958 Broadview and the adjacent Estonian Foundation properties have been sold to DK Broadview Inc.
There is nothing that can be done to reverse the sale.
Land registry documents show the following:
958 Broadview Ave. sold to DK Broadview Inc by Estonian House in Toronto LTD - $12,500,000.00
Fees and taxes paid by the purchaser :
1. Registration - $65.05
2. Provincial Land transfer tax - $246,475.00
3. Municipal Land Transfer tax - $246,475.00
Total - $ 491,015.05
Each party would pay their own legal fees.
The Estonian Foundation Properties according to Land Registry documents were sold as follows:
72 Chester Hill Rd. sold to DK Broadview Inc by the Estonian Foundation of Canada - $1,600,000.00
Fees and taxes paid by the purchaser: - $57,015.05
956 Broadview Ave. sold to DK Broadview Inc by the Estonian Foundation of Canada - $750,000.00
Fees and taxes paid by the purchaser: - $23,015.05
954 Broadview Ave. sold to DK Broadview Inc by Lia Hess, Eva Varangu, Peeter Poldre - $750,000.00
Fees and taxes paid by the purchaser - $23,015,05
In addition DK Broadview Inc. gives a mortgage of $1,600,000.00 as collateral security in respect of the Density Bonus pursuant to section 2.2 of an agreement of purchase and sale dated April 14, 2020 between Lia Hess, Eva Varangu, and Peeter Poldre, Estonian Foundation of Canada, Estonian House in Toronto Limited as vendor and the chargor (DK Broadview Inc) as purchaser (as amended by agreement dated July 15, 2020 and an assigned to the chargor by purchase agreement dated August 10.
If DK Broadview Ltd. can achieve a “max density” as provided for in their Purchase and Sale agreement, then the $ 1,600,000 would be prorated between the vendors. Estonian House Ltd would be entitled to 80% of $1,600,000 or $1,282,051 and the Estonian Foundation would be the beneficiary of an additional $ 317,948. If the additional density is not approved no additional funds would be disbursed and the mortgage would be cancelled.
The land registry documents also indicate that DK Broadview Inc took out a mortgage of $11,000,000 secured by the properties that it purchased, 958 Broadview, 72 Chester Hill Rd., 956 Broadview Ave., and 954 Broadview Ave. This mortgage is at an interest rate of 25% per annum.
Both mortgages are registered for the fee of $65.05 each.
Notes:
1. The land registry documents show that the sale of 958 Broadview was between Estonian House Ltd. and DK Broadview Limited. There was no transfer of “beneficial ownership” to an intermediary charitable organization as originally conceived.
2. The assumption that has been made is that the sale of 958 Broadview is by a “not for profit” organization and hence is not subject to capital gains tax.
3. The sale of the Estonian Foundation properties is by a charitable organization and hence is not subject to capital gains tax. (it is assumed that 954 Broadview was held in trust for the Estonian Foundation by members of their executive.)
4. There is an assumption that the collateral mortgage 1,600,000 secured by the vendors’ properties pending the resolution of the density of the properties does not bear interest.
5. The purchaser has obtained a mortgage from CIBC for $11,000,000 at 25% interest. This appears to be high. It is noted that risks in the development industry are high and do merit a high interest rate. The development at 1001 Broadview was financed by a mortgage with an interest of 15%.
6. Estonian House Ltd has sold 958 Broadview Ave. It has registered its new mailing address as 11 Madison, Toronto Ontario, M5R 2S2
SHAREHOLDER EXPECTATIONS
Transparency
1. Shareholders expect the board of Estonian House to demonstrate that they have fulfilled their fiduciary responsibility to the shareholders.
2. Shareholders should receive a full disclosure of the purchase and sale agreement and any attached schedules.
3. Shareholders should see a complete statement of adjustments as normally provided to an owner when a property is sold.
4. Shareholders should receive a statement of all professional services and costs associated with the sale of 958 Broadview Ave.
5. Shareholders should be presented with a balance sheet showing the current financial status of Estonian House Ltd
6. Shareholders should be advised of the net proceeds from the sale that are available to be applied toward the IEC (sale proceeds minus liabilities and contingencies)
7. Shareholders should be briefed on the current financial projections for the IEC and the shortfall that needs to be covered by fundraising and or additional mortgage financing.
8. The Estonian House Board should re-assure the shareholders that the IEC will be owned 100% by Estonian House Ltd.
9. There is a financial risk associated with the management of Estonian House during the 22-month transition period. Can the board share with the shareholders the financial projections and contingencies provided during this period?
VAINO EINOLA - Shareholder representing 34 shares of Estonian House.
