Condo buyer doubtful about future of downtown 'beacon of hope' after trustee appointed
‘I personally don't believe it's going to go,’ says Winnipeg condo buyer
A Winnipegger who hopes to own a unit in a planned downtown condo tower launched in 2013 by Fortress Real Developments says he's disappointed, and doubtful the tower will actually be built after signs of more troubles for the delayed project.
On Friday, the Ontario Superior Court of Justice appointed FAAN Mortgage Administrators to act as trustee of Richmond, Ont.-based Building & Development Mortgages Canada (BDMC).
"It's really disappointing to hear that, because we were really excited for the project in Winnipeg," said Peter Paley, who has a $27,000 deposit on a one-bedroom condo in SkyCity. "It was such a beacon of hope for our downtown."
BDMC is the brokerage which provided financing for SkyCity and other Fortress projects through syndicated mortgage investment vehicles — which pool funds from private lenders to create a single mortgage.
The trustee said it will review the status of all of the Fortress projects funded by BDMC.
"For clarity, the trustee is not appointed over any of the projects that have received advances from BDMC," wrote the trustee in a letter to investors on Wednesday. "The developers remain in control of the projects."
Buyers of SkyCity condo units were already left wondering about the future of the Graham Avenue project after RCMP raided Fortress's Richmond Hill, Ont., headquarters in mid-April as part of an ongoing investigation into syndicated mortgage fraud.
"I think a lot of the people who bought in the building are really uneasy about it and most of them just want their money back," said Paley. "I personally don't believe it's going to go."
The lawyer acting as escrow agent for SkyCity says condo buyers don't need to worry about their deposits.
"I can tell you that any deposit funds that have been paid to this firm are still safely in our trust account," said lawyer Doug Forbes, of Winnipeg's Thompson Dorfman Sweatman LLP.
Links between BDMC, Fortress
BDMC and Fortress are located in the same Richmond Hill two-storey commercial building and several Fortress executives, including vice-president Vince Petrozza, held licences to deal in mortgages for BDMC.
RCMP executed search warrants at both companies' offices earlier this month.
The Financial Services Commission of Ontario (FSCO) argued a trustee needed to be appointed because BDMC was in breach of an agreement reached in February.
"Orders like this, which are made at the behest of the regulator, or an order over an issue of this size are relatively rare," said David T. Ullmann, a restructuring lawyer for Toronto-based Blaney McMurtry LLP.
"For the [BDMC syndicated mortgage] investors, this is probably the best outcome they could get at this moment, where there was clearly a lot of concern with this company."
FSCO's lawyer filed an affidavit on Friday to back up its application, in which he makes the following allegations:
- Fortress has failed to make required payments. A separate document titled "demand and requirement to pay" in court documents pegs the amount owed at more than $100,000.
- Fortress has, at times, interfered with FAAN Mortgage's efforts to access information and communicate with syndicated mortgage investors.
- BDMC is insolvent and in default of its obligations to pay into a $300,000 reserve fund.
- BDMC has been struggling to make a number of important payments, including payroll and rent.
Neither Fortress nor BDMC responded to requests for comment.
No charges have been laid against either company.
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