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Court File No. CV-18-596204-00CL
Ontario SUPERIOR COURT OF JUSTICE
B E T W E E N:
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
- and -
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006,
c. 29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43
MOTION RECORD OF FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee
June 20, 2018 OSLER, HOSKIN & HARCOURT LLP P.O. Box 50, 1 First Canadian Place Toronto, ON M5X 1B8
Jeremy Dacks (LSUC# 41851R) Tel: 416.862-4923
Michael De Lellis (LSUC# 48038U) Tel: 416.862.5997
Patrick Riesterer (LSUC# 60258G) Tel: 416.862.5947
Fax: 416.862-6666
Lawyers for FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee
TO SERVICE LIST:
1
Court File No. CV-18-596204-00CL Ontario
SUPERIOR COURT OF JUSTICE COMMERCIAL LIST
THE SUPERINTENDENT OF FINANCIAL SERVICES Applicant
- and -
BUILDING & DEVELOPMENT MORTGAGES CANADA INC. Respondent
APPLICATION UNDER SECTION 37 OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c. 29
and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43
SERVICE LIST
TO: OSLER, HOSKIN & HARCOURT LLP 100 King Street West 1 First Canadian Place Suite 6200, P.O. Box 50 Toronto, ON M5X 1B8
Jeremy Dacks Tel. +1.416.862.4923 Michael De Lellis Tel. +1.416.862.5997 Patrick Riesterer Tel. +1.416.862.5947
[email protected] [email protected] [email protected]
Counsel for the Trustee
AND TO:
FAAN MORTGAGE ADMINISTRATORS INC. 20 Adelaide Street East Suite 920 Toronto, ON M5C 2T6
Naveed Manzoor Tel. +1.416.258.6415 Daniel Sobel Tel. +1.647.272.8383 Lana Bezner Tel. +1.416.966.7646
[email protected] [email protected] [email protected]
Trustee
2
AND TO:
AIRD & BERLIS LLP Brookfield Place 181 Bay Street, Suite 1800 Toronto, ON M5J 2T9 Steven L. Graff Tel. +1.416.865.7726 Ian Aversa Tel. +1.416.865.3082 Miranda Spence Tel. +416.865.6414 [email protected] [email protected] [email protected] Counsel for the Superintendent of Financial Services
AND TO:
CHAITONS LLP 5000 Yonge Street, 10th Floor Toronto, Ontario M2N 7E9 Harvey Chaiton Tel. +1.416.218.1129 George Benchetrit Tel. +1.416.218.1141 [email protected] [email protected] Proposed Representative Counsel
AND TO:
HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF ONTARIO AS REPRESENTED BY THE MINISTER OF FINANCE P.O. Box 620 33 King Street West, 6th Floor Oshawa, ON L1H 8E9 Kevin O’Hara Tel: +1.905.433.6934 Fax: +1.905.436.4510 [email protected]
AND TO:
NORTON ROSE FULBRIGHT CANADA LLP Royal Bank Plaza, South Tower 200 Bay Street, Suite 3800, P.O. Box 84 Toronto, Ontario M5J 2Z4 Jennifer Teskey Tel: +1.416.216.2303 Jeremy Devereux Tel: +1.416.216.4073 Fax: +1.416.216.3930 [email protected] [email protected]
AND TO:
FINANCIAL SERVICES COMMISSION OF ONTARIO (“FSCO”) 5160 Yonge Street, 16th Floor Toronto, Ontario M2N 6L9 Mark Bailey Tel: +1.416.250.7250 Brendan Forbes Tel: +1.416.250.7250 Fax: +1.416.590.7070 [email protected] [email protected]
AND TO:
BRAUTI THORNING ZIBARRAS LLP 161 Bay Street, Suite 2900, Toronto, ON M5J 2S1 Jay Naster Tel. +1.416.507.2442 [email protected] Counsel to Building and Development Mortgages Canada Inc., Canadian Development Capital & Mortgage Services Inc. and Ildina Galati
3
AND TO:
BUILDING AND DEVELOPMENT MORTGAGES CANADA INC. (“BDMC”) 25 Brodie Drive, Unit 8 Richmond Hill, ON L4B 3K7 Ildina Galati [email protected]
AND TO:
CANADIAN DEVELOPMENT CAPITAL & MORTGAGE SERVICES INC. (“CDCM”) 25 Brodie Drive, Unit 7 Richmond Hill, ON L4B 3K7 Charene Bunnett [email protected]
AND TO:
ROBINS APPLEBY LLP 120 Adelaide Street West Suite 2600 Toronto, ON M5H 1T1 David Taub Tel. +1.416.360.3354 John Fox Tel. +1.416.360.3349 [email protected] [email protected] Counsel to Fortress Real Developments Inc.
AND TO:
FORTRESS REAL DEVELOPMENTS INC. 25 Brodie Drive, Unit 1 Richmond Hill, ON L4B 3K7 [email protected] [email protected]
AND TO:
BLANEY MCMURTRY LLP 2 Queen Street East, Suite 1500 Toronto, Ontario M5C 3G5 David Ullmann Tel. +1.416.596.4289 [email protected]
AND TO:
PAUL BATES BARRISTER 100 Lombard St., Suite 302 Toronto, ON M5C 1M3 Paul Bates [email protected]
AND TO:
MILLER THOMSON LLP 40 King Street West, Suite 5800 Toronto, ON M5H 3S1 Craig Mills Tel. +1.416.595.8596 [email protected] Counsel to Brookhill Holdings Inc.
AND TO:
GOLDMAN, SLOAN, NASH & HARBER LLP 480 University Avenue, Suite 1600 Toronto, ON M5G 1V2 David Nakelsky Tel. +1.416.597.7880 [email protected] Counsel to Wellington House Inc.
4
AND TO:
O’CONNOR MACLEOD HANNA LLP 700 Kerr Street Oakville, ON L6K 3W5 Orie Niedzviecki Tel. +1.905.842.8030 [email protected] Counsel to JW Roberts Enterprises Inc.
AND TO:
COMPUTERSHARE TRUST COMPANY OF CANADA 100 University Avenue 12th Floor, South Tower Toronto, ON M5J 2Y1 [email protected]
AND TO:
FFM CAPITAL INC. 35 Silton Road Woodbridge, ON L4L 7Z8 Tony Mazzoli Krish Kochhar [email protected] [email protected]
AND TO:
FDS BROKER SERVICES INC. 160 Traders Blvd, Suite 202 Mississauga, ON L4Z 3K7 Zafar Khawaja [email protected]
AND TO:
ROYAL CANADIAN MOUNTED POLICE Integrated Market Enforcement Team 20 Queen Street West, 15th Floor Toronto, ON M5H 3R3 Sgt. Dominic Milotte [email protected]
AND TO:
TSUNAMI TECHNOLOGY GROUP INC. 215 Traders Blvd. East, Suite 16 Mississauga, ON L4Z 3K5 Don Tanner [email protected]
AND TO:
TWIN HILLS FORD LINCOLN LIMITED 10801 Yonge Street Richmond Hill, ON L4C 3E3
AND TO:
OLYMPIA TRUST COMPANY 200, 125-9 Avenue SE Calgary, AB T2G 0P6 Jonathan Bahnuik Johnny Luong [email protected] [email protected]
5
AND TO:
RSM CANADA LTD 11 King Street West Suite 700, PO Box 27 Toronto, Ontario M5H 4C7 Jeffrey Berger [email protected] Court-appointed Receiver of Dunsire (Landsdown) Inc.
AND TO:
DUNSIRE (LANDSDOWN) INC. 203A-465 Phillip Street Waterloo, Ontario N2L 6C7 Shawn Keeper [email protected] Borrower
AND TO:
189 DUNDAS STREET WEST INC. 3830 Bathurst Street, Unit 115 Toronto, ON M3H 6C5 Paul Goldfischer [email protected] Borrower
AND TO:
BEL CALGARY INC. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower
AND TO:
LAMB BAUHAUS INC. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower
AND TO:
BROOKHILL HOLDINGS INC. 56 The Esplanade, Suite 206 Toronto, ON M5E 1A7 Giuseppe Valela
[email protected] Borrower
AND TO:
SUNRISE ACQUISITIONS (BOND HEAD) INC. 50 West Wilmot Street, Suite 100 Richmond Hill, ON L4B 1M5 Sajjad Hussain
[email protected] Borrower
AND TO:
BRAESTONE DEVELOPMENT CORPORATION 85 Bayfield Street, Suite 500 Barrie, ON L4M 3A7 J. David Bunston James Massey [email protected] Borrower
6
AND TO:
FORTRESS BROOKDALE INC. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower
AND TO:
WESTGATE PROPERTIES LTD. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower
AND TO:
EMERALD CASTLE DEVELOPMENTS INC. 361 Connie Crescent, Suite 200 Concord, ON L4K 5R2 Desi Auciello [email protected] Borrower
AND TO:
FORTRESS CHARLOTTE 2014 INC. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore [email protected] Borrower
AND TO:
FORTRESS COLLIER CENTRE LTD. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower
AND TO:
CARLYLE COMMUNITIES (CRESTVIEW) INC. 20 Rivermede Road, Suite 204 Concord, ON Naram Mansour [email protected] Borrower
AND TO:
LAMB EDMONTON CORP. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower
AND TO:
AVERTON HOMES (PRESCOTT) INC. 101 Riele Drive, Suite 310 St. Alberta, AB T8N 3X4 Paul Lanni [email protected] Borrower
7
AND TO:
THE HARLOWE INC. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower
AND TO:
THICKSON ROAD 407, WHITBY LIMITED 9000 Keele Street, Unit 4 Concord, Ontario L4K 0B3 Mario Bottero [email protected] Borrower
AND TO:
2309918 ONTARIO INC. 30 Wertheim Court, Unit 3, Building A, Richmond Hill, Ontario L4B 1B9 Dino Sciavilla [email protected] Borrower
AND TO:
NOBLETON SOUTH HOLDINGS INC. 56 The Esplanade, Suite 206 Toronto, Ontario M5E 1A7 Domenic Fazari [email protected] Borrower
AND TO:
2301132 ONTARIO INC. 11025 Lakeridge Road Port Perry, Ontario L9L 1V7 Brian Tilley [email protected] Borrower
AND TO:
2309840 ONTARIO INC. 11025 Lakeridge Road Port Perry, Ontario L9L 1V7 Brian Tilley [email protected] Borrower
AND TO:
SOUTH WEST QUEENSVILLE HOLDINGS INC. 56 The Esplanade, Suite 206 Toronto, Ontario M5E 1A7 Giuseppe Valela [email protected] Borrower
AND TO:
WORTHINGTON HOMES (HUMBERTON) INC. 164 Nelson Street Oakville, Ontario L6L 3J2 Daniel Marion [email protected] Borrower
8
AND TO:
BEL-EDMONTON INC. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower
AND TO:
KING SQUARE LTD. 50 Acadia Avenue, Suite 310 Markham, Ontario L3R 0B3 Wen Yi Wang [email protected] Borrower
AND TO:
KINGRIDGE DEVELOPMENT CORPORATION 235 Speers Road Oakville, Ontario L6K 2E8 Daniel Marion [email protected] Borrower
AND TO:
SMYGINE (LAKEEAST) INC. 6021 Yonge Street, Suite 229 Toronto, Ontario M2M 3W2 Mike Petrovski [email protected] Borrower
AND TO:
DUNSIRE (1041 LAKESHORE) INC. 203A-465 Phillip Street Waterloo, Ontario N2L 6C7 Shawn Keeper [email protected] Borrower
AND TO:
DUNSIRE (1407 LAKESHORE) INC. 203A-465 Phillip Street Waterloo, Ontario N2L 6C7 Shawn Keeper [email protected] Borrower
AND TO:
NOBLETON NORTH HOLDING INC. 368 Four Valley Drive Concord, Ontario L4K 5Z1 Giuseppe Valela [email protected] Borrower
AND TO:
OLD MARKET LANE INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower
9
AND TO:
FORTRESS CARLYLE PETER STREET INC. 20 Rivermede Road, Suite 204 Concord, Ontario L4K 3N3 Naram Mansour Jawad Rathore [email protected] Borrower
AND TO:
AVERTON (RUTHERFORD) INC. 101 Riele Drive, Suite 310 St. Alberta, Alberta T8N 3X4 Paul Lanni [email protected] Borrower
AND TO:
KINGRIDGE (OAKVILLE EAST) INC. 1660 North Service Road East, Suite 109B Oakville, Ontario N6H 7G3 Daniel Marion [email protected] Borrower
AND TO:
6566074 MANITOBA LTD. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower
AND TO:
2382917 ONTARIO INC. 500 Hanlon Creek Blvd Guelph, Ontario N1C 0A1 Lee Piccolo [email protected] Borrower
AND TO:
1177 DANFORTH AVENUE LTD. 156 Duncan Mill Road, Suite 23A Toronto, Ontario M3B 3N2 Morris Hansun [email protected] Borrower
AND TO:
L RICHMOND CORP. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower
AND TO:
FORTRESS KEMPENFELTBAY DEVELOPMENTS INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower
10
AND TO:
LAMB CALGARY INC. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower
AND TO:
2221563 ONTARIO INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower
AND TO:
AMADON-WESTWATER PROJECTS LTD. 426B William Street Victoria, British Columbia V9A 3Y9 Max Tomaszewski [email protected] Borrower
AND TO:
HALO TOWNHOMES INC. 229-6021 Yonge Street Toronto, Ontario M2M 3W2 Mike Petrovski Sayf Hassan Konstantine Simionopoulos [email protected] Borrower
AND TO:
FORTRESS TRIPLE CREEK INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower
AND TO:
UNION WATERFRONT INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower
AND TO:
WELLINGTON HOUSE INC. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower
11
Email List: [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected];[email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]
INDEX
INDEX
Tab Document Page No.
