RHH Rental Properties: $110 million of investor loans, by the judge's math

Most of RHH Rental Properties Ltd.'s unsecured debt is loans from retail investors, taken for land development, and on May 22 Justice A.K. Mitchell of the Ontario Superior Court of Justice set out where about $110 million of those loans went. Investors were repaid $27.5 million. RHH put $32.2 million through its US subsidiary, RHP USA, L.P., into what the endorsement calls "a failed US development(s)"; $7.7 million into the Vaughan development in Guelph; $7.1 million into the Horizen development in London; $300,000 into the company that owns an apartment building in Stratford; and $20 million into bonds issued by Demeter Investment Holdings, a Cayman Islands company. "By my math, approximately $15.2 MM remains unaccounted for," the judge wrote, in an endorsement whose facts, he noted, were not in dispute, per the Endorsement of Justice Mitchell, May 22, 2026, paras. 7, 19–21.

The trustee, Deloitte Restructuring Inc., believes that RHH misappropriated a portion of the investment loans, the endorsement records, and should the charge it asked for be granted, it intends to investigate RHH's dealings before the bankruptcy and attempt to "trace" the loans, per the Endorsement, para. 21. That charge was a "super-priority" charge of up to $1 million over RHH's assets, securing Deloitte's fees and its lawyers', past and future; Deloitte also sought a six-month stay on secured creditors and approval of its sale of RHH's 25% interest in the owner of a 52-unit Stratford apartment building to the holder of the other 75%, per the Endorsement, paras. 1, 23. Justice Mitchell approved the sale, at a price sealed until it closes, and adjourned the charge and the stay to May 26: "The court's inherent jurisdiction is not to be exercised simply because no secured creditor opposes the granting of a priority charge," he wrote, per the Endorsement, paras. 28–29, 34, 38.

A developer's books

RHH built residential rental properties, such as condominiums and townhouses, primarily in southern Ontario, the trustee reports, per the First Report of the Trustee, May 13, 2026, para. 2. The preliminary report of BDO Canada Limited, its first trustee, counted ten employees in June 2024 and three at the date of bankruptcy, all directors and officers, and gave BDO's understanding that the Canada Revenue Agency had demanded repayment of approximately $1 million in outstanding source deductions and garnished the company's bank account(s) on September 26, 2024, per the Trustee's Preliminary Report (BDO Canada Limited), July 7, 2025, pp. 1, 3. In spring 2025, the endorsement says, RHH became unable to meet its obligations as they came due, in particular its tax obligations to the CRA. It made a voluntary assignment in bankruptcy on June 18, 2025, with BDO as trustee, and at the first meeting of creditors on July 7 BDO was replaced by Deloitte, per the Endorsement, paras. 10–12.

The statement of affairs listed assets of $26,271,783, including the Stratford shares, against $92,107,888 of unsecured and $2,039,637 of secured liabilities. Proofs of claim, the judge noted, "indicate far greater liabilities": 127 unsecured claims totalling $99,378,489 and six secured claims totalling $17,932,963, per the Endorsement, paras. 14–15. On the trustee's claims register the largest secured claim is 1000931276 Ontario Inc.'s, at $13,834,185, and Equiton Real Estate Development Fund Limited Partnership claims $2,821,814, per the First Report, App. "C".

RHH's records show a net of approximately $32.2 million deployed to a Tennessee-based limited partnership in which RHH invested through RHP USA, the trustee's notice of motion says; they show funds transferred to the partnership, but not any description of how it used them, per the Amended Notice of Motion, May 13, 2026, paras. (p)–(q). Local management has told the trustee that the partnership does not have material assets, as much of the land formerly owned by the operating company has been foreclosed upon by local lenders, per the First Report, para. 19(a).

The trustee understands the Demeter bonds were bought in 2022 to be used as collateral for future development projects; its notice of motion puts the purchase, made directly and through RHP USA, at US$20 million. After Demeter repurchased some of the bonds in 2023 and 2024, those RHH holds have a face value of US$15.2 million and mature on January 30, 2027, per the First Report, para. 39 and the Amended Notice of Motion, para. (m). Demeter paid a semi-annual interest instalment in July 2025, $207,176 in Canadian-dollar terms. In mid-December it told the trustee that the securities supporting the bonds had been subject to a margin call in October and swept by the brokerage holding them to offset a negative position in a separate Demeter account, which it said reduced the bonds' value to "de minimis amounts"; no further interest would be paid, per the First Report, paras. 41–42.

That payment is most of the estate's cash. The trustee's receipts from July 7, 2025 to May 6, 2026 total $208,264, per the First Report, paras. 22–23. "To my knowledge, the interest payment was received by the Trustee with no efforts expended by the Trustee and/or its counsel to recover same," the judge wrote, per the Endorsement, para. 22.

Fifty-two units in Stratford

LaBelle/RHP Stratford Inc. owns a fully built, fully occupied, 52-unit apartment building in Stratford, Ontario. RHH holds 250 of its shares and LaBelle Stratford Inc. the other 750, and the two negotiated the key terms of a sale of RHH's stake before the bankruptcy. The estate's inspectors approved the transaction on April 8, 2026, and the share purchase agreement was signed on May 11, per the Endorsement, paras. 23–24 and the First Report, paras. 58–59.

The trustee did not administer a sale process or otherwise test the market. It relied on two appraisals of the building issued in January 2025, which the endorsement identifies as Avison Young's and Cushman Wakefield's, and had its own valuations group review them. The price, its report says, is the average of the two appraisals less certain amounts required to be paid under the agreement and to retire the mortgage on the building, per the First Report, para. 62(a)–(d) and the Endorsement, para. 28, n. 3. Rents had declined modestly over several quarters and capitalization rates had become less favourable for sellers, the trustee wrote, so "the previously agreed price likely represents a small premium over what could be negotiated in today's rental environment," per the First Report, para. 62(e).

But for the agreement's own terms, the judge noted, the trustee did not need court approval: the BIA gives it all necessary powers, subject to inspector approval, to sell a bankrupt's assets without involving the court. The trustee explained that it sought approval out of an abundance of caution, anticipating potential opposition from unsecured creditors, an approach the judge said Re Fantasy Construction Ltd. endorsed, per the Endorsement, paras. 26–27. Having reviewed the sealed agreement and appraisals, he was "satisfied that the purchase price for the Shares is fair and reasonable notwithstanding the lack of formal sale process," and no creditor opposed. He sealed both confidential appendices pending completion, "To preserve the integrity of the sale process and to maintain the value of the Shares should the Transaction not close as contemplated," per the Endorsement, paras. 28–29.

The approval and vesting order he signed vests the shares in the purchaser on delivery of the trustee's certificate, after which claims against the shares attach to the net proceeds with the same priority, per the Approval and Vesting Order, May 22, 2026, paras. 4–5.