EDITOR'S NOTE: The following story has been updated to include comments from the city's planning staff.
Two residential towers planned for the property that was the former home of Dickson Bowl and Dr. Junk in downtown Galt probably won't go ahead now that the lender backing the project has listed it for sale in an effort to recoup more than $6.6 million from the developers.
Waterloo-based MarshallZehr Group says the owners of the site next to the bus terminal on Ainslie Street South defaulted on a loan it gave them in 2023.
The real estate capital lenders filed a receivership application under the Bankruptcy and Insolvency Act in July against Atlantic Development Group Ltd. and two numbered Ontario companies.
The receivership says Atlantic and 2721259 Ontario Inc. provide land development, design and project management services to 2699380 Ontario Inc.
The sole directors of all three corporations are Adeel Khan and Noman Khan.
As owners of 2699380 Ontario Inc., the Khans filed official plan and zoning bylaw applications with the City of Cambridge in July 2020 with a proposal to develop 61-69 Ainslie St. S. into 392 units with commercial space on the ground floor.
The original application was to build 15 and 20 storey towers over a five storey podium containing 335 parking spots and 13 ground floor commercial units.
A second application proposed building the towers at 18 and 21 storeys.
The official plan and zoning amendments sought to increase the site's permitted density, reduce the floor space in each unit and allow the taller towers.
It was discussed at a public meeting in October 2020 but a recommendation report never returned to council for approval.
For three years there was little movement on the property. Then in January 2023, MarshallZehr Group announced it had reached a "land financing solution" with Atlantic Development Group to "refinance existing debt and fund pre-construction activities" on the property.
According to the receivership application filed by MarshallZehr, the purpose of their $6.3 million loan to the Khans was to pay out their existing debt, fund an interest reserve for the duration of the loan term, and fund demolition of the old bowling alley prior to preliminary grading of the site.
Interest was to be paid monthly, on the first day of each month.
Any buildings were demolished last fall and the property is currently an empty lot.
MarshallZehr called the proposal's "sophisticated design and architecture...a great addition to an already thriving downtown community."
But their excitement about the project waned by January of this year when Atlantic failed to make interest payments.
A letter demanded the interest payments and when the Khans agreed, MarshallZehr extended the loan's maturity date to June 1, 2024.
When no payments were made between January and May, the lender demanded repayment in full on May 16.
On May 28, the MarshallZehr Group issued a notice of sale against the borrower and last week, 61-69 Ainslie St. S. was listed for $8.3 million to recoup the more than $6.6 million the lender says it's owed as of July 4.
The listing says the property is a "high-rise mixed use development site in the Galt core" despite the fact approvals have not been granted by the city.
An affidavit from MarshallZehr's chief operating officer says approvals were granted for the project.
The receivership also indicates the owners submitted a site plan approval application in April 2022 and comments were received from city staff in August of the same year.
"The Lender expected the Borrower to receive site plan approval in the second quarter of 2024," reads the receivership application.
That didn't happen. The city's website says the proposal is still under review by staff and agencies.
In an email to CambridgeToday, the city's manager of communications, Teresa Chiavaroli, said she was told by planning staff that a recommendation report to council on the official plan and zoning bylaw amendments has been deferred due to pending updates to technical reports required in the application.
"Once satisfactory updates to the technical studies are provided, staff will take a recommendation report to council. Site plan approval cannot be granted until the OPA and ZBA are approved and in effect."
Maya Poliak, a lawyer with Toronto firm Chaitons LLP, said information about the approval included in the receivership would have come from the Khans and was not confirmed with the city by MarshallZehr.
She said the court-supervised sale would include all attached planning documents allowing the buyer to attempt to advance the project with the city as proposed.
CambridgeToday attempted to reach Adeel Khan and Noman Khan for comment, but did not receive a reply.
