The landmark tower’s future is in doubt as explained in this article by Kevin Donovan that first appeared on the front cover of Saturday’s Toronto Star.
Below is the article in it’s entirety.
Jul 18, 2009 04:30 AM
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The gleaming 80-storey condominium tower that was to lead the revitalization of the Yonge-Bloor intersection in Toronto is teetering on the edge of extinction.
On Monday, the Toronto lender that advanced a $46 million loan is going to ask a court to put the Kazakhstan-backed project into receivership and sell off the now-vacant land its international developer boasts is the “best address in the world.”
The lender, a consortium of Toronto businessmen, alleges in court documents that Kazakh developer Bazis International has defaulted on its land loan and the Kazakh bank backing the tower portion of the project is involved in a “massive financial scandal involving fake loans, racketeering and money laundering activities.”
“The (land) loan has been in an almost constant state of default since December of 2008,” said Toronto consortium leader Gary Berman, in a court affidavit supporting his group’s bid to appoint receiver Ernst &Young.
Berman states in the affidavit that his group wants its loan repaid, or they are willing to purchase the property in a court-approved sale.
Michael Gold, the Canadian face of the Kazakh project, fired back late yesterday, telling the Star he will fight the lender “vigorously” and the project will go ahead. Documents he filed in court say he plans to pay the land loan back, but needs time. Gold’s documents do not deal with allegations against Kazakhstan’s BTA Bank, though he noted the bank is “undergoing a restructuring process.” Gold said a receiver can be appointed, but he wants to choose the firm.
About $70 million in deposits put down by roughly 490 condo buyers remain in a law firm’s trust account in Toronto.
Yesterday, the presentation suite at the southeast corner of Yonge and Bloor St. was locked tight. A sign noting its hours indicated it should have been open. The sign encouraged interested buyers – condo unit prices start at $500,000 to “over $8 million” – to book an appointment. The Star left a message, but did not get a call back.
Buyers who entered into agreements for units from floor 68 to 80, were told this week they will get their money back. Gold’s development team has decided to cut the size of the project to 67 floors to reduce construction costs estimated originally at $542 million. No construction has taken place, but the site has been cleared. The move-in date was to be sometime in 2011.
When the units were first offered for sale in November 2007, prospective buyers and real estate agents paid people to line up for weeks, acting as place markers until the sales door opened.
The development proposal for the property dubbed 1 Bloor was enticing. A sweeping slice of glass rising 80 storeys on the southeast corner of the “epicentre of Canada.” The glossy brochure spoke of a mood of “effortless sensuality” in the proposed building. There would be a Zen meditation lounge and a reflecting pool. “The interiors of 1 Bloor are sensual, seductive, sexy, sophisticated and intensely urbane.” Units would make “you feel transported to a different place.” The bathroom would be “a true sanctuary.”
In an interview at the time, Gold, a Russian-born Canadian who married into Kazakhstan’s wealthy Belovich family, said the response from condo buyers was “amazing.” Offering 612 condo units, Gold told the Star in 2007 he could sell 5,000. The Belovich family started the Bazis firm in 1991. Gold is married to Veronika Belovich, a member of the family.
Toronto Councillor Kyle Rae backed the project, saying it would restart an area of Toronto he called “an armpit.” Rae was not available for comment yesterday.
A lot happened between 2007 and now. Bazis International of Kazakhstan (Gold runs the Canadian arm of the company) initially purchased the land for $63 million. To finance it, Bazis had a $46 million loan from French bank Société Générale. Bazis stopped making loan payments last December.
Société Générale, faced with its own financial woes, sold off the loan to Berman’s group for an undisclosed amount. The group is made up of representatives of three Canadian companies, Tricon Capital Group, the Minto Group and KingSett Capital.
Now, the group wants to be paid out, or to be allowed to buy the property with an eye to building a more modest project. Berman’s group has offered $50.5 million as the opening bid of an auction they suggest take place soon.
In an email to the Star yesterday, Bazis boss Gold accused Berman’s group of trying to “acquire the property for itself and cancel all sale agreements and the proposed development on the site.”
“Bazis International Inc. is vigorously opposing the receivership proceedings and fully intends to honour all agreements and to complete the development as planned on schedule,” Gold said in a written response to a request for an interview.
The court documents are peppered with international intrigue.
Gold announced in one document that, in June, he had found a financial solution in BTA Bank, which he said committed $195 million (U.S.) to the project.
However, BTA bank is under criminal investigation in Kazakhstan, according to statements made by federal prosecutors in that country. Prosecutors there have filed lawsuits trying to recover more than $1 billion (U.S.) in assets. According to a statement in March by the prosecutors, the bank’s former chair and CEO were involved in a loan fraud scam for years. One published report said the chairman initially denied any wrongdoing before going into hiding.
According to Berman’s group, they determined BTA could not possibly come up with the promised cash. The Kazakh government has announced a bailout of the bank, but international credit rating agencies downgraded BTA “four levels below its previous junk bond rating.”
In his response, Gold said BTA is his company’s “house bank” and he believes it will be able to fund the $195 million loan to his Toronto project.
