Amidst an alleged $30-million loss incurred on a flagship condo project, real estate developer Sam Mizrahi has filed a lawsuit against Edward Rogers and Constantine Enterprises Inc., the real estate fund owned by Mr. Rogers. The conflict between the businessmen has escalated, leading to this legal action.
In the lawsuit, filed in Ontario Court, Mr. Mizrahi alleges that Mr. Rogers and his business partner, Robert Hiscox, who co-own Constantine, obstructed his attempts to salvage the value of two jointly developed real estate ventures. These efforts were met with resistance, leading Constantine to seek court-appointed receivers for both projects.
Mr. Mizrahi’s lawsuit seeks $100 million in damages and accuses Mr. Rogers, Mr. Hiscox, and Constantine of breach of contract, negligence, and breach of fiduciary duty, among other allegations. The lawsuit asserts that the luxury condo project at 128 Hazelton in Toronto’s Yorkville neighborhood, which was developed in collaboration with Constantine, has incurred losses exceeding $30 million. Constantine is purportedly demanding that Mr. Mizrahi assume half of this loss. Due to Mr. Mizrahi’s refusal, Constantine is said to have blocked his attempts to sell undeveloped land at their other project, known as 180 Steeles or 180 SAW. Additionally, other financing initiatives proposed by Mr. Mizrahi were reportedly obstructed.
The lawsuit alleges that the defendants refused to realize the profit potential on the 180 SAW project based on offers solicited by Mr. Mizrahi because he exercised his legal rights and declined to be coerced into indemnifying Constantine for 50% of the losses on the 128 Hazelton project as a condition of accepting the offers on the 180 SAW project.
In an email to The Globe and Mail, Constantine’s Mr. Hiscox challenged Mr. Mizrahi’s account, asserting that “in December 2021, Sam, through one of his entities, had agreed, as a 50-percent partner in Hazelton, to share equally in the losses of that project. This was documented in the ‘contribution agreement.'”
Mr. Hiscox further stated, “We are about to enter the 10th year of what Mizrahi represented would be a three-year project,” adding that the project has exceeded Mr. Mizrahi’s original budget by more than $50 million, nearly double the initial estimate.
Mr. Mizrahi’s lawsuit follows two major developments. In January, the senior lender to 128 Hazelton foreclosed on the project. A month later, Constantine acquired Duca’s debt and subsequently filed its own request for court-appointed receivers for both 128 Hazelton and 180 Steeles, with the intent of having a third party complete sales for each.
In an interview with The Globe, Mr. Mizrahi described Constantine’s behavior as “predatorial.” As of January, Constantine and Mr. Mizrahi jointly owned eight units in 128 Hazelton. In its receivership application, Constantine alleged that Mr. Mizrahi’s company “failed or neglected to provide its share of the required additional funds necessary to complete and sell the remaining Hazelton project units.”
Regarding the 180 Steeles project, Constantine claimed it was owed $29 million by Mr. Mizrahi and had lost confidence in his ability to repay the debt. Constantine also expressed concerns that Mr. Mizrahi’s company would continue to fail or neglect to fulfill its required capital contributions to the partnership. 180 Steeles is situated on Toronto’s northern border but remains in the preconstruction phase and was listed for sale a year ago.
As the legal battle intensifies, both parties have accused the other of acting in bad faith. For instance, in February, Mr. Mizrahi informed The Globe that he attempted to secure financing from Third Eye Capital (TEC), a private lender, to pay off Duca’s loan and sought Constantine’s approval. However, he later discovered that Constantine had independently reached a private agreement to do the same. “They didn’t tell me, they weren’t transparent,” he stated.
In his email response, Mr. Hiscox asserted, “There were a number of issues with that financing proposal, not the least of which was the cost of the TEC debt being much higher than the existing Duca debt.”
Mr. Mizrahi also engaged with Hyundai Asset Management, a South Korean entity, as a potential buyer for the 180 Steeles project, but Constantine reportedly declined the transaction, as stated in his lawsuit. Mr. Hiscox, in his email, noted that the potential buyer “walked from the deal because of the current status of the zoning approval.”
While Mr. Mizrahi litigates against Constantine, another of his Yorkville condo projects, known as The One, is in receivership. Last fall, the 85-story project was placed in receivership due to a $1.6-billion debt owed to its lenders. The project has faced significant delays and numerous lawsuits. Recently, Mr. Mizrahi was removed as the project manager.
