District REIT: the court finds no 'cheque in hand' and appoints EY

On October 28, 2026, Justice Jana Steele of the Ontario Superior Court of Justice (Commercial List) appointed Ernst & Young Inc. receiver and manager over a building at 3967 Savoy Street in London, three in Toronto at 15 and 33 Gamble Avenue and 40 Beaty Avenue, 33 and 45 Jack Street and 133-135 Woodhaven Drive in Saint John, New Brunswick, and 11 West Street in Brantford, on the application of CMLS Financial Ltd., per the Receivership Order, Oct. 28, 2026, para. 2. At the hearing that day the borrowers asked for about 60 more days, on the strength of a new commitment letter from Phoenix Mortgage Inc. The judge refused. The letter was "not a firm commitment," the endorsement says: it was conditional on "satisfactory due diligence" and on the lender getting CMHC approved lender status, and "this was not a situation where the Debtors came to court with a 'cheque in hand,'" per the Endorsement of Justice Steele, Oct. 28, 2026, paras. 3, 16.

It was their second request for time in twelve days. On October 16 the same judge had granted "a brief adjournment to give the Debtors a final opportunity to obtain refinancing sufficient to repay CMLS," with terms for October 28: if the receivership order was granted that day, the respondents were to hand CMLS and the proposed receiver, immediately, a list of all bank accounts into which rent from the mortgaged properties was deposited, and their counsel was to have it at the hearing "in order to facilitate the immediate turnover of the same," per the Endorsement of Justice Steele, Oct. 16, 2026, paras. 7–8. The application, Court File No. CL-26-00000428-0000, was brought under s. 243(1) of the Bankruptcy and Insolvency Act and s. 101 of the Courts of Justice Act, per the Receivership Order, Oct. 28, 2026, p. 1.

A REIT of 28 properties and more than 850 investors

District REIT is the name under which District REIT Limited Partnership, an Ontario limited partnership created in April 2017, and its general partner, District REIT GP Inc., headquartered in Burlington, carry on business as "a privately managed real estate investment trust." The respondents are part of the Valour Group, whose mission, their affidavit says, is to develop and operate real estate in secondary urban markets. The REIT's portfolio is 28 properties in Ayr, Brantford, London, Milton, Owen Sound, Sauble Beach, Woodstock, Toronto and Saint John, appraised at approximately $218.36 million as of December 31, 2025. The partnership is owned as to approximately 99.9% by retail investors, and the REIT has more than 850 unique investors, who contributed approximately $86 million; the affiant, an officer and director of each of the corporate respondents, estimates their equity today at approximately $50 million on an appraisal basis and $25 million to $30 million "on the basis of the sale prices currently being achieved in the market," per the respondents' affidavit, Oct. 13, 2026, paras. 1, 5–6, 8–10.

CMLS holds first mortgages on eight multi-residential properties. Seven are owned beneficially by the partnership and, the respondents say, make up more than 40% of the REIT's property assets; the eighth, the Woodhaven building in Saint John, "is not a District REIT property" and is owned beneficially by East Park Limited Partnership. The respondents' own chart put the eight at 307 units, 209 of them leased, for 68% occupancy and gross rent of $306,271.51 as of October 1, 2026, with 40 Beaty Avenue 33% occupied, per the respondents' affidavit, Oct. 13, 2026, paras. 12–15, 40.

Eight loans, a June demand, and a stabilization plan

CMLS, a mortgage lender and servicer, lent under eight credit agreements dated between February 2022 and January 2025, secured, among other things, by first mortgages and general security agreements from the title-holding companies, and the beneficial owners bound themselves to those obligations through beneficial ownership agreements, per the Factum of the Applicant, Oct. 13, 2026, paras. 9, 11, 16–17. Behind CMLS on the three Toronto buildings, according to CMLS's affidavit, sit second mortgages registered by Computershare Trust Company of Canada on behalf of Timbercreek Mortgage Servicing Inc. and third mortgages registered by Gennaro Investments Limited, per the CMLS affidavit, Oct. 1, 2026, para. 25.

CMLS's affidavit, affirmed October 1, lists the missed payments loan by loan, beginning in April 2026 for some of them. On June 2 CMLS sent demand letters with notices of intention to enforce security under s. 244 of the BIA. The borrowers then paid the mortgage arrears up to June 1, the affidavit says, and missed July, August and September, per the CMLS affidavit, Oct. 1, 2026, paras. 26, 31–32. On July 31 the borrowers had proposed a "stabilization plan" to CMLS; by CMLS's account it advised that the District REIT properties CMLS financed faced an operating shortfall of approximately $4.4 million and had property tax arrears of approximately $447,251. CMLS rejected it, and the forbearance terms CMLS later offered were not accepted, per the CMLS affidavit, Oct. 1, 2026, paras. 33–34. The respondents' affiant answers that the discussions continued and that the respondents "have not refused forbearance," per the respondents' affidavit, Oct. 13, 2026, para. 27. October's payment was missed as well, and as at October 5 CMLS put the debt at $78,829,792.96, exclusive of legal fees, per the Factum of the Applicant, Oct. 13, 2026, paras. 4, 12(b), 15.

What the borrowers offered instead

The respondents did not dispute that payments were in arrears. The respondents attribute their liquidity constraints primarily to the correction that followed the rise in interest rates from 2022, compounded by the United States tariffs of February 2025, which brought "tightened credit conditions, increased carrying costs and delays in planned refinancings and dispositions," per the respondents' affidavit, Oct. 13, 2026, paras. 4, 16–18 and the Factum of the Respondents, Oct. 14, 2026, para. 7. Cushman & Wakefield appraisals as at December 31, 2025 put the seven REIT properties at $84,475,000, which the respondents set against the approximately $68.9 million CMLS claimed on them for an appraised cushion of approximately $15.6 million. On the respondents' estimates any shortfall was confined to the three Toronto buildings, and by their affidavit they "openly" offered CMLS additional mortgages over 11 West Street, Riddell Gardens in Woodstock, the Jack Street properties and the Savoy Street building, which on those estimates would cover it, per the respondents' affidavit, Oct. 13, 2026, paras. 4(a), 29, 31, 41 and the Factum of the Respondents, Oct. 14, 2026, paras. 1, 8–9.

The REIT has retained Colliers to market its properties, and the affiant points to sales. It sold Ayr Apartments and Assumption Plaza earlier in 2026; CMLS was repaid in full on Ayr Apartments, the affiant says, and approximately $860,000 of the sale proceeds was paid to CMLS and applied to arrears. On or about October 6 the REIT entered into an agreement of purchase and sale with a purchaser based in Quebec for two Toronto properties that are not mortgaged properties. The respondents expected agreements for Riddell Gardens and the Savoy Street building during October, and equity funding initiatives to be finalized by mid-November, per the respondents' affidavit, Oct. 13, 2026, paras. 34–36, 39. A receivership, their factum said, would on their estimates bear $1 million to $2 million in costs and a 10% to 20% forced-sale discount, a loss that "would fall first on the investors' remaining equity," and would disrupt more than 300 tenant households, per the Factum of the Respondents, Oct. 14, 2026, paras. 26–27.