'Significant concerns' raised after insolvent landlord lists Sault properties for sale

The insolvent out-of-town landlords affiliated with SID Developments have been asked to produce information on properties directly or indirectly owned by them as part of ongoing insolvency proceedings as they continue to restructure their business operations in the face of a multi-million dollar debt.     

KSV Restructuring Inc. — the court-appointed monitor overseeing the insolvency of 11 SID-affiliated corporations under the Companies' Creditors Arrangement Act (CCAA) — has expressed “significant concerns” in recent court filings about the potential for dissipation of assets that may have been acquired with funds borrowed by nearly a dozen corporations helmed by Dylan Suitor, Aruba Butt and Ryan Molony.   

That concern was exacerbated when the monitor learned through a SooToday article that Butt is currently trying to sell off four properties in Sault Ste. Marie acquired by Zack Files Real Estate, a corporation named after the sci-fi television series starring SID Developments founder and chief executive officer Robert ‘Robby’ Clark. Zack Files Real Estate, which lists Butt as sole director, purchased seven properties locally in 2021 at a combined price tag of $2.65 million.

Legal counsel for the monitor have since reached out to lawyers for Butt, Molony and Suitor in search of answers. 

“The monitor has significant concerns about assets that may have been acquired with funds borrowed by the applicants being dissipated, and therefore requires an explanation of the linkages between Zack Files Real Estate and both the applicants and your clients; an explanation, together with supporting documentation, of the source of the funding that Zack Files Real Estate used to acquire these properties; and the intended use of proceeds of the proposed sales,” said legal counsel for the monitor in a March 18 letter. “For greater clarity, we require the same information concerning any other properties owned, directly or indirectly, by your clients or the applicants.” 

Real estate listings show that Zack Files Real Estate has recently placed the following properties up for sale:   

• 308 Korah Road ($749,000)
• 859 Trunk Road ($1.3 million)
• 40 Hynes Street ($2.63 million)
• 134-134A Gore Street ($799,000)

Most notably, 134 Gore Street —  which was overrun by squatters and without running water for weeks during the summer of 2022 due to people entering the building and stripping it of its copper piping — has dropped in price from $1.1 million to $799,000. 

The mixed-use building that once housed the now-defunct Neighbourhood Resource Centre is over 8,000 square feet and consists of three retail units and eight one-bedroom apartments, according to an online real estate listing. 

Legal counsel for the monitor reached out to Butt, Suitor and Molony prior to the SooToday article, seeking information on all listings, sales and transfers of properties directly or indirectly owned by them, in addition to details on the “intended use of the transaction proceeds.”  

Court filings show that legal counsel representing Clark, Butt, Molony and Suitor asked the monitor’s legal counsel about the basis of the request for “information involving the disclosure of personal information, personal assets, and personal business interests,” as well as information outlining the overall scope of the investigation. Legal counsel for the monitor, however, reminded them the investigation was ordered by the court, and the corporations have an obligation to cooperate. 

A spokesperson for Clark and Suitor advised SooToday the pair are are “eager to provide those answers,” and will be submitting the requested information to KSV Restructuring prior to the next insolvency hearing, scheduled for April 12. 

"We chose to initiate CCAA proceedings to, among other things, secure the necessary funding to complete our projects and thereby maximize value for our creditors,” said Clark in a statement provided to SooToday Monday. “Our commitment to transparency and open communication is evident through our comprehensive engagement in the proceedings and town hall meetings with creditors. Any outstanding information requests will be fulfilled as quickly as possible and we are confident that any exploration of our conduct will validate the integrity of our business practices." 

As first reported by SooToday, the directors behind 11 insolvent corporations — Butt, Molony and Suitor — filed for protection from creditors in the Ontario Superior Court of Justice in late January, claiming they owe approximately $147 million in unpaid loans and have less than $100,000 in the bank amid rising interest rates and falling home prices. 

The group owns more than 600 rental units in housing markets across Ontario with lower average costs of living, including Timmins, Sudbury and the Sault.

The SID family of companies was founded by Clark, a former child actor known for his starring role on The Zack Files, a Canadian sci-fi television series which aired on YTV from 2000 to 2002. 

In all, seven now-insolvent corporations affiliated with SID Developments own 152 properties in Sault Ste. Marie. There are 201 rental units within those properties, 79 of which sit vacant. 

Ontario Superior Court Justice Jessica Kimmel has granted the group of insolvent corporations an extension of its court-ordered protection from creditors until April 30. It had originally been set to expire March 28. 

The court heard the extension will stabilize day-to-day operations and help the group of corporations complete renovations on rental units while avoiding “uncoordinated and distressed sales or forced liquidations of the properties, which would be value deteriorative and contrary to the best interests of the applicants' stakeholders,” according to court filings.  

Meanwhile, court-appointed legal representation will be provided to 300 unsecured lenders through Goldman Sloan Nash & Harber LLP, after court-appointed legal counsel for the lenders was withdrawn in court earlier this year based on feedback from secured creditors.   

However, Lion’s Share Group Inc. and chief executive officer Claire Drage will be excluded from the legal representation, as well as any other unsecured lenders directly or indirectly linked to them. 

The SID-affiliated companies were provided with 802 promissory notes — a legal document outlining the specific terms of a loan — totalling $54 million. Lion’s Share is the lender on 602 of those promissory notes; the remaining notes were issued in favour of a number of individual lenders sourced by Windrose Group Inc. through Drage, who is also the principal broker for Windrose. 

The monitor has since excluded Drage and all affiliated companies due to “potential conflicts results from claims” made against them by unsecured lenders.