Bank nearly pulled funds due to roof of doomed mall

Owners hired repair firm; work never done

ELLIOT LAKE, Ont. Water damage at the doomed Algo Centre Mall was so severe that the bank threatened to pull the mortgage several years before it collapsed, an inquiry into the tragedy heard Monday.

The threat sent the Nazarian family, who owned the mall, on a frantic scramble to forestall the default but the needed repairs were never made. “We were in desperate need of funds to fix the roof,” testified Levon Nazarian, who worked closely alongside his father as an independent contractor and administrator. “We were trying our best efforts to stop the leaks.”

In the summer of 2008, the Royal Bank noted an inspection had revealed it would cost about $3 million to make the needed repairs.

The inspection found a “marked deterioration” over the previous year and severe leaking from the parking-deck roof had caused extensive water damage.

“Several tenants are threatening to leave the property or withhold payment,” Jim Davis, a commercial mortgage specialist with the bank, wrote the Nazarians on Aug. 20, 2008. “We are somewhat dismayed that the property has been allowed to deteriorate to this extent.”

The Nazarian family had paid $6.2 million for the property in 2005, putting up $2 million in cash and taking out a $4.2-million mortgage.

In an effort to head off the bank, the Nazarians signed a deal with a purported contractor, who aimed to borrow $1.7 million to carry out the repairs.

Commission lawyer Peter Doody was incredulous.

“So the company that was going to do the work was going to borrow the money to pay itself?” Doody said.

“I don’t understand how that makes any sense. It sounds like a great deal for the owner.”

Nazarian said the family was making best efforts to find ways to do what was needed. “We were exploring every possible option,” he testified. “We wanted the roof leaks to end.” The contract was forwarded to the bank as evidence the repairs were being done but it was never executed.

Nazarian, 29, a real-estate broker, also said it was at his request that changes were made to an engineering inspection report done just weeks before the parking deck collapsed June 23, 2012, killing two women.

He said he wanted to make the report “more presentable” to the bank but denied the “irrelevant” changes were intended to mislead.