Restructurings more common in current difficult economic, regulatory environment
Developers in Vancouver are facing a confluence of economic and regulatory factors that are financially stressing projects and making insolvencies more common.
Sometimes, insolvency leads to receivership. This is when a creditor goes to court and obtains an order that a neutral third party or “receiver” be appointed to put together an assessment of the business and a plan going forward. According to the federal Office of the Superintendent of Bankruptcy, there were 283 bankruptcies and proposals in the real estate, rental, leasing and construction sectors under the BIA in Q2 2024, compared to 198 in Q2 2023—an increase of 43 per cent.
Often there will be a sale or the project will get built out. There are time-limited stays of proceedings, so no party can enforce its debts without court approval. Creditors hope to eventually get paid out as best as possible depending on their rank. On January 11, 2024, after the B.C. Supreme Court was petitioned by the Bank of Montreal, Deloitte Restructuring Inc. was appointed as the receiver and manager, without security, of certain lands and assets of Harlow Holdings Ltd., Haro-Thurlow Street Project Limited Partnership, Haro and Thurlow GP Ltd.
Another high-profile insolvency in Vancouver was the Modus project, which entered receivership in May 2024 when construction was nearly halfway complete. The project by Centred Developments, legally owned by Grandlake Investments Corp., was meant to be 17 townhouses at the intersection of Park Drive and Granville Street. The proceedings were initiated in mid-February by First Commercial Bank, which was owed more than $10 million according to Storeys.
Pre-sale purchase agreements can be terminated and the property re-marketed. Sometimes, deposits are returned months later with interest, and sometimes they are not returned at all. Derek Lai, partner and senior vice-president with Crowe MacKay LLP, is a licensed insolvency trustee whose book of business includes foreclosures and strata wind-ups. He said that sometimes, trustees like him are engaged by secured lenders to perform so-called “look-see” monitoring pursuant to security agreements.
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