Winnipeg SkyCity tower pitch to Toronto investors lacks key info

Ads inviting Toronto investors to park their money in Winnipeg's tallest condo tower do not disclose the developer has yet to secure a critical piece of public funding.

Toronto investment pays out 8 per cent a year; Winnipeg tower not ‘feasible project without … grant'

The concept art for SkyCity, the 45-storey tower Fortress Real Developments plans to build on a surface-parking lot at the northeast corner of Smith Street and Graham Avenue. (Fortress Real Developments)

Winnipeg condo buyers are bullish about SkyCity Centre, a 45-storey tower billed as the tallest structure between Toronto and Calgary.

Almost half the $200-million project's units — 188 of 388 condos — have been pre-sold, with most of the deals going down in a million-dollar show suite on Garry Street, within sight of the surface-parking lot at Graham Avenue and Smith Street, where the tower is supposed to rise.

Winnipeg SkyCity tower pitch to Toronto investors lacks key info

7 years ago
Duration 3:18
Featured VideoWinnipeg condo buyers are bullish about SkyCity Centre, a 45-storey tower billed as the tallest structure between Toronto and Calgary.

That's not the only place where SkyCity is being sold. In a nondescript meeting room in the Toronto suburb of Richmond Hill, small investors can snatch up a piece of the project for as little as $30,000 in the form of a syndicated mortgage.

But the ads inviting Ontario investors to park their money in a Winnipeg condo tower do not disclose the developer Fortress Real Developments has yet to secure a critical piece of public funding.

Correspondence sent to the city and investors tells contradictory stories about the $14.5 million worth of public money Fortress says it needs to kickstart construction and when the project will begin construction.

SkyCity marketing materials tell potential investors that "a municipal and provincial grant has been approved for the project and will allow construction to start in 2016." 

That public funding, however, has not been secured.

In 2015, Fortress informed downtown development agency CentreVenture it will not be able to meet the construction deadline for a downtown housing-stimulus grant, which only had conditional approval. One condition required the project to be finished by January 2019 in order for Fortress to be eligible for $6.5 million worth of city funding as well as $8 million from the province.

SkyCity Centre is supposed to rise on this parking lot at Graham Avenue and Smith Street. (Bartley Kives/CBC)

Then in March 2016, Fortress submitted a letter to the City of Winnipeg to warn the project was in jeopardy without the public money.

"While we are a long way down the road to developing SkyCity Centre, we need your help to keep the project viable," Fortress COO Vince Petrozza wrote in a letter addressed to Mayor Brian Bowman and other members of city council on March 11.

"To be clear, SkyCity Centre is not a feasible project without the [housing] program grant."

Fortress obtained the SkyCity site, the former home of the Winnipeg Tribune building, in late 2013 for $9.5 million from Oggi Investments, a company owned by Winnipeg entrepreneurs Sabino Tummillo and John Garcea. The 1.1-acre parcel of land was assessed at $2.4 million.

Fortress says more than half of the 388 units in SkyCity Centre have been pre-sold. (CBC News)

Oggi still owned the land in April 2013, when Fortress originally applied for city-provincial funding under a now-defunct downtown residential development grant program, and was given conditional approval that hinged on completion by January 2019. CentreVenture managed the grant program on behalf of the city and province by receiving, assessing and processing applications.

In a November 2015 briefing note, authored after Fortress warned it was going to miss the construction deadline, CentreVenture urged city officials to change the bylaw governing the grant program.

CentreVenture asked for the changes to ensure funds could flow to SkyCity as well as two other condo projects that would not meet the four-year deadline: the 91-unit, $25-million D Condos tower on Assiniboine Avenue, which is already being built, and YouCube, an 11-unit, $2-million project on Waterfront Drive that's nearly finished.

The city's lawyers rejected the idea of amending the bylaw, said John Kiernan, the director of Winnipeg's planning, property and development department.

Instead, at the end of August 2016, city economic development and housing managers recommended new grants that would replace the expired housing program and effectively extend construction deadlines for all three projects.  

City council approved grants of $1.9 million and $135,000 for D Condos and YouCube, respectively, in September — but Fortress asked the city to pull a $6.5-million SkyCity grant off the table for now.

Potential SkyCity condo buyers line up outside a show suite on Garry Street, within sight of the surface-parking lot where the tower is supposed to rise. (Fortress Real Developments/Canada News Wire)
While the new city grant would give Fortress more time to finish the building, it would remove an option to collect the grant as a lump sum as soon as condo buyers move in. Instead, the money would be paid out over a period of 10 years.

