Allied Properties Real Estate Investment Trust has announced it is buying out its partner Westbank Corp.Tijana Martin/The Canadian Press
Allied Properties REIT AP-UN-T is buying out its partner, Westbank Corp., on two skyscrapers as the Vancouver-based real estate developer faces rising costs and legal claims at projects in Toronto and Seattle.
Over the past decade, the two Canadian real estate developers joined forces to construct the two office properties in Toronto and Vancouver with Allied providing Westbank with loans and a credit facility to purchase the land. The debt had been extended over the past few years with the interest rates increasing.
At the same time, Westbank, Allied and the rest of the commercial real estate industry have had to deal with sharply higher construction and borrowing costs as well as labour shortages. Westbank has faced delays in finishing projects in Vancouver, Seattle and Toronto and has been dealing with lawsuits against some of its major projects including Mirvish Village, a massive residential complex of nearly 900 rental units in downtown Toronto.
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Allied announced late Tuesday it will convert a $130.5-million Westbank loan on the Vancouver office building in exchange for a 90-per-cent ownership stake in the property at 400 West Georgia St.
Allied also said it will convert a $67.5-million Westbank loan on a Toronto office building and is making a $36.3-million cash payment to the developer in exchange for a 95-per-cent stake in the mixed-use tower on Duncan Street in the city’s downtown core.
The deal, which is expected to close in early April, will significantly cut the amount of debt Westbank owes Allied. At the same time, it gives Westbank an infusion of cash.
Westbank did not immediately respond to a request for comment. Allied said it will fund the deals by selling “less strategic” properties in Toronto and Montreal. As well, Allied will use some of the proceeds from the recent reorganization of its massive office tower in Calgary to fund the cash payment to Westbank.
Allied said in a statement that the transactions will reduce Westbank’s debt to Allied materially.
Westbank has a reputation for architectural sophistication and is an international builder of rental apartments, condominiums, hotels and office buildings with sites in China, Japan and the United States. The company was founded in 1992 by Vancouver developer Ian Gillespie and started out with a shopping plaza in suburban Richmond, B.C.
In November, The Globe and Mail reported that Westbank faced legal claims for $25-million in unpaid work at the Mirvish Village development. Among the companies seeking repayment was EllisDon Corp., one of the largest general contracting companies in Canada, which is still seeking more than $9-million from Westbank over the Mirvish site.
Two of Westbank’s much-delayed Seattle construction projects have also faced dozens of legal claims or liens filed by unpaid suppliers and contractors, many of which were resolved with construction bonds that allow work to continue on the sites without resolving the issues of non-payment.
Currently, there are three liens on Westbank’s Project Stewart in Seattle, a twin-tower rental apartment project also known as WB1200 that was initially planned to be completed by 2021.
The largest claim is by Martin Holberg of Redmond, Wash.’s Expert Drywall Inc., that alleges his company is owed US$5.375-million for work that was finished as of Dec. 8, 2023.
The most recent lien was filed March 1, by a company called Winsupply Bremerton, a local plumbing and HVAC supplier, seeking US$919,155 based on work it says it started in July, 2022, and stopped on Dec. 8.
Another was filed at the end of February by Reagan J. Perry of Macdonald-Miller Facility Solutions LLC, seeking US$1.046-million for work that the SeaTac, Wash., metal fabrication company started in September, 2023, and stopped as of Feb. 8.
None of the lien claimants responded to requests for comment.
Editor’s note: A previous version of this article incorrectly described Westbank's Duncan Street development in Toronto as an office tower. It is a mixed-use building.