The fate of an unfinished 14-storey rental apartment complex in downtown Winnipeg is uncertain after the project’s developer was granted creditor protection and construction was halted, according to court documents

Construction on the building, located at the corner of Donald Street and St. Mary Avenue, appears to have halted. It was to have 120 rental apartment units and a 10,000-square-foot commercial restaurant space, according to documents filed this month in Manitoba Court of King’s Bench.

On Friday, a crane remained on site but there wasn’t any noticeable activity. Lanes were still blocked off on both Donald and St. Mary around the construction zone.

In an affidavit filed April 10 as part of creditor protection proceedings, Donmar Properties director Gordon Howard said the project has faced challenges related to cost overruns, increased interest rates and delays.

Ernst & Young, which has been appointed as court officer in the creditor proceedings and provided reports on the project, says construction is approximately 36 per cent complete and was scheduled to be finished at the end of July 2024.

“The viability of the project, even if completed, is uncertain at this time,” says a report dated April 11.

“The current rental rates for apartments and commercial space in the city, do not support the feasibility of the project for the capital deployed and would require further project subsidies for the foreseeable future.”

Budget ballooned from $40M to nearly $64M

In April 2019, when architects were tasked with coming up with a design to reflect an estimated $40-million budget, Akman Construction — the company acting as the construction manager on the project — pegged costs for the design at $53 million, which delayed the project one year.

Ernst & Young says approximately $23 million has been spent on the project to date, but the updated total budget has climbed to $63.8 million.

The project faced challenges due to increased interest rates, which already total more than $2.4 million, and would add $4.6 million over the tenure of the project, according to the documents.

In his affidavit, Howard said the project had issues with tax increment financing — a funding mechanism that uses future property tax revenue to stimulate development.

It’s described in Howard’s affidavit as “a credit on the city’s property taxes, which over time could have resulted in significant value for the applicants.”

However, the city’s policy on the funding mechanism changed soon after construction started, meaning “projects that had begun construction were no longer eligible for the city TIF credit,” according to the affidavit.

It also says Donmar has not exhausted all its options with the city, and there is still “an opportunity … to approach the city about the possibility of being approved” for the credit.

Howard had a meeting with Akman Construction and inquired about a possible redesign or putting the project on pause to “re-strategize,” but was told that wouldn’t be possible, according to his affidavit.

Donmar owes approximately $25 million to lenders, including $12 million to Steinbach Credit Union, and was granted creditor protection on April 18, according to the court documents.

When reached by phone Friday morning, a staff member at Akman said the company had no comment.

CBC Manitoba reached out to Howard and a lawyer representing his company for comment but didn’t hear back.

Howard’s affidavit indicates discussions have been underway since mid-February with a potential buyer who is interested in possibly purchasing or investing in the project.

“This potential purchaser remains interested in the project but needs more time to assess the viability of the project,” the affidavit says.

“Whether the project will be completed is uncertain at this time,” the Ernst & Young report said, with neither Howard nor his company “prepared to contribute more funding to the project at this time.”

‘Tough to see’ projects halted: councillor

Sherri Rollins, the chair of the City of Winnipeg’s property and development committee, said it’s disappointing to see a project that would bring more people downtown stall.

“When you’re looking at 120 units, when you’re looking at a large development project, it is tough to see,” said Rollins, who is the city councillor for Fort Rouge-East Fort Garry.

“It is for sure frustrating as a local councillor … to see a show already in progress, see piles in the ground, and then [see] work cease,” Rollins said. “And that can be difficult for neighbours.”

Rollins said she sympathizes with developers and construction companies facing a rising cost of doing business. 

“There’s delays, there’s supply chain issues, there’s inflationary costs — so, you know, the construction economics have gotten really complicated.”