"This structure would create difficulty when working to obtain construction financing," Fortress spokeswoman Natasha Alibhai said in a statement.

The status of the province's $8-million contribution is less clear. A spokeswoman for Manitoba's municipal government ministry said SkyCity satisfied all the conditions of the original housing-stimulus grant program but would not speculate whether the province would join the city in offering a replacement grant that would extend the tower's construction deadline.

Ads directed to investors in syndicated mortgages — a pooled form of investment — do not reflect the fact Fortress was unable to meet the deadline for the original housing-stimulus grant and that the status of the new economic-incentive grant is uncertain. Some of those ads remained online last week.

These investment vehicles allow several people to combine their money to create a single mortgage, with each investor individually registered on the land title. Investors in SkyCity are being promised eight per cent annual interest.

That's a more attractive return than banks and other lenders can offer in the form of bonds, guaranteed investment certificates and other secure investment vehicles. Syndicated mortgages are pitched on the basis they are backed up by the underlying value of the land in question in the event a project is not completed.

As a surface-parking lot, the SkyCity site is currently assessed at $3.5 million by the city.

Fortress did not respond to queries about the discrepancy between what investors in SkyCity syndicated mortgages are being told about the status of the government funding and what Fortress told CentreVenture and city council.

Winnipeg planning director Kiernan also declined to comment on the discrepancy, but he did offer general advice.

"It's a buyer beware. People should be careful and should do their research and their due diligence," he said. "Each individual investor should really take time, caution, and investigate thoroughly and get legal advice before they enter into an agreement."

Three brokerage firms market syndicated mortgages for Fortress projects. The president of two of those firms, FFM Capital and FDS Broker Services, deferred questions about the marketing materials — "termsheets," in the parlance of the industry — to Fortress's head office.

"We are one of the three referral channels that Fortress uses in order to distribute their products, but we are not the product designer. They are," FFM Capital president Tony Mazzoli said in a telephone interview.

Marcus Kwamie, a spokesman for the third brokerage, FMP Mortgage Investments, said the termsheet remained online into October in error. The firm changed the materials following CBC News queries about them earlier this month.

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FMP's new SkyCity termsheet is dated June 2016, which is after Fortress notified both CentreVenture and city council it wouldn't meet the original grant's construction deadline.

Both the city and CentreVenture say no taxpayer money is at risk if SkyCity does not proceed.

Kiernan, whose department recommended the new grant, said no government money will flow to Fortress until the tower is built.

"We want to ensure we follow through with our commitment on the grant. That's what we can do from our side. We also do want to protect taxpayer investment in this project," Kiernan said.

CentreVenture, which assessed and processed applications under the old city-provincial housing-development program, reinforced the fact SkyCity must be finished before any government money flows to Fortress.

"They will only receive grants when the project is completed, so there is no real risk to city or the province to extend the deadline in question, and that is why we are supporting it," CentreVenture CEO Angela Mathieson said.

Left to right: Winnipeg Mayor Brian Bowman, Fortress CEO Jawad Rathore, Fortress COO Vince Petrozza and Winnipeg CAO Doug McNeil meet in the mayor's office in this photo dated Dec. 3, 2015. The mayor's online schedule shows a meeting with Fortress officials took place that day. (Twitter)
In its March 2016 letter to city council, Fortress also provided construction completion dates that differ from the October 2019 move-in date in the contract signed by SkyCity condo buyers.

"Our architect has advised that working drawing preparation, and city review process, will likely take us into the early part of 2017, which is when we propose to put a shovel in the ground," Petrozza wrote. "The project will take a minimum of three years to construct."

If the project is built in 36 months, SkyCity will not be finished before 2020. That date also depends on condo sales remaining strong, Petrozza said.

Fortress spokeswoman Alibhai said the SkyCity builder will be announced this month.

"With all components moving forward, we are aiming to put a shovel in the ground next year," she said via email.

The city, however, is expecting to see progress within the next three months.

Fortress paid $125,000 for a permit to begin excavating and build a foundation at the SkyCity site. That permit expired in July 2016, but was extended as long as Fortress meets two conditions.

First, the firm must submit construction drawings by Dec. 1. The excavation must begin by Jan. 5, 2017.

Have you invested in SkyCity or pre-purchased a condo? We would like to hear from you. Email us at

- With a file from CBC Toronto