The Calgary-based Strategic Group’s bid to put more than 50 properties under creditor protection has been rejected — meaning those properties, with mortgages totalling nearly $651 million, will now be placed in receivership.
A decision filed on Dec. 20 by Court of Queen’s Bench Justice Karen Horner appointed Alvarez & Marshal Canada Inc. as receiver, denying Strategic Group the opportunity to control those properties while it adjusted course.
Under protection secured in early December under the Companies’ Creditors Arrangement Act (CCAA), Strategic Group would have been allowed to remain in possession and control their assets.
The Dec. 20 decision, however, means future direction for those properties — a combined 3.7 million square feet — will be subject to direction by Alvarez and Marshal.
This development is consistent with our end goal.– Strategic Group statement
In a statement provided to CBC, the company said the development was “consistent with [its] end goal.”
“[We want] an orderly disposition of some of our real estate assets to maximize recovery for our stakeholders and ensure our company is stronger moving forward,” the statement reads. “We will work closely and collaboratively with the receiver to ensure a smooth transition and minimize impact to our tenants and residents.”
The company said it would share further information in the coming weeks as it becomes available.
According to the court order, Alvarez and Marshal will now “take possession and exercise control” over the properties, as well as “any and all proceeds, receipts and disbursements arising out of or from” the properties.
Vacancy rate and economic downturn
Speaking to CBC in December, Strategic Group CEO Riaz Mamdani said Alberta’s “severely negative” economy had forced the company into an “incredibly challenging environment.”
“Our Alberta office portfolio is in year five of a pretty distressing situation,” he said.
Since mid-2014, the company said that 78 tenants did not remain in their leased properties — representing 573,333 square feet of available space. In 2019, the company said 21 tenants closed down.
Part of the company’s strategy to respond to vacancies downtown is to repurpose existing commercial buildings into residential rental apartments. That’s the plan for the 11-storey Barron Building on Eighth Avenue S.W., the former home of the Uptown Theatre.
Completed in 1951, the Barron Building was home to a number of oil and gas companies. The Strategic Group plans to utilize the space to provide 94 rental apartments sometime in 2020.
According to realtor Avison Young, nearly one in four downtown Calgary office buildings are currently vacant.
“We are focused to create a strong new future for Strategic Group and all of our stakeholders,” Mamdani said in a statement issued before the assets were placed into receivership. “It is our desire to be a vibrant contributor to our city and province.”
A full list of the affected properties is below: