A Vancouver lender has petitioned the B.C. Supreme Court to appoint a receiver for a medical office project near the new St. Paul’s Hospital, saying the borrower, a Vancouver developer, defaulted on two mortgages totalling more than $60 million.
Shape Capital Corp. says it provided credit facilities of $65 million to a subsidiary of Keltic Canada Development Co. Ltd. for a 10-storey medical office building on Prior Street lands near the future hospital site.
Shape’s Aug. 25 petition says it issued a notice of default to Keltic on Feb. 7 for the latter’s alleged failure to fulfil various mortgage commitments. Shape said it also “became aware that the borrower had misappropriated $3.2 million from the holdback account established for the benefit of the contractors on the project.”
Shape says it issued demand letters and agreed to an interim forbearance agreement to avoid the need for an insolvency filing. But the forbearance period expired “without the debtors providing the lender with an adequately funded solution for the completion” of the project, it said.
Shape claims it became aware of a second unauthorized withdrawal from the holdback account. A construction firm issued a notice of default regarding the unauthorized withdrawals and threatened to suspend work on the project.
Shape says it made “protective disbursements” to the construction firm and BC Hydro, which was also owed some money for power supply, to avoid “serious delays.” Shape claims that as of Aug. 25, Keltic’s total indebtedness was $61,905,222 plus interest.
Shape’s claims have not been tested in court, and the respondents have not yet filed responses to the petition.
Reached for comment, Keltic CEO Rachel Lei said a receivership would be costly, and that it’s in everyone’s interest to finish the work.
“We are still trying to reach out to Shape to see whether we can avoid [receivership] by solving the issue through mutual understanding and agreements,” she said. “I’m still trying to do that, because apparently there are factors that help to mitigate Shape’s risk.”
Lei said the project is “85 per cent” done, and that only limited work remains. She said “20 per cent” of units have already been contracted, and that more buyers and tenants are expected before the new hospital opens in 2027.
Lei said her company is willing to cooperate with Shape, even if a receivership is approved by the court.
“We will still cooperate with them because we, Keltic, want to be a responsible corporate citizen, and we also want our partners and creditors to believe we are offering them the best effort we can to reduce the risk of the lenders and contractors,” she said.
The respondents named in the insolvency filing are Keltic (Prior) Development LP, 1319191 B.C. Ltd., Keltic Group Equities (2019) Ltd., Keltic Projects Development Ltd., 1232616 B.C. Ltd., Keltic Canada Development Co. Ltd., DDAW Holdings Ltd., Keltic (River Garden) Development Ltd., 1319188 B.C. Ltd., Wei Guo Li and Rui Wang.
Shape is seeking the appointment of FTI Consulting Canada Inc. as receiver. It is seeking various other orders including declarations of first-ranking charges, a declaration of default, a summary accounting of money owed, a one-week redemption period and, failing that, a foreclosure order and exclusive conduct of sale.
