Government lender wins court order over unpaid debt
An affordable British Columbia housing project that was completed and occupied now faces foreclosure by its government lender over an outstanding mortgage debt of over $18 million.
The Olympic Villas, a 75-unit rental complex that opened to tenants last November, is in a legal battle with BC Housing, the Crown agency that provided $16.6 million in low-interest construction financing for the project through its HousingHub program.
According to court documents, Olympic Villas Inc., the development company, and its construction manager, TBS Procurement Interface Inc., have failed to repay the $16.6 million mortgage and accrued interest totalling over $17 million as of last September.
The developers claimed they paid the $3.9 million overrun themselves but fell behind on mortgage payments to BC Housing, missing the final extended repayment deadline of November 1, 2022.
Despite achieving full occupancy in October 2023, the developers incurred a significant cost overrun of 19.8% due to pandemic-related supply chain disruptions and regional forest fires. This increased the project's cost to $23.6 million from the original $19.7 million budget.
Olympic Villas and TBS Procurement also attempted to convert the foreclosure proceedings into a civil action, arguing that BC Housing's actions were "unconscionable." They raised several issues, including the timing of the default notice.
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Court documents reveal a series of events leading to the foreclosure, including disagreements over interest rates and missed property tax payments.
The developers said BC Housing threatened foreclosure in mid-2022 while construction was ongoing, forcing them to accept a higher interest rate to avoid default.
Olympic Villas and TBS Procurement are now looking to either sell or refinance the property. They are exploring potential funding from Canada Mortgage and Housing Corporation (CMHC).
The CMHC refinancing process, however, is complicated by the requirement that the project be 97% tenanted, while Olympic Villas is currently 84% tenanted.
Despite this, the developers said they could secure a sale or refinancing by November 2024 to pay off the debt in full.
"One of the options the borrowers have been actively pursuing is to have the Canada Mortgage and Housing Corporation (CMHC) refinance the property," the developers said in a court filing. "However, as a federal Crown corporation, CMHC requires the borrowers to work through much red tape, including a restriction on financing, which requires the project to be 97% tenanted.
“Currently, [Olympic Villas] is 84% tenanted in a town with a population of approximately 7,000 residents. The borrowers are actively marketing the project for rent through a marketing agency and marketing campaign and are confident that the project will achieve 97% tenancy within the next year."
If the debt remains unpaid by November 20, BC Housing can apply for conduct of sale, allowing them to sell the property to recover the debt. The borrowers have engaged Colliers to solicit offers for the property, currently valued at $14.6 million by BC Assessment.
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