1 Notice of Motion dated June 20, 2018 1-8
2 Draft Order for the Approval of Interim Stabilization Measures 9-21and Appointment of Representative Counsel
3 First Report of the Trustee dated June 19, 2018 22-119
TAB 1
Court File No. CV-18-596204-00CL
Ontario SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
- and -
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006,
c. 29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43
NOTICE OF MOTION (Motion for Approval of an Order for the Approval of Interim Stabilization Measures and
Appointment of Representative Counsel)
FAAN Mortgage Administrators Inc. (“FAAN Mortgage”), in its capacity as
Court-appointed trustee (the “Trustee”) of all of the assets, undertakings and properties of
Building & Development Mortgages Canada Inc. (the “Respondent”) pursuant to section 37 of
the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c. 29, as amended
(the “MBLAA”), and section 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended,
will make a motion before a judge of the Ontario Superior Court of Justice (Commercial List) on
June 26, 2018 at 9:00 a.m., or as soon after that time as the motion can be heard, at 330
University Avenue, Toronto, Ontario.
PROPOSED METHOD OF HEARING: The motion is to be heard orally.
THE MOTION IS FOR:
1. An Order (the “Stabilization Order”) substantially in the form attached to the Motion
Record, inter alia:
1
- 2 -
(a) if necessary, abridging the time for service of this Notice of Motion and the Motion
Record and dispensing with service on any person other than those served;
(b) appointing Chaitons LLP as representative counsel (“Representative Counsel”) to
represent all Investors in respect of these proceedings, other than Investors in
respect of any syndicated mortgage loan made to Dunsire (Landsdown) Inc., unless
and until written notice is provided to Representative Counsel by a particular
Investor that such Investor does not wish to be represented by Representative
Counsel;
(c) approving certain interim stabilization measures in connection with the
Respondent’s estate, including:
(i) that the Trustee distribute 50% of the principal amount held by the Trustee in
respect of each of the Victoria Medical SML Loans to the applicable Investors
pro rata based on each such Investor’s respective portion of such Victoria
Medical SML Loans;
(ii) that the Trustee hold in a separate account, until further Order of the Court, all
(I) funds that are currently in the Respondent’s or the Trustee’s possession or
that may come into the Respondent’s or the Trustee’s possession, in each case
as a result of a repayment (in whole or in part) of principal on any loan or
other indebtedness owing to or administered by the Respondent on behalf of
Investors (including, for greater certainty, the remaining portion of the
repayments on the Victoria Medical SML Loans held by the Trustee after
making the distributions previously described), whether or not (i) secured by
any Real Property Charges in the name of the Respondent or in the name of
OTC, Computershare or any other person acting for Investors in respect of
investments held through RRSPs or other registered accounts or funds, (ii)
received before or after the date of the Appointment Order, or (iii) paid or
payable in trust, plus (II) all interest paid or payable to the Respondent or the
Trustee at the time such repayment (in whole or in part) of principal is made
(collectively, “Realized Property”) and that the Trustee report to the Court
2
- 3 -
by no later than October 31, 2018 with a recommendation regarding next steps
with respect to the Realized Property, including any potential distribution of
any Realized Property to the Investors; and
(iii) that the Trustee hold in a separate account all funds (other than Realized
Property) that were in the Respondent’s possession on or prior to the date of
the Appointment Order as well as any amounts (other than Realized Property)
paid or payable to the Respondent or the Trustee (in trust or otherwise) after
the date of the Appointment Order, including in respect of interest where
principal is not repaid, fees, expenses or other amounts (collectively, “Estate
Property”) and shall be authorized to use such Estate Property as set out in
the Appointment Order and as further confirmed by the Stabilization Order;
and
(d) clarifying the Trustee’s powers with respect to the registration, discharge, partial
discharge, postponement and subordination of any mortgages so as to address any
concerns of the applicable land titles offices.
2. Such further and other relief as this Court may deem just.
THE GROUNDS FOR THE MOTION ARE:
1. Concurrently with the filing of this notice of motion, the Trustee is filing the First
Report of the Trustee dated June 19, 2018 (the “First Report”) with the Court, and the Trustee’s
activities described therein have been reasonable and responsible in accordance with the
Trustee’s mandate as provided by the Appointment Order. Capitalized terms used but not defined
herein have the meanings given in the First Report;
2. Pursuant to the Order of the Court in respect of the Respondent dated April 20,
2018 (the “Appointment Order”), FAAN Mortgage was appointed as the Trustee, without
security, of all of the assets, undertakings and properties of the Respondent, including, without
limitation, all of the assets in the possession or under the control of the Respondent, its counsel,
agents and/or assignees but held on behalf of any other party, including, but not limited to,
Investors, brokers, or borrowers, in each case whether or not such property is held in trust or is
3
- 4 -
required to be held in trust, which includes, for greater certainty, any and all real property
charges in favour of the Respondent, including, without limitation, any and all monetary and
non-monetary entitlements in respect to the assets and values thereunder;
3. The purpose of the Trustee’s appointment is to protect the interests of the investing public
who are syndicated mortgage lenders (the “Investors”) who have invested funds in certain real
estate development projects secured by charges (typically third-ranking or lower priority
charges) registered on title to the applicable real property;
4. The circumstances leading to the appointment of the Trustee are summarized in the
affidavit of Brendan Forbes sworn April 19, 2018 and the exhibits thereto (the “Supporting
Affidavit”), which was filed by the Applicant in support of the Trustee’s appointment;
Interim Stabilization Measures
5. To date, the Trustee has been principally engaged in three broad types of activities: (i)
responding to enforcement actions by senior lenders on distressed projects; (ii) responding to
urgent requests for postponements and other actions to prevent enforcement by senior lenders
and to permit the projects in question to continue; and (iii) responding to a multitude of borrower
and Investor inquiries;
6. The Trustee has determined that, in order to discharge its Court-ordered mandate, it needs
to (a) complete a detailed evaluation of the condition of each of the projects and the associated
syndicated mortgage loans made by the Respondent, and (b) proactively engage with competing
stakeholders on a project by project basis in order to develop a strategy to maximize recoveries
for Investors in difficult circumstances;
7. BDMC is functionally insolvent but has a number of regular expenses. The Trustee has
no assurance that further contributions from Fortress or CDCM will be forthcoming;
8. The Trustee has prepared a Cash Flow Projection, on a monthly basis through to October
31, 2018 (the “Stabilization Period”). The Cash Flow Projection has been prepared by the
Trustee using the information provided to it by BDMC’s employees and representatives, based
4
- 5 -
on the Trustee’s review of BDMC’s records and third-party estimates. It should be noted that
there are no cash receipts projected during the Stabilization Period;
9. The Trustee controls certain funds as more fully described in the First Report, including
funds received after the date of the Appointment Order;
10. Certain brokers have raised concerns regarding the proceeds received with respect to
repayments of certain loans and the funds held as an “interest reserve” in a separate account of
the Respondent established for that purpose;
11. The Trustee would like the Court’s authorization to distribute certain of the proceeds
received with respect to loans made to one of the projects and to clarify and confirm the scope of
the Trustee’s Charge (as defined in the First Report) and to put some additional restrictions on
the Trustee’s rights with respect to the funds charged to give comfort to Investors, brokers and
borrowers who have expressed concerns;
12. The proposed Stabilization Order provides that (i) the Trustee will distribute 50% of the
principal received on the Victoria Medical SML Loans, (ii) will retain all Realized Property
(consisting of payments of principal and of interest where principal is paid as well) separate and
apart from any other funds until further order of the Court and (iii) will be authorized to use
Estate Property (consisting of all other funds received or held by or on behalf of the Trustee,
including payments of interest where no principal is paid). The Trustee is to report to the Court
by no later than the end of the Stabilization Period with a recommendation regarding next steps
with respect to the Realized Property;
13. The proposed Stabilization Order will facilitate the Trustee in carrying out its mandate
for the benefit of all Investors and other stakeholders of the Respondent;
Representative Counsel
14. The Trustee is of the view that it is in the best interests of the Investors to appoint
Chaitons LLP as Representative Counsel on behalf of the Investors in order to provide the
Investors with legal representation to protect their common interests, while keeping professional
fees for Investors as low as possible;
5
- 6 -
15. Representative Counsel shall have no obligation to consult with, follow the instructions
of, or provide an opinion to, any individual Investor in connection with the discharge of its duties
under the proposed Stabilization Order;
16. Any Investor that does not wish to be represented by Representative Counsel would be
permitted to opt out and be required to provide notice of same in writing to Representative
Counsel;
17. Representative Counsel would be entitled to a charge (“Representative Counsel
Charge”) on the Property as security for its fees and disbursements in respect of these
proceedings, both before and after the making of the proposed Order, such Representative
Counsel Charge being a charge on the Property ranking immediately subordinate in priority to
the Trustee’s Charge;
Land Title Documents
18. The Trustee has concluded that certain clarifications are desirable with respect to its
rights to execute and register certain documents required in connection with a registration,
discharge, partial discharge, postponement, subordination, transfer or other dealings with the
Property, including mortgages;
General
19. The provisions of the MBLAA, including section 37 thereof;
20. The Appointment Order;
21. Rules 1.04, 1.05, 2.03, 3.02, 16, 37 and 41 of the Ontario Rules of Civil Procedure,
R.R.O. 1990, Reg. 194, as amended;
22. Sections 101 and 106 of the Ontario Courts of Justice Act, R.S.O. 1990, c. C.43 as
amended;
23. The inherent and equitable jurisdiction of this Honourable Court; and
24. Such further and other grounds as counsel may advise and this Court may permit.
6
- 7 -
THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of
this motion:
1. The Appointment Order;
2. The Supporting Affidavit;
3. The First Report; and
4. Such further and other evidence as counsel may advise and this Court may permit.
June 20, 2018 OSLER, HOSKIN & HARCOURT LLP Box 50, 1 First Canadian Place Toronto, ON M5X 1B8 Jeremy Dacks (LSUC# 41851R) Michael De Lellis (LSUC# 48038U) Patrick Riesterer (LSUC# 60258G) Tel: (416) 362-2111 Fax: (416) 862-6666 Lawyers for FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee
TO: SERVICE LIST
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CV
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5962
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TAB 2
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Court File No. CV-18-596204-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE HONOURABLE MR.
)
TUESDAY, THE 26th DAY
) JUSTICE HAINEY ) OF JUNE, 2018 BETWEEN:
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
- and -
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THE
MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c. 29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43
ORDER FOR THE APPROVAL OF INTERIM STABILIZATION MEASURES
AND APPOINTMENT OF REPRESENTATIVE COUNSEL
THIS MOTION, made by FAAN Mortgage Administrators Inc. (“FAAN Mortgage”),
in its capacity as Court-appointed trustee (in such capacity, the “Trustee”), of all of the assets,
undertakings and properties of Building & Development Mortgages Canada Inc. (the
“Respondent”) pursuant to section 37 of the Mortgage Brokerages, Lenders and Administrators
Act, 2006, S.O. 2006, c. 29, as amended (the “MBLAA”), and section 101 of the Courts of
Justice Act, R.S.O. 1990, c. C.43, as amended, for an Order, inter alia (i) appointing
representative counsel to represent Investors in respect of these proceedings; and (ii) approving
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certain interim stabilization measures in connection with the Respondent’s estate, was heard this
day at 330 University Avenue, Toronto, Ontario;
ON READING the First Report of the Trustee dated June 19, 2018 (the “First Report”),
and on hearing the submissions of counsel for the Trustee, counsel for The Superintendent of
Financial Services, and Chaitons LLP, and such other counsel as were present, no one appearing
for any other person on the service list, as appears from the affidavit of service of David
Williams sworn June 20, 2018, filed;
SERVICE
1. THIS COURT ORDERS that the time for service and filing of the notice of motion and
the motion record herein is hereby abridged and validated so that this motion is properly
returnable today and hereby dispenses with further service thereof.
DEFINITIONS
2. THIS COURT ORDERS that any capitalized terms used but not defined herein shall
have the meanings given in the Order of the Court in respect of the Respondent dated April 20,
2018 (the “Appointment Order”) or in the First Report.
REPRESENTATIVE COUNSEL
3. THIS COURT ORDERS that, subject to Paragraph 8 below, Chaitons LLP is hereby
appointed as counsel (“Representative Counsel”) for all Investors in respect of these
proceedings (including, without limitation, all those persons who are Investors as a result of
having investments held through registered retirement savings plans (“RRSPs”) or other
registered accounts or funds with RRSP Trustees (defined below)) regarding their common
interests in the loans and other indebtedness administered by the Respondent, including the
common interests of Investors in any particular loan or other indebtedness administered by the
Respondent, unless and until written notice is provided by a particular Investor to Representative
Counsel that such Investor does not wish to be represented by Representative Counsel.
Notwithstanding the foregoing, Representative Counsel shall not represent Investors in respect of
any syndicated mortgage loan made to Dunsire (Landsdown) Inc.
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4. THIS COURT ORDERS that, in fulfilling its mandate under Paragraph 3,
Representative Counsel shall act in the best interests of the Investors and shall take such
necessary and appropriate steps or actions as Representative Counsel deems fit from time to
time, including, where appropriate, to give such consents on behalf of Investors that may be
necessary or desirable in the circumstances, provided however that Representative Counsel shall
not be obligated to take any step or action where Representative Counsel determines (in
consultation with the Trustee) that the best interests of Investors would not be served by any such
step or action.
5. THIS COURT ORDERS that Representative Counsel shall have no obligation to
consult with, follow the instructions of, or provide an opinion to, any individual Investor in
connection with the discharge of its duties under this Order.
6. THIS COURT ORDERS that the Trustee shall provide to Representative Counsel,
without charge to the Investors, the following information, documents and data (including
personal information), to the extent such information, documents or data is in the Trustee's
possession or control in respect of these proceedings (the “Information”):
(a) the names, last known addresses and last known email addresses (if any) of the
Investors (the “Investor Contact Information”); and
(b) such additional information, documents and data (including personal information)
as may be reasonably requested in writing by Representative Counsel and which
is (i) relevant to the Investors’ participation in these proceedings and (ii)
reasonably necessary for Representative Counsel to fulfill its mandate in these
proceedings, or as ordered by the Court,
provided that the Trustee and its counsel may recover their time and expenses for so
doing at their standard rates. This Order shall be sufficient legal authority for the Trustee
to disclose the Information to Representative Counsel under the Personal Information
Protection and Electronic Documents Act (Canada), other applicable privacy legislation,
or any other applicable law without the knowledge or consent of the individual Investors
or any other person, the Trustee is not required to obtain any consent from any Investor
11
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or any other person to authorize disclosure of the Information to Representative Counsel,
and the Trustee shall have no liability whatsoever for making such disclosures in
accordance with the terms hereof.
7. THIS COURT ORDERS that notice of the granting of this Order, substantially in the
form attached hereto as Schedule “A”, shall be sent by Representative Counsel (or by the
Trustee on behalf of Representative Counsel) to each Investor by electronic or regular mail at the
address for such Investor provided pursuant to Paragraph 6(a), within seven business days of the
date of receipt by Representative Counsel of the Investor Contact Information, and that the
notice shall also be posted on the Trustee’s website at www.faanmortgageadmin.com.
8. THIS COURT ORDERS that any Investor who does not wish to be represented by
Representative Counsel in these proceedings shall notify the Trustee and Representative
Counsel, in writing, that he, she or it is opting out of representation by delivering a notice by
electronic or regular mail substantially in the form attached as Schedule “B” hereto, and such
Investor shall thereafter not be bound by the actions of Representative Counsel and shall
represent himself, herself or itself or be represented by any counsel that he, she or it may retain
exclusively at his, her or its own expense.
9. THIS COURT ORDERS that Representative Counsel may communicate with any
Investor who has not opted out pursuant to Paragraph 8 hereof by electronic or regular mail at
the addresses provided pursuant to Paragraph 6(a) or such other addresses provided by the
applicable Investor to Representative Counsel.
10. THIS COURT ORDERS that Representative Counsel shall have no liability as a result
of its appointment or the performance of its duties or in carrying out the provisions of this Order
and any subsequent Orders in these proceedings, save and except for any gross negligence or
willful misconduct on its part.
11. THIS COURT ORDERS that, subject to prior approval by the Trustee or further Order
of the Court, Representative Counsel shall be paid its reasonable fees and disbursements, at its
standard rates and charges, and shall be entitled to and is hereby granted a charge (the
“Representative Counsel Charge”) on the Property as security for its fees and disbursements in
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respect of these proceedings, both before and after the making of this Order, and that the
Representative Counsel Charge shall form a charge on the Property ranking immediately
subordinate in priority to the Trustee’s Charge but ranking in priority to all other security
interests, trusts, liens, charges and encumbrances, statutory or otherwise, in favour of any Person.
12. THIS COURT ORDERS that, subject to prior approval by the Trustee or further Order
of the Court, Representative Counsel is entitled to be paid its fees and disbursements from any
distributions to be made to the Investors in these proceedings.
13. THIS COURT ORDERS that all reasonable professional fees and disbursements that
may be incurred by Representative Counsel, whether incurred prior to or after the date of this
Order, will form part of the indebtedness owing to the Investors.
14. THIS COURT ORDERS that Representative Counsel shall be given notice of all
motions in these proceedings, and that the giving of notice to Representative Counsel shall
constitute service on all of the Investors who have not opted out pursuant to Paragraph 8 hereof.
15. THIS COURT ORDERS that Representative Counsel shall be at liberty and is
authorized at any time to apply to this Court for advice and directions in the performance or
variation of its powers and duties.
INTERIM STABILIZATION MEASURES
16. THIS COURT ORDERS that the Trustee shall:
(a) distribute 50% of the principal amount held by the Trustee in respect of each of
the Victoria Medical SML Loans (as defined in the First Report) to the applicable
Investors pro rata based on each such Investor’s respective portion of such
Victoria Medical SML Loans;
(b) hold, until further Order of the Court, in a separate account all (I) funds that are
currently in the Respondent’s or the Trustee’s possession or that may come into
the Respondent’s or the Trustee’s possession, other than such amounts to be
distributed pursuant to paragraph 16(a), in each case as a result of a repayment (in
13
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whole or in part) of principal on any loan or other indebtedness owing to or
administered by the Respondent on behalf of Investors, whether or not (i) secured
by any Real Property Charges in the name of the Respondent or in the name of
OTC, Computershare or any other person acting for Investors in respect of
investments held through RRSPs or other registered accounts or funds (each an
“RRSP Trustee”), (ii) received before or after the date of the Appointment Order,
or (iii) paid or payable in trust, plus (II) all interest paid or payable to the
Respondent or the Trustee at the time such repayment (in whole or in part) of
principal is made (collectively “Realized Property”) and shall report to the Court
by no later than October 31, 2018 with a recommendation regarding next steps
with respect to the Realized Property, including any potential distribution of any
Realized Property to the Investors; and
(c) hold in a separate account all funds (other than Realized Property) that were in the
Respondent’s possession on or prior to the date of the Appointment Order as well
as any amounts (other than Realized Property) paid or payable to the Respondent
or the Trustee (in trust or otherwise) after the date of the Appointment Order,
including in respect of interest where principal is not repaid, fees, expenses or
other amounts, (collectively “Estate Property”) and shall be authorized to use
such Estate Property as set out in the Appointment Order and as further clarified
herein.
For greater certainty, Realized Property and Estate Property shall be included within the
definition of “Property” as set out in the Appointment Order.
17. THIS COURT ORDERS and confirms that, with the exception of Realized Property,
which shall be held as provided for in Paragraph 16(b), the Trustee is hereby empowered and
authorized, but not obligated, to use any Property to aid the Trustee in complying with the
Appointment Order and carrying out its mandate, as the Trustee, in its sole discretion, considers
necessary or desirable for the effective administration of the estate including, without in any way
limiting the generality of the foregoing, to do any of the following:
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(a) to provide a retainer for and to pay the professional fees, expenses and
disbursements of the Trustee, its counsel, and any experts or other advisors
retained by the Trustee pursuant to the Appointment Order;
(b) to pay expenses of the Respondent, including, without limitation, payroll, rent,
utilities, taxes, and other statutory remittances;
(c) to pay expenses incurred in the administration of any loan or indebtedness
administered by the Respondent, including, without limitation, in connection with
obtaining new appraisals of any property or, if necessary, taking any enforcement
action;
(d) to make protective disbursements to or on behalf of a borrower or in respect of a
project, provided that any such disbursement shall be an advance made to the
applicable borrower in respect of such project and the amount of such advance
plus any applicable expenses incurred in connection therewith shall be added to
the sum owing by the borrower and shall be added to the Real Property Charge in
respect of same; or
(e) to pay general expenses of the Respondent or the Trustee, in that capacity, not
covered by the foregoing,
in each case without interference from any other Person and without regard to any
arrangement in existence as of the date hereof between the Respondent, any borrower,
any Investor or any other Person.
18. THIS COURT ORDERS that, in using any Property in accordance with the
Appointment Order or this Order, the Trustee shall keep detailed records regarding the source
and use for such payments and shall report to the Court from time to time regarding same.
19. THIS COURT ORDERS that the Trustee be and is at liberty, but is not obligated, to
surrender the Respondent’s mortgage administrator license issued under the MBLAA and any
corresponding license in any other jurisdiction at such time as the Trustee may determine, with
the concurrence of the applicable regulatory authorities, that it is no longer necessary or desirable
15
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for the Respondent to maintain such license(s). In addition, the Trustee is authorized, but not
required, to apply for such other licenses as the Trustee determines are necessary or desirable for
it to hold in connection with its mandate.
LAND TITLE DOCUMENTS
20. In addition to any powers granted to the Trustee in the Appointment Order, the Trustee is
hereby empowered:
(a) to direct the applicable land registry office, registrar, other official or similar
government authority under The Land Titles Act (Ontario), the Land Registration
Reform Act (Ontario), the Land Titles Act (Alberta), or any other comparable
legislation in any province, including for greater certainty the Registrar of Land
Titles of Alberta, (“Real Property Authority”) to register a copy of this Order
and any other Orders in respect of the Property, notwithstanding the requirements
of s. 191 of the Land Titles Act, RSA 2000, c L-4, or the provisions of any other
similar provincial enactment, and notwithstanding that the appeal period in
respect of this Order has not elapsed, which appeal period is, for the purposes of
this paragraph 20, expressly waived, and for such purposes the Trustee shall be
treated as if it were a receiver appointed pursuant to the Bankruptcy and
Insolvency Act, RSC, 1985, c B-3;
(b) to execute, assign, issue and endorse documents of whatever nature in respect of
any of the Property, whether in the Trustee’s name or in the name and on behalf
of the Respondent for any purpose pursuant to this Order, including, without
limitation, any documents in connection with any registration, discharge, partial
discharge, transfer, assignment, postponement, subordination or similar dealings
in respect of any mortgage or interest in land (each, a “Land Title Document”)
and, for greater certainty, the applicable Real Property Authority is hereby
directed, following (i) registration of this Order or being presented with a certified
true copy of this Order and (ii) being presented with such Land Title Document,
to register such Land Title Document to register, discharge, partially discharge,
transfer, assign, postpone, subordinate or otherwise deal with such mortgage in
16
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accordance with such Land Title Document without any obligation to inquire into
the propriety of the execution or effect of such Land Title Document.
GENERAL
21. THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,
regulatory or administrative body having jurisdiction in Canada or in the United States to give
effect to this Order and to assist the Trustee and its agents in carrying out the terms of this Order.
All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to
make such orders and to provide such assistance to the Trustee, as an officer of this Court, as
may be necessary or desirable to give effect to this Order or to assist the Trustee and its agents in
carrying out the terms of this Order.
22. THIS COURT ORDERS that the Trustee be at liberty and is hereby authorized and
empowered to apply to any court, tribunal, regulatory or administrative body, wherever located,
for the recognition of this Order and for assistance in carrying out the terms of this Order, and
that the Trustee is authorized and empowered to act as a representative in respect of the within
proceedings for the purpose of having these proceedings recognized in a jurisdiction outside
Canada.
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SCHEDULE “A” You are receiving this notice because you have invested in certain syndicated mortgage loan products or other indebtedness administered by Building & Development Mortgages Canada Inc. (“BDMC”). As previously advised, by an Order issued by the Ontario Superior Court of Justice (“Court”) on April 20, 2018 on application by The Superintendent of Financial Services, FAAN Mortgage Administrators Inc. was appointed trustee of BDMC by the Court (the “Trustee”). By Order dated June , 2018 (the “Representation Order”) granted by the Court, Chaitons LLP was appointed as representative counsel (“Representative Counsel”) for all Investors in respect of their interests in the loans and other indebtedness administered by BDMC, including where such loans or other indebtedness is held through RRSPs or other registered accounts or funds, unless and until written notice is provided by a particular Investor to Representative Counsel that such Investor does not wish to be represented by Representative Counsel. A copy of the Representation Order is attached hereto. All capitalized terms not defined above are used as defined in the Representation Order. You have no obligation to pay or otherwise compensate Representative Counsel in respect of its efforts on your behalf, but Representative Counsel’s fees and disbursements will be added to the indebtedness that was administered by BDMC and paid in priority to a distribution to you or to any other Investor, whether or not you or any other Investor opts out of the group. If you do not wish to be represented by Representative Counsel, you may opt-out of the group in accordance with Paragraph 8 of the Representation Order by completing the form attached hereto. If you have any questions concerning this matter, please contact either Representative Counsel at [email protected] or the Trustee at: Email: [email protected] Local Telephone Number: 416-606-3338 Toll-Free Telephone Number: 1-833-495-3338
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SCHEDULE “B”
Court File No. CV-18-596204-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
BETWEEN:
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
- and -
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
OPT-OUT FORM
TO: Chaitons LLP 5000 Yonge Street, 10th Floor Toronto, ON M2N 7E9 Email: [email protected]
I, _______________ am an Investor as defined in the Order dated April 20, 2018 (the “Appointment Order”) granted by the Ontario Superior Court of Justice (Commercial List) in the proceeding commenced under Court File No. CV-18-596204-00CL (the “Trusteeship Proceeding”), in that I invested the sum of $ with respect to the project known as _______________ administered by Building & Development Mortgages Canada Inc. Under Paragraph 8 of the Order dated June , 2018, Investors who do not wish Chaitons LLP to act as their representative counsel may opt out.
I hereby notify you that I wish to exercise my option to opt out of representation by Chaitons LLP under the Order and will be represented as an independent individual party at my own expense to the extent I wish to appear or participate in the
19
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Trusteeship Proceeding.
Date Print Name:
20
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21
TAB 3
Court File No. CV-18-596204-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)
BETWEEN
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
- and -
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c.
29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43
FIRST REPORT OF THE TRUSTEE
JUNE 19, 2018
FAAN Mortgage Administrators Inc. Court-Appointed Trustee of the Respondent
22
TABLE OF CONTENTS
INTRODUCTION ............................................................................................................................... 1
PURPOSE OF THE FIRST REPORT ..................................................................................................... 2
SCOPE AND TERMS OF REFERENCE ................................................................................................ 3
BACKGROUND ................................................................................................................................. 4
ACTIVITIES OF THE TRUSTEE TO DATE ............................................................................................ 9
FUNDING OF THESE PROCEEDINGS AND CASH FLOW PROJECTION ............................................ 15
FUNDS HELD IN BDMC BANK ACCOUNTS ..................................................................................... 18
FUNDS RECEIVED FROM BORROWERS SINCE THE TRUSTEE’S APPOINTMENT ............................ 22
REPRESENTATION FOR INVESTORS ............................................................................................... 29
CONCLUSION AND RECOMMENDATION ...................................................................................... 32
23
INDEX OF APPENDICES
Appendix 1 Appointment Order dated April 20, 2018
Appendix 2 Forbes Affidavit sworn on April 19, 2018, without exhibits
Appendix 3 Project Status Chart as of May 31, 2018
Appendix 4 Cash Flow Projection to October 31, 2018
24
Court File No. CV-18-596204-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
BETWEEN
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
- and -
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c.
29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43
FIRST REPORT OF THE TRUSTEE
JUNE 19, 2018
INTRODUCTION
1. On April 20, 2018, pursuant to an order (“Appointment Order”) of the Honourable Mr.
Justice Hainey of the Ontario Superior Court of Justice (Commercial List) (“Court”), FAAN
Mortgage Administrators Inc. (“FAAN Mortgage”) was appointed as trustee (“Trustee”)
over all of the assets, undertakings and properties of Building & Development Mortgages
Canada Inc. (“BDMC”) including, without limitation, all of the assets in the possession or
under the control of BDMC, its counsel, agents and/or assignees but held on behalf of any
other party, including, but not limited to, lenders under syndicated mortgage loans
(“Investors”), brokers, or borrowers, in each case whether or not such property was or is
held in trust or was or is required to be held in trust (collectively, the “Property”). The
Appointment Order was issued following an application made by the Superintendent of
Financial Services (“Superintendent”) pursuant to section 37 of the Mortgage
Brokerages, Lenders and Administrators Act, 2006 (Ontario), as amended (“MBLAA”),
and section 101 of the Courts of Justice Act (Ontario), as amended. A copy of the
25
2
Appointment Order is attached as Appendix “1” hereto.
2. The affidavit of Brendan Forbes, legal counsel at the Ministry of the Attorney General Civil
Law Division, Financial Services Commission of Ontario (“FSCO”) branch, sworn on April
19, 2018, was filed in connection with the Superintendent’s application for the Appointment
Order (“Forbes Affidavit”). The Forbes Affidavit contains detailed background information
regarding BDMC, its business and affairs, the circumstances leading to the Trustee’s
appointment, and the regulation of syndicated mortgage loans in Ontario generally.
Capitalized terms not otherwise defined in this Report have the meanings ascribed to them
in the Forbes Affidavit, a copy of which is attached as Appendix “2”, without appendices.
3. Materials filed with the Court with respect to these proceedings (other than confidential
materials filed under seal), including the Forbes Affidavit, the Superintendent’s application
record, motion materials, court reports and the Orders and endorsements issued by the
Court, are accessible on the Trustee’s website at: www.faanmortgageadmin.com
(“Trustee’s Website”).
PURPOSE OF THE FIRST REPORT
4. The purpose of this first report of the Trustee (“Report”) is to provide stakeholders with an
update on the Trustee’s activities since the date of the Appointment Order and to support
the Trustee’s request for an Order (“Stabilization Order”), inter alia:
(a) approving certain interim stabilization measures in connection with BDMC’s estate,
including in respect of funds held by BDMC as at the date of the Trustee’s
appointment and the funds received by the Trustee following its appointment;
(b) appointing representative counsel to represent Investors in respect of these
proceedings; and
(c) clarifying the Trustee’s powers with respect to the registration, discharge, partial
discharge, postponement and subordination of any mortgages so as to address
any concerns of the applicable land titles offices.
5. In support of the Trustee’s request for the Stabilization Order, the Report describes the
following matters:
(a) background information concerning BDMC and its business;
26
3
(b) the Trustee’s activities to date;
(c) the need for certainty with respect to funding of these proceedings, including
BDMC’s projected cash flow until October 31, 2018 (“Stabilization Period”);
(d) details regarding funds held in bank accounts maintained by BDMC, including
funds received by the Trustee following its appointment, and the Trustee’s
proposed use of such funds during the Stabilization Period; and
(e) the need for collective representation for the Investors.
6. The Trustee is seeking the Stabilization Order, among other things, to clarify and confirm
the Trustee’s rights and responsibilities under the Appointment Order in respect of certain
Property that is subject to a Court-ordered priority charge to secure the payment of the
Trustee’s and its legal counsel’s fees, disbursements and other costs of these proceedings
(“Trustee’s Charge”) and to put some temporary restrictions on the Trustee’s rights with
respect to these funds during the Stabilization Period in order to give clarity to BDMC’s
numerous stakeholders. During the Stabilization Period, the Trustee intends to continue
to analyze the remaining 43 projects that are subject to syndicated mortgage loans
administered by BDMC and develop a strategy to maximize recoveries for the members
of the investing public who have made loans through BDMC.
7. The Trustee will report back to the Court prior to the expiration of the Stabilization Period
to give the Court, Investors, borrowers, brokers and other stakeholders further information
regarding BDMC and its business and affairs, to seek further advice and directions from
the Court regarding the use of the funds held or received by the Trustee and subject to
the Trustee’s Charge, and the proposed next steps in these proceedings.
SCOPE AND TERMS OF REFERENCE
8. In preparing this Report, the Trustee has relied upon unaudited financial information
provided by, inter alia, BDMC, Fortress (defined below), Canadian Development Capital
& Mortgage Services Inc. (“CDCM”), the mortgage brokerage who assumed the mortgage
duties of BDMC (as explained further below), and certain of the individual borrowers who
have borrowed funds from BDMC under various syndicated mortgage loans administered
by BDMC. While the Trustee reviewed various documents provided by BDMC, CDCM,
and applicable borrowers (including, among other things, unaudited internal information,
appraisals and financial projections), the Trustee’s review does not constitute an audit or
27
4
verification of such information for accuracy, completeness or compliance with Generally
Accepted Assurance Standards (“GAAS”), Generally Accepted Accounting Principles
(“GAAP”), or International Financial Reporting Standards (“IFRS”). Accordingly, the
Trustee expresses no opinion or other form of assurance pursuant to GAAS, GAAP or
IFRS, or any other guidelines, with respect to such information.
9. Some of the information used and relied upon in preparing this Report consists of financial
projections. The Trustee cautions that these projections are based upon assumptions
about future events and conditions that are not ascertainable. The actual results may vary
from the projections, even if the assumptions set forth therein materialize, and the
variations from the projections could be significant. The Trustee’s review of the future
oriented information used to prepare this Report did not constitute an audit or review of
such information under GAAS, GAAP or IFRS or any other guidelines.
10. This Report has been prepared for the use of this Court and BDMC’s stakeholders as
general information relating to BDMC and to assist the Court with respect to the Trustee’s
request for the proposed Stabilization Order. Accordingly, the reader is cautioned that this
Report may not be appropriate for any other purpose. The Trustee will not assume
responsibility or liability for losses incurred by the reader as a result of the circulation,
publication, reproduction or use of this Report contrary to the provisions of this paragraph.
11. All references to dollars are in Canadian currency unless otherwise noted.
BACKGROUND
12. BDMC is an Ontario corporation with its head office located at 25 Brodie Drive, Unit #8,
Richmond Hill, Ontario. The Trustee understands that BDMC is wholly owned by Ildina
Galati, who is also BDMC’s sole director and officer. BDMC was formerly known by the
name Centro Mortgage Inc. and changed its name to BDMC in or around January 2016.
13. BDMC was the principal mortgage broker and administrator used by Fortress Real
Developments Inc. and certain related entities (collectively, “Fortress”) to raise initial
financing or “equity” from the investing public for early stage real estate developments.
Fortress and its affiliates are development consultants or borrowers with respect to various
real property development projects. Often, the real property in question consisted of
vacant lands or of projects taken over from other developers, including, in some cases,
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projects that were facing financial difficulties. BDMC acted as lender (in trust for members
of the investing public), who made loans to borrowers through syndicated mortgage loan
agreements where BDMC acted as lender to the Borrower and administrator for the
Investors. Syndicated mortgage loans are regulated by FSCO and are more fully
described in the Forbes Affidavit.
14. The funds loaned through BDMC were generally advanced for the purpose of providing
financing for the early stages of a real estate development project. The use of proceeds
from these loans included repaying vendor take back mortgages and bridge loans,
obtaining initial planning consents, attending to zoning changes, funding various
consultants involved in conceiving and commencing a real estate development and other
“soft costs” associated with the development. Funds were also used to pay interest on
other loans made to the applicable borrower in question.
15. According to the Forbes Affidavit, significant portions of the sums advanced by Investors
through BDMC were used to pay “development consultant fees”. The development
consultant fees were in an amount that generally appears to be equal to approximately
35% of the principal amount advanced under the applicable BDMC syndicated mortgage
loan. A portion of this fee (approximately 50%) would be paid to the Investors’ brokers,
FMP Mortgage Investments Inc., FFM Capital Inc. and FSDS Broker Services Inc. (who
are generally referred to by BDMC and Fortress as the “F Brokers”); a portion would be
paid to BDMC (now CDCM) in its capacity as the borrowers’ broker; and the balance, net
of any additional fees, would be paid to Fortress. As described in the Forbes Affidavit, the
portion of the fees paid to Fortress typically ranged between 2% and 5% of project costs.
16. In some instances, another portion of the funds advanced by Investors was retained by
BDMC to pay interest owing to those same Investors on the syndicated mortgage loan.
The funds held to pay interest on the BDMC loan were retained as an “interest reserve” in
a separate BDMC account established for that purpose (“Interest Reserve Account”). Depending on the terms of the applicable loan agreement, interest reserve funds were
paid or to be paid to Investors periodically in accordance with the applicable loan
agreement until the reserve funds were exhausted or held until the time when the
syndicated mortgage loan is repaid. However, as more particularly described below in the
section “Funds Held in BDMC Bank Accounts”, the Trustee has become aware that certain
of the funds held in the Interest Reserve Account are held for the benefit of borrowers and
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have been historically deployed to or on behalf of borrowers for purposes unrelated to the
payment of interest to Investors, including paying interest amounts owing to priority
lenders and paying expenses incurred on projects.
17. Although the funds advanced by Investors were secured by mortgages held by BDMC on
the related real property, the Investors typically expressly agreed to subordinate their
mortgages to current or future lenders who agreed to provide construction financing.1 In
most cases, the BDMC mortgages rank third or lower in priority in respect of the specific
real property in issue, and behind the mortgages securing the sums owing to senior
lenders, in amounts that are often significant. Moreover, many Investors agreed to terms
that permit repayment “waterfalls” that, at least in some instances, appear to permit
owners of the real estate (including the borrowers and owners of the borrowers) to recover
some of the amounts they invested in the developments in priority to the amounts loaned
by the Investors. The Trustee is still in the process of investigating these complex priority
arrangements and notes that the priority arrangements vary from project to project.
18. Approximately $560 million is currently invested in syndicated mortgage loans
administered by BDMC by over 11,000 individual Investors. These funds have been
advanced in connection with 44 different projects that are in various stages of
development. The following table summarizes the status of the various projects
administered by BDMC, based on BDMC’s records as of May 31, 2018:
Project Status
Number of Projects
BDMC SML Debt
($000s) Development 24 260,066 Pre-construction 6 73,042 Construction 12 216,274 Completed 2 10,905 Total 44 $560,287
1 Construction financing in very broadly construed in the syndicated mortgage loan documents and generally includes all the funds needed to complete the project that are not financed by BDMC, including further “mezzanine” debt. The Trustee has been advised by borrowers and others that the agreements require BDMC to subordinate up to a certain maximum amount of construction financing specified in the syndicated mortgage loan documents as being permitted to rank in priority to BDMC’s mortgages.
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A detailed schedule of the status of the ongoing projects, based on BDMC’s records as of
May 31, 2018, is provided as Appendix “3”.2 As discussed in more detail below, all
amounts owing on BDMC loans made to the Victoria Medical Borrower (defined below)
have been repaid, BDMC’s security in respect of such loans has been discharged and the
Trustee is holding the amounts that have been repaid. Further, the Dunsire Project
(defined below) is subject to a receivership proceeding and an order authorizing the sale
of the property free and clear of the security in favour of BDMC was approved by the Court.
More details on these matters are described below.
19. As described in more detail in the Forbes Affidavit, FSCO had received numerous
complaints from Investors regarding BDMC’s activities and the performance of their
investments in BDMC compared to the promises the Investors say were made to them at
the time they invested. These complaints prompted FSCO to engage in a lengthy
investigation of BDMC’s business and activities. As a result of its investigations, FSCO
concluded that there were significant regulatory issues associated with BDMC’s
syndicated mortgages activities.
20. FSCO’s investigation into BDMC ultimately resulted in the Superintendent and BDMC
entering into a settlement agreement executed on January 31, 2018 (“Settlement Agreement”). Key conditions of the Settlement Agreement included: (i) that BDMC
consent to the revocation of its Ontario mortgage brokerage license; (ii) that BDMC retain
its Ontario mortgage administration license; (iii) that BDMC enter into and comply with a
management and administration agreement (“MAA”) appointing FAAN Mortgage as the
arm’s length, independent manager of BDMC’s syndicated mortgage loan administration
business (“Administration Business”); and (iv) that BDMC agreed to pay an
administrative penalty of $400,000 by no later than July 31, 2019.
21. On February 1, 2018, FSCO revoked BDMC’s Ontario mortgage brokerage license with
BDMC’s consent pursuant to the Settlement Agreement. However, CDCM, an entity also
owned by BDMC’s principal, has received a mortgage brokerage license from FSCO and
has assumed the functions as brokerage for the borrowers that were previously carried
out by BDMC on many existing projects. A relative of the owner of BDMC is the principal
broker of CDCM. Many of BDMC’s former employees are now employed by CDCM.
2 Although funds have only been advanced in respect of 44 projects, the chart includes a 45th project, 189 Dundas, for completeness because BDMC has had some involvement with the 189 Dundas project.
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CDCM is often the principal entity facilitating contact between BDMC and the borrowers;
however, the Trustee is working, with the assistance of CDCM, on establishing direct
communications with all borrowers.
22. On February 7, 2018, the MAA was executed and FAAN Mortgage assumed the role of
arm’s length, independent manager of the Administration Business. As noted in the Forbes
Affidavit, the Settlement Agreement expressly provides that its terms and any related
documents, information or records are to remain confidential and subject to settlement
privilege, except in certain limited circumstances. As such, the specific terms of the MAA
cannot be disclosed.
23. During the period from February 7, 2018 to the date of the Appointment Order, FAAN
Mortgage acted as the independent manager of the Administration Business. During this
period, FAAN Mortgage was presented with a number of urgent demands for
postponements of security granted to BDMC (in trust for Investors) to new loans. CDCM
and certain borrowers advised FAAN Mortgage that new loans were needed either to
prevent enforcement action by senior lenders and the immediate failure of a project or to
fund critical steps necessary for projects to continue. In addition, FAAN Mortgage
responded to a number of enforcement steps that were taken by senior lenders.
