[Introduction]
In a surprising turn of events, three landlords who collectively own hundreds of rental properties in Ontario are facing a dire financial situation. According to documents filed with the Ontario Superior Court of Justice, Dylan Suitor, Ryan Molony, and Aruba Butt, the masterminds behind 11 now-insolvent corporations, have accumulated a staggering $144 million in unpaid loans. In addition to this financial burden, the landlords are also finding themselves embroiled in dozens of lawsuits from creditors. The court has granted them bankruptcy protection, allowing them to halt legal proceedings against their corporations in an attempt to salvage their businesses. This revelation has sent shockwaves through the real estate market, as these landlords are currently among the largest residential real estate holders in Ontario.
Lack of Funds and Legal Troubles
The court documents reveal that the landlords, despite being major players in the real estate market, are facing a severe liquidity crisis. With only $100,000 in the bank, they are struggling to meet their financial obligations. Consequently, they have sought protection under the Companies' Creditors Arrangement Act (CCAA), shielding themselves from legal action by lenders for the time being. However, this temporary reprieve does not diminish the seriousness of the situation. Currently, there are 32 ongoing lawsuits against their corporations in various courthouses across Ontario.
It is worth noting that the landlords and their corporations are primarily based in the Hamilton area. They specialize in acquiring, renovating, and, in some cases, reselling distressed residential real estate in undervalued markets. These markets include Timmins, Sault Ste. Marie, Sudbury, as well as smaller communities such as Kirkland Lake, Temiskaming Shores, and Val Caron. Their expansive portfolio of 406 properties makes them one of the largest holders of residential real estate in Ontario.
Unoccupied Rental Units Amplify the Crisis
Adding to their financial woes, the landlords are also contending with more than 200 empty rental units. Insiders reveal that financial constraints prevented the completion of renovation projects in these units, which now sit vacant. As a result, the landlords are losing an estimated $350,000 in potential monthly revenue. The consequences of this predicament extend beyond lost income. The empty units not only represent a significant financial burden but also impact the housing market and the availability of affordable housing for residents in these areas.
Caption: Robby Clark (left) and Dylan Suitor (right)
The Personalities Behind the Corporations
Among the key personalities involved in this complex situation is Dylan Suitor, an established Hamilton investor with a notorious reputation. Last year, Suitor made headlines for shutting off tenants' water for nearly three months in one of his properties. He claimed that this drastic measure was necessary to evict tenants for renovations, a process that is still ongoing. Suitor also enjoys a significant social media following, where he offers business advice to his 200,000 Instagram followers.
Aruba Butt, a director of some of the corporations under creditor protection, is responsible for managing dozens of properties in Sault Ste. Marie. Meanwhile, Ryan Molony serves as the president of SID Developments, a company that offers renovation and management services to the landlords' corporations. Interestingly, SID Developments was founded by Robert "Robby" Clark, a former child actor known for his role in The Zack Files. Clark himself has attested to the unraveling of the corporations in an affidavit filed with the court.
Road to Recovery
The three landlords have been granted access to a $12 million loan to cover the costs of the ongoing court proceedings and to complete necessary renovations. Additionally, they plan to pursue comprehensive refinancing or restructuring strategies and negotiate a consensual plan of compromise with lenders to ensure the viability of their operations. However, their chances of success rely heavily on the support and cooperation of the 300 lenders involved. If they can garner the necessary backing, an extension of the creditor protection order is likely, accompanied by the potential sale of some of their properties.
It is important to note that tenants have rights that can protect them in these uncertain times. Even if a new owner were to take over the properties, tenants are legally entitled to remain in their homes unless the court orders their eviction. However, the impact of this financial crisis on tenants who reside in properties not subject to the court proceedings, like the one at 1083 Main St. E. in Hamilton, is expected to be minimal, as these buildings are owned by separate corporations.
Caption: Dylan Suitor
The Complex Web of Corporate Structures
Real estate investors often employ multiple corporations to limit their liability. This strategy, while not uncommon, results in intricate corporate structures that can be challenging to disentangle. The interdependencies between various companies, lenders, and legal entities can contribute to the complexity of these scenarios. Indeed, understanding the intricate links between the corporations involved in this case is no easy task, as confirmed by lawyer Karen Fellowes, a specialist in restructuring and insolvency. She notes that the success of these landlords in saving their businesses will depend on whether the lender community rallies behind them. An extension of the creditor protection period and the potential sale of properties may be crucial steps towards the ultimate recovery of their financial stability.
If you are a tenant who may be impacted by this case or have any relevant information, please contact us at Hamilton@cbc.ca.
[Figure: Robby Clark and Dylan Suitor]