Screwed
Urbancorp was one of Toronto’s most prolific and respected developers.
When the company filed for bankruptcy protection last April, nearly 200
pre-construction buyers lost their future homes and their best chance
to break into the market. Anatomy of a real estate disaster.
Toronto Life
By Steve Kupferman
04 January 2017
Patrick and Jessie Hooker weren’t planning to buy a house. It was April
25, 2015, and they’d accompanied Patrick’s sister, Jessica, to a sales
centre in a former public school near Lawrence and Black Creek Drive.
Jessica had bought a home from Urbancorp, a property developer with a
24-year track record of building moderately priced condos and
townhouses in the GTA. Her home was to be part of a cluster of 88
supermodern townhouses, semis and detached homes called Ravines on
Lawrence. Patrick and Jessie had given her a lift there to sign the
papers.
Patrick, a geophysicist, and Jessie, a software engineer, are both in
their mid-30s. He has a Bunyan-esque build and a calm, frank demeanour;
Jessie, who was born in Malaysia, has dark, shoulder-length hair and an
easy smile. At the time, they were living in a rented condo in Fort
York. They were happy there, but they knew there wasn’t enough space
for a child, let alone Jessie’s mother, who they expected would one day
move in with them.
Inside Urbancorp’s sales centre, the Hookers walked through the sleek
model suites. There was an open-concept living room with wood-veneer
floors. New appliances gleamed in the kitchen. They were dazzled by the
premium finishes, the spacious layouts, the high ceilings. While they
waited, an Urbancorp salesperson approached them with some news: a
buyer had backed out of a deal to buy a $580,000 four-bedroom townhouse
just two doors down from Jessica’s. If the Hookers acted quickly, they
could reserve it for themselves.
Fearing that another buyer would snatch it up, they scribbled out four
post-dated cheques on the spot, for a total of $58,000. Before they
knew it, they’d spent nearly all of their savings on something that
didn’t yet exist. The scheduled occupancy date for their new home was
October 2017, two and a half years away.
They moved out of their condo and into a two-bedroom apartment in
Jessie’s sister’s basement in Richmond Hill, hoping to save money for
their down payment. For the next few months, they commuted an hour each
way to their jobs downtown. In January, they found out Jessie was
pregnant—they were glad they’d had the foresight to lock down a large
family home.
One day last April, a year and a half before they were supposed to move
in, Patrick was reading a discussion thread on BuzzBuzzHome, a website
that tracks new housing developments. There was a rumour circulating
that Urbancorp was in financial trouble—that the company might be on
the verge of filing for bankruptcy protection, which would jeopardize
all of its unbuilt projects. “At first, I thought, Oh, it’s just some
random thread on the Internet,” Patrick said. “It can’t be true.” But
it was, and the full story was worse than they could have imagined.
When a buyer places a deposit on an unbuilt condo, a developer is
required, under Ontario’s Condominium Act, to either insure the deposit
or hold it in a trust account, so the money can be refunded if the
project is cancelled or delayed. But the Hookers’ townhouse was
freehold, which meant the Condominium Act didn’t apply to them. When it
comes to freehold properties, developers can do whatever they like with
buyers’ deposits—and Urbancorp had taken advantage of that freedom. The
Hookers’ $58,000 was gone, and so were the deposits of 180 other buyers
across the GTA.
Alan Saskin, Urbancorp’s founder, took on an increasingly risky debt
load until his company collapsed Alan Saskin, Urbancorp’s founder, took
on an increasingly risky debt load until his company collapsed
The man behind Urbancorp’s precipitous rise and rapid fall is Alan
Saskin, the company’s founder and president. He and his wife, Doreen,
live in a $6-million Yorkville condo that has a library; three
bedrooms, including a master suite with a spacious dressing room; and a
private terrace large enough to host dozens of guests. Down in the
parking garage, Saskin keeps a Tesla and an Aston Martin.
