Rapidly rising interest rates have caused Coromandel Properties Ltd. — a major Vancouver developer specializing in high-density condominium towers — to file for creditor protection with $700 million of debt tied to 16 active residential real estate projects in the city.
Coromandel’s Feb. 6 petition to B.C. Supreme Court asks for a brief pause on enforcement steps being taken by creditors. This stay on proceedings will allow the company to continue to operate until it can be restructured, sold or sold in part. To do this, the court has appointed Deloitte as a monitor of the proceedings so as to avoid liquidating assets “on a fire sale basis.”
In some instances, Coromandel has already sold condo units that have not yet been built. The company is also intending to launch new rounds of so-called pre-sale condos this fall. In other instances, the company is acting as a landlord for rental units it is seeking to develop.
All of the projects are in jeopardy, according to the company, as eight secured lenders have issued default notices and demanded their loans, totalling close to $300 million, be re-paid.
Coromandel is in the business of buying multiple parcels of land (assembly), typically with low-density structures on them, and applying to have them re-zoned to build and sell condominiums, in most cases.
Coromandel creates separate limited partnership companies for each of its projects. Zhen Yu Zhong is listed as the sole director and officer of each of the general partners and registered owners for each of the projects. Partner companies include: CM Bay Holdings Ltd., Coromandel Resorts Ltd., Coromandel Capital Ltd., Coromandel Properties Ltd., Mulberry Capital Ltd., CM Bay Investments Ltd. and Baystone Properties Ltd.
Coromandel, Zhen and Junchao Mo are listed as guarantors of loans creditors are demanding back.
Coromandel started its business in 2013 and now has 30 employees via Coromandel, Mulberry and Baystone.
The $700 million of debt stems from the purchase of the 16 groups of properties between 2016 and 2021. In most instances the current assessed value is higher than the purchase price, according to the filing.
“Due to the rise of interest rates since 2022, the petitioners have had difficulty servicing the secured debt on projects,” the petition states.
Coromandel said compounding the rise in interest rates is the slow pace of approvals at city hall.
“Due to the foregoing issues and liquidity concerns, the petitioners have been unable to meet their obligations as they fall due. The petitioners have insufficient cash flow to complete development on the projects, have been unable to refinance their existing debts and liabilities, or sell assets at sufficient prices to avoid loss, all in the face of demands for payment by their secured creditors.
“As a result, the development work on various properties is in jeopardy,” the filing states, adding “in the absence of CCAA protection the completion of development on the Projects will not occur, the Petitioners’ assets will be forced into liquidation in a down market and returns to stakeholders will be substantially diminished.”
Southview Gardens is the largest loan a creditor is seeking, at $80.55 million. It’s a 6.6-acre site at 3240 East 58th Ave. consisting of 140 units of townhouses and apartments.
Coromandel bought the 40-year-old property in 2017 for $72.7 million. Rental income is about $224,000. The complex sits on parcels with no community plan but the filing states the company has been actively exploring options with the city.
If developed, the site could be a residential community comprising 1,150 units within four six-storey buildings. Doing so would bump the assessed value up to $592.8 million, from $99 million, the filing states. Peakhill Capital Ltd., Cenyard Pacific Developments Inc. and WB Canada Partners seek $50.8 million, $21.4 million and $8.3 million, respectively.
Bank of Canada interest rates have risen from 0.25 per cent in January 2022 to 4.5 per cent today. The rapid hikes, intended to suppress inflationary pressures, have since caused the real estate market to slow as buyers qualify for smaller purchases, putting downward pressure on property values.
Alberta 40: Two 18-storey towers with 349 rental units. *
Ash & Manson: Two 18-storey towers and one six-storey social housing complex in rezoning phase
Cambie 43: One 29-storey tower and a 15-storey hotel with rezoning approved
Cambie 45: One 21-storey tower and an 11-storey hotel with rezoning approved *
Cambie 59: Two six-storey condos with rezoning approved
Coromandel Ash: One four-storey condo still subject to the Cambie Corridor Plan
Georgia Court: A 25-unit rental complex in Chinatown under a proposal to re-develop *
Kingsway Frame: One parcel under proposal to develop 219 units
Laurel 57: Five parcels within the Cambie Corridor Plan to be developed into high-density complex *
Oak West 52: Twenty-three townhouse units that are 60 per cent complete and all but one sold
Pacific Burrard: The seven-storey Kilborn Building under a proposal to re-develop
Southview Gardens: An existing 140-unit townhouse and apartment complex proposed for 1,150 apartment units *
Transit Projects: Twenty-six parcels with rental units near SkyTrain in proposal stage for densification *
Wilmar: A heritage restoration project that includes five new infill homes that are 95 per cent complete
*Indicates creditor has applied to get its loan back.