Series of offers to buy doomed mall fell through over financing issues

ELLIOT LAKE, Ont. – An inspection done for the bank that held the mortgage on the ill-fated Algo Centre Mall turned up numerous deficiencies in the fall of 2010, an inquiry heard Tuesday.

The report concluded the overall state of the building was poor, with a big backlog of major maintenance.

“The rusting steel support columns are a structural concern,” the report stated.

“It is obvious the repair work to the deck has not worked.”

However, Levon Nazarian, the son of the mall’s owner, testified he was unaware of the report, saying he was only involved in a desperate bid to sell the property as a real estate agent.

The Royal Bank, alarmed by the water-penetration problems, had been threatening to pull the mortgage, which would likely have led to Bob Nazarian, who owned the mall, losing the property.

The bank estimated it would take $3 million to repair, and pressure increased on the owner to deal with the situation.

“I’m not trying to get the sympathy of this commission, but the stress of managing this mall put my father on insulin,” Nazarian told the inquiry.

“When a son hears that about his father, I just want to get rid of it.”

Nazarian, 29, admitted to portraying the condition of the building in positive terms in a sales brochure he created, but chalked that up to youthful naivete rather than a deliberate attempt to mislead.

His father had spent a lot of money trying to upgrade the leaking roof, he said.

Nevertheless, a series of offers fell through, often because the would-be buyers — including one from Libya — had difficulty in obtaining financing, backed out, or weren’t offering enough money.

Default or prepayment of the Royal Bank loan would have triggered a huge financial penalty, further complicating a sale of the mall.

The inquiry is probing the collapse of part of the mall in June 2012 that killed two women and injured several others. Evidence to date is that decades of water and salt penetration rusted steel beams holding up the roof-top garage.

Nazarian testified he had no idea there were any structural problems with the facility.

Bob Nazarian, now 67, had bought the property from its second owner — Elliot Lake Retirement Living — in 2005 for $6.2 million, taking out a mortgage for $4.65 million — not $4.2 million as the inquiry was told Monday.

At the end of 2010, as the Nazarians tried to come up with ways to renovate the mall, the previous owner said it would consider buying it back for $3 million but nothing came of it.

The Nazarians engaged consultants, architects and engineers and booted around plans for fixing the problems including putting solar panels on the parking deck and buying town land to create parking so cars could be moved off the roof.

However, the Nazarians balked at buying the adjacent land from the town for $55,000 — they offered $10,000 — and the plans, which included major redesigns, all went nowhere due to the high cost.