The Saskins take lavish vacations—one recent trip included stops at
Machu Picchu, Easter Island, Angkor Wat and the Taj Mahal. Saskin goes
to Art Basel every year and has at least one original Jean-Paul
Riopelle in his personal collection. Over the past few years, he and
Doreen have donated money to the symphony and the ballet, and he served
as chair of the Artscape Foundation’s board of directors. In 2014, his
daughter Jyll had her wedding at the Art Gallery of Ontario. Her
husband, Phillip Gales, later became Urbancorp’s CFO.
Saskin originally studied architecture at McGill but quickly realized
there was more money to be made in development. He earned his MBA at
Harvard in 1981, then climbed the ranks of the Canadian real estate
industry. He worked for Cadillac Fairview before decamping to
York-Hannover, a smaller company, where he became a vice-president.
According to former colleagues, Saskin was a strategic thinker who
could see opportunities where other people didn’t, but he also had a
daredevil streak. For a time in the 1980s, he made a hobby of shorting
stocks on the TSX.
By 1990, Saskin was an executive VP at Camrost, a large commercial and
residential developer. After a dizzying five-year rally, the housing
market had entered a slump. The average price of a single-family home
in the GTA was plummeting. Development giants struggled to refinance
debt in a flailing market, and some collapsed into bankruptcy. Toronto
developers found themselves sitting on parcels of land they couldn’t
use.
Most people looked at this state of affairs and saw devastation. Saskin
saw a gold mine. Home prices were depressed, but so were land prices.
If he could buy up cheap real estate, he could build inexpensive homes,
which are popular with first-time buyers, even in times of economic
distress.
Saskin left Camrost with Ann Martin, who had worked under him as a
senior project manager, and together they launched Urbancorp. His first
move was to buy a small parcel of farmland in Richmond Hill; it was
relatively cheap and had already been rezoned for 300 housing units.
Saskin advertised stacked faux-Georgian townhouses for as little as
$99,990 apiece, and young families lined up at the sales centre to
place deposits. Urbancorp had found a way to make money on real estate
when it seemed like there was none to be made.
The success of that first development earned Saskin credibility among
financiers, allowing him to set his sights downtown, where he developed
two projects on St. George Street: Sloane Square and Lennox Mews, which
won Urbancorp glowing press. “For people who want a solid roof over
their heads in a nice neighbourhood at a decent price, the company is
doing everything right,” the Globe’s John Barber wrote in 1993. “All
Urbancorp needs now is some competition.”
Within a few years, Toronto’s housing market had begun to recover. As
the industry regained its confidence, Urbancorp started developing
low-rise and mid-rise projects throughout the GTA. By 1998, the company
had become the fifth-largest builder of new homes in the GTA, and it
had made a major land purchase that would change the city: an
ex-industrial site on King, west of Bathurst. Saskin turned some of the
real estate into King West Village, a cluster of townhouses that
initiated the area’s transformation from a grimy manufacturing district
into a destination for young urbanites.
As Urbancorp grew, the company began aggressively pursuing taller,
denser buildings. The denser the project, the more revenue. But
Urbancorp would often sell units before they’d been approved by the
city, which strained relationships with customers. In 2000, one buyer
put a pre-construction deposit on a condo in Urbancorp’s Electra Lofts
on King West only to discover that her unit had been removed from the
floor plan during the approval process.
The constant tug-of-war with the city also jammed up the company’s
construction pipeline. In 2002, new occupants of South Beach Marina
Townhomes, an Urbancorp project on Queens Quay West, discovered that
their building had a major omission: when one couple opened a door in
their unit that was supposed to lead to the building’s elevator, they
found an open shaft that ran all the way down to the garage. The
elevator was installed a month after they moved in. Several years
later, realtor David Fleming went to inspect a suite he’d purchased at
Urbancorp’s Westside Gallery Lofts on Sudbury Street. He found chaos.
His loft was a bare-concrete tomb with flaking walls and pipes poking
through jagged holes in the ceilings. He made a video of himself
exploring the wreckage and posted it on YouTube, where it racked up
views among other realtors and developers.
Saskin declined to be interviewed for this story, but, according to one
former employee, Saskin and Martin argued over their dealings with city
hall. Martin was increasingly dissatisfied with the quality of the
homes. She finally resigned. By the mid-2000s, the company’s
credibility was eroding. “Urbancorp’s nickname in the industry is
Urbancrap,” said realtor Carl Langschmidt. “They were a company that
just delivered shitty units.”
Urbancorp’s doomed freehold developments, the buyers who were shafted
and how much they lost. Urbancorp’s doomed freehold developments, the
buyers who were shafted and how much they lost. Photographs:
development sites by Google Maps; illustration by Brian Anson Wong
In 2010, despite Urbancorp’s floundering reputation, Saskin went on a
buying spree. Over the next five years, his company snapped up
properties in Leslieville, King West, Downsview, Corso Italia and the
Bridle Path. The projects were still selling, and the future looked
bright.
Because developers only collect deposits on pre-construction homes,
they usually have to finance their projects with outside money. A
developer with good credit and enough capital to make a large down
payment can generally get a mortgage for two to three per cent above
the prime rate. If a developer can’t get one of those loans—or if he
can only get enough to partially finance a building—he can make up the
difference by tapping into a vast pool of money controlled by mezzanine
lenders, who are often willing to make loans that banks won’t. As a
result, they demand high interest rates, usually in the range of eight
to 15 per cent. These lenders often exude the swashbuckling confidence
of people who stand to gain no matter what becomes of a project. If a
development runs into trouble, they can simply take it over and sell it
for parts.
Urbancorp relied heavily on mezzanine debt during its spending spree.
One company, Terra Firma Capital Corporation, financed large swaths of
Urbancorp’s land purchases starting in 2012. The loans allowed
Urbancorp to acquire more and more land, but, in the process, the
company took on a huge debt load. While bank lenders usually only
finance between 50 and 75 per cent of the land purchase value,
Urbancorp was often using a combination of Terra Firma’s loans and bank
loans to finance up to 95 per cent of the land purchase price.
By 2012, the company had two new projects underway near Queen and
Dufferin: Epic on Triangle Park and Edge on Triangle Park. The land was
already zoned for three 14- to 16-storey buildings, but Saskin wanted
taller towers, for the same reason developers always do: more floors
mean more units to sell. If he could convince the city to give him more
density, it would set the stage for a significantly bigger payday.
Urbancorp managed to get the city’s approval for towers that ranged
from 19 to 22 storeys, but the projects, already delayed by the wait
for rezoning, ran into holdups and cost overruns during construction.
“His construction department was horrendous,” said a former colleague.
In one instance, a $3-million construction contract ballooned to about
$6.5 million, as the contractor piled on extras that Urbancorp
executives had failed to price into the original deal.
In the east end, the company encountered similar problems. At 50 Curzon
Street in Leslieville, Urbancorp had pre-sold 55 townhouses. Among the
buyers were Elaine Quinn, a civil servant with the province, and her
husband, Howard, a marketing manager at Manulife Financial. In June
2011, they put a 10 per cent deposit on a $610,000 home with stone
countertops, hardwood flooring and nine-foot ceilings. They expected to
move in by February 2013. Five months after they put down the payment,
Urbancorp mailed the couple a notice saying that their occupancy date
had been pushed back to October 31, 2013.
The Quinns were worried. They’d recently had a baby, and they weren’t
certain where they’d be living when he started kindergarten. Three
delay notices later, Elaine called Urbancorp’s management office, where
someone in customer relations gave her a firm occupancy date of
February 20, 2015. The couple sold their Leslieville house, intending
to use the proceeds to finance the purchase of their new townhouse.
But, within weeks, Urbancorp had pushed their occupancy date back to
August 2015. The company blamed the city for dragging its feet on
installing water service.
Meanwhile, 50 Curzon Street was facing another set of problems.
