Is the end nigh for Fortress Real Developments?
Lenders are pushing hard for repayment from Fortress Real Developments, but only those designated as primary investors are likely to be successful.
The Globe and Mail yesterday reported that mortgage lenders on at least four Fortress Real developments have initiated legal action after the embattled developer defaulted on payments.
Lawyer David Franklin, who’s representing investors allegedly swindled by Fortress Real (but none of whom are involved in the litigation reported by the Globe), believes that the layers of hefty mortgages make repayment of all parties unlikely.
“On the Collier Centre, the initial valuation projected the sale price of the whole project at around $72mln, and that’s with having the retail space all rented and the office space and condo all occupied,” he said. “Now, the condominium has been sold and that reduced David Morrison’s mortgage. He’s down to $25-28mln and there’s a second mortgage of $7.225mln and then a third mortgage of $3mln. The fourth mortgage was syndicated and worth about $10mln, and then there’s a fifth mortgage, also syndicated, worth of about $17mln plus interest from the original investors.”
Fortress Collier Centre Ltd., which is developing a commercial tower in Barrie, Ont., owes money to Morrison Financial, and has a narrow window in which to sell the property before Morrison steps in to claim power of sale.
“Definitively, in relation to the Collier Centre, they are in discussion to sell the property and to recover as much money as they can, and I think they are doing that in good faith,” David Morrison of Morrison Financial told MortgageBrokerNews.ca. “I don’t think they’re game playing, but whether they recover enough to repay investors is unlikely.
“I don’t think they believe they will get enough to recover all investors’ funds, but I think they’re acting in good faith. If they complete a transaction before proceedings go full course, we’ll allow them to because we don’t have an axe to grind. If they do not complete the transaction in the time allowed, we will proceed with power of sale. We just want to protect our own loan and to do the best for everybody in that situation.”
Ron Butler of Butler Mortgage doesn’t believe anybody will recover their money on the Fortress projects, save for maybe the primary lenders. Moreover, he doesn’t believe those projects will come back to life, either.
“I don’t believe, personally, that the economics of those projects will ever allow them to come back to life with Fortress,” said Butler. “Fortress, in the Globe and Mail article, suggests they have eminent new buyers, but, personally, I don’t think that will happen. I’m not a Fortress insider, but I believe it will not happen. If the City of Regina is suing them to fill in the hole in the ground they made [for a project called Capital Pointe], I don’t believe there will ever be a condominium tower there.”
In April, the RCMP executed search warrants that targeted, among others, Fortress Real’s headquarters.
Related stories:
Fortress Real's offices searched by RCMP
Fortress Real fiasco underscores FSCO's impotence
