Court-ordered sale of insolvent Port Coquitlam development approved by B.C. Supreme Court

The B.C. Supreme Court has forced the sale of a major development site in Port Coquitlam’s downtown core, after the project fell into receivership earlier this year.

The sale of The Met, Quarry Rock Development’s (QRD) six-storey, 80-unit project on 2245 McAllister Ave, to Northstar Development for $11.6 million was approved by the court on Nov. 20.

“Any delay would simply result in further expense and loss to (the bank) at some future date,” said Justice Shelley Fitzpatrick. “No one disagrees that the project has been sufficiently exposed to the market and that potential offerors have been notified of the purchase opportunity.”

Canadian Western Bank’s (CWB) receivership application was approved in April 2024, after QRD defaulted on its financial obligations pursuant to a $12.7 million loan dating back to 2020.

In total, the Burnaby-based developer owes $23 million to 57 creditors over the project, with total company assets valued at $29.6 million, according to the receivership statement.

“Due to a number of factors including construction delays and rising costs of borrowing, the debtors did not have sufficient access to capital to fund ongoing obligations as they became due,” a report from the receiver said.

In fact, four other QRD developments in B.C. have gone belly up since 2023, including three in Langley and one in Richmond.

The Met received final approval from Port Coquitlam council in August 2023. It was originally granted a development permit in 2020, but QRD returned to council with a revised application asking for an extra floor and 17 more units.

Starting in the fall of 2023, however, QRD started to default on its payments to CWB, and various liens were registered against the property by building contractors. As of April 2024, QRD owed approximately $10.5 million to builders’ lien claimants, and $700,000 to unsecured creditors. The City of Port Coquitlam is also listed as a creditor, although for an unspecified amount.

CWB filed its petition in December 2023, asking for the immediate appointment of a receiver, though QRD initially opposed the application arguing it wanted to shop around a sales agreement with other potential purchasers.

One interested buyer was Mosaic Seniors Care Society, which entered into a preliminary sales agreement for $25 million, but the deal collapsed after Mosaic did not secure a deposit.

The property was eventually listed by a court-approved agency for $18.5 million, receiving four offers ranging between $8 million and $13.2 million. Northstar Development’s winning $9-million bid was eventually upped to $11.6 million following further negotiations.

QRD attempted to adjourn the sale process in June 2024 to pursue a sale with BC Frontier Housing Society, a non-profit housing provider associated with Mosaic, which had issued a letter of intent to purchase the property for $28.4 million

The adjournment request was opposed by the receiver and CWB, and ultimately rejected by Justice Fitzpatrick on Nov. 20.

Fitzpatrick noted that debtors often oppose sale approvals to find better offers or even refinancing options to prevent an entire loss of their interest in a property.

She emphasized that Frontier’s letter was simply an non-binding expression of interest, and curiously, significantly higher than all other initial offers and appraisals.

Fitzpatrick noted an “unusual condition” in the letter, in which Frontier would borrow funds of up to $9.8 million from QRD, at no interest, until the “cash flow allows for its repayment.”

“There is no indication as to how Frontier was going to provide assurances as to that ultimate repayment, whenever it would be made,” she said. “In my view, in reality, such a provision was really only to an illusory payment that, on the surface, created a very inflated purchase price.”

Fitzpatrick concluded the other more concrete offers presented by the receiver would guarantee repayment to the bank, lienholders, and other unsecured creditors.

The sale is expected to be finalized on Jan. 22, 2025.