Strategic Group ordered to put properties with $650M in mortgages into receivership

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 Hornerappointed Alvarez & Marsal 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.

• Strategic Group puts 50 Calgary properties, with $650M in mortgages, under creditor protection

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 Marsal.

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 Marsal 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 Mamdanisaid Alberta's "severely negative" economy hadforced 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 Buildingwas home to a number of oil and gas companies. The Strategic Group plans to utilize the space to provide94 rental apartments sometime in 2020.

• Office buildings turn to apartments, bring downtown Calgary back to life

According torealtor 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," Mamdanisaid 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."

Mamdaniis a polarizing character in Calgary's real estate market. In 2018, his company was ordered to pay more than $2 million in a partial settlement over a class-action lawsuit.

In 2016, he was shot while leaving his mansion in one of Calgary's wealthiest neighbourhoods in what police said was a targeted shooting.

He has also been recognized for his philanthropic work in the community.

A full list of the affected properties is below: