Troubled real estate developer Fortress Real Developments Inc. is searching for buyers for many of its projects as the list of mortgage lenders launching legal action grows.
Among the latest moves, two senior lenders have filed lawsuits seeking to take control of Fortress’s Triple Creek housing subdivision project west of Calgary, while another lender is seeking to seize Old Market Lane, a condominium and townhouse development in the Toronto suburb of Woodbridge.
Fortress is also facing a lawsuit from Toronto-Dominion Bank, which is seeking repayment of $190,000 it says it is owed on the company’s corporate credit cards. The bank’s claim says the borrowing was personally guaranteed by Fortress founders Vince Petrozza and Jawad Rathore, so the pair are also named in the suit.
Many of Fortress’s other projects are also up in the air, facing delays or possible sales, and the company says it is working on a new development plan for its business.
“Fortress is currently in the process of restrategizing their project portfolio,” company spokesman Scott Davidson said in an e-mail.
A sale of Fortress’s Brookdale condominium project on Avenue Road in Toronto – which was put up for sale in June by receiver RSM Canada – should be announced shortly, Mr. Davidson said, “and represents a substantial land price for the [Greater Toronto Area] with significant benefit to secured land holders.”
He said Fortress also expects to sell Old Market Lane shortly.
“Fortress anticipates several significant transactions and announcements in the next 30 days as part of the successful repositioning of their portfolio,” he said.
Fortress, a real estate developer based in Richmond Hill, north of Toronto, is facing a flurry of legal actions from lenders, many launched after the RCMP searched the company’s offices in April as part of an investigation into syndicated mortgage fraud.
Fortress’s projects are financed by syndicated mortgage loans arranged through mortgage affiliate Building and Development Mortgages Canada Inc. (BDMC), which is based at Fortress’s head office address in Richmond Hill. (A syndicated mortgage is an investment in which two or more investors lend money to a borrower, often a developer building a new project.) BDMC raised more than $560-million from 11,000 individual investors to finance 44 projects for Fortress or other third-party developers working with Fortress.
A court-appointed receiver took control of BDMC in May and warned in a June report that some of the projects are under “considerable stress” and lower-ranking syndicated lenders could face “significant losses.”
The development projects have mortgage loans from senior financial lenders that rank ahead of the syndicated loans. Some of those senior lenders have been moving to seize land this spring and summer, concerned about the spate of other legal action facing the company and the growing list of loan defaults.
Two lenders filed lawsuits in Calgary seeking to recover funds and take control of Fortress Triple Creek Inc., which is planning a housing subdivision on 155 acres of land in Rocky View, west of Calgary.
Romspen Investment Corp., which holds a first-ranking mortgage on the property, says it is owed $3.1-million on a loan that is in default, while Eagles Edge Capital Corp., the second-ranking mortgage holder, says it is owed $2.6-million. Both companies have also named Mr. Petrozza and Mr. Rathore in their lawsuits, saying the men personally guaranteed the Triple Creek loans.
Fortress was also notified this summer that the senior lender for its Old Market Lane project, JYR Real Capital Mortgage Investment Corp., was demanding payment on its $694,778 mortgage loan by Aug. 29, or it would take legal steps to seize and sell the property.
In addition, the company’s Union Waterfront project in St. Catharines, Ont., was put into receivership in August after the project’s lender moved to seize the property. Meanwhile, a power-of-sale process for Fortress’s Harmony Village Sheppard project in Toronto was completed in June and the court accepted a purchase offer from a developer. The company has also defaulted on loans for its Glens of Halton Hills project in Georgetown, west of Toronto.
The lender for Fortress’s Collier Centre office complex project in Barrie, Ont., is also pushing for a sale of that property, and Fortress is in talks to sell its Mississauga Meadows townhouse project. It is also trying to complete the sale of The Kemp condominium development project in Barrie. The potential buyer of The Kemp requested an extension until this fall to complete due diligence.
Fortress, meanwhile, is still in a legal fight with the City of Regina over its Capital Pointe condo project at the prominent intersection of Albert Street and Victoria Avenue in downtown Regina.
The city ordered the developer to fill in a foundation hole on the long-delayed project site, but an appeal tribunal ruled in August that Fortress had the option to finish construction or build more stable shoring at the site.
In early September, the city filed an appeal of the tribunal decision in Saskatchewan Court of Queen’s Bench.
Janet McFarland
Jeffrey Jones