Jamesville Lofts builder tried to buy back units from investors in months before insolvency

Areacor Inc. tried to buy back units from investors in a failed downtown Hamilton condo development 10 months before the company was declared insolvent.

Plans to erect a modern, six-storey condominium with 40 residential units at 15 Cannon St. W. were halted in June 2021 after Areacor's contractor, Fusioncorp Developments, ended their partnership, claiming more than $2.4 million in unpaid labour and construction fees.

On at least four separate occasions, Fusioncorp has been forced to issue formal notices of default to obtain payment," Fusioncorp's lawyer wrote in a June 25 letter to Areacor, attached in bankruptcy documents obtained by The Spectator.

The letter came as the Etobicoke-based company - placed in receivership in January - grappled with significant cost overruns at the long-stalled Jamesville Lofts, including hefty budget bumps and loan rejections from its main lender, according to bankruptcy records.

But three months earlier, in March 2021, Areacor offered more than two-dozen investors one-time" offers to terminate their deposits on units they bought some four years earlier.

The offers - received by email and reviewed by The Spectator - made no mention of the company's money troubles or project delays.

The builder is providing you a one-time COVID-19 offer to terminate the purchase for Unit 406 and receive a full refund of your deposit monies," reads an email Areacor sent to fourth-floor condo owner Nathan George on March 26 last year.

George had no more than five days to respond. He didn't budge.

The seasoned property investor deposited nearly $80,000 - 20 per cent of the purchase price - for a Jamesville Lofts unit in November 2017. By now, he thought, the condo would be worth far more considering the state of the local market.

I thought, OK, I'm in a great position, because obviously they want to buy it back to sell it for more,'" George said in a recent interview. I was confident the property was accruing value - even if construction was slow - because why else would they want to buy it back?"

A month after he received the email, and unbeknownst to buyers, the company increased its project budget for the fourth time in three years, records show.

We felt that they were trying to find a way to get more money to get the project done," said Jeff Soldaat, who declined a refund on his $80,000 deposit for a unit. Why would we sell it if the property's gone up in value and construction has started?"

Soldaat and George both said they never heard back from Areacor after the emailed offers - despite several inquiries regarding construction progress. They only learned about the project being in limbo after The Spectator published a story on the insolvent company last week.

It's unclear how many units - if any - Areacor successfully bought back. The company has not responded to several requests for comment.

Efforts to repurchase condos from investors caused a rift in Areacor's relationship with its main sales representative, Michael St. Jean Realty, which said it was unaware buyback offers were made until investors asked what was going on.

It was a surprise to us," said Michael St. Jean, CEO of the local realty. Our recommendation to the buyers was don't give your unit back."

St. Jean said his team confronted the builder numerous times" about the offers and they denied it.

But we were getting calls all the time from buyers telling us the same thing, that (Areacor) wanted to buy back units," he added. Even our own staff who purchased units were getting offers. We knew what was going on but they were not transparent."

Eventually, according to St. Jean, Areacor admitted to making the offers. The realty - which says it was still unaware of the extent of the developer's financial troubles - declined to help, he said.

We flat out said we're not going to participate in any situation where we reach out to our clients, encourage them to give their units back, and then relist the same units 15 minutes later for $100,000 or $150,000 more than they paid," said St. Jean.

While the realty refused to convince" existing clients to resell their units, St. Jean said they agreed to prepare a marketing campaign" for Areacor to off-load their remaining condos - of which there were 11 at the time, according to bankruptcy records.

We gave them our recommendations and they said they'd get back to us soon, but we never heard from them again," said St. Jean. They went dark."

Areacor was placed in receivership on Jan. 13 after owing more than $9.9 million to 21 creditors.

RSM Canada Limited, which has been appointed receiver of Areacor's assets and properties, says it's still too early to tell" whether the condo development will be demolished or eventually completed.

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