Halifax Harbour in Halifax on Wednesday evening, Feb. 28, 2018.Darren Calabrese/For The Globe and Mail
A contentious insolvency involving the heavily indebted estate of a deceased property developer from the Halifax area has put the future of some of the city’s prized heritage properties in doubt.
Five businesses connected to Steven M. (Steve) Caryi – who was 54 when he died in his Florida home on Christmas Day, 2023 – owe more than $47-million to a handful of lenders. And, despite a grinding housing shortage in the Nova Scotia capital, the caretakers of his business estate have been unable to find buyers for several commercial properties in various stages of residential redevelopment.
Among the properties affected is the 163-year-old Halifax Club, which has operated on Hollis Street since 1862. Mr. Caryi’s wake or “celebration of life” was held there, and it has been a popular wedding venue since he purchased it in 2015. Currently, an out-of-office alert warns patrons and clients of the cigar lounge and event space that operations have ceased until at least May 1, 2025.
Affidavits from lenders and duelling reports from insolvency advisers at Grant Thornton and Deloitte outline a situation where Mr. Caryi appeared to have been piling up debts on properties stretching as far back as 2008, and that some of the projects faced delays and cash shortages as early as 2020. One recent project he completed was the addition of a hotel behind the restored façade of National Film Board building on historic Barrington Street, a project that took almost seven years to complete and left the building with a $7.7-million mortgage.
Just months before his death, Mr. Caryi borrowed money to do more deals, including $1.8-million in bridge financing from Douro Capital Ltd. in October, 2023, to buy 1674 Hollis St., known as the Sonic Building, part of a land assembly for a block of properties around the Halifax Club. The Caryi Group hoped to build 143 residential units on the site.
“His funnel in the development pipeline was as large as it had ever been. He was in growth mode; he had found a niche,” Charles Ackerman, president and director of Douro, said. He added that Mr. Caryi had a reputation in Halifax for delivering on difficult heritage sites. “These conversion projects, oftentimes these were projects that 10 years ago people would look at and say: ‘That’s way too complex.’”
The largest lender is the Atlantic Central Credit Union and its subsidiary League Savings and Mortgage Co which hold almost $30-million of the Caryi Group debt. The largest single loan is $13.7-million for the Freemason’s Hall building on Barrington Street that is mid-renovation with plans to add 54 residential units.
On Jan. 9, 2024, the estate filed an application in Nova Scotia’s Supreme Court for a debtor-in-possession liquidation under the Companies Creditors Arrangements Act, but several lenders opposed that as creating unnecessary costs and delays. They filed for quicker receiver-led process under the Bankruptcy and Insolvency Act.
In an oral ruling on Jan. 27, Justice John Keith admonished the parties for the “procedural chaos” of the filings and warned the debtors “intemperate words suggested a capacity to inflict harm on the companies assets in a vengeful attack,” referring to a Jan. 13 letter from the estate’s lawyer that warned lenders the debtors would be cancelling insurance on the buildings and simply hand over keys. Justice Keith ultimately allowed the debtors to offer a modified bankruptcy proposal with the parties required to report back to the court on Feb. 20.
According to Mr. Ackerman, the “human element” of Mr. Caryi’s death may have played a role in the long delay in finding a resolution of the company’s debts.
“You want to be respectful of the family and the estate,” said Mr. Ackerman, who said a belief in Mr. Caryi’s vision for the properties and concern for a mourning family may have stopped it from more aggressive enforcement. “We could have been more forceful the approach we took: We tried to work with the estate and tried to be conscientious. … By the time we went to court they [the Caryi properties] were all in default of forbearance agreements.”
Court filings show some of those agreements – where lenders agreed in some cases not to take the borrower to court after payments were missed – began to take effect as early as April, 2024.
After his death, Mr. Caryi’s sister, Joanne Caryi, and his wife, Laurie Caryi, attempted to carry on as directors of the various companies and developed a plan by early 2024 to sell off some of the buildings and concentrate on finishing some of the sites. An affidavit filed by Ms. Caryi claims some sales got as close as a conditional offer stage, but ultimately fell through.
When reached by The Globe, Ms. Caryi declined to offer comment on her brother’s legacy or answer questions about the prospects of his former companies.
Commercial property experts warn some of the asking prices may have been set too high, perhaps to reflect potential worth, rather than current value.
“We pitched on this but we didn’t get the listing, the people that got the listing were talking about getting much higher pricing,” said Mike Czestochowski, vice-chairman of CBRE Land Services Group.
After a year with at least 70 real estate-related insolvency filings according to tracking by InsolvencyInsider.ca, Mr. Czestochowski said he’s dealt with a number of property owners facing liquidations and restructurings who were unwilling to accept new pricing realities.
“There has been a fair number of properties changing hands, I don’t know that’s necessarily indicative of what the market’s like,” said Paul MacKinnon, CEO of the Downtown Halifax Business Commission, who said that one issue the city struggles with is to attract attention of developers and businesses outside the Maritimes.
“You get this sense that Canada runs from Vancouver to Montreal, and a lot of people haven’t thought about Atlantic Canada. People are surprised when you start talking about how Halifax now has half-a-million people, I think there’s some great opportunities here,” he said. “As much as we love local developers we’d like to have some new ideas from outside. I think if a Toronto developer – or a Vancouver or a New York developer – would come in, it would shake up the market.”