Church lands sold in court fire sale

Victory Christian Center lost title in ill-fated mortgage deal

Victory Christian Center — a church, daycare and K-12 school — will have to vacate its south Edmonton site by end of July, according to a deal approved Friday in the Court of Queen’s Bench.

Justice Juliana Topolniski approved a cash offer of between $6.6 million and $7.1 million for the eight-hectare site at 11520 Ellerslie Rd. Details of the transaction are under a sealing order until the deal closes June 28.

The church, which has occupied the site since 1989, lost its title five years ago during an ill-fated $18-million deal with mortgage fraudster Kevyn Frederick. The church receives nothing from the sale, which came in at about half of the $14-million price tag from its July 2012 judicial listing. Barring an appeal, Ram Singh, one of Frederick’s partners, will also lose claim to a $6-million mortgage agreement signed with Frederick.

“The market has spoken,” Topolniski said. “This is a difficult case for many: the congregation, the students at the school, children at the play school, Dr. Singh.”

The land was auctioned on behalf of creditors owed tens of millions by Frederick, whose finances collapsed in late 2011. Proceeds of the sale will go to Romspen Investment Corporation, a Toronto-based mortgage company that loaned Frederick $32 million to buy the Château Lacombe hotel in downtown Edmonton in August 2010. That hotel recently sold under court order for $27.5 million, leaving Romspen roughly $8 million short of recouping its losses.

A last-minute offer nearly saw the church become a mosque. Less than an hour before the hearing, Topolniski received word that the Southwest Muslim Community Centre had submitted a new and higher offer. The group placed a $1-million deposit on the land, offering to pay $500,000 by December and the rest of the money next year.

Despite two counter-offers tendered in the early afternoon, Romspen rejected that deal, opting for the earlier cash bid. “It’s a clean deal that will work and close smoothly,” said Schuyler Wensel, Romspen’s lawyer. Victory Christian Center spent the past 10 months looking for a “white knight investor” to buy back its property, said Lyle Brookes, the church’s lawyer.

The church was founded in 1982, and built a $1.5-million, 40,000-square-foot sanctuary on the land seven years later.

In later years, it added a series of modular classrooms to house a private school incorporated in 1995, and which became its own charity in June 2008.

Last year, 169 students attended Victory Christian School, a chartered private school that receives 70 per cent of its funding from the province. Classes finish in mid-June, six weeks before the proposed eviction date.

Financial problems began in August 2008 when Victory’s founder, pastor Cal Switzer, made a deal with Frederick, who wanted to develop the site into condos. Switzer, who controls 98 per cent of shares in the charitable organization, never consulted a lawyer in the deal.

The deal included a $12.3-million take-back mortgage promising to return the land if Frederick defaulted, and also included $2.8 million and 32 hectares in Leduc County, where the church planned to build a new facility. The church also signed a five-year lease with Frederick to remain on the land.

Instead, Frederick mortgaged the church land to Singh, who sits in second position on the mortgage. Then in October 2010, he used the church property as collateral to borrow $32 million from Romspen. The company foreclosed on both properties after Frederick stopped making payments in September 2011.

Singh tried to foreclose on the church property in November 2011, then later sued Frederick and Romspen, claiming Frederick forged his signature to allow Romspen priority on the property. Singh will be allowed to offer evidence from that case before the deal closes.

On Friday, Singh’s lawyer argued his client should be allowed to make an offer on the property. Topolniski agreed with lawyers representing the two offers, who argued that a later offer would affect the integrity of the bidding process.

“In my view Dr. Singh is asking too much, too late,” Topolniski said.