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Failed B.C. seniors facility sees man slapped with $9M judgment

"Cactus Ridge continued to be unable to cover its operating costs," said Justice Heather MacNaughton
The planned 92-unit assisted living facility was opened in 2010 but failed to attract as many residents as expected.

A long-delayed trial over a failed Osoyoos seniors' residence has resulted in one of the business partners involved slapped with a $9 million judgment.

The Cactus Ridge project, a planned 92-unit assisted living facility, was opened in 2010 but failed to attract as many residents as expected.

"The partners over-estimated demand in Osoyoos for such a large seniors’ residence and did not anticipate the downturn in the real estate market which made it difficult for seniors to sell their homes and move into Cactus Ridge," reads a decision from Justice Heather MacNaughton issued Feb. 17, following a three-day trial in late January.

Farouk Shah was sued by his former business partners in the venture, William Kujat and Gordon Hoover. They had a history of successful co-investments before Cactus Ridge went south.

"By October 2012, primarily under Mr. Shah’s supervision, only 19 units of 92 were rented," MacNaughton found in her decision.

"Cactus Ridge continued to be unable to cover its operating costs."

HSBC, the mortgage backer behind the investment, issued a request to be repaid its $10 million investment in 2012. The three partners had put in $500,000 each as an initial investment and co-guaranteed the loan.

As interest began accruing, Kujat's company Safeway Holdings oversaw a sale of Cactus Ridge in foreclosure for $6 million. There was still a shortfall of $5,717,281.65.

"In its pleadings, Safeway sought judgment against Mr. Shah for the shortfall and calculated interest based on the mortgage interest rate," reads the court decision.

Justice MacNaughton determine that, given interest rates, Shah is on the hook for $7.2 million for the mortgage shortfall, and $1.8 million for operating expenses of Cactus Ridge billed to Safeway Holdings.

Shah was living in the Bahamas at the time of trial, and requested delays, which were denied due to his demonstrated ability to appear virtually.

He appeared virtually on the first day of trial on January 24, 2022, but halfway through the day left and did not reappear for the rest of trial.

"All of Safeway’s evidence was uncontroverted and unchallenged," MacNaughton wrote, as a result.

A counterclaim and third party claim were dismissed due to Shah's decision not to participate.