The One Condo development on Bloor Street in Toronto, a troubled project once marketed as Canada's tallest condo building, could not find a buyer and its senior lenders will finalize construction.Abhijit Alka Anil/The Globe and Mail
The One, Sam Mizrahi’s luxury condo project in Toronto, could not find a buyer after a months-long sale process, so the court-appointed receiver who now controls the project is hiring Tridel Corp. to finish construction.
As part of this agreement, The One will file for creditor protection under the Companies’ Creditors Arrangement Act (CCAA) and the project’s senior lenders will finance its remaining construction.
The One has been under development since 2015 at the corner of Yonge and Bloor streets in Toronto, and was originally marketed as Canada’s tallest condo building with 85 storeys of residential units, hotel rooms and retail spaces. Mr. Mizrahi, a real estate developer, owns 50 per cent of the project and former road-paving magnate Jenny Coco owns the other half.
Despite some early marketing buzz, The One is now years behind schedule and hundreds of millions of dollars overbudget – owing, in part, to severe cost inflation and construction delays caused by the COVID-19 pandemic. Lead lender KEB Hana Bank, a commercial bank based in South Korea that is acting as trustee for investor IGIS Global, requested that the project be put into receivership in October, 2023, and Alvarez & Marsal took control of it as receiver shortly after. At the time, The One had $1.6-billion in debt.
Over the 14 months since, Alvarez & Marsal has alleged project management deficiencies and replaced Mr. Mizrahi as The One’s general contractor with SKYGRiD Construction Inc. The One was also put up for sale.
When launching the sale process this summer, Alvarez & Marsal cautioned that creditors would not accept anything less than $1.2-billion for the troubled project. If no bid satisfied that minimum, the senior lenders were committed to financing the completion of construction.
In a new report filed Wednesday, Alvarez & Marsal said 10 participating bidders submitted development proposals and one presented two forms of “transaction,” or sale, proposals. Ultimately, the receiver determined that the transaction proposals were not qualified bids.
After narrowing the development proposals down to four qualified bidders, the receiver chose Tridel to take over from SKYGRiD as development manager, construction manager and general contractor. Tridel will be paid on a fee-for-service basis.
Tridel is a well-known developer in Toronto and has experience with large, high-end projects, including developing condos at The Well, a large office, retail and residential complex on the west side of the city’s core.
“Tridel’s premier reputation in the development industry will be of additional value in the construction and marketing of the project,” the receiver wrote in its new report.
Tridel has also granted The One’s owners a licence to use its name and branding in the future sale or lease of condo units and in connection with its commercial component.
A full-blown sale of The One was widely considered a tall order given the history of the building and its cost overruns, higher borrowing costs relative to the ultra-low rates that were available during the pandemic and a slowdown in the condo market.
Even though interest rates are now falling, including another 50-basis-point cut on Wednesday, the preconstruction condo market is in a slump and condo sales in the Toronto region at their lowest level in decades. Investors make up the bulk of the preconstruction buyers and many are no longer interested in condos because they cannot count on the properties to increase in value.
Because borrowing costs are still relatively high and some of the newly built condo units have dropped in value, some preconstruction buyers are having trouble getting mortgages to close on their units. And even if they can secure financing, they are at risk of losing money every month because rents often are not high enough to cover their mortgage payments, condo fees and taxes.
The One is also in a precarious financial position. In a prior report filed in late May, Alvarez & Marsal said it wanted to redesign the upper part of the building by adding more units per floor, instead of only two to four luxury suites per floor because of low demand for the large, highest-priced units. Just over 70 per cent of the large upper-floor condo units had not been sold, and of the 19 that have been, nine of the buyers were in default on their required deposits.
It is also unclear which retailer will take the large space on the ground floor. The One originally had a deal with Apple. However, in 2021, the tech company threatened to pull out and in the aftermath, Apple and Mr. Mizrahi sued each other for breach of contract. According to the receiver’s first report, a settlement was brokered before the two parties were set to go to trial.
Construction on The One is progressing. When the receiver took control in October, 2023, tower slabs in the building were poured to the 42nd level, but by the end of November, 2024, an additional 34 floors had been poured. Gas service has been installed in suites up to level 47 and HVAC distribution is partly completed to level 59.