The ongoing legal saga surrounding The One skyscraper at Yonge and Bloor continues. Alvarez & Marsal Canada Inc., the receiver for the project, filed a motion last month with the Ontario Superior Court claiming that the project’s original developer, Mizrahi (referring to the Mizrahi group of companies, headed by Sam Mizrahi) owes approximately $58.8 million to the project’s lenders.

The receiver is alleging that Mizrahi overcharged the project through managerial decisions and payment practices, specifically in labor rates and construction management fees. For example, court filings stated that Mizrahi was only entitled to a 3.5% construction management fee but charged a 5% fee between Aug. 2022 and March 2024.

Mizrahi also reportedly received about $1.8 million in sales commissions for selling condo units but refused to return the commissions after the purchase agreements fell through due to purchaser default, court filings state.

The receiver alleges that Mizrahi is on the hook for $2.7 million in unauthorized marketing fees — in addition to receiving a residential management fee, Mizrahi also reportedly received a monthly marketing fee of $100,000 plus HST, a charge for which the receiver found no contractual basis.

“[T]he Receiver has concluded that MI had no contractual right to charge the Debtors for the Labour Rates. It made significant profits by charging approximately $49.3 million (comprised of $47.4 million in Labour Rates plus $1.9 million in CM Fees that MI [Mizrahi Inc] charged on the Labour Rates) to the Debtors, and the Receiver has concluded that MI is liable to return the amounts that it improperly charged,” public court documents dated Oct. 18 state. “The Receiver has also concluded that MI is liable to the Debtors for at least $9,539,853.71 because it breached the contracts that governed its work on the Project.”

The receiver is requesting repayment of the figures above as part of the $58.8 million owed by Mizrahi to the debtors.

The court filings also state that Mizrahi failed to meet the contractual obligations as the firm didn’t deliver the project on or before the due date of Dec. 31, 2022, for a total price of $583.2 million.

The One ended up facing substantial delays and cost overruns, so much so that by the time Mizrahi’s role on the project had ended in March of this year, it had charged approximately 84% of the contract price to complete less than 50% of the project, court documents state.  Failure to complete the project by the due date also reportedly caused a material increase in the project’s total soft costs and financing costs.

“The Receiver now expects the total construction costs to complete the Project will significantly exceed the Contract Price with a Project completion date in the second half of 2027,” the court filings state.

“Put simply, every experienced professional that the Receiver has consulted with in respect of MI’s performance as general contractor of the Project has identified significant issues.”

Mizrahi Developments dominated local media coverage in February when it was announced that the company was ousted from the development of the Yonge and Bloor skyscraper The One, a few months after the building was put into receivership.

In June, more challenges hit the company after an Ontario court agreed to the receivership orders for sites at 128 Hazelton, a luxury condo in Yorkville, and 180 Steeles Avenue West, a pre-development in Vaughan.