Hopeful buyers left waiting as dispute roils Toronto-area developer CIM

Open this photo in gallery:

Hopeful townhouse buyers are waiting to see if the condominium units they prepurchased in 2016 will ever get built as shareholders wage a power struggle for control of CIM International Group Inc., a publicly-traded Toronto-area real estate development company. The dispute has caused construction delays and has already put several of the company’s projects “in jeopardy,” according to the company’s own statements.

In recent months CIM’s shareholders have been sent several notifications that relate to its investments in three projects, the most advanced of which is the Mackenzie Creek condominium townhouse development at 9900 Markham Rd., in Markham. The company has claimed it sold out the 195-unit project to presale purchasers in 2016, though construction has yet to begin. According to the senior lender on that project, it’s not that the company has no money, it’s that various parties involved can no longer agree on how to move forward.

“My sense is they are all good people, but there’s some kind of dispute here and the buyers have sort of gotten in the middle of it. I don’t think anyone is trying to defeat the buyers or take advantage of them,” said David Morrison, CEO of Morrison Financial Mortgage Corporation. Morrison extended construction financing to the project, as much as $71-million, but says CIM has only drawn about $16-million on the loan and has been meeting its payments throughout the dispute. “The issue’s not money, they have all the money in the world. … I’m not really taking sides in the whole thing, we’re just sort of sitting waiting to hear how it resolves.”

At the centre of the story is Jiubin ‘Jerry’ Feng, who until recently was the chief executive officer of CIM, and its primary deal maker. Starting in March 2016, Mr. Feng led the reverse takeover of a listed mining company called Golden Bridge Development Corp. to a diversified real estate company controlled by three entities: CIM Investment & Development LP, Shang Titlist Investment Inc. and Global King Inc. Mr. Feng is the primary investor in CIM, Xiao Xin Zhang is the director of Shang Titlist and Toronto-area real estate broker Joseph Pang is behind Global King Inc.

In 2017, a company called New Silkroad (which is backed by Beijing-based Macro-Link Holding Co. Ltd.) announced it had paid $31-million to invest in a 51 per cent interest in the Mackenzie Creek project.

The two main parties in the dispute appear to be Mr. Feng and Macro-Link.

“He’s not the money,” said Mr. Morrison, of Mr. Feng. “He put together some financing investment from abroad, there’s some kind of debate going on between them. They are not crooks or anything like that, this isn’t a money-laundering thing, none of that thing going on at all, it’s just somehow some sort of partnership dispute has emerged.”

Markham City Councillor Amanda Collucci, whose ward contains the Mackenzie Creek site, said she has been dealing with representatives of Macro-Link as she attempted to work on behalf of her constituents. “Macro-Link is supposed to be the investor – more like a silent partner. I don’t know what happened, but it seems like one tried to take over the other.”

She said fewer than half-a-dozen constituents have contacted her with concerns about the delays, hoping to get their deposits refunded and contracts cancelled. “What I’ve heard back is those who wanted to get out have been able to get their money back,” she said.

CIM is listed on the Canadian Securities Exchange – an alternative exchange launched in 2007 that is popular among blockchain and cannabis investors – and as such must publicly notify investors of material changes in the business. In recent months, an increasing tempo of releases related to resignations and legal actions have highlighted the company’s growing corporate difficulties.

On June 13, 2019, CIM named Dianyuan Zhang as chairman of its board, replacing Mr. Feng. It also appointed Maggie Di Guo acting CFO replacing Dan Fuoco (who had been with the company since its Golden Bridge incarnation). By June 23, Mr. Feng returned as Chairman, with the proviso that he would be replaced as CEO after the company’s next Annual General Meeting. Then in July, Ms. Di Guo resigned as CFO and Xiyuan Yang was appointed interim CFO. In August, CIM’s auditor Deloitte resigned, replaced by McGovern Hurley LLP. Several members of the board have left the company as well. On Oct. 4, Helen Min Zou was named CEO of CIM.

None of the principals in CIM responded to multiple attempts to contact them and calls and e-mails to CIM went unanswered.

In April 2019, Mr. Pang’s Global King Inc. registered a certificate of pending litigation on the land title for 9900 Markham Rd. Ms. Collucci said Mr. Pang’s company was the sales agent on the pre-sales of townhouses in Mackenzie Creek. Oftentimes full commissions to sales representatives are not paid out until projects are complete. Mr. Pang did not respond to attempts to contact him.

In May, home-builder Averton Developments (Ontario) Inc. put a lien on the property after one of the warring parties listed the plot for sale, a listing that was later withdrawn. According to Averton’s co-owner Matthew Lanni, the lien was removed once they were assured it wouldn’t be sold. His company was hired to build the homes for the financiers in 2016, and while communication with the warring partners has been an issue in recent months, he remains hopeful the townhouses will yet materialize.

“We were relying on this project. We are a smaller organization and we’re still trying to grow,” said Mr. Lanni. “We would love to build it … if it doesn’t go that way, it will be a shame.”

In addition to its delays at Mackenzie Creek, two other development plots CIM invested in were subject to insolvency proceedings and are now for sale. CIM issued warnings to shareholders about those proceedings in early October, though the insolvency processes began as early as July.

The company says it invested $3,452,500 in a partnership to develop a huge 850-acre lakefront site in Port McNicoll, Ont. In October, CIM warned investors “Skyline (Port McNicoll) Development Inc. has taken enforcement proceedings with respect to a vendor take back mortgage.”

CIM also has an interest in a 20-acre property at 6910 and 6950 Highway No. 7 East in Markham that Am-Stat Corp. has listed for sale as part of court-ordered insolvency process to recover the $24-million loan it extended to the developers. Commercial real estate company CBRE listed the plot for $75-million; the Port McNicoll plot is listed as negotiable.

On Oct. 10, a Macrolink controlled company called New Silk Road Toronto sent out a news release that it would pay out $41.7-million to purchase the remaining securities in the Mackenzie Creek project. The release does acknowledge at least one party has won a court injunction blocking any sales related to the company, so it remains to be seen if this offer will unlock the project. The project was supposed to also include a second phase with a mix of high-rise residential and retail on part of the land parcel.

“One of the things I can say about this group is they are motivated by a high degree of honour, they want to deliver what they said they’d deliver,” said Mr. Morrison. “I think if they could all have their druthers they would just build out these houses even though they are sold under today’s market, but whether or not the circumstances allow for that is uncertain to me.”

Your house is your most valuable asset. We have a weekly Real Estate newsletter to help you stay on top of news on the housing market, mortgages, the latest closings and more. Sign up today.