Court extends creditor protection for insolvent out-of-town landlords

The group of out-of-town corporations that received court-ordered protection from lenders after aggressively buying up hundreds of properties across northern Ontario — including more than 150 houses in Sault Ste. Marie — will now have that protection extended until the end of next month.    

The amended order extending the stay period — which typically prohibits collection proceedings or enforcement processes over existing debts — was formally approved Thursday by Ontario Superior Court Justice Jessica Kimmel, following a request for additional relief made by lawyers for the now-insolvent property owners during ongoing Companies' Creditors Arrangement Act (CCAA) proceedings. 

Extending the stay period until March 28 "provides additional breathing room and support for the Applicants' continuing pursuit of a comprehensive refinancing or restructuring and their efforts to implement a consensual plan of arrangement, if one can be achieved," Kimmel wrote in her endorsement.

The Superior Court also approved the group’s request for a $12-million line of credit, to be provided through Toronto-based Harbour Mortgage Corp., in order to assist the corporations with “working capital requirements and other general corporate purposes and capital expenditures,” according to the amended court order. A $4-million advance from the debtor-in-possession (DIP) credit facility was previously approved by the court in January.   

In a report filed earlier this week, KSV Restructuring Inc. — the court-appointed monitor overseeing the insolvency proceedings — said the corporations required the line of credit as they continue to struggle with a “critical and immediate" need for financing. “Without access to the full amount of the DIP facility, the applicants will be unable to maintain their operations or pursue their restructuring objectives,” the report said. 

While the group of shell corporations received additional relief, the same amended court order simultaneously dealt a blow to dozens of unsecured creditors: They are now cut off from court-appointed legal representation, which is being afforded to secured creditors only. 

That means the City of Sault Ste. Marie, PUC, in addition to a number of local businesses and contractors — owed more than $775,000 collectively, with more than $600,000 of that owed to the city alone for tax arrears — will have to seek out their own legal representation in order to recover outstanding debts from the insolvent out-of-town landlords via CCAA proceedings.  

One of those contractors, speaking to SooToday on the condition of anonymity, said they were assured by a representative for the group of shell corporations earlier this week that its outstanding debt to the Sault-based contractor will be paid off “in a few weeks.” The contractor provided interior renovations, including painting and flooring, to a number of properties owned by the now-insolvent corporations in Sault Ste. Marie dating back to 2021. 

“That’s the hope, right? I don’t know the real truth,” they said, when asked about the prospect of repayment. “I’m lucky they don’t owe me too much.” 

As first reported by SooToday, the directors behind 11 insolvent corporations — Aruba Butt, Ryan Molony and Dylan 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 now-insolvent corporations helmed by Butt, Molony and Suitor are affiliated with SID Developments, SID Management and SID Renos, all of which are based in Burlington, Ont. Together, they are referred to in court documents as a group of companies “specializing in the acquisition, renovation and leasing of distressed residential real estate in undervalued markets throughout Ontario.”

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 Robert 'Robby' 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.

Seven of the shell corporations affiliated with SID Developments currently own 152 properties in Sault Ste. Marie alone, court documents show. There are 201 rental units within those properties — 79 of which are sitting vacant.  

A total of 32 civil lawsuits have been filed against the group across Ontario, including eight in Sault Ste. Marie, court documents show.

The group’s ties to the Sault, however, don't end there: Three of the insolvent corporations have been taken to Provincial Offences Court to answer for 37 alleged property standards violations in addition to a number of Ontario Fire Code offences locally.  

DSPLN Inc. made headlines late last year when it was fined $140,000 after being found guilty of six Ontario Fire Code offences. The majority of the offences found at the multi-residential building in the city's west end were linked to smoke and carbon monoxide detectors. 

Sault Ste. Marie Mayor Matthew Shoemaker told SooToday earlier this month the insolvent out-of-town landlords have been "an overall disaster for the community."  

“I think that we would be better off if their assets were ordered to be liquidated by the courts and bought up by reputable landlords who had some connection to the community, because clearly these corporate entities — these shell corporations — have no regard for the well-being of the community," he said at the time.