98 James Street South is back in receivership, again, as the saga of The Connolly project (as it is known) continues.
A decade after the historic James Street Baptist Church was demolished using a “minor alternation” heritage permit, the site remains vacant, with the heritage facade slowly deteriorating.
In an endorsement order dated August 14, 2024, Ontario’s Superior Court appointed KSV Advisory as the receiver for the property, which will be put on the market again – in the hope of recovering some of the approximately $24-million in debt tied to the property. (As of April 15, 2024)
98 James Street South (2002) Inc. purchased the property from Hue Developments in 2022.
The Land Registry document included in the receivership documents states a $24-million sale price when 98 James South (2022) Inc. purchased from Hue Developments in 2022.
A $13.2-million mortgage was registered to the property, and it is owed to MarshallZehr Group Inc.
A $14-million take-back mortgage from Hue Developments, is also registered on title.
Hunter Milborne was the original president of 98 James South Inc. Milborne is the President and CEO of Milborne Group.
The sole director listed in the receivership documents is Michael Budovitch. Budovitch is VP special projects and business development at Milborne Group.
Receivership Follows Failure to Make Interest Payments to MarshallZehr
Receivership documents state 98 James Street South (2002) Inc. failed to make interest payments on a $12-million loan provided to the corporation by MarshallZehr Group Inc.
The loan was agreed to in August 2022, and interest payments are due on the first of each month.
No payments were made on November 1 and December 1, 2023. Following this, MarshallZehr Group Inc. began legal proceedings.
In its evidence to the Superior Court, lawyers for MarshallZehr state no further payments have been made.
The loan commitment letter, dated August 19, 2022, states the interest rate as “Prime + 6.30% per annum.”
The Hue Developments take-back mortgage documents state that it has a six percent interest rate and states a payment of $560,000 was due on January 8, 2026, and a payment of $140,000 on March 8.
Project Stalled Since New Owners Took Possession in 2022
Receivership documents state the project “has remained at the site plan approval stage since it was sold to 98 James Inc. in 2022.”
MarshallZehr President Cecil Hayes states in an affidavit that he “had communications with representatives for 98 James Inc. and was advised that 98 James Inc. does not currently have the means to advance construction” of the project.
Terracap Investments Showed Interest in Purchasing Before Receivership
In the August 13 affidavit, on behalf of MarshallZehr, the company’s lawyer states that Terracap Investments was conducting due diligence to purchase 85 percent of the property.
MarshallZehr filed its receivership application to the Superior Court in March. However, it did not come into effect until the August 14 court ruling because negotiations were ongoing with Terracap.
City Deadline of September 15, 2024, to Commence “Stabilization and Restoration Work”
The City of Hamilton granted its annual “minor alternation” heritage permit extension on May 3, 2024.
This year’s extension includes a deadline for 98 James South Inc. to begin stabilization of the facade.
The permit requires “that stabilization and restoration work on the retained historic structure commence, to the satisfaction and approval of the Director of Planning and Chief Planner, by September 15, 2024.”
Ken Coit, Director, Heritage and Urban Design, City of Hamilton, responded to TPR‘s emailed questions by writing:
“If the work is not completed in accordance with the conditions by the identified dates, then the heritage permit approval will expire. If a request for extension of the expiry dates of the existing heritage permit is received before it expires, then staff could consider granting an extension under the delegated authority of Council. Otherwise, a new heritage permit application, review and approval process would be required.
If the heritage permit expires the building remains designated and will continue to be monitored by the Building Division and Municipal Law Enforcement who are currently working with the receiver to resolve several Orders to Comply presently issued on the property.”
A Brief History of the James Baptist Site Redevelopment
The heritage-designated James Baptist Church was demolished in 2014. Officially, the demolition was classified as a “minor alteration” to the heritage building. The front facade was retained.
Since the 2014 demolition, the site has had three owners.
The first owner, who took possession from the former church parish, went bankrupt, after taking out several mortgages on the property.
Hue Developments and LCH Developments purchased the property in the bankruptcy sale.
This group sold the property in 2022 to 98 James South (2022) Inc., the current owners.
The property has planning approvals for the construction of a 30-storey residential condominium building with 315 units and ground-level commercial use.
The City of Hamilton has security for the heritage facade, and the planning approvals are conditional on its retention.
Next Steps
KSV will now seek a buyer, or buyers, for the property to maximize recovery on the loans and mortgages.
KSV’s receivership documents are available online: https://www.ksvadvisory.com/experience/case/98jamessouth
Production Details v. 1.1.0 Published: August 29, 2024 Last updated: August 29, 2024 Author: Joey Coleman Update Record v. 1.0.0 original version v. 1.1.0 added response from City of Hamilton regarding heritage permit conditions deadline
They should be given some sort of deadline to start construction or the City should expropriated the site for much needed surface parkland. Just as the Church was a sanctuary a small urban park would be great considering all the intensification.
There is a typo. It says sage instead of saga.
Thank you!
What a complicated mess.
Recall the previous Councillor raving about all the wonderful things this project was going to bring to downtown.