‘We were duped’: Owners of financially plagued Jamesville Lofts speak out

Investors of a failed downtown Hamilton condo building say they haven't heard from its developer in months, sparking fears about when deposits they made four years ago will be refunded.

Areacor Inc. halted construction at 15 Cannon St. W. last June when plans to erect a modern, six-storey condominium with 40 residential units were scuttled by significant cost overruns and loan rejections.

Six months later, the Etobicoke-based company was placed in receivership after owing more than $9.9 million to nearly two-dozen creditors, leaving the state of its project in limbo.

Three people who bought units of the so-called Jamesville Lofts say they only learned of Areacor's financial woes after The Spectator published a story about the insolvent company this week.

We were absolutely left in the dark," said Jeff Soldaat, who placed an $80,000 deposit for a unit on behalf of his daughter in November 2017. We sent many emails (to Areacor) asking what was happening with the building and haven't received a reply for the past year and a half."

Areacor did not respond to a request for comment from The Spectator.

Work at the company's now-defunct downtown development had long-stalled since ground was broken in the summer of 2019.

Bankruptcy records show Areacor initially expected the condos to be completed by November 2019. But several roadblocks - including three hefty budget bumps in as many years and a $2.4-million lawsuit from its general contractor - saw the company continuously push that date back.

According to bankruptcy records, Areacor entered into agreements of purchase and sale for 29 of the 40 residential units it planned to build.

Darius Knight was one of those buyers.

The Toronto man said the opportunity to buy a contemporary apartment that promised floor-to-ceiling windows in an attractive downtown location was too good to pass up in November 2017.

In a phone interview Thursday, Knight recalled securing the last available Warhol" suite - the smallest of eight units Areacor offered - at an opening day" weekend hosted by the development's main sales representative, Michael St. Jean Realty.

There was a big lineup outside the (15 Cannon) office and a lot of excitement around these boutique apartments," he remembered. It was take it or leave it. There was no negotiating."

Knight said he didn't hesitate when he deposited around $61,000 for a 484-square-foot apartment intended for his daughter.

And, to his credit, the investment initially appeared to be sound. Two years after he made the deposit, construction began and Areacor reached out to him to ask what colour he'd like the condo to be painted.

It was glimmer of hope when they got us to pick colours, even if construction was slow," Knight said.

But then things went awry. Areacor halted communication with Knight and construction moved at an even slower pace. I started getting really, really concerned because there was nothing - absolutely nothing - going on with the building. There was no communication," he said.

There too was little-to-no communication with Areacor's main sales representative, said Michael St. Jean, CEO of Michael St. Jean Realty, adding his brokerage hasn't heard from Areacor in at least eight months.

They went dark," said St. Jean in a phone interview Friday, noting many of his staff members also invested in units at the Jamesville Lofts. I've never experienced anything like it in my career."

St. Jean said delays in new residential developments are common. Construction costs often exceed initial projections, he said, and closing dates are often pushed back. But what makes Areacor's situation very rare" is that they had started the project and sold more than 80 per cent of available units.

Projects get cancelled all the time, but what's really surprising is when a project gets cancelled after it's already started," he said. I've never worked on a project where things started and then suddenly stopped."

St. Jean said Areacor downplayed concerns with delays and attributed them to structural issues" with the building, not financial difficulties.

The issues were greater than they ever indicated to us."

The problems now facing investors are twofold.

For one, they worry about the state of their deposits. According to bankruptcy records, 26 buyers deposited more than $2 million into Areacor's project, of which more than $1.7 million was released to (Areacor) for use with respect to the development."

Does that mean their money wasn't kept secured in a trust and instead, like records suggest, used to pay for construction costs?

It remains unclear. Records state $20,000 per unit are guaranteed by the Tarion Warranty Corporation, indicating that at least a portion of deposits will be reimbursed. RSM Canada Limited, which has been appointed receiver of Areacor's assets and properties, declined to comment Friday when asked whether deposits would be returned in full.

Still, refunds notwithstanding, many investors just want to see the development finished because the housing market is much hotter than it was five years ago, said Nathan George, who deposited around $80,000 for a unit.

The property accrues more value over time, so if we had to buy again, we'd pay far more than we did in 2017," said George, who owns a few properties in Hamilton and created a Facebook group this week for worried owners.

Indeed, according to St. Jean, the price of a unit at 15 Cannon has nearly doubled since they first went up for sale. It was around $575 per square foot at the time; now it would be around $900 to $1,000 per square foot," he said.

For George, risk comes with any property investment - but the lack of communication from Areacor has left him feeling like there wasn't enough warning about the project's demise.

It shouldn't have happened like this," he said. We were duped."

Sebastian Bron is a reporter at The Spectator. sbron@thespec.com