For your interestEvent
Yesterday, The Globe and Mail reported (link) that Westbank Corp., (Canadian mixed-use real estate development company with more than 16 high-rise projects underway in the U.S. and Canada) is being sued by four construction companies for over $25mm in unpaid work at the five-building 890-unit Mirvish Village rental apartment development on Bloor and Bathurst in Toronto.
Impact: POTENTIALLY SLIGHTLY NEGATIVE
Our Take: We note that it is not uncommon for disputes to occur with trades on large development projects, which is all this appears to be. That said, below we address exposures to Westbank at names within our coverage universe.
Allied Properties REIT (see Exhibit). As of Q3/23 Allied had ~$473mm in loans receivable (including interest) with Westbank across four developments. Allied noted that as of Q3, Westbank was current with all obligations under the loans. In terms of security, should Westbank default on any of the projects, Allied has first mortgage rights (subordinated to construction loans). As such, the REIT would end up owning the assets on a 100% basis. Three of the four projects (Adelaide & Duncan, King Toronto, and 400 West Georgia) are progressing well/ nearing completion, and we have little concern on Allied's investments. The fourth, 150 West Georgia has not yet begun construction.
Crombie REIT — very limited exposure. Crombie has JV arrangements with Westbank on two properties. Westbank is a 50% owner and operator of Crombie's 330-suite Davie Street/"Zephyr" residential rental property in downtown Vancouver (estimated fair value $130mm-$135mm at 50% ownership or ~ $800,000/suite using a low-mid 3's cap rate). Net of mortgage debt, the equity value at 50% is just ~$30mm. Westbank is also development partner on Crombie's Broadway & Commercial redevelopment site in Vancouver where it would in future acquire a 50% interest from Crombie. There are no loan arrangements between Crombie and Westbank.
Further Details on Mirvish Village. Per the Globe article, Westbank reportedly paid $69mm in 2013 to acquire the Mirvish lands and began construction in 2018. The project is nearing completion and appears well-capitalized with Westbank and its JV partner obtaining construction loans and commitments totaling $562mm (~$630,000/ door in financing)