Deal to sell Elliot Lake mall failed on bank’s mortgage penalty

A public inquiry has heard how a deal to sell an ill-fated mall in Elliot Lake, Ont., in late 2011 foundered at the last minute because the bank would not allow early discharge of the mortgage.

The son of the Algo Centre Mall’s owner testified Wednesday that the Royal Bank had initially agreed to waive a huge financial penalty for a prepayment.

However, Levon Nazarian told the inquiry into the mall’s collapse that the bank changed its position, making it “impossible” to sell the property.

Nazarian denied ever telling the buyer the mall’s “roof was fine.”

He said the family had spent “astronomical” amounts of money trying to repair and upgrade the leaking roof.

Nazarian is testifying for a third day at the inquiry into the mall’s collapse last summer in which two women died.

The inquiry heard that developer Ron McCowan offered the Nazarians $7 million to buy the mall in October 2011.

As part of the buyer’s due diligence, Nazarian provided a raft of documents.

But he denied showing a representative for the buyer a report that indicated the mall’s roof — which leaked badly — was in good condition.

“I wasn’t hiding anything,” Nazarian testified Wednesday.

“You told her the roof was fine,” commission lawyer Peter Doody said.

“Nonsense, sir. Did not happen,” Nazarian said.

The inquiry also heard how the Nazarians became embroiled in litigation over an earlier aborted sale of the property to another buyer, who accused them of providing “concocted” financial statements.

They also did not pay a service provider as required.

“We were in extreme financial hardship,” Nazarian explained, adding they had spent massive amounts of money on upgrades and repairs to mall.

In September 2011, another Royal Bank inspection report noted serious problems with the condition of the mall, the inquiry heard.

“Various steel beams are rusting and concrete is deteriorating on the outside walkway,” the report stated.

“The mall roof leakage issue is still the most pressing issue and seems to be improving, but not resolved.”

Nazarian said he never saw the report but agreed with assessment that the leakage issues were improving.