Ontario landlords who owe investors $144M 'misappropriated' funds for 'extravagant' expenses: court report
CBC
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:
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.
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.
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