24. On April 20, 2018, as a result of events that were detailed extensively in the Forbes
Affidavit, including the RCMP’s execution of a search warrant at BDMC’s premises on
April 13, 2018, the Superintendent brought an application to Court seeking the
Appointment Order to appoint FAAN Mortgage as Trustee. Among other things, there had
been a number of defaults under the MAA, including access to documents and other
information and failure to make mandatory payments, each as more particularly described
in the Forbes Affidavit. As a result, FAAN Mortgage was operating with insufficient
information regarding BDMC’s arrangements and the status of the various projects where
BDMC was lender to respond effectively to the urgent requests described above.
25. Since its formal appointment as Trustee, the flow of information from Fortress and CDCM
has improved significantly, but BDMC’s mortgage loans remain under considerable stress.
As noted above and as described in more detail in the Forbes Affidavit, BDMC’s security
is often in third place or lower and, in many cases, BDMC is required under the applicable
loan agreements to subordinate its security to facilitate further advances by senior lenders
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under existing loans or the advancement of funds under new loans. The Trustee has been
advised that many of the projects need further funding to permit developments to continue
and that such funding is only available if the security interests granted to BDMC are further
postponed and subordinated to new financing.
26. As discussed in more detail under “Activities of the Trustee to Date”, the Trustee continues
to face many urgent demands to execute postponements and subordinations to new
lenders and to address various types of enforcement activities by senior lenders. In
addition, the Trustee has received demands to turn over certain funds held by BDMC for
borrowers, Investors and others.
27. Under the Appointment Order, the Trustee was granted the Trustee’s Charge over all of
the amounts held by BDMC and to be received by BDMC or the Trustee on its behalf going
forward. Among other things, the Trustee is seeking the Stabilization Order to clarify the
status of these proceedings, set expectations around the use of the funds subject to the
Trustee’s Charge and to put certain temporary limits on the Trustee’s ability to use those
funds during the Stabilization Period.
ACTIVITIES OF THE TRUSTEE TO DATE
28. To date, the Trustee has been principally engaged in three broad types of activities: (i)
responding to enforcement actions by senior lenders on distressed projects; (ii)
responding to urgent requests for postponements and other actions to prevent
enforcement by senior lenders and to permit the projects in question to continue; and (iii)
responding to a multitude of borrower and Investor inquiries.
29. The Trustee has also been working to obtain recovery for Investors whenever possible.
For example, and as discussed in more detail below, the Trustee was able to obtain
payment in full from the Victoria Medical Borrower notwithstanding initial indications that
a portion of the debt in question would be compromised.
30. In addition, in the short time since its appointment, the Trustee has familiarized itself with
certain of the distressed projects and engaged with stakeholders regarding the Investor’s
interests. For example, on the Dunsire Project, it initially appeared that there would be no
recoveries for the Investors, but the Trustee has since learned that some recovery should
be available.
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Enforcement Matters:
31. A number of BDMC’s borrowers face enforcement actions taken by one or more senior
lenders as a result of borrower defaults under the senior loans. The Trustee is responding
to these enforcement actions in an effort to obtain the best possible result for the Investors
in the circumstances, but in some cases, the Investors’ interests have already been
severely compromised and, in other cases, the Investors’ interests are at risk of being
severely compromised. It is critical that the Trustee take an active role in any enforcement
process, including reviewing and negotiating any proposed enforcement steps and
working with other creditors and stakeholders to ensure that any process that is
undertaken protects the Investors to the maximum extent possible. A summary of certain
projects currently facing material enforcement actions and the Trustee’s efforts in respect
of these actions follows.
32. Brookdale Project: A real estate development project in midtown Toronto (“Brookdale Project”), with over $20 million of subordinate syndicated mortgage loan debt
administered by BDMC and approximately $4.7 million of “mezzanine” syndicated
mortgage loan debt also administered by BDMC.3 The Investors rank in 4th and 5th position
on this project. In addition, the Brookdale Project is subject to two separate enforcement
processes by the senior lender: (i) a receivership application brought by Firm Capital
Mortgage Fund Inc. (“Firm”) in respect of construction financing that has matured; and (ii)
a notice of sale under mortgage proceeding also brought by Firm in respect of the same
debt. The Trustee understands that the receivership application was put into abeyance to
permit the negotiation of a settlement agreement among a number of stakeholders who
have asserted claims on the Brookdale Project, including a number of construction lien
claimants and certain bondholders. A notice of sale was issued to preserve Firm’s rights
while a settlement was negotiated. The settlement negotiations have stalled and Firm is
seeking to sell the Brookdale Project pursuant to its notice of sale under Firm’s mortgage
enforcement proceeding. FAAN Mortgage has been involved in discussions with the
various stakeholders both before and after its appointment as Trustee and continues to
seek to maximize value for the Investors in loans made by BDMC to the Brookdale Project.
3 A mezzanine syndicated mortgage loan debt is a BDMC syndicated mortgage loan debt that is in priority to other BDMC syndicated mortgage loan debt but still subordinate to debt owed to senior lenders. Typically, BDMC mezzanine syndicated mortgage loan agreements contain the same mandatory subordination provisions as are found in other BDMC syndicated mortgage loan agreements.
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FAAN Mortgage has invested a significant amount of time in reviewing and commenting
on multiple proposed settlement arrangements that it has been presented in an attempt to
protect the Investors’ interests in the Brookdale Project, including engaging in extensive
communications with Investors. FAAN Mortgage is now in the process of engaging directly
with counsel to Firm in order to better understand the steps it is taking in its mortgage
enforcement proceeding to help ensure that steps are not taken that would be to the
detriment of the Investors and the Trustee has contacted the private receiver to offer its
assistance in developing a process to maximize value for all stakeholders, including the
Investors. At this time, it is unclear what the outcome for the Brookdale Project will be due
to the existing defaults under senior loans in excess of $23 million and the numerous
additional construction liens that have been asserted. The Trustee notes that a sale of the
property could result in significant losses to the Investors.
33. Bowmanville Project: a real estate development project in Clarington, Ontario
(“Bowmanville Project”), consisting of three separate parcels of land that secure
approximately $5.3 million of syndicated mortgage loan debt administered by BDMC. Each
parcel has a separate first priority mortgage holder and all three mortgage holders have
sought to enforce their rights to sell or foreclose on the portion of the Bowmanville Project
that is subject to their mortgages. FAAN Mortgage has been involved in discussions with
the borrower and the lenders both before and after its appointment as Trustee in an effort
to defend against foreclosure and to maximize recoveries for the Investors. The Trustee
continues to seek to maximize value for the Investors in loans made by BDMC to the
borrower in connection with the Bowmanville Project and is working cooperatively with
counsel to the first priority mortgage holders. At this time, it appears that the Bowmanville
Project will be refinanced, with sufficient new funds to repay the three first priority
mortgages on the property that comprises the Bowmanville Project but leaving BDMC’s
mortgage in its current third place position (and subordinate to the new financing). The
syndicated mortgage loan documents contemplate BDMC subordinating its mortgages to
additional loan facilities, including the facility that is anticipated to be the source of the
funding to repay the existing mortgages on the Bowmanville Project. The borrower has
advised that once the senior mortgage debt is refinanced and the project is no longer in a
distressed state, the borrower will be in a position to obtain the required planning
approvals and to meet related milestones for the project. If the project continues to
advance, the value of the project will likely be enhanced and the potential recoveries to
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Investors should be higher than what would be available if the refinancing was not
completed and the project was sold in its current state.
34. Dunsire Project: a real estate development project in Guelph, Ontario (“Dunsire Project”). On May 15, 2018, the Trustee was served with an application for a vesting order sought
by RSM Canada Limited (“RSM”) in its capacity as receiver of the Dunsire Project to vest
title to the Dunsire Project in a new owner related to the current owner, free and clear of
certain encumbrances, including approximately $1.7 million of subordinate, secured debt
owed to BDMC in trust for Investors. Immediately after service of the motion record, the
Trustee and its counsel engaged in comprehensive discussions with RSM regarding the
proposed vesting order. The Trustee sought clarifications regarding the sales process
conducted and the potential value available to BDMC and its Investors. Despite the
Trustee’s request that RSM seek an adjournment for a period of thirty days to permit
further marketing of the property, RSM was only prepared to provide a short adjournment.
RSM ultimately obtained a vesting order on May 25, 2018. Once the transaction closes,
BDMC’s security interest will be expunged from title with very little recovery to BDMC or
the Investors due to the purchase price payable for the Dunsire Project and the quantum
of secured debt in priority to BDMC’s loans. In the course of the Trustee’s diligence on the
Dunsire Project, it learned that that there may be HST refunds available for benefit of the
Investors, which will likely result in at least a partial recovery for Investors.
35. Georgetown Project: A real estate development project in Georgetown, Ontario
(“Georgetown Project”), consisting of seven different parcels of land collectively securing
approximately $14.4 million of debt owing to BDMC under various syndicated mortgage
loans, including subordinate and mezzanine loans. There are a number of different senior
lenders with priority mortgages on different parcels of land comprising the Georgetown
Project. The senior lenders on certain parcels of land comprising the Georgetown Project
have issued notices of sale with respect to the property that is subject to their mortgages
and the period set by the lenders for repayment of their loans has expired. As such, the
Trustee has been engaged in discussions with Fortress and other stakeholders regarding
the Georgetown Project and potential options to address the defaults. The Trustee is also
seeking additional details regarding the senior lenders’ intentions with respect to the
Georgetown Project to ensure that the Trustee is satisfied that any sales or marketing
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process is appropriate in the circumstances. However, the Trustee notes that despite its
efforts, a sale of the property could result in significant losses to the Investors.
36. Colliers Project: A real estate development project in Barrie, Ontario (“Colliers Project”), with approximately $53 million of debt owing to BDMC under various syndicated mortgage
loans, including subordinate and mezzanine loans. The senior lender to the Colliers
Project has issued a notice of sale under mortgage with respect to the property that is
subject to its mortgage and the period set by the lender for repayment of its loan has
expired. As such, the Trustee has been engaged in discussions with Fortress and other
stakeholders regarding the Colliers Project and potential options to address the defaults.
The Trustee is also seeking additional details regarding the senior lenders’ intentions with
respect to the Colliers Project to ensure that the Trustee is satisfied that any sales or
marketing process is appropriate in the circumstances. However, the Trustee notes that
despite its efforts, a sale of the property could result in significant losses to the Investors.
Postponements:
37. In addition to the enforcement actions described above, the Trustee has been attending
to various postponement and subordination requests, often sought by a borrower on an
urgent basis to prevent senior lenders from taking enforcement action.
38. Prior and subsequent to the Trustee’s appointment, many of the senior loans on real
estate developments that also secure BDMC syndicated mortgage loans have matured or
otherwise come due. In addition, borrowers have faced funding shortfalls with respect to
achieving development milestones on a project, including planning approvals. The Trustee
has been asked to agree to postpone the security granted to BDMC to new loans to be
made by other lenders that are intended to permit the development to continue. In many
cases, the Trustee has been advised that failure to grant the postponement would (i)
breach the applicable BDMC loan agreement; and (ii) cause the project to fail and
enforcement steps to occur in the near term.
