Ashcroft Homes receives court-ordered protection from creditors

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An Ottawa judge has approved an order that gives Ashcroft Homes protection from its lenders while the developer and property owner restructures its struggling business.

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Ontario Superior Court Justice Graeme Mew granted creditor protection to the Ashcroft Homes Group, a group of eight related companies, under the Companies’ Creditors Arrangement Act on Dec. 5.

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The order essentially buys time for Ashcroft founder David Choo and his management team to refinance the business or sell some of its assets to reduce the company’s debt.

In an email Dec. 9, Ashcroft chief financial officer Manny Difilippo said the court-ordered creditor protection will allow the company to chart a path forward and emerge in a stronger position.

“Our goal is to trim our debt and improve operational performance, which will enable us to strengthen our overall financial position for the longer term,” he said.

According to documents filed with the court, the Ashcroft Homes Group owes banks and other lenders $284 million. The debt is secured against the value of the firm’s real estate, which is estimated to be worth about $460 million.

It leaves the company with net equity of roughly $175 million.

In an affidavit, Choo said the company’s liquidity problem developed in recent years due to the combined effects of rising interest rates and falling occupancy levels.

But Choo said he’s convinced the company can be rescued from the current crisis.

“I firmly believe that the root causes of the current liquidity shortfalls can be addressed in the longer term,” Choo said in his affidavit. “Occupancy declines are being addressed now and going forward through enhanced marketing and sales initiatives; the problem of higher interest rates on current loans is being addressed by refinancing efforts undertaken now, in a period of lower interest rates.”

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Founded by Choo in 1992, Ashcroft has built thousands of homes, condos, apartment and retirement units in and around Ottawa.

Its previous projects include planned communities such as Central Park at the Experimental Farm, and townhouse neighbourhoods such as Manhattan Square at Bells Corners.

The Ashcroft Homes Group operates largely through four divisions: Ashcroft Homes develops residential units; Alavida Lifestyles builds and operates retirement homes and seniors’ residences; Envie develops and operates student accommodation; and reStays operates luxury short-term rentals.

Collectively, they own about 1,000 residential units and employ more than 500 people, mostly within the city of Ottawa.

Alavida operates three retirement homes, Park Place, Ravines and Promenade, along with three seniors’ residences that use the same names.

Choo or his relatives own all of the businesses that operate under the Ashcroft Homes umbrella, according to information filed with the court.

In his affidavit, Choo said the company developed serious “liquidity shortfalls” in early 2023 and began working with its lenders to renegotiate repayment schedules.

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“While many of the discussions with lenders to the Ashcroft Homes Group have been successful, others have not,” Choo said, noting that several of the firm’s projects have been sent into receivership this year.

In October, Ashcroft lost control of its 200-acre Eastboro development, which was sent into receivership after the company defaulted on an $80 million loan with the Royal Bank of Canada. In June, Ashcroft defaulted on a $6.5-million loan, which resulted in three Richmond Road condominium properties going into receivership.

In his affidavit, Choo revealed that a 125-unit Ashcroft retirement residence, the Ravines, is also the subject of an ongoing receivership hearing. In that case, Central 1 Credit Union contends an Ashcroft subsidiary has defaulted on a $38 million loan.

All of the Ashcroft companies are in negotiation with lenders or under pressure from them to provide new forms of collateral or payment, Choo said.

He argued in his affidavit that court-ordered creditor protection is the only “viable means” of preserving the company’s value while it restructures and refinances itself.

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“Without immediate relief, including a stay of enforcement actions and additional financing,” Choo said, “the applicants will be forced to liquidate properties at distressed prices through numerous, unco-ordinated, and high-cost enforcement proceedings to the detriment of their stakeholders, including the lenders, hundreds of tenants and employees, and my own substantial equity.”

The court appointed the firm Grant Thornton Ltd. to monitor and report on Ashcroft’s operations while under creditor protection.

The move caps a difficult, eventful year for Ashcroft Homes, during which the company sued the City of Ottawa for $45 million, alleging staff wrongly led the firm to believe it would be fully compensated for building a stormwater pond and sewers at its Eastboro development.

It later settled with the city for $30 million, but the Eastboro development went into receivership before that money was paid out.

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