According to a former site superintendent who worked on the
development, the project started to unravel mid-construction. The crews
stopped showing up for work, and the reason was simple: Urbancorp
wasn’t paying them. In September, their bosses began flooding the
property with construction liens. “We must have spent six months there,
doing nothing,” said the superintendent.
The company wasn’t completing projects, and costs were mounting. In
fall 2014, pre-construction purchasers at an Urbancorp townhouse
development in Etobicoke discovered their houses had been downsized
because the original plans hadn’t received approval from city council.
Many buyers tried to back out of their sales agreements after two years
of delays only to learn that Urbancorp wouldn’t refund their money for
months. When the developer finally did issue refund cheques, it warned
the recipients not to cash them right away. In
January 2015, the company abruptly cancelled Kingsclub, a condo
development near Liberty Village that was under construction. The
project was supposed to contain 639 units, but Saskin had only managed
to pre-sell about 180.
Buyers at Urbancorp developments across the GTA were noticing a
disturbing lack of activity at the construction sites where their new
homes were supposed to be built. In Markham, there were still trees on
a lot where 28 homes should have been completed within a few months. At
St. Clair and Caledonia, where 41 more homes were originally scheduled
for completion in late 2016, Urbancorp had only just started
demolishing the vacant school on the site.
It was around this time that Patrick and Jessie Hooker visited
Urbancorp’s sales centre on Lawrence Avenue. Like most pre-construction
buyers, the Hookers assumed that the strength of the city’s housing
market would shield them from disaster. They belong to a generation
that has never lost money on Toronto real estate. But the market hadn’t
failed them. Urbancorp had.
Loraine Adal-Salmon and Anthony Salmon—shown with five-year-old Isabel
and seven-year-old Olivia—put down $81,000 on a townhouse near St.
Clair and Caledonia that will never be built Loraine Adal-Salmon and
Anthony Salmon—shown with five-year-old Isabel and seven-year-old
Olivia—put down $81,000 on a townhouse near St. Clair and Caledonia
that will never be built
When Urbancorp buyers placed deposits on their homes, many of them
regarded the money as down payments. In reality, deposits function more
like loans. Each payment on a pre-construction home is pooled with the
deposits of all of the other buyers of that development. And so, when
buyers hand over their post-dated cheques at a sales centre, as the
Hookers did in April 2015, what they’re actually doing is advancing the
developer money, at little or no interest, which the developer can then
use to get more financing—or, in the case of a freehold home, to spend
on whatever he wants.
What buyers get in exchange for their money is not a home, or even an
ironclad promise of one; a deposit entitles a pre-construction buyer to
nothing more than a signed agreement of purchase and sale, which is
written by the developer with his own interests in mind. The developer
usually has latitude to make changes to the design of a unit; a buyer
may show up on inspection day to find a side door missing, an
unexpected set of steps to the front door or the entire unit built as a
mirror image of the original floor plan. Developers often reserve the
right to change the types of materials used without notice to the
buyer, meaning the completed unit may look different from the model
suite. A developer may even have the ability to cancel a project
altogether.
When developers fall short of their obligations, there’s one
organization that’s supposed to keep them honest: Tarion, the private,
not-for-profit corporation that enforces Ontario’s New Home Warranties
Plan Act. By 2015, Tarion had started to worry about Urbancorp’s
troubles. The staff met with the company several times and asked to
send in a forensic accountant to review Urbancorp’s books, but, as a
non-government corporation, it had no formal investigative power.
Urbancorp was free to refuse—and it did.
The pre-construction deposit, which homebuyers regard as sacrosanct, is
surprisingly insecure. Tarion protects buyers against the loss of their
deposits through government acts, but only to a degree. The legislation
covers up to $20,000 of a condo down payment, which has to be held in
trust. The coverage for freehold deposits, which don’t have to be held
in trust, is higher, at $40,000, but most deposits exceed that amount.