39. In response to these requests, the Trustee, on behalf of BDMC and its Investors, has
requested detailed information regarding the applicable project and the proposed use of
funds. In most instances, the Trustee has concluded that the loan agreement requires
BDMC to postpone to the new loan and that permitting further advances to be made to
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the borrower in priority to BDMC’s loan(s) is in the best interests of the Investors as well
as increases the likelihood of completion of the project.
40. The Trustee is considering its options with respect to postponement requests, but
recognizes that many of the projects will fail if further funding is not advanced to permit
the borrower to achieve development milestones and make payments on senior
indebtedness. Further, in many cases the BDMC loan documentation requires that a
postponement be granted in these circumstances. The Trustee is in the process of
obtaining detailed information regarding each project, including development milestones
and senior loan maturity dates, so that it can more proactively address these matters. As
discussed in more detail below, the proposed Stabilization Order is intended to facilitate
the desired proactive approach.
Investor Communications:
41. FAAN Mortgage has been engaging with Investors since its appointment as manager of
the Administration Business and has continued to do so after its appointment as Trustee.
In addition to providing Investors information about the matters described above and,
where appropriate, seeking consent of Investors to material actions to be taken by the
Trustee, the Trustee has provided Investors with notice of the Trustee’s appointment,
notice of significant developments on the projects that are the subject of their investments
and responded to large volumes of telephone calls and email correspondence from
Investors regarding the Trustee’s appointment and the status of their investments and the
related projects. Investor communications are a critical part of the Trustee’s mandate and
are also very time consuming and labour intensive.
42. In circumstances where FAAN Mortgage has determined that it was appropriate to seek
Investor consent, it has received very few responses and has been required to rely on
certain deemed consent provisions of the applicable Participation and Servicing
Agreement (as more fully described in the Forbes Affidavit).
Other Matters:
43. In addition to the activities described above, since the Trustee’s appointment, the
Trustee’s activities have included, among other things:
(a) commencing a detailed analysis of each project and the associated senior loans,
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syndicated mortgage loans and other relevant information, including the status of
the project, the principal development milestones to completion and any known
impediments to achieving such milestones;
(b) attending to partial discharges of BDMC’s security interests to facilitate sales of
units or the development of properties;
(c) engaging with the Investors’ brokerages, including FFM and FDS, who acted as
brokers on behalf of individual Investors;
(d) engaging with other stakeholders of BDMC and related parties, including Ms. Ildina
Galati, BDMC’s shareholder, and her counsel, Fortress and its counsel, and CDCM
and its counsel;
(e) engaging with borrowers and with the borrowers’ broker, CDCM, regarding the
postponements and enforcement matters noted above and to obtain detailed
updates on the progress on projects and associated financial reporting;
(f) engaging with FSCO and its legal counsel, including responding to inquiries made
by FSCO in respect of BDMC’s activities and records and the Trustee’s ongoing
activities;
(g) engaging with mortgage brokerage and administration licensing authorities outside
of Ontario to discuss the Trustee’s mandate and the Appointment Order and to
address matters related to BDMC’s licenses in such jurisdictions, including
regulators in Manitoba, Saskatchewan, Alberta and British Columbia;
(h) supervising the day to day business activities of BDMC, including supervising the
payment of payroll, rent and related matters;
(i) engaging with BDMC’s bank regarding the Trustee’s appointment and its mandate;
(j) obtaining access to and, in some cases, possession of, BDMC’s records, including
electronic records (primarily in the form of emails) from BDMC’s third party IT
service provider; and
(k) engaging with BDMC’s insurance broker regarding the Trustee’s appointment and
mandate.
FUNDING OF THESE PROCEEDINGS AND CASH FLOW PROJECTION
44. The Trustee was required to engage in, and to continue to engage in, the activities
described in the foregoing section in order to protect the interests of Investors. These
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activities are time consuming and costly and are being carried out in circumstances where
BDMC has little to no revenue.
45. As noted in the Forbes Affidavit, BDMC is functionally insolvent. BDMC has a number of
regular expenses, including payroll, rent, utilities and other normal business expenses, but
it has no material revenue source. BDMC previously relied upon fees payable when new
loans were established and upon funding from Fortress, neither of which may be
forthcoming in the future.
46. Since many of BDMC’s borrowers are Fortress entities or otherwise related to Fortress,
the Trustee is of the view that the Trustee’s and BDMC’s costs associated with
administering the syndicated mortgage loans should not be borne solely by the Investors,
but rather should be paid for by Fortress and the borrowers. The Appointment Order
provides for the payment of the Trustee’s fees, disbursements and costs (including
professional advisory fees incurred) without delay and also provides that unpaid fees,
disbursements and costs shall be added to the mortgages securing the amounts advanced
by BDMC.
47. As such, the Trustee has been engaged in discussions with Fortress with respect to
ongoing funding not only of BDMC’s operating expenses but also of BDMC’s professional
fees (i.e., the fees of the Trustee and its counsel). The Trustee is hopeful that Fortress
and the borrowers will agree to a mechanism whereby BDMC’s and the Trustee’s costs,
including professional fees for administering the loans made by BDMC, are not borne
solely by the Investors. Further, the Trustee understands that it was Fortress’s practice,
prior to the appointment of the Trustee, to fund BDMC’s expenses (including professional
fees) to the extent BDMC had insufficient revenue to pay its own expenses.
48. As a result of the above, the Trustee has succeeded in obtaining funding in the amount of
approximately $35,000 from Fortress (which has been funded through CDCM) on account
of certain of BDMC’s operating expenses that were incurred prior to the date of the
Appointment Order. Fortress has also funded payroll and certain other operating expenses
following the date of the Appointment Order in the amount of approximately $65,000.
49. In addition, the Trustee has succeeded in obtaining some amounts for BDMC’s legal and
other professional expenses primarily incurred prior to FAAN Mortgage’s appointment
under the MAA from Fortress on account of a certain guarantee and indemnity to FAAN
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Mortgage under the MAA (as more particularly described below). There are, however,
significant arrears owing for the period prior to the issuance of the Appointment Order and
significant expenses incurred following the issuance of the Appointment Order.
50. The Trustee has no assurance that further contributions by Fortress or CDCM will be
forthcoming; nevertheless, the Trustee continues to work with Fortress and CDCM
regarding funding of certain of BDMC’s costs. The Trustee intends to keep the Court
informed regarding these matters.
51. In addition, as noted in the Forbes Affidavit, prior to the issuance of the Appointment Order,
Fortress and certain of its affiliates provided a guarantee and indemnity to FAAN Mortgage
in respect of BDMC’s funding obligations under the MAA. Notwithstanding the termination
of the MAA, pursuant to the terms of the MAA, Fortress is still responsible for the
outstanding obligations up to April 20, 2018. Fortress has made certain payments under
the indemnity, but significant amounts are still owing to the Trustee and its counsel and
the Trustee continues to seek to recover these amounts from Fortress.
52. Notwithstanding that Fortress has been paying certain of BDMC’s expenses and has paid
certain debts it owes to the Trustee, the Trustee has no assurance that such funding will
continue. The Trustee has access to certain limited additional amounts (described below
under “Funds held in BDMC Bank Accounts”), and it needs immediate access to certain
portions of these funds and to preserve portions of these amounts during the Stabilization
Period for the benefit of the estate and all its stakeholders. The Trustee is in the process
of obtaining detailed information regarding each project and will use this information to
develop a plan to maximize value for all the Investors.
53. The Trustee has prepared a Cash Flow Projection, on a monthly basis through to the
conclusion of the Stabilization Period on October 31, 2018 (“Cash Flow Period”). The
Cash Flow Projection is attached as Appendix “4”. The Cash Flow Projection has been
prepared by the Trustee using the information provided to it by BDMC’s employees and
representatives, based on the Trustee’s review of BDMC’s records and third-party
estimates. A summary of the Cash Flow Projection is provided in the following table:
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$000s June
(2wks)
July
Aug.
Sept.
Oct.
Total Receipts - - - - - -
Disbursements Staffing costs 16 33 33 46 33 161 Rent and utilities 1 6 7 8 7 29 Office expenses and IT 4 3 4 9 5 25 Bank charges - 1 1 1 1 4 Other expenses 5 10 10 13 10 48 Total Operating Disbursements 26 54 56 76 55 267 New Appraisal fees 35 140 140 35 - 350 Professional fees - 150 150 150 150 600 Total disbursements 61 344 346 261 205 1,217
54. It should be noted that there are no cash receipts projected during the Cash Flow Period.
Historically, BDMC’s primary source of revenue was funds raised from Investors in the
form of an administration fee of $113, per Investor per year of the term of the loan. These
funds were collected at the time of the initial advance of the funds from the Investors.
Although there is deferred revenue of approximately $750,0004 on BDMC’s balance sheet,
it represents funds that were collected at the time a loan was established, which revenue
was to be earned over the term of the loan. The Trustee has been advised that the cash
was utilized by BDMC at or around the time it was collected. As noted above, Fortress
covered BDMC costs to the extent that such costs exceeded BDMC’s revenues.
55. Among other things, the Cash Flow Projection estimates total operating disbursements of
approximately $267,000, plus approximately $350,000 for New Appraisals (defined and
discussed below).
FUNDS HELD IN BDMC BANK ACCOUNTS
56. As at the date of the Appointment Order, BDMC maintained five bank accounts at The
Toronto-Dominion Bank and a sixth account has since been opened. A summary of these
accounts is as follows:
4 As at December 31, 2017.
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Account name/ Reference
Primary Purpose of account (per BDMC)
Balance on April 20, 2018 (appointment)
Current Balance
Property Type5
Account #1 (763 Account)
Operating account 480 2,519 Estate Property
Account #2 (420 Account)
To hold funds to potentially be paid to third parties
71,329 52,594 Estate Property
Account #3 (455 Account)
To hold funds for Investors
469,882 486,874 Realized Property
Account #4 (214 Account)
Interest Reserve Account
1,403,496 1,461,471 Estate Property
Account #5 (term deposit)
Regulatory capital required to be maintained under the MBLAA
25,752 25,777 Estate Property
Account #6 (GIC account)
To hold Victoria Medical SML Loan repayments
- 4,511,218 Realized Property
Total 1,970,939 6,540,453
763 Account – this is BDMC’s main operating account, used to pay BDMC’s operating
expenses, such as payroll, rent, and other general and administrative expenses. There
are almost no funds in this account. Where funds are made available by Fortress, the
Trustee understands that these funds are typically paid first to CDCM and thereafter by
CDMC to the 763 Account. These funds are then immediately paid out by BDMC to meet
critical business needs and, to date, there have not been any surplus sums available for
future needs. The funds currently in this account represent amounts transferred from the
420 Account (described below) or amounts funded by CDCM, to satisfy outstanding
cheques that were issued to pay critical operating costs.
420 Account – BDMC advises it used this account as a “segregated funds account” to
hold fees and other amounts received by BDMC that it believes to be payable to another
party, including brokers but excluding Investors. The balance currently in the account is
comprised primarily of a returned bank draft that was never cashed from 2015. The
5 Estate Property and Realized Property are defined and described below.
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Trustee has been investigating why the bank draft was not deposited by the payee, but
based on a preliminary review it appears that it may have been a duplicate payment that
was issued in error by BDMC. As such, it appears that these funds are not payable to
another party. Since the Trustee’s appointment certain critical operating costs that have
not been funded by Fortress were paid from this account.
