Condo king files for bankruptcy protection
Harry Stinson in $11.8M feud with David Mirvish over 1 King West
Mar 09, 2007 04:30 AM
Flamboyant Toronto condominium developer Harry Stinson has filed for bankruptcy protection in a high-profile dust-up with his business partner, prominent theatre producer David Mirvish.
The battle pits two of the city's most enigmatic personalities against each over the historic 1 King West condominium and hotel development, while threatening the move of one of Canada's oldest and most prestigious Bay St. clubs.
Stinson, a veteran developer and one of the pioneers of the condo-hotel boom in the city, has filed under the Companies' Creditors Arrangement Act at the Superior Court of Justice for two of his companies that are involved in that project, in a case adjourned to later this month.
The move is not considered bankruptcy, but allows troubled corporations to restructure their financial affairs. CCAA presents an opportunity for companies to restructure under a formal plan of arrangement overseen by a federal court and allows creditors to receive some form of payment.
Considered an innovator by many in the industry, Stinson is well known from his late night television ads touting his projects, while Mirvish is Toronto's biggest theatre impresario whose family operates the Royal Alexandra and Princess of Wales theatres.
"It has been humiliating to have to do this. But I would very much like to see a resolution. We don't want the operations of the project jeopardized by a business squabble that should have been fixed," said Stinson in an interview, sitting in the former Dominion Bank vault in the heart of the city's financial district.
David Mirvish was in New York yesterday, but in a statement to the Star, he said:
"This matter took us completely by surprise. As by far the biggest creditor of this group of debtors we were surprised and disappointed not to have been consulted and we stated that position to the Court."
According to documents obtained by the Star, Stinson's two companies, Stinson Hospitality Inc., and Dominion Club of Canada Corp., owe more than $20 million. The main secured creditor is Ed Mirvish Enterprises Inc. for $11.8 million. Unsecured creditors include debenture holders for $5.25 million.
What is perhaps more remarkable, is the fight perhaps wasn't more public. Both men have put on a chummy public face in the past. But that has apparently come to an end. Stinson says he hasn't had a lengthy sit down meeting with Mirvish to discuss the problems at the project "in years."
While Stinson was the visionary behind 1 King West, which includes the refurbishment of the historic Dominion Bank building with an elegantly slim 51-storey hotel and condo tower behind, Mirvish was the money backing it.
The units in the complex are typically owned by individual investors who have the option of pooling their units into the hotel operation if they don't happen to live there.
The hotel was open for business in 2005, and 540 units have been sold, with 32 units still owned by the Mirvish Group. Three of the units are penthouses, with an asking price of about $6.5 million each.
Stinson Hospitality Inc. owns public areas of 1 King West, such as the front desk, the valet service, the elevator and other operational components. Stinson's Dominion Club of Canada Corp. owns the second floor former grand hall of the bank, and the bank vault area downstairs. Together, the two companies comprise about 42,000 square feet of space in the project.
The financial deal between Stinson and Mirvish meant Stinson would get compensated through hotel and leasing operations, while Mirvish would receive the proceeds of condo sales, said the affidavit.
"The condominium unit purchasers expected to receive a deluxe condo/hotel property, and I ... expected to receive a turnkey facility," said Stinson in his filing.
In an interview, Stinson argues that the valuation of the amount owed to Mirvish should be closer to $2 million or $3 million, since he claims Mirvish did not finish the project to acceptable standards. He said he applied for CCAA reluctantly, and only as a last resort. The action was triggered because Mirvish had demanded the $11.8 million, which was overdue, said Stinson.
"We really think this should be fairly looked at," said Stinson. "I really didn't want to do this. But what we need is someone to take the both of us by the scruff of our necks to sit down and talk this out objectively."
Meanwhile, the fallout has kneecapped one of the country's most historic clubs.
The Ontario Club, founded in 1909, with many of the country's movers and shakers as members, may have to look for a new home – again.
It currently occupies a full floor in the Commerce Court office complex in the financial district, but was supposed to move to 1 King W. on March 1. The move had been jeopardized, says Stinson in his affidavit because "representatives of the Mirvish interest have steadfastly interfered and threatened the Ontario Club's representatives with legal action."
Robert Clark, chair of the Ontario Club, said in an interview that the club reluctantly called off the move as of yesterday.
"There were a number of complexities that we were completely not aware of before we got involved and we'd like to see that cleared up," said Clark.
As a result, the club will be homeless as its lease expires at the end of March, although a number of other private clubs have offered their facilities in the meantime for the club's 1,200 members, Clark said.
A fixture on the Toronto development scene, Stinson has long been ahead of the curve – perhaps too far for some of his backers – in real estate development.
He was the first to market lofts on a big scale in Toronto with the Candy Factory when it wasn't fashionable to do so, and he was one of the first in the city to jump on mixed-use condominium and hotel developments.
Mirvish, who has been known to have a major interest in art and architecture, and was responsible for making Toronto one of the top spots in North America for live theatre, also happens to be the son of Toronto icon Ed Mirvish, of Honest Ed's fame.
Meanwhile, Mirvish may also have another issue on his hands in the future, with a lawsuit being threatened by the condominium's board of directors, on which Stinson was recently elected as a director.
The condominium corporation is arguing that 1 King West did not finish the building to acceptable standards and it may cost up to $20 million to fix the problems.
"We are dying the death of a thousand cuts. It's an amazing building, but there are a heck of a lot of little things that need to be done," said Bob Verdun, chair of the board, and a well-known shareholder rights activist.
Brian Smith, the vice-president of the condo board, and a former associate press secretary for Pierre Trudeau, said the building needs serious work including better insulation and windows, which could cost millions.
"I think there is a reasonable expectation that, when you purchase a condo for $500 a square foot, you don't find the wind blaring through your windows," Smith said.
Despite the problems, ironically the hotel side of the business is actually doing well, said Stinson.
During this week's mining convention for example, the hotel was full, and it has maintained a healthy occupancy rate over the last year.
The squabble also does not affect his Sapphire Tower development on Temperance St. that started selling last month, Stinson said.
Stinson's lawyer Arthur Jacques stresses that his client isn't bankrupt, but simply wants to make the project work.
"It's about restructuring the company. Unfortunately what you have are two men who are visionaries who came together and couldn't come to terms in the end."