As their real estate business was failing, a group of Ontario landlords spent millions of dollars of investors’ money on “extravagant” expenses, ranging from renting a luxury vacation home in Hawaii, to footing a $5,000 Miami strip club bill to flying on private jets.
Those are among the findings of KSV Advisory, a court-appointed monitor given special powers by Superior Court to investigate the web of corporations linked to four landlords:
- Former YTV actor Robbie Clark.
- Hamilton-area real estate agent Dylan Suitor.
- Burlington business owners Aruba Butt and Ryan Molony.
Their 11 corporations currently have bankruptcy protection from over 30 lawsuits after they failed to pay back over $144 million borrowed from investors.
In a 92-page report released this week, KSV said the landlords appear to have “diverted, misused or misappropriated funds that were borrowed from investors.”
“Funds were improperly used for their personal benefits or extravagant expenses … without any discernible benefit to the business,” it says.
CBC report detailed apparent spending
The landlords had used first and second mortgages and unsecured promissory notes from private lenders to buy up 800 properties, mostly in small Ontario cities, to renovate and rent out at a higher cost or sell them.
CBC Hamilton revealed in February that the landlords flaunted a lavish lifestyle throughout 2022, even as their business was running out of money, properties sat derelict and vacant, and contractors, utility bills and property taxes went unpaid.
The court agreed for KSV to conduct an investigation earlier this spring, following concerns raised by investors in the wake of the CBC report.
The KSV report reveals more details about how the landlords’ spending unravelled the business, which the landlords, also known as the applicants, “vigorously dispute,” as stated in a letter from their lawyer to investors on Wednesday.
Parts of the KSV report published online have been redacted and information provided by the landlords wasn’t included “without explanation,” wrote Alex Payne, a lawyer with Bennett Jones.
“It appears that the monitor has either not reviewed, misunderstood, and/or ignored certain of the applicants’ responses,” Payne said in the letter.
He added they will work with the monitor to “dispel” concerns raised in the report.
Steven D’Amico, a spokesperson for the landlords, told CBC Hamilton in a statement that their business practices are lawful, allegations of “excessive luxury expenditures” are inaccurate — and that the purchases are related to company retreats and capital-raising activities, and a small portion of the companies’ overall expenses.
D’Amico works in crisis communications for the Florida-based firm JConnelly.
Landlords due in court over bankruptcy protection
The landlords and investors are preparing to go to court in the coming days. Both sides will argue whether or not the bankruptcy protection — and protection from investors looking to recoup their money — should expire June 24.
The business was fuelled by over 1,300 loans, the vast majority of which came from Hamilton mortgage broker Claire Drage and her company, the Windrose Group, which closed down earlier this year.
KSV reviewed presentations Windrose made to convince people to invest with Suitor, Butt and Molony, and found them to be “misleading.” The presentations didn’t convey the amount of debt they’d taken on and how much they were paying to service that debt — which was substantial.
Investors were under the impression that when they lent their money to the landlords, it was being used to buy or renovate a specific property, the KSV report says. But the landlords transferred over $12 million to corporations linked to other properties without investors knowing.
During a call with investors in April 2024, KSV learned many people took “significant issue” with this practice of moving money to whatever company needed it, the report says.
And in at least once instance, Suitor renewed a loan for a Sault Ste. Marie property that had been sold without investors’ knowledge, the report says. Suitor also renewed two other loans without telling investors the property, in Timmins, had burned down.
The landlords had also transferred over $21 million to their personal bank accounts, credit cards and unrelated corporations, KSV found.
The landlords failed to provide adequate financial records that tracked their spending, which has caused KSV “substantial concern,” according to its report.
“However, even more concerning to the monitor is the timing of many of these transfers.”
Millions transferred to personal accounts
When Windrose and other sources acting on behalf of investors deposited large amounts of money into the corporate accounts, most or all of it would be transferred to unrelated corporations within days or weeks, says the report.
Butt, for example, received a $400,000 transfer marked as “dividend” to her bank account in May 2022, as did a corporation owned by Drage’s family members. In the months that followed, the business faced “severe liquidity issues” and missed interest payments, says the report.
In total, it says:
- Butt transferred $2.7 million to her personal account.
- Suitor transferred nearly $630,000 to his, with the majority going towards his credit cards.
- Clark transferred close to $1 million and Molony nearly $460,000.
D’Amico, their spokesperson, said the vast majority of these payments are actually reimbursements for business expenses such as renovations and utilities.
The landlords also used the loans to pay for jewelry, appearances with social media influencers, a cut from a famous hairdresser, stays in luxury hotels, and expensive meals in Paris and New York City, the report says.
KSV spoke to Drage throughout the investigation and she said she had similar expectations as investors, didn’t know the landlords were using the loans in this way and only became aware of their cash flow issues in late 2022 or early 2023. She is currently facing about 20 lawsuits filed by lenders across Ontario.
Drage did not respond to a request for comment through her lawyers.
By 2023, the landlords, through their companies, were borrowing money just to make interest payments and other debt obligations, the report says.
Even when it was clear the business was operating at a “significant loss” with no “exit strategy” and they wouldn’t be able to pay back all investors, the landlords renewed loans. This practice continued into January 2024, shortly before they applied for bankruptcy protection.
Overall, KSV found investor funds were “mismanaged” to the benefit of the landlords.