455 Account – BDMC advises that it used this account to hold funds for Investors. There
are two types of balances that are held in this account, (i) funds advanced by Investors to
BDMC for investment in future syndicated mortgage loans where such loans have not yet
been executed or other conditions to the advance are incomplete; and (ii) principal
repayments received from borrowers to be ultimately repaid to Investors.6 The funds
repaid in respect of the Victoria Medical SML Loans (defined and discussed below) were
paid into this account and subsequently transferred to the interest bearing GIC account.
214 Account – BDMC advises that the 214 Account is the Interest Reserve Account
described above. BDMC advises that this account is used to hold certain funds that were
originally advanced by Investors to specific projects for the benefit of the respective
borrowers under the applicable syndicated mortgage loan agreement for a project. All
amounts received that were not immediately advanced to a borrower, regardless of the
project, were deposited into this one bank account.7 Certain of these funds consist of
interest reserve amounts payable to Investors. Additionally, despite the fact that the 214
Account is called the Interest Reserve Account, the Trustee has been advised that certain
of the funds held in this account are funds that are for the account of certain borrowers,
and, in the past, the Trustee understands that the borrowers have requested BDMC to
issue payments from this account to pay for matters other than interest owing to Investors,
such as interest payments on senior loans and bridge loans as well as certain
development costs. In addition, the Trustee understands that in the past, BDMC received
and complied with instructions to apply funds held in the Interest Reserve Account on
behalf of one borrower to satisfy expenses incurred by another borrower on a distinct
project.
6 Notwithstanding the fact that payments of interest and repayments of principal for all projects were advanced into one bank account, the balances are tracked separately by project in BDMC’s accounting software, QuickBooks. 7 Notwithstanding the fact that funds for all projects were advanced into one bank account, the balances are tracked separately by project in BDMC’s accounting software, QuickBooks.
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Since the issuance of the Appointment Order, the Trustee has received a number of
requests from borrowers for disbursements out of the Interest Reserve Account. On or
about May 3, 2018, the Trustee forwarded letters to CDCM, in its capacity as the
borrowers’ broker, addressed to borrowers who appear to have an interest in the Interest
Reserve Account and requested that CDCM distribute the letters to the applicable
borrowers. The letters advised the respective borrowers of the Trustee’s appointment and
that no funds could be distributed to the borrowers from the Interest Reserve Account for
a period of time because, among other things, the funds are subject to the Trustee’s
Charge. Further, the borrowers were advised that the Trustee was in the process of
investigating the Interest Reserve Account and BDMC’s other accounts and considering
the various competing claims on BDMC’s funds and other property. In addition, the letters
stated that the Trustee needs additional time to assess the status of all projects, the
anticipated overall administration costs of the estate and the potential sources of funding
for same. The Trustee’s assessment of these matters is ongoing. A sample copy of one
of these letters sent is attached as Appendix “4”.
Account #5 – BDMC is required under the MBLAA to have a certain financial guarantee
of $25,000 available, which may include unimpaired working capital. BDMC maintains
$25,777 in satisfaction of this obligation in Account #5.
57. In addition to the funds maintained in the various bank accounts. BDMC also has 13
cheques totaling $815,000 (“Investor Cheques”) that were received by BDMC in October
2017. The Investor Cheques were received from Sorrenti Law Professional Corporation
(“Sorrenti”), a law firm that administered certain syndicated mortgage loans brokered by
BDMC. The Investor Cheques were issued by Sorrenti in its capacity as administrator of
syndicated mortgage loans owing in connection with a project called Masonary that was
repaid on or about October 5, 2017. At that time, certain Investors in the Masonary project
requested that their payments be redeployed to projects administered by BDMC; however,
as a result of the FSCO investigation and related regulatory actions, the Trustee has been
advised that BDMC could not deposit the cheques or redeploy the funds. With the
exception of one cheque that was adjusted and re-issued on February 27, 2018, all of the
Investor Cheques are now stale dated. The Trustee has written to Sorrenti to advise that
the cheques are stale dated and will therefore not be deposited by BDMC. In addition,
the Trustee has advised the Investors to whom the Investor Cheques relate that they
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should contact Sorrenti regarding the return of their funds. The Trustee is in the process
of returning the Investor Cheques to Sorrenti.
58. The Trustee understands that BDMC does not have any other funds other than the bank
balances and cheques described above and the Trustee expects to receive no additional
funds other than intermittent funding from Fortress (both in accordance with its past
practices and its obligations in respect of the MAA) and occasional expense
reimbursements and loan repayments from borrowers. The timing and quantum of any
such payments is unknown.
FUNDS RECEIVED FROM BORROWERS SINCE THE TRUSTEE’S APPOINTMENT
59. Since the Trustee’s appointment, the amounts set out below have been received by BDMC
from borrowers. These amounts are in addition to the amounts received from Fortress
(through CDCM) described above. Funds received from Fortress were immediately
disbursed to pay BDMC’s operating expenses. The following amounts paid by borrowers
continue to be retained by the Trustee on behalf of BDMC:
(a) Approximately $1.75 million for the payment of interest and the repayment of
principal to Investors that advanced funds pursuant to a loan agreement dated
September 23, 2015, between BDMC and Amadon-Westwater Projects Ltd.
(“Victoria Medical Borrower”) and $2.75 million for the payment of interest and
the repayment of principal to Investors that advanced funds pursuant to a loan
agreement dated September 16, 2016, between BDMC and the Victoria Medical
Borrower (collectively, the “Victoria Medical SML Loans”). The Victoria Medical
Borrower had initially advised FAAN Mortgage that it would not be able to repay
the Victoria Medical SML Loans in full and sought a discharge of BDMC’s security
in respect of such loans upon payment of a lower amount. FAAN Mortgage refused
to release BDMC’s security and instead engaged in negotiations with Fortress and
the Victoria Medical Borrower that resulted in the full repayment of the principal
and interest owing up to May 1, 2018 under the respective Victoria Medical SML
Loans. After receiving payment in full, FAAN Mortgage consented to the discharge
of BDMC’s mortgages on the Victoria Medical Borrower’s property. The Trustee
received the funds paid by the Victoria Medical Borrower in the 455 Account and
these funds were subsequently transferred to an interest bearing GIC account.
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Certain of the Investors’ brokers and certain Investors have expressed concerns
regarding the Trustee’s continued retention of these funds. The Trustee has
responded to these brokers and Investors with a similar message that it delivered
to borrowers with an interest in the Interest Reserve Account to advise that the
Trustee is an officer of the Court and needs additional time to assess the status of
all projects in accordance with its mandate under the Appointment Order, including
the anticipated overall administration costs of the estate and the potential sources
of funding for same.
At this time, the Trustee is seeking the Court’s authorization to distribute 50% of
the principal amounts it is holding in respect of the Victoria Medical SML Loans to
the Investors who invested in such loans, pro rata based on the amount of each
such Investor’s investment, in the aggregate amount of approximately $2.2 million. The Trustee has determined that the remaining amounts it is holding in respect of
these loans should be retained during the Interim Stabilization Period while the
Trustee continues to assess the status of all projects. As discussed in more detail
below, the remaining portion of the recovery on the Victoria Medical SML Loans
will be treated as Realized Property (as defined below), and will continue to be
held in a separate account and not used for any purpose until further order of the
Court.
(b) Interest in the amount of approximately $178,0008 was received from Braestone
Development Corporation (“Braestone Borrower”) in respect of the May 15 and
June 15, 2018 interest payments. Pursuant to the loan agreement dated
December 1, 2012, between BDMC and the Braestone Borrower, the Braestone
Borrower is to pay interest on a monthly basis to BDMC, which is then typically
distributed to the Braestone Investors. The Trustee continues to hold the funds
that have been paid to BDMC in the Interest Reserve Account.
(c) Interest in the amount of $8,667, received from Kingridge (Oakville East) Inc.
(“QEWN Borrower”) in respect of the monthly interest payment for March, 2018.
Pursuant to the loan agreement dated December 4, 2015, between BDMC and the
QEWN Borrower, the QEWN Borrower is to pay interest on a monthly basis to
8 As of the date of this Report approximately $100,000 of this amount has not yet been deposited into the Interest Reserve Account and accordingly is not included in the Interest Reserve Account balance in the chart above.
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BDMC, which is then typically distributed to the QEWN Investors. The last monthly
payment was made to BDMC on April 12, 2018, however, it had not yet been
distributed to Investors prior to the Trustee’s appointment and accordingly
continues to be held in the Interest Reserve Account. No further interest payments
have been received from the QEWN Borrower.
60. The Trustee notes that interest has been paid on only two projects since FAAN Mortgage’s
appointment in February, 2017. The majority of the syndicated mortgage loans
administered by BDMC provide that interest accrues until the applicable loan is paid out.
The Trustee notes that many of the syndicated mortgage loans administered by BDMC
have matured, but that the loans are subject to postponement and standstill arrangements
with senior lenders that require BDMC to wait until the senior loans are repaid before
seeking repayment of its loans. The Trustee is investigating these arrangements.
INTERIM STABILIZATION MEASURES AND USE OF FUNDS TO ADMINISTER ESTATE
61. Since the issuance of the Appointment Order, and as detailed above, the Trustee has
been primarily focused on dealing with urgent issues related to certain projects in various
states of distress and obtaining information from the borrowers, CDCM and other
stakeholders with respect to the status of the projects.
62. In responding to these urgent matters and in assessing the status of projects generally,
the Trustee has been analyzing BDMC’s rights and Investors’ interests under the various
syndicated mortgage loans administered by BDMC as well as the impact of any requested
postponement or threatened enforcement action on such rights and interests. The Trustee
has also begun a detailed analysis of each project and the associated senior loans,
syndicated mortgage loans and other relevant information, including the status of the
project, the principal development milestones to completion and any known impediments
to achieving such milestones.
63. The Trustee has not yet obtained sufficient information regarding the status of each
project, the funding needs of the projects, the maturity dates of third party loans made to
the projects, or the next milestones associated with the completion of the projects. As
noted above, the Trustee is working to complete a detailed analysis of these matters so
that it is in a better position to act proactively to protect Investors’ interest in these projects.
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64. One important element of the Trustee’s analysis is the potential recoveries to Investors if
senior lenders attempt to enforce their security in the near term compared to the likely
outcome for Investors if the Trustee decides to agree to a requested further postponement
of BDMC’s security to permit the development of a particular project to continue for a
period of time. This process is dependent on a legal analysis by the Trustee’s counsel and
a number of factual assumptions and business judgments by the Trustee, including
whether the Trustee’s decision is likely to permit the project to continue towards
development and completion (or to the achievement of a critical development milestone)
or whether enforcement prior to the achievement of a potential milestone is likely, and, in
circumstances where enforcement is the likely outcome, the anticipated timing of any such
enforcement.
65. In making its assessments, the Trustee must rely, in part, on appraisals prepared in
connection with the applicable project. Unfortunately, many of the available appraisals
suffer from significant shortcomings, including relying on assumptions regarding (i) the
outcome of completion of the applicable project (including the timing of completion, the
cost to complete and the projected sales revenