A number of companies attached to local developer Reid’s Hertitage Properties are in financial trouble
A well-known local residential developer is in deep financial trouble, as are many local investors who backed it.
RHH Rental Properties, or Reid’s Heritage Properties (RHP), filed for bankruptcy last week, listing $26 million in assets and more than $94 million in liabilities, according to court documents obtained by GuelphToday.
The company develops, builds and sources financing for rental properties around southern Ontario, including several in Guelph.
As of June 18, a notice was posted on its office door at 1515 Gordon St. indicating that the property was in possession of BDO Canada under The Bankruptcy and Insolvency Act.
Those owed money by RHP range from large investors owed millions to a significant number of Guelph individuals who invested their savings in the $100,000 to $300,000 range.
Efforts to contact the company and Scott Reid, the founder and president of RHP, were unsuccessful. The company website is down, phone lines disconnected and LinkedIn profiles of senior staff deleted.
Two days ago, Reid listed his rural home for sale at a price tag of just under $5 million.
Reid’s Heritage Properties was previously under the umbrella of the family-owned Reid’s Heritage Group in 2013, but was sold to Scott Reid in 2018.
Cambridge-based Reid’s Heritage Homes (RHH) was first established more than 45 years ago, with a focus of building mid-rise condos, stacked townhouses and single-family homes.
Reid’s Hertiage Homes made it clear they no longer have anything to do with the company in financial turmoil.
CEO Tim Blevins confirmed over email that Reid’s Heritage Homes and Reid’s Heritage Properties “are entirely separate and independently owned companies.”
“The two companies formally separated (in 2018) and have not continued any ongoing relations,” he said. “There are no shared projects, ownership, leadership, investments, or staff between the two companies. They are owned and operated completely separately.”
That hasn’t stopped RHP from using the family name to promote its ventures.
In a 2023 advertorial article, RHP notes it is “building on three generations of experience and over 50 years of staff industry experience … Reid’s Heritage Properties continues the rich family heritage of developing and constructing much-needed housing for Ontarians.”
Attempts to reach Reid, his chief financial officer Todd Neill or others previously listed as directors of the company over phone and email were unsuccessful.
Blevins added they “cannot imagine the level of distress all parties are experiencing. Loss in the real estate industry carries deep human impact, especially in these challenging times.”
Some of the projects RHP has been involved with include URBN Lofts on Farley Drive and the townhouses on 710 Woolwich St.
According to investors who asked to remain anonymous, around 150 equity investors provided RHH Rental Properties with between $75 million to $100 million in return for monthly interest payments.
Many of them are local to Guelph and Wellington County, and are single parents or retired older adults who would be severely impacted by the financial loss.
Those payments abruptly stopped in February, with the promise that money was going to be sent any day.
A number of investors asked to pull their investments — that money has not come either, they say.
Emails sent between February and June show Reid and Neill continuously promised money was on the way, that another 24 hours were needed, another 45 hours, a week, two weeks.
In April, they began to mention that a lender from Dubai would be sending millions of dollars to the company, most of which was to be used to pay investors.
“In speaking with my lender this morning, he noted that as soon as he has clearance, he will begin to send the wires on a moment’s notice,” an April email states.
But vague delays happened again and again, and the money never came.
Now, investors are left wondering where their money went.
The June 18 bankruptcy notice wasn’t the first sign of trouble for Reid.
Earlier this year, a 25-storey RHP project in Ottawa called Evoke GP was placed under receivership, owing more than $8.4 million to Starbank Developments 2000 Corp.
According to court documents, Evoke GP is a wholly owned subsidiary of RHP.
Another division of RHP, SF Square GP Corp., previously owned a student housing rental in London, Ont. called The W.
According to emails seen by GuelphToday, Reid tried to sell The W in order to liquidate assets and repay investors.
By May, that property, and SF Square GP Corp., was placed into bankruptcy proceedings with BDO “due to competing claims,” according to an email.
Kessab, a family-owned Guelph investment company, advanced more than $5 million to RHP, an investment they expected would be returned. Another out of town couple invested $3 million.
Those investors heard a familiar refrain about a foreign investor, court documents show.
Reid advised that Kessab needed to be patient and that he had $160 million in funding coming from a Dubai investor.
However, this has been the “story” for months,” Kessab said in court filings.
It goes on to say “at all times Reid led us to believe that Foreign Funding would be used to repay Kessab” – the same story RHP investors were given.
In recent years, there have also been a number of lawsuits against RHH Rental Properties LTD. from architects, credit unions and property owners.
Among them was a conflict with investment firm Equiton over The Marquis development behind the Beer Store on Woolwich Street, in which RHP was kicked off the project for non-payment and breach of contract, owing about $2.6 million, according to court records.
A company typically files for bankruptcy when it can’t meet its financial obligations as they come due, said Clark Lonergan, senior vice-president with BDO Canada’s financial advisory services, who is handling the bankruptcy of RHP.
The bankruptcy process is a public one, governed by the Bankruptcy and Insolvency Act.
As the trustee, BDO will try to pool the assets together as much as possible, liquidating assets, selling shares, selling buildings – whatever assets they can find or get control of.
BDO is also the receiver for Sherwood Forest Square LTD. and its two affiliated companies, all of which are owned by Reid as a division of RHP.
In terms of the bankruptcy process, each company will be treated as an individual estate and tracked separately.
Source deductions like CRA will be paid first, secured creditors paid next, followed by unsecured creditors like Bell or Rogers.
Only after all remaining debt is paid will equity holders receive any remaining funds.
Lonergan said it’s too early in their investigation to determine whether or not the equity holders in this case will get paid, and if so, how much.
“The job right now of the trustee is just to garner as much information as we can, trying to get the pool of funds as big as we can, and then look how to distribute it.”
The process can take months.
Currently, he said they are focused on figuring out what the assets are and how much they’re worth, so they can get a clearer understanding of what is owed.
