COURT FILE 1703-21274 NUMBER
COURT COURT OF QUEEN’S BENCH OF ALBERTA
JUDICIAL EDMONTON CENTRE
PLAINTIFF ROYALBANK OF CANADA
DEFENDANTS 1679775ALBERTA LTD., REID-BUILT HOMESLTD., REID WORLDWIDECORPORATION,BUILDER’S DIRECT SUPPLY LTD., REID BUILTHOMES CALGARY LTD., REID INVESTMENTSLTD., REID CAPITAL CORP. and EMILIE REID
IN THE MAUER OF THE RECEIVERSHIPOF 1679775ALBERTA LTD., REID-BUILTHOMES LTD., REID WORLDWIDE CORPORATION,BUILDER’S DIRECT SUPPLY LTD., REID BUILT HOMES CALGARY LTD., REIT)INVESTMENTSLTD., 1852512ALBERTA LTD.. ANCHORVIEWCAPITAL CORP., and REID CAPITAL CORP.
APPLICANT ALVAREZ& MARSALCANADA INC. in its capacity as Court- appointed Receiver and Managerof the current and future assets, undertakings and propertiesof 1679775ALBERTALTD., REID- BUILT HOMES LTD., REID WORLDWIDECORPORATION, BUILDER’S DIRECT SUPPLY LTD., REID BUILT HOMES CALGARY LTD., REID INVESTMENTSLTD., 1852512ALBERTA LTD., ANCHORVIEWCAPITAL CORP., and REID CAPITAL CORP.
DOCUMENT RECEIVER’S SIXTEENTH REPORT June 20, 2019
ADDRESS FOR Norton Rose Fulbright Canada LIP SERVICE AND 400 3rd Avenue SW, Suite 3700 CONTACT CaIary, Alberta T2P 4H2 INFORMATION OF PARTY Phone: +1 403267.8222 FiLiNG THiS Fax: +1 403.2645973 DOCUMENT Email: howard.gorman(anorionroseli.ilbribt.com I ad!tya.badami(nortonrosefuIbriht.corn Attention: Howard A. Gorman, Q.C. / Aditya M. Badami
ALVARSZ & MARSAL TABLE OF CONTENTS
1.0 INTRODUCTION -1-
2.0 PURPOSE -2 - 3.0 RESIDENTIAL SAVOS -2-
4.0 LAKEVIEW SAVO -4 - 5.0 ENERGY CROSSING SAVO -7-
6.0 INTERIM STATEMENT OF CASH RECEIPTS & DISBURSEMENTS -9 -
7.0 RECEIVER’S ACTIVITIES - 10 -
8.0 RESIDUAL ASSETS & INTERESTS - 12 - 9.0 RECEIVER’S. CONCLUSION. AND RECOMMENDATION - 13 - 1.0 INTRODUCTION
On November 2, 20 17(the “Receivership Date”), upon application of the Royal Bank of Canada (“RBC”), Alvarez & Marsal Canada Inc. was appointed as Receiver and Manager (the “Receiver”) pursuant to a consent receivership order (“Receivership Order”) granted by the Honourable Justice Hillier in respect of the current and future assets, undertakings and properties (the “Receivership Proceedings”) of 1679775 Alberta Ltd. (“167”), Reid-Built Homes Ltd. (“RBH”). Reid Worldwide Corporation (“RWV”), Builder’s Direct Supply Ltd., Reid Built Homes Calgaiy Ltd., Reid Investments Ltd., and Reid Capital Corp. (“RCC”) and as subsequently amended to include 1852512 Alberta Ltd. (“185”) and Anchorview Capital Corp. (collectively, the “Reid Group”).
1.2 The Receivership Order authorizes the Receiver to, among other things, solicit offers in respect of the Reid Group’s property and sell any such property or parts thereof with the approval of this Honourable Court for any transactions for which the purchase price exceeds $150,000.
1.3 On January 22, 2018, the Receiver commenced a sales process to solicit offers to purchase the Receiver’s right, title and interest in certain of Reid Group’s assets (the “Sales Process”). Certain details of the Sales Process are set out in the Second Report of the Receiver dated February 28, 2018 and Fourth Report of the Receiver dated April 5, 2018 and are not repeated herein.
