880 Eastern: a take-back mortgage, passed to the lenders

Michael & Michael Auto Body Ltd. took title to 880 Eastern Avenue in Toronto in 1981, and the lot, 12,170 square feet with its driveway off Eastern Avenue, still held a one-storey auto body shop building when the lender's affidavit described it in 2025. In February 2020 the company transferred the land to 880EA Corp. and 880EA LP and took back a $4,320,000 first mortgage for part of the price, registered the same day as a $7,800,000 charge in favour of Canadian Mortgage Servicing Corporation over 880 Eastern and 80 Knox Avenue, the corner lot next door, per the parcel register for 880 Eastern attached to the First Report of the Receiver, Sept. 11, 2026, App. "C", pp. 46–47 and the Affidavit in support of the application, Sept. 5, 2025, paras. 7, 30. Six and a half years later the court-appointed receiver of the owners is asking the court to approve a sale of the same two lots, and part of the price is again a mortgage taken back by the vendor. This time the receiver proposes to give it to the lenders.

The motion is returnable at 10:00 a.m. on September 23, 2026, by video conference before a judge of the Ontario Superior Court of Justice (Commercial List), file CV-25-00751137-00CL. Grant Thornton Limited, receiver since September 17, 2025, dated its First Report September 11 in support of two draft orders: a sale approval and vesting order, and an ancillary order dealing with distribution, the take-back mortgage, fees and sealing, per the Notice of Motion, Sept. 11, 2026, paras. 1–2.

A lender's account of the default

The receivership was brought by CMSC, a mortgage servicer, and the account of how the lots got here is its own. Under a commitment letter dated January 29, 2020 and four later amendments, CMSC lent $10.3 million to 880EA Corp., as general partner of 880EA LP, and to 874EA GP Inc., for 874EA LP, first to buy 80 Knox and then, in September 2022, to add the two semi-detached houses at 874 and 876 Eastern for $2.5 million. The plan, as CMSC understood it, was a mixed-use rental building of 184 apartments over 10,000 square feet of ground-floor commercial space; the affidavit adds that the owners obtained a zoning by-law amendment for a 12-storey building of 200 residential units and 156,788 square feet of gross buildable area. TAS LP 3 guaranteed the loan, which carried interest at TD prime plus 3.75%, with a floor of 10.20%, per the Affidavit in support of the application, Sept. 5, 2025, paras. 6–11, 31.

CMSC's affiant, the managing director of its parent company, listed the defaults: interest unpaid from July 1, 2025, property taxes unpaid, maturity on February 7, 2025, and — in CMSC's account — a mortgage registered in favour of Kingsett Mortgage Corporation on or around March 28, 2025 without CMSC's consent. The debt stood at $10,734,679.39 on August 13, 2025. A sale effort by Cushman & Wakefield beginning in or about May 2024 had run "for the better part of a year" without result, and the affiant described the lots as "suffering from varying degrees of disrepair and degradation," per the Affidavit in support of the application, Sept. 5, 2025, paras. 13–14, 19, 32.

Nobody appeared for the respondents. On September 16, 2025 Justice W.D. Black found it just and convenient to appoint Grant Thornton and, "given that none of the respondents filed any materials or attended before me to contest the debts owing," granted CMSC judgment jointly and severally against the owners and TAS LP 3 for $10,734,679.39, exclusive of continuing interest and costs, per the Endorsement of Justice W.D. Black, Sept. 16, 2025, paras. 7–11. The signed order, dated the next day, lets the receiver sell without court approval only up to $250,000 a transaction and $500,000 in all, per the Receivership Order, Sept. 17, 2025, para. 3(k).

Two rounds, and one bidder from outside them

Grant Thornton never took possession. TAS LP 3 already held the sites, and the receiver worked through it and through Cushman & Wakefield, which it chose from four brokers who answered its request for proposals because the firm had marketed the lots before and "had a data room already prepared and populated." The marketing ran five weeks from an email blast on October 27, 2025, with a Globe and Mail advertisement, LinkedIn and MLS in the week of November 3. Thirty-one parties signed confidentiality agreements and eight bids arrived by the 5:00 p.m. deadline on December 9, 2025, per the First Report of the Receiver, Sept. 11, 2026, paras. 13, 16, 20–22.

The receiver "was dissatisfied with all offers," rejected every one and reopened bidding with a deadline of January 12, 2026. In the second round Cushman & Wakefield talked to buyers about "a structured finance transaction that included a possible vendor take-back mortgage for a portion of the purchase price." None of the first-round bidders raised its bid. The winning offer came from a party that had not bid in December but had stayed in discussion with the broker, and it covered 80 Knox and 880 Eastern only. Nobody, through either round or the MLS listing, bid for 874 and 876 Eastern, per the First Report of the Receiver, Sept. 11, 2026, paras. 23–27. The summary of first-round bids is among five confidential appendices the receiver asks the court to seal, with the key financial terms, the unredacted agreement, a January 23, 2026 valuation memorandum from Cushman & Wakefield and a pro forma waterfall, per the First Report of the Receiver, Sept. 11, 2026, p. 4 and para. 59.

Four amendments and an assignment

The agreement of purchase and sale was signed on February 9, 2026 with CD Capital Developments (Acquisitions) Limited. It has since been reworked in four written amendments and one exchange of emails between solicitors on April 15, 2026, as the recitals to the last amendment list them. The first, on March 19, fixed the due diligence date at April 30, added a further deposit, and added a financing condition running to July 17. On April 30 the purchaser waived due diligence, the parties settled the form of the take-back charge, and the receiver took on, at its own cost and as a condition of closing, delivering an amendment to a construction licence and limiting distance agreement registered in April 2025 between the 880EA owners and 874EA Corp., with postponements from every chargee on the neighbouring lots, per the First Report of the Receiver, Sept. 11, 2026, paras. 28–31 and App. "G", pp. 79–86, 102. The receiver also promised not to disclaim that agreement during the receivership, and may push closing out by up to six months if it cannot deliver the registrations on time.

A third amendment on July 13 set closing for the later of three business days after the vesting order and October 15, 2026, extended the financing condition to July 31, and restated the take-back terms. On July 31 the purchaser waived financing and assigned the agreement to 880 Eastern Limited Partnership, by its general partner 880 Eastern GP Corporation. The recital describes CD Capital Developments as an affiliate of a limited partner of the new purchaser, and the assignment leaves the original purchaser jointly and severally liable through closing. The same amendment moved closing to one business day after the appeal period on the vesting order runs out, provided nothing has been filed to stay or set it aside, and not before October 15, per the First Report of the Receiver, Sept. 11, 2026, paras. 32–34 and App. "G", pp. 91–92, 102–104.

The price, the deposits, the principal of the take-back mortgage and its opening rate are blacked out of the public copy. What the public copy does show is the take-back's shape. It matures on the earlier of four years and the first advance of long-term financing once the new building is "completed and stabilized," and the borrower may extend it three times by six months each for a fee of 0.25% of principal, at the greater of 5% and prime, prime plus 1% and prime plus 2%. It stands behind pre-development financing and acquisition financing up to 65% of the purchase price, each to a stated cap, and behind construction financing from a Schedule 1 bank or insured by the Canada Mortgage and Housing Corporation. The mortgagee must consent within ten business days to the plans, rezonings and road dedications the development needs, and give partial discharges up to 20% for land conveyed to the city, per the First Report of the Receiver, Sept. 11, 2026, App. "G", pp. 63, 97–99.

The receiver's defence of the structure is short: "While an ideal scenario would have resulted in a cash only purchase price for the Real Property, the Receiver and Cushman & Wakefield are of the view that the current environment required structured finance by way of the VTB to maximize the purchase price and provide the highest recovery to affected stakeholders," per the First Report of the Receiver, Sept. 11, 2026, para. 37. It adds that neither it nor the broker thinks more marketing would find a better bid, "especially in consideration of the additional professional fees required to do so," and that both first mortgagees support the deal, and it works through the Soundair factors to the same conclusion, per the First Report of the Receiver, Sept. 11, 2026, paras. 35–36, 38.

Who gets the cash, and who gets the paper

The two lots do not carry the same lenders first. CMSC holds the first charge on 80 Knox and ranks behind Michael & Michael on 880 Eastern, and Kingsett Mortgage Corporation's $4,850,000 charge, registered in March 2025, ranks after them on both lots, per the draft Sale Approval and Vesting Order, Sched. "C", pp. 193–194 and the Affidavit in support of the application, Sept. 5, 2025, paras. 7, 20. So a single price has to be split between them. The receiver uses Cushman & Wakefield's "As-Is – Direct Sales Comparison Approach," which puts 36.5% of the value on 880 Eastern and 63.5% on 80 Knox. A split by gross area comes out close to the same, the report says, but the receiver and the broker reject it because 80 Knox "holds slightly more value being a corner property with better access," per the First Report of the Receiver, Sept. 11, 2026, paras. 39–40.

On closing the receiver would pay court-approved professional fees, property taxes and the one $30,000 receiver's certificate issued to CMSC to insure the sites, then divide the net cash between CMSC and Michael & Michael on that allocation, holding back $200,000. The take-back mortgage goes to the same two creditors. Michael & Michael receives the portion equal to its debt with interest to closing, which the report calls "less than the proportionate cash allocation," and CMSC takes the rest, per the First Report of the Receiver, Sept. 11, 2026, paras. 11(f), 41–43 and the draft Ancillary Order, paras. 6(a)–(e). Counsel for both mortgagees agreed the valuation was an acceptable basis for the split, the receiver reports.

The payout figures run to the expected closing date. CMSC is owed $11,792,933 and Michael & Michael $4,944,703 as at October 15, 2026, and after the cash and its share of the take-back, CMSC is left with a shortfall of approximately $1,890,639 plus accruing interest. Loopstra Nixon LLP, as independent counsel, found both mortgagees' security valid and enforceable over the two lots, per the First Report of the Receiver, Sept. 11, 2026, paras. 42, 44–46. Michael & Michael's draft payout statement traces its 2020 loan from 5% interest to 10.5% from February 2024, per the First Report of the Receiver, Sept. 11, 2026, App. "H", p. 111.

Kingsett, the third registered mortgagee, is told to expect nothing. The two houses at 874 and 876 Eastern, which stay unsold and outside the deal, were listed for a year at an aggregate $1,500,000 without an offer, and the receiver says it advised Kingsett's counsel early in the receivership that it did not anticipate any recovery, per the First Report of the Receiver, Sept. 11, 2026, para. 44. The draft vesting order would expunge Kingsett's charge from both lots being sold.

Two tenants and the rest of the motion

In July 2026 the receiver learned that TAS LP 3 had let space at the sites to a woodworking provider and a parking operator on short-term arrangements that "do not appear to be subject to a lease." It told TAS to end them, TAS told the tenants to leave by September 30, and "as a matter of precaution" the receiver gave both tenants notice on August 18, 2026 disclaiming the tenancies, effective September 30. Neither opposed, per the First Report of the Receiver, Sept. 11, 2026, para. 14 and App. "F", pp. 55–58.

The estate itself holds almost nothing until closing. Its interim statement to August 31, 2026 shows $30,513.63 received, nearly all of it the certificate advance, against $27,293.36 spent, $23,755.68 of it on insurance. The receiver seeks approval of its own fees of $112,325.06 plus HST of $14,602.26, at an average hourly rate of $601.47, and of Gardiner Roberts LLP's $79,946.71 plus HST of $10,393.08 as its counsel, and says there are insufficient funds to pay any of it until the sale closes, per the First Report of the Receiver, Sept. 11, 2026, paras. 49, 53–55 and App. "I", p. 113. The ancillary order would also approve the First Report and seal the five confidential appendices; the report asks that they stay sealed until closing, because disclosure "could negatively affect the Receiver's ability to market the Properties" if the transaction fails, per the First Report of the Receiver, Sept. 11, 2026, para. 59.