Renovations and rent
The DIP loan was approved partly to renovate vacant units. The Monitor forecast that renovations would add about $5M a year in operating cash flow. Actual renovation spending ran far below forecast.
The Monitor reported that the DIP would fund renovation of 98 properties comprising 206 vacant units, "which is expected to result in additional annual operating cash flow of approximately $5 million". At filing the Monitor counted 207 unoccupied units. The Monitor said renovated units achieve significantly higher rents and that every renovated property was tenanted. It described the companies' projection of about $400,000 a month in net cash flow once vacant units were renovated and occupied as resting on assumptions that "appear reasonable".
Who approved the spending
From February 2024 renovation spending needed the Monitor's prior approval, and DIP money was paid out through the Monitor's own trust account. On June 17, 2024 the Monitor said it did not intend to approve any further renovation costs; its forecast to July 31, 2024 shows $0 for renovations.
Delays in renovation funding
The companies' sworn evidence states that, after the comeback motion was adjourned and the order limited use of the DIP, they had no access to renovation funds until February 26, 2024, when $65,000 was allocated to renovations. The Monitor's first forecast had $3,000,000 of DIP money going to renovations by March 28, 2024. By June 20, 2024 about $748,503 of DIP money had reached the companies for renovations, in advances dated February 26, March 11, March 26, April 24 and June 6, 2024; the rest of the renovation work was funded from rent. Most of a $250,000 advance was not received until March 8, 2024.
The companies' evidence states that the lenders' representatives required the Monitor's prior consent for any DIP draw and renovation expense, and that under the first scope of work the Monitor approved twelve properties, the most it was prepared to approve. In March 2024 the companies planned about 85 units by May 27, 2024, at about ten units a week if unimpeded.
By June 20, 2024 the companies had renovated about 90 units, which their evidence describes as "approximately half of the units that could have been completed but for these delays and challenges", with about 27 under way. Of a fifth scope of work covering about 39 units, 27 were approved. The companies stated they could finish all remaining units by the end of August 2024 if given the opportunity.
The companies' evidence states the proceedings were "marred by significant delays and procedural quandaries" caused by the secured lenders' representatives, including a two week delay from opposition to the amended order, and that the unfinished properties' renovation had been "constrained and delayed by the Secured Lenders now critiquing their state".
The Monitor described the early gap as timing differences linked to scope approvals. On June 17, 2024 it said it did not intend to approve further renovation costs.
Source: Second Report of the Monitor (Mar 2024), s.5.0; Third Report of the Monitor (Apr 2024), s.6.0; Fifth Report of the Monitor (Jun 17, 2024), Appendix D, note 4
Where the DIP money for the companies went
The $1.24M advanced to the companies by June 14, 2024 covered renovations and every operating cost: utilities, repairs and maintenance and general operations. About $748,503 of DIP money went to renovations, and about 90 units were renovated with it.
How much of the portfolio was finished
631 units in 405 properties. 424 tenanted at filing is about 67% (this site's arithmetic).
Source: Pre-Filing Report of the Proposed Monitor (Jan 2024), s.2.0 para 3; Fifth Report of the Monitor (Jun 17, 2024), s.2.0; Ninth Report of the Monitor (Nov 21, 2024), background para 2
June figure is this site's arithmetic: 207 less the about 90 units the companies reported renovated by June 20, 2024. About 27 more were under way then.
Source: Motion Record of the Applicants (Jun 20, 2024), including the affidavit of Robert Clark, Clark affidavit paras 32 and 34
At filing, 424 of 631 units were tenanted, about two thirds of the portfolio. By June 2024, 456 were tenanted. The Monitor said every renovated property was tenanted.
The companies' sworn evidence states that before the filing "approximately 207 of the Applicants' approximately 631 rental units were unrenovated", and that about 90 had been renovated by June 20, 2024. At filing the companies estimated the unrenovated units represented about $350,000 a month in lost rent.
Up about $64,000 a month in about five months (this site's arithmetic). The Monitor does not attribute the change.
Source: Fourth Report of the Monitor, redacted (Jun 11, 2024), s.4.3 paras 3 to 4
Rent and the Monitor's accounts
None of the Monitor's cash flow forecasts or variance reports includes a line for mortgage interest or principal; the only interest line is the DIP lender's. The Monitor's forecast for January 27 to March 28, 2024 shows rent receipts of $1,062,000 against operating disbursements (property taxes, utilities, property management fees and insurance) of $959,000, with renovations, tax arrears and professional fees funded by the DIP. For the ten weeks to April 5, 2024, actual net rent collections were $686,000.
No payroll or salary line. Professional fees, DIP costs, tax arrears and renovations sit outside these costs and were funded by DIP borrowing.
Source: First Report of the Monitor (Jan 29, 2024), s.4.0 and Appendix D, notes 2 to 4
Property costs: property taxes $413K, insurance $391K, repairs $212K, other $104K. Insurance and current taxes ran $505K over forecast. Professional fees and DIP costs together were about 19 times renovation spending (this site's arithmetic).
Source: Second Report of the Monitor (Mar 2024), s.5.0 para 2
The companies had no payroll of their own; the Monitor reported one employee, at The Mulligan Inc. Property management, maintenance and renovation services came from related SID companies, and rent was reported net of a property management fee paid to SID Management, about 7.5% of forecast rent (our arithmetic: $80,000 of $1,062,000). Professional fees were never part of operating costs: every forecast lists them separately, funded by the DIP loan, which added to the debt.
Estimate: 12 months at about $530,000 a month (this site's arithmetic). Rent also paid operating costs through the companies' own accounts, which the Monitor's tables exclude. The comparison shows what the published tables do not cover, not missing money.
Source: Fourth Report of the Monitor, redacted (Jun 11, 2024), s.4.3; Eleventh Report of the Monitor (Feb 20, 2025), s.7
The new property manager
The court approved a property management agreement with Richmond Advisory Services Inc. on July 31, 2024, at a principal fee of 6% of rent collected; management moved from the SID companies over the following months, and the transition period ended December 20, 2024. On December 17, 2024, 316 properties closed to the secured lenders' credit bids. For the properties that remained, the Monitor reported occupancy from Richmond: 81 of 131 units occupied in February 2025 and 66 of 126 in April 2025, against 446 of 631 across the portfolio in November 2024.
The Monitor's cash tables cover its own trust account and exclude the companies' operating accounts. No report reviewed contains a statement of rent collected and spent through those accounts. Where is the full record of rent received during the proceedings and how it was used?