1,4 Concurrent with this Receiver’s Sixteenth Report (the “Sixteenth Report”), the Receiver intends to file an application seeking the following orders:
a) an order (the “Residential SAVO”) approving the sale of 9 substantially completed residential homes owned by 167 in the Edgefield and Fireside subdivisions located in Strathmore and Cochrane, Alberta, respectively, pursuant to offers submitted by Shepherd West Ltd. (“Shepherd West”) and accepted by the Receiver, subject to the approval of this Honourable Court (the “Accepted Residential Offers”);
b) an order (the “Lakeview SAVO”) approving the sale of 25 residential vacant lots and 1 commercial vacant lot located in Spruce Grove, Alberta pursuant to an offer submitted by Lakeview Developments Inc. (“Lakeview”) and accepted by the Receiver, subject to the approval of this Honourable Court (the “Lakeview Offer”); and c) an order (the “Energy Crossing SAVO”) approving the sale of the Energy Crossing industrial condominium located in Leduc, Alberta pursuant to an offer submitted by Solar Cittee Developments Ltd. or its nominee, Energy Crossing Leduc Inc. (“Solar Cittee”) and accepted by the Receiver, subject to the approval of this Honourable Court (the “Solar Cittee Offer”).
1.5 The Receivership Order and other motion materials are posted on the Receiver’s website at www.alvarezandrnarsal.comJreidbuilt.
1.6 Capitalized ternis not defined in this Sixteenth Report are as defined in the Receivership Order.
I.7 All references to dollars in this Sixteenth Report are in Canadian currency.
2.0 PURPOSE
2. 1 This Sixteenth Report is a special purpose report that is intended to provide this Honourable Court with information with respect to the Receiver’s application for the Residential SAVO. Lakeview SAVO, and Energy Crossing SAVO as well as to provide an update of the Receiver’s interim statement of cash receipts and disbursements, its activities to date, and summary of residual assets.
3.0 RESIDENTIAL SAVO
Accepted Residential Offers
3.1 A summary of the two offers for certain residential properties submitted by Shepherd West and accepted by the Receiver, subject to the approval of this Honourable Court, is tabled below:
No. of Reid Group Homes No. of Purchase Developer Builders’ Lien Purchaser Subdivision Developer Entity & V1P Lots Price Lot Payout Claims
I Shepherd West Ltd. Strathmore N/A 167 8 - S 1,880 S - S 5
2 Shepherd West Ltd. Cochrane N/A 167 I - 235 - Total 9 - $ 2,115 $ - $ 5
3.2 Each Accepted Residential Offer includes a purchase price and legal description of the purchased assets as well as, among other things, the following key commercial terms:
a) the purchaser offers to purchase all of the Receiver’s interest in and to the purchased assets, free and clear of any encutnbrances; b) the execution of the subject offers by the Receiver converts the offers into binding agreements for the purchase and sale of the Receiver’s interest in and to the purchased assets, subject to this Honourable Court granting a Sale Approval and Vesting Order (“SAVO”) for each transaction;
-2- c) the closing date for the subject transactions will be the date 30 days following the date on which all conditions are satisfied or waived or such earlier date as may be mutually agreed upon between the purchaser and the Receiver;
d) a deposit of $76,000 has been remitted to the Receiver and is non-refundable if the Purchaser does not close after Court approval; and e) the sales are “as is, where is” with no representations and warranties of the Receiver.
Receiver’s Review of the Accepted Residential Offers
3.3 In summary, the Receiver’s review of the Accepted Residential Offers included consideration of the following:
a) the results of the Sales Process and whether the Accepted Residential Offers represent the highest and best price for the applicable purchased assets; b) the nature and stage of construction of work-in-progress inventory and the risks, costs and time associated with completing construction and listing completed inventory for sale; c) the potential for the Receiver to avoid additional holding costs in respect of the purchased
assets if transactions are concluded in a timely manner including preservation costs, professional fees and interest accruing in respect of first ranking mortgages; d) where available, confidential third party appraisals and other indications of value; and e) the economic interests of senior secured creditors and other stakeholders with interests in the purchased assets.
3.4 The Receiver is of the view that the Sales Process was comprehensive and conducted in a manner which was fair and reasonable, that the market has been adequately canvassed for potential purchasers and that the transactions contemplated by the Accepted Residential Offers are in the best interests of the secured creditors and other stakeholders of Reid Group.