As 10 per cent of a property’s purchase price, a $40,000 deposit would
barely cover a one-bedroom apartment in Toronto, let alone a
single-family home. To recover anything in excess of $40,000, a buyer
has nowhere to go but the courts. The bulk of Urbancorp’s townhouse
developments were freehold—and most of the buyers I spoke to had no
idea their deposits weren’t fully protected until it was too late.
By 2015, Urbancorp had invested in at least 17 different pieces of land
in five years. Only two developments had been completed, and the
company was hemorrhaging money as it tried to keep up with its debts.
Among its holdings were nearly $16 million worth of deposits from
homebuyers at five unbuilt townhouse developments.
Saskin’s existing loan options were no longer sufficient. He needed new
and cheaper financing to sustain the company until developments were
complete enough that Urbancorp could start collecting full payments
from buyers. Only then would he be able to clear his debts.
He decided to tap into a popular source of interim capital: the Israeli
bond market, which had gained a significant presence in North American
real estate financing during the economic collapse of 2008. By 2016,
U.S. real estate companies had raised $2.4 billion (U.S.) from Israeli
bondholders. For developers, Israeli bonds come at much lower interest
rates than mezzanine debt, but they’re ridiculously complicated to
engineer. To issue bonds in Israel, a developer has to submit to
financial audits and write a complex prospectus that describes his
assets and what he intends to do with the money. The principals of the
company usually travel to Israel for what’s known as a roadshow, during
which they meet with money managers and investors. Several of
Urbancorp’s loans were coming due in 2016, and it was unlikely that the
company would be able to build homes quickly enough to pay them off.
Saskin would have seen the Israeli bonds as the only way to refinance
his debt.
He created a new company whose sole purpose was to hold all the
projects he was about to peddle to Israeli investors. The new corporate
structure included most of Urbancorp’s pending developments but
excluded three troubled east-end projects, whose presence may have
raised red flags. Saskin also committed to inject $12 million into the
company. The prospectus made no mention of Urbancorp’s escalating
conflict with Tarion. “The investors in Israel never bothered to
inquire what Urbancorp’s status was with Tarion,” says Howard Bogach,
the watchdog’s CEO. “Had they inquired, we would have told them that
there were concerns.” Saskin travelled to Israel for the roadshow and
met with potential investors, with huge success. “Out of all the people
we visited on our roadshow, only one had googled us,” an incredulous
Saskin told a colleague upon his return.
On December 14, 2015, the newly reconstructed Urbancorp Inc. made its
Israeli offering. The bonds were worth 180 million shekels, or about
$64 million (Cdn.), and Israeli mutual funds gobbled them up. The money
bought Saskin some badly needed time. Urbancorp received $58 million
from the bond issue and used most of the funds to pay off existing
loans. Saskin had managed to satisfy some of his Canadian lenders, but,
in exchange, he’d invited an army of Israeli mutual fund managers and
securities regulators into his business.
For the moment, they were satisfied with him, but that didn’t last
long. Within days of finalizing the bond issue, Urbancorp registered at
least two more loans. Two months later, it defaulted on a $5-million
2014 loan from Terra Firma and Laurentian Bank that had come to
maturity. The lenders quickly set about making a series of increasingly
dire legal threats. At the same time, homeowners at The Bridge, a
534-unit condo tower, sued Urbancorp and Tarion over a long list of
unaddressed construction problems, including shoddy balcony concrete,
improperly installed wall cladding, and faulty wiring and elevator
systems. As Urbancorp continued to collapse, Tarion’s leadership
decided to use one of the most coercive weapons in its arsenal: it
moved to revoke the company’s registration, which would bar
17 Urbancorp companies from building and selling homes.
In late March, the bad news reached Israel. The bond market there had
recently been rattled by a plunge in the price of Extell bonds over
fears the New York luxury condo market was becoming oversupplied. Into
this jittery environment, Urbancorp fired a bottle rocket: it finally
disclosed its problems with Tarion, and Saskin admitted his initial
failure to make the $12-million capital injection into his company that
he’d committed to in Urbancorp’s prospectus.
The reaction was swift and furious. The value of Urbancorp’s bonds
dropped by 53 per cent in a single day, and the Israeli lenders
initiated a class-action lawsuit. They accused both Saskin and
Urbancorp of breaching disclosure and reporting duties. When Urbancorp
finally released its 2015 financial report, it projected a $15-million
loss in the fourth quarter. The bond price immediately plunged again.
Rather than wait for its bondholders to react, Urbancorp turned to the
Canadian courts, filing for bankruptcy protection for eight of its
subsidiaries. The move blindsided investors in Tel Aviv, who had
expected Urbancorp to use the Israeli court system. Coincidentally or
not, Urbancorp’s insolvency filing happened on the first day of
Passover. An Israeli judge had to be summoned out of recess to deal
with the mess.
Urbancorp eventually sought protection for 24 of its companies. Another
three were thrown into receivership when a consortium of construction
lenders took the company to court over $27 million in unpaid debts.
Saskin also filed for personal bankruptcy protection—a career nadir for
a man who had once been hailed as a visionary. At the time of
Urbancorp’s collapse, it had 1,058 homes under construction in the GTA.
In a press release, Urbancorp tried to tamp down hysteria among its
buyers. “We determined, after much consideration and consultation, that
a court-supervised process is the best way to deal with current cash
flow issues,” Saskin said. “The court process is intended to ensure
that, with our partners, we will be delivering these homes in the next
two years.” It’s possible that Urbancorp would have been able to build
some or all of those homes if its Israeli creditors had been in a
forgiving mood. They weren’t. At a meeting of the bondholders, they
voted to demand immediate repayment of their misspent shekels. The
quickest way for Urbancorp to satisfy many of its creditors—which
included not only the Israeli lenders but also Scotiabank, CIBC, a few
smaller banks, dozens of pissed-off contractors and Terra Firma—would
be to sell off the company’s undeveloped land for whatever it was
worth. The company would have to convince a court to set aside existing
sales agreements—no land buyer would want to sell new homes at
five-year-old prices.
Justin Polce and Anna Maria Pedace spent $68,000 on a pre-construction
home at Lawrence West and Black Creek Drive. They believe Urbancorp’s
collapse robbed them of their chance to own a house Justin Polce and
Anna Maria Pedace spent $68,000 on a pre-construction home at Lawrence
West and Black Creek Drive. They believe Urbancorp’s collapse robbed
them of their chance to own a house
Urbancorp’s buyers were stunned. Not only had their deposits been spent
but they might not be fully recoverable. By tying up their deposits for
years, Urbancorp had robbed them of both money and time. There were a
number of loans between the company’s subsidiaries, leading to
confusion about which buyers’ deposits had gone where. Buyers at four
of the townhouse developments attempted to band
together. Ontario law offers no formal support system to
pre-construction purchasers who have been burned by a developer, so
they found each other the way everyone does: online. They formed
Facebook groups, and traded news and rumours gleaned from around the
web. “This waiting is emotionally exhausting,” one person wrote in
August. “I still don’t understand why this isn’t a criminal matter.”
Their hope stayed alive until September 15, when Ontario Superior Court
Justice Frank Newbould authorized Urbancorp’s court-appointed monitor
to sell six of its properties, free of any obligations to
pre-construction buyers.
Loraine Adal-Salmon and her husband, Anthony Salmon, told me they were
looking forward to giving their children, five-year-old Isabel and
seven-year-old Olivia, separate bedrooms in the family’s new
semi-detached house in Urbancorp’s Manors of St. Clair West
development. The girls had been bunking together in a guest bedroom in
the family’s cramped townhouse. As Urbancorp tore down a school to make
way for their future neighbourhood, the Salmons regularly visited the
construction site. In April 2016, when they learned Urbancorp was
insolvent and their $81,000 deposit had been spent, they kept the bad
news from their daughters for weeks. “We’d been planning where our
coffee maker was going to be,” Loraine said. “We believed our contract
was a guarantee that we were getting our home.”
Another couple, Justin Polce and Anna Maria Pedace, put a $68,000
deposit on a semi-detached home at Urbancorp’s Lawrence Avenue
development in 2013. The couple were in their late 20s at the time and
still euphoric from their wedding a few months earlier. The semi seemed
like a remarkably good value. Urbancorp promised hardwood flooring, a
finished basement, and an iPad-controlled smart-home system.
Polce, who works in urban planning, started to worry a few months
later, when he saw that Urbancorp hadn’t advanced its rezoning
application for a year. When the couple found out they would likely
never get their house, they were gutted. “If we had known even three
years ago that this was going sour, it would have been easy to look for
a smaller home at the same price,” Polce says. “You can’t do that in
2016.” The Urbancorp fiasco has warped the contours of their married
life. The couple had hoped to have a child by now, but their condo
isn’t big enough. They’ve been scouring the north end of the city for
properties in the same price range as their Urbancorp townhouse with no
luck so far. The average price of a new low-rise home has jumped 33 per
cent in the past three years, from $654,147 to $937,689. “Our future is
up in the air,” Polce says.
At Urbancorp’s half-completed Curzon development, 45 buyers joined
forces and hired lawyers to represent them. It’s expected that the new
owner of the land will charge each Curzon buyer a $200,000 premium on
top of the purchase prices they negotiated with Urbancorp in 2011. In
the meantime, their homes remain half-completed shells in a
mud-encrusted construction site, cordoned off with graffiti-covered
hoardings. Signs on the perimeter fence warn passersby to stay away.
For Patrick and Jessie Hooker, who have moved out of Jessie’s sister’s
basement and are renting a two-bedroom condo downtown, losing their
future home meant renting indefinitely. Four-month-old Nathan has his
own nursery, but the living room, already crowded with furniture, has
little space left over for the deluge of baby gear and toys yet to
come. Their rent is about the same as the mortgage payments would have
been on their townhouse.
“We’d love to look for a new home, but there’s no point,” Patrick said.
“We can’t do it without the money we lost.”
In the months since Urbancorp’s problems became public, Alan Saskin has
retreated from public life. He resigned from his spot on the Artscape
board of directors and pulled back from the day-to-day management of
his company, allowing a court-appointed monitor to handle many aspects
of the business. He’s now Urbancorp’s sole officer. Everyone else
resigned, including Phillip Gales, Saskin’s son-in-law.
Saskin’s reputation as a businessman is permanently tarnished. He has
been struggling to avoid personal bankruptcy. According to court
filings, he has no income, and his expenses are being paid out of
family trusts or out of Doreen’s pocket. The insolvency proceedings
have put a pause on any lawsuits against him and Urbancorp, but it’s
only a matter of time before those legal battles resume. Tarion is
suing him and Urbancorp over $146,000 in unpaid warranty claims, and
the Israeli class-action is still pending.
Urbancorp’s shafted buyers are no longer customers: they’re creditors.
They’ll have to wait in line to recover what’s theirs. Among the first
to be repaid will be the insolvency monitors, banks, contractors,
mezzanine lenders and bondholders who have registered legal claims
against Urbancorp’s assets. Whatever is left will go to the
pre-construction buyers.
There may be a silver lining. Urbancorp hasn’t gone bankrupt yet, and
its raw development land has gained so much value in the past few years
that the sale proceeds might cover most of the company’s debts,
allowing it to refund buyers’ deposits and even potentially go back
into business. As real estate prices continue to rise, condo-dwelling
young professionals might be willing to ignore the company’s financial
troubles for the opportunity to break into the market. Patrick Hooker,
for one, is keeping an open mind. “This hasn’t deterred me from buying
pre-construction,” he said. “Maybe I’ll do a bit more research into the
builder next time.”
top contents appendix previous next