLP to hold in trust, in order to faciltate a later transfer to the new developer.
In November, the BC Financial Services Authority asked Thind and the Receiver to cease sales. It is now expected that the Receiver will be filing a new disclosure statement that would allow sales to restart. At that time, the existing purchasers will have the option to back out of their presale contracts. The buyers who wish to continue with their purchase, however, will be required to agree to an amendment that extends the outside completion date to December 31, 2030.
As this creates some uncertainty for the new developer, the stalking horse bid by BMG is also contingent on achieving a certain level of presales. By June 6, 2025 (ahead of the sale of the project being approved), there either has to be enough units under contract that the aggregrate sales price is at least $420,000,000, or the amount of deposits collected has to total to at least $63,000,000.
In other words, the fate of the District Northwest project will be in the hands of the presale purchasers. If too many purchasers back out, the stalking horse bid may potentially fall through.
All of the above is up for court approval on Wednesday, April 2. On that day, the court is also set to approve the sales process (without a stalking horse bid) for Thind’s Minoru Square project. That property had been listed for sale by JLL prior to it being placed under receivership and the Receiver is seeking court approval for JLL to continue listing the property, now as a court-ordered sale.