Residential SAVO
3.5 The Receiver is seeking the Residential SAVO to approve the Accepted Residential Offers and provide authorization and direction with respect to the distribution of the net sales proceeds to the respective secured creditors.
3.6 The Residential SAVO provides for, among other things:
a) approval of the Accepted Residential Offers and direction to the Receiver to take such steps and execute such additional documents as may be necessary or required to complete the
-3- transactions contemplated by the Accepted Residential Offers or for the conveyance of the purchased assets to Shepherd West;
b) upon delivery of a Receiver’s Certificate to Shepherd West, the Reid Group’s interest in the purchased assets shall vest in Shepherd West, free and clear from security interests, hypothecs, caveats, mortgages, trusts or deemed trusts, liens, executions, levies, charges or other financial or monetary claims;
c) upon delivery of a Receiver’s Certificate, and upon filing of a copy of the applicable Residential SAVO, together with applicable registration fees, the Registrar of Land Titles of Aiberta is authorized and directed to cancel the Certificate(s) of Title for the applicable purchased assets and to issue new Certificate(s) of Title in the name of Shepherd West; d) from the net proceeds, no holdback or security in respect of registered builders’ liens, given this Honourable Court’s prior direction and determination regarding the priority of prior- registered mortgages as against such registered liens on Reid Group titled lots; e) for lots encumbered by prior ranking mortgages among the purchased assets, direction and authorization for the Receiver to repay the priority ranking mortgagee subject to the Receiver’s confirmation of the validity of the priority registered mortgagee’s security and outstanding indebtedness; and f) following the payments referenced in paragraphs 3.6(d-e) above, authorization for the Receiver to distribute any remaining proceeds from the sale of the purchased assets in accordance with the administration of the receivership estate.
3.7 The estimated distributions of sales proceeds as contemplated by the Residential SAVO total
approximately $2. 1 million, of which approximately $1.1 million will be available to a third party first mortgagee, Cobra Mortgage Services Ltd., pending confirmation of the priority of their mortgage and amount of indebtedness. The remaining approximately $1.0 million, net of property taxes and closing costs, will be made available to the receivership estate.
4.0 LAKEVIEW SAVO
Lakewood and Century Crossing
4. 1 The Lakewood and Century Crossing properties are located Spruce Grove, Alberta and consist of
25 residential vacant lots totaling approximately 1.48 acres and 1 commercial lot, which is approximately 0.35 acres (the “Lakewood Property”).
-4- 4.2 In August 2018, the Receiver retained Jones Lang LaSalle Real Estate Services Inc. (“JLL”) to act as the exclusive real estate broker with respect of the Lakewood Property. Based on valuations prepared for the Lakewood Property, the list price was set at $1.75 million.
4.3 JLL conducted a first round of offers with expressions of interest to be submitted by October 9, 2018. The highest offer received was $800,000 which was rejected due to the apparent discrepancy with realtor guidance as well as the low holding costs associated with the property.
4.4 Since being marketed, the City of Spruce Grove (the “City”) advised the Receiver in March 2019
that pursuant to a development agreement, the Lakewood Property is subject to $1.1 million of outstanding servicing costs.
4.5 The Lakewood Property was remarketed in April 2019 by the Receiver through JLL and the highest offer submitted for Lakewood Property was $750,000, which was accepted by the Receiver, subject to the approval of this Honorable Court.
Lakeview’ Offer
4.6 The key commercial terms of the Lakeview Offer are summarized as follows:
a) the purchaser offers to purchase all of the Receiver’s interest in and to the Lakewood Property, free and clear of any encumbrances;
b) the execution of the subject offer by the Receiver converts the offer into a binding agreement for the purchase and sale of the Receiver’s interest in and to the Lakewood Property, subject
to this Honourable Court granting a SAVO for the transaction;
c) the purchaser acknowledges that the Lakewood Property may be subject to a development agreement with the City requiring certain construction, municipal improvements, and other outstanding obligations to be completed and the estimated cost of such work is $1.1 million subject to adjustment and change. The purchaser further acknowledges that it is their responsibility to contact the City regarding the status of the development agreement and
outstanding work and to resolve any issues to the satisfaction of the City prior to obtaining issuance of any development permits; d) the closing date for the subject transactions will be the date 30 days following the date on which all conditions are satisfied or waived or such earlier date as may be mutually agreed upon between the purchasers and the Receiver; e) a deposit of $75,000 (10% of the purchase price) has been remitted to the Receiver’s legal counsel and is non-refundable if the Purchaser does not close after Court approval; and f) the sales are “as is, where is” with no representations and warranties of the Receiver.
-5- Receiver’s Review of the Lakeview Offer
4.7 The Receiver’s review of the Lakeview Offer included consideration of the following:
a) the results of the marketing efforts undertaken by established and market leading real estate listing broker and whether the Lakeview Offer represents the highest and best price for the property; b) the reputation and wherewithal of the prospective purchaser and the likelihood of the offeror
being able to conclude a successful transaction; c) the estimated cost of outstanding work pursuant to the City’s development agreement; d) the potential for the Receiver to incur additional holding costs in respect of the property if the transaction was not concluded in a timely manner including preservation costs, and professional fees; e) confidential third party valuations and other indications of value; f) the weak current market conditions in the Alberta residential and commercial real estate market; and g) the economic interests of senior secured creditors and other stakeholders with interests in the purchased assets. In that regard, the Receiver has consulted with the primary secured creditor, RBC, and has confinned that RBC is satisfied with the terms of the Lakeview Offer.
4.8 The Receiver is of the view that the Lakewood Property was marketed comprehensively and in a manner which was fair and reasonable, that the market has been adequately canvassed for
potential purchasers and that the transaction contemplated by the Lakeview Offer is in the best interest of the secured creditors and other stakeholders of the Reid Group.
Lakeview SAVO
4.9 The Lakeview SAVO provides for, among other things:
a) approval of the Lakeview Offer and direction to the Receiver to take such steps and execute such additional documents as may be necessary or required to complete the transaction or for the conveyance of the purchased assets to the purchasers; b) upon delivery of a Receiver’s Certificate to the purchasers, the Reid Group’s right, title and interest in the purchased assets shall vest in the purchasers, free and clear from security interests, hypothecs, caveats, mortgages, trusts or deemed trusts, liens, executions, levies, charges or other financial or monetary claims; and c) upon delivery of a Receiver’s Certificate, all claims shall attach to the net proceeds from the sale of the purchased assets with the same priority as they had with respect to the purchased
-6- assets immediately prior to the sale and the Receiver may then distribute such net proceeds in accordance with the administration of the receivership estate;
5.0 ENERGY CROSSING SAVO
Energy Crossing
5. I Energy Crossing is an untenanted (vacant) industrial condominium property in Leduc, Alberta
totaling approximately 40,520 square feet on 4.98 acres (“Energy Crossing”) owned by 185. As
noted in section 1.1, the Receiver’s initial appointment did not include the assets of 185 but the Receivership Order was amended effective March 21, 2018 to include the assets of 185, which include the Energy Crossing property.
5.2 Prior to the Receivership Date, the Reid Group had been presented with offers to purchase Energy
Crossing but was not in a position to deal with such offers as a result of the pending Receivership Proceedings. In consultation with the senior secured creditor/first mortgagee on Energy Crossing (see section 5.3 below), the Receiver sought the amendment to the initial Receivership Order to include 185 and, by extension, the Energy Crossing property, in the Receivership Proceedings so that the property would be adequately secured and safeguarded while it was marketed for sale by the Receiver.
5.3 Canadian Western Bank (“CWB”) is the senior secured creditor holding a first mortgage securing $5.3 million excluding accrued interest. The mortgage is subject to personal guarantees provided
by two fornier executives of the Reid Group and a third party individual.
5.4 In April 2018, the Receiver retained Cushman & Wakefield Edmonton (“CW”) to act as the exclusive real estate broker with respect to Energy Crossing. Based on valuations prepared for Energy Crossing and realtor guidance, the list price was set at $6.5 million and subsequently
reduced to $5.5 million at or around March 5, 2019.
5.5 Two competing offers were received by CW and on June 7, 2019, the Receiver accepted an offer
of $4.3 million to purchase Energy Crossing submitted by Solar Cittee subject to a 30 day due diligence period and approval of this Honourable Court.
Solar Cittee Offer
5.6 The key commercial terms of the Solar Cittee Offer are summarized as follows:
a) the purchaser offers to purchase all of the Receiver’s interest in and to Energy Crossing, free and clear of any encumbrances;
-7- b) the execution of the subject offer by the Receiver converts the offer into a binding agreement for the purchase and sale of the Receiver’s interest in and to Energy Crossing, subject to this
Honourable Court granting a SAVO for the transaction;
c) the purchaser is granted a 30 day period to complete its due diligence, which includes: i. reasonable access to the property and authority to contact and access third parties involved in the construction or maintenance of Energy Crossing, including all such files and records of said parties and of the Receiver;
ii. at the purchaser s sole expense and risk, carry out reasonable tests, inspections and reviews provided that they are carried out under the supervision of the Receiver’s representative, copies of the results of such testing shall be provided to the Receiver, and any damage to the property as a result of such access and testing is restored; and iii. all government authorities are authorized to provide the purchaser with any information relating to the property;
d) the closing date for the subject transaction will be the date 15 days following the date on which all conditions are satisfied or waived or such earlier date as may be mutually agreed upon between the purchasers and the Receiver;
e) a deposit of $430,000 (10% of the purchase price) has been remitted to the Receiver’s legal counsel and is non-refundable if the Purchaser does not close after Court approval and satisfaction of due diligence conditions; and f) the sales are “as is, where is” with no representations and warranties of the Receiver.
Receiver’s Review of the Solar Cittee Offer and Competing Offer
5,7 The Receiver’s review of the Solar Cittee Offer included consideration of the following:
a) the results of the marketing efforts undertaken by CW, as established and market leading real estate listing broker, and whether the Solar Cittee Offer represents the best offer for the property (refer to section 5.8 below); b) the reputation and wherewithal of the prospective purchaser and the likelihood of the offeror
being able to conclude a successful transaction;
c) the length of the due diligence and closing periods and the substantial amount of a deposit (S430,000) provided by the prospective purchaser; d) the potential for the Receiver to incur additional holding costs in respect of the property if the transaction was not concluded in a timely manner including preservation costs, professional fees and interest accruing in respect of first ranking mortgages; e) confidential third party valuations and other indications of value;
-8- f) the weak current market conditions in the Alberta commercial real estate market; and g) the economic interests of senior secured creditors and other stakeholders with interests in the purchased assets. In that regard, the Receiver has consulted with the primary secured creditor, CWB and has confirmed that CWB is satisfied with the terms of the Solar Cittee Offer.
5.8 The Receiver received a competing offer for Energy Crossing from a third party that was working in consultation with the guarantors of the CWB secured indebtedness. The offer was priced slightly higher by $200,000 than the accepted offer from Solar Cittee but other select terms of the
competing offer were not, in the Receiver’s view, as advantageous, including a nominal upfront deposit and longer due diligence and closing timelines. The Receiver is of the view that the closing risk associated with the competing offer was greater than the accepted offer of Solar Cittee and after consultation with CWB, the Receiver made the decision to accept the Solar Cittee
Offer, albeit at a slightly lower price.
5.9 The Receiver is of the view that Energy Crossing was marketed comprehensively and in a manner which was fair and reasonable, that the market has been adequately canvassed for potential purchasers and that the transaction contemplated by the Solar Cittee Offer is in the best interest of the creditors of the Reid Group. There is no residual equity in the Energy Crossing property for the benefit of the receivership estate as the market value and sales price are for less than the
indebtedness of CWB on its first mortgage. As a result, third party guarantors of the CWB loans to 185 may have financial exposure.
Energy Crossing SAVO
5. 10 The Energy Crossing SAVO will conform in most respects to the Lakeview SAVO as set out in section 4.9 with the following addition: the net proceeds for the purchased assets payable on the
closing date shall be held by the Receiver’s legal counsel in trust pending a resolution in due course between CWB and the Receiver as to an allocation determination and agreement on certain charges including the Receiver’s Charge, property taxes and other holding costs.
6.0 INTERIM STATEMENT OF CASH RECEIPTS & DISBURSEMENTS
6. 1 While a more fulsome report on the Receiver’s realization efforts and details of the realizations by Reid Group entity will be provided to this J-lonourableCourt in due course, the Receiver has
prepared a summary of the Receiver’s interim statement of cash receipts and disbursements from
November 2, 2017 to June 18, 2019 to provide this Honourable Court and Reid Group’s stakeholders a brief financial update on the status of the Receivership Proceedings.
-9- Reid Group in Receivership Receiser’s Combined Interint Statement of Cash Receipts and Disbursements For the period Nosenther 2,2017 to June 18, 2019 [S000s)
Receipts
Cash on hand S 70 Receivers borrowings 000 Sale ofequipinent 181 Sale ofliotnes and lots 57,552 Sale of development properties 15.783 Sale ofcoitsinercial properly 38,423 RenI receipts 1.547 Other receipts 1.349 GST collected on sales 420 Total Receipls 116.325
Disburse nienls \‘ages and contractor payments 1,028 Properly tax 2359 Commissions 660 Insurance 512 L’tilities and services 757 Rent 22 Security 29 House completion and svintermzaliotmcosts 79 Other disbursements 321 GST paid on dmsbmusensents 356 GST retnitled 344 Receis’er fees amidexpenses 2.844 Legal fees and expenses 2.469 Receiver’s borrossings repasomienl .000 Receis’er’s borrowings interest and fees SI Developer lot payouts 11.014 Dislrmbulionto Jos’ica 1.109 Distribution to Cobra 547 Distribution to Laurentian 6.045 Distribution to K’s’Capital 6.971 Distribution to Canada CI 28,350 Distribution to RBC 38,092 92.129 Total Disbursements 104.960
Closing Cash Balance S 11.366
6.2 The closing cash balance in the Receiver’s trust accounts as at June 18, 2019 was approximately $11.4 million with approximately $51,000 held for restricted purposes.
6,3 Net cash proceeds recovered by the Receiver have totaled approximately $1 16.3 million and net
proceeds of $92. 1 million have been paid out and/or distributed to secured creditors and developers.
7.0 RECEIVER’S ACTIVITIES
7, I In addition to the activities described in this Sixteenth Report and the initial activities described in the Receiver’s First Report dated November 24, 2017, the Receiver’s activities have since included the following:
a) executing 62 transactions involving accepted or approved offers for 492 residential work-in- progress homes and lots, 33 commercial, development and other real properties, and
- 10 - settlement of 3 other assets and interests of the Reid Group for total cash consideration of $120.0 million, which are detailed in previous reports of the Receiver; b) conducting sales process of the capital assets of Reid Group consisting primarily of vehicles, computer equipment and show home furnishings; c) attending meetings and discussions with interested parties of Reid Group’s properties including providing information for due diligence requests; d) maintaining appropriate insurance coverage of the Reid Group’s assets and continued communication with insurance brokers; e) communicating with commercial tenants with various matters regarding their leases and the Sales Process; f) continued security of vacant residential, industrial, commercial and development properties, arranging regular site visits in compliance with insurance policies, and performing maintenance work in compliance with municipal codes; g) facilitating the Wage Earners’ Protection Program and attending to employee-related matters such as issuance of Records of Employment and T4s and responding to employee inquiries; h) continuing communication and consultation with various stakeholders, customers, lienholders and other creditors; i) meetings and ongoing discussions with representatives of New Homes Warranty Insurance (Canada) Corporation as Reid Group’s inventory of residential homes are sold; j) meetings and ongoing discussions with the Receiver’s legal counsel to assist with various matters including review of offers to purchase, dispute lien claims holdbacks, review of letters of credit and preparation for court hearings; k) vacating the Edmonton and Calgary offices and arranging for storage of the books and records;
1) communicating and cooperating with the Canada Revenue Agency for trust claim audits, GST filings, source deductions and other matters; m) communicating with various municipalities regarding property taxes, letters of credits, outstanding servicing required for certain neighbourhoods and other matters; n) collecting accounts receivables and other amounts owed to the Reid Group; o) reconciling and releasing eligible seasonal holdbacks to homeowners who purchased homes from the Reid Group prior to the Receivership; p) reviewing and assisting with the detennination of the validity and enforceability of lien claims on Reid Group-owned lots and developer-owned lots;
-11- q) preparing for and attending court hearings including reviewing court materials and preparing accompanying Receiver’s reports; r) attending to accounting and administrative matters including maintaining accounting of all receipts and disbursements incurred by the Receiver for each entity in the Reid Group, updating the Receiver’s website, payment of contractors and suppliers, and managing ongoing service providers; and s) addressing all other matters pertaining to the Receivership Proceedings.
8.0 RESIDUAL ASSETS & INTERESTS
8.1 As at the date of this Report, there remains certain residual assets and interests not yet realized by the Receiver which are described below.
Bridge to Homeownership Partnership
8.2 The Bridge to Homeownership Partnership (“BTHO”) was launched in 2016 as a venture between the Reid Group and Prospect Financial Inc. The BTHO arrangement is detailed and defined in the Receivers Second Report dated February 28, 2018 and not repeated herein. The Reid Group sold 17 homes prior to the Receivership to BTHO. A further 14 homes remain in the name of the Reid Group entities but are occupied and subject to Lease Agreements and Option to Purchase Agreements between BTHO and third-party purchasers/lessors.
8,3 The Receiver has continued negotiations with the joint venture partner with respect to a sale of the 14 homes as well as the settlement and recovery of amounts due to the Reid Group and in the interim, the Receiver has taken an assignment of the rents of the 14 homes, which remain owned byRBH and 167.
Fairways North Development Lands
8.4 Fairways North are development lands in Stony Plain, Alberta comprised of approximately 44.1 acres, with approximately 12.1 acres ready to be subdivided into 37 residential single family lots and approximately 32 acres of unserviced lands (“Fairways”). Fairways was included in the Sales Process and currently listed with a real estate broker, Colliers International (“Colliers”)
since August 2018. Given the nature of the property and current market conditions, a longer term sales strategy has been necessary.
Head Office
8.5 The former head office of the Reid Group is located in Edmonton, Alberta and the building is
approximately 30,000 square feet on 1.19 acres (the “Head Office”). The I-leadOffice has been
- 12- listed for sale by Colliers since March 2018 and the Receiver continues to deal with offers as they are presented.
Highland Ridge Joint Venture
8.6 Highland Ridge is a development property with 76.6 acres located in Sturgeon County, Alberta (the “Highland Ridge JV”). RWW holds 25% interest in a joint venture with Carton Land Inc. (“Carton”) which holds 25% interest and the previous landowners, who hold the remaining 50% interest. The book value of RWWs interest is approximately $750,000 and loan receivable due from the joint venture is $110,000. Highland Ridge JV was included in the Sales Process and continues to be marketed for sale.
Morinville Mortgage
8.7 RCC is owed approximately $984,000 plus accrued interest from 714559 Alberta Ltd. relating to a mortgage held by RCC over a 2.1 acre property in Morinville, Alberta that was due to be repaid in July 2018. The Receiver has commenced enforcement proceedings in respect of the mortgage.
Life Insurance Policies
8.8 In July 2018, certain Reid Group life insurance policies were collapsed for which the cash surrender values and accumulated fund values had been assigned as collateral for third party loans to certain former executives of the Reid Group (the “Insurance Defendants”). In August 2018, the Receiver filed statements of claim totaling $25.3 million against the Insurance Defendants and has since received statements of defense in January 2019.
Syml Systems Inc. Loan
8.9 RCC provided a loan to Symi Systems Inc. (“Symi”) of $1.5 million which was due to be repaid on December 31, 2018. The Receiver has recently commenced enforcement proceedings against Syml.
9.0 RECEIVER’S CONCLUSION AND RECOMMENDATION
9.1 It is the Receiver’s respectful view that the purchase prices and other terms of the Accepted Residential Offers, Lakeview Offer, and Solar Cittee Offer are commercially reasonable in the circumstances. The Sales Process and marketing efforts undertaken by the Receiver was conducted in a manner which was fair to all interested parties, has resulted in transactions that provide for the highest overall sales proceeds for the purchased assets with the best prospects of closing and has given consideration to the economic and commercial interests of the various competing financial stakeholders.
-13- 9.2 Based on the forgoing, the Receiver respectfully recommends that this Honourable Court grant the three SAVOs referenced herein.
* ** * *
All of which is respectfully submitted to this Honourable Court this 20 day of June, 2019.
Alvarez & Marsal Canada Inc., in its capacity as Receiver and Manager of the assets, undertakings and properties of the Reid Group and not in its personal capacity
Per: Todd M. Per: Vicki Chan Senior Vice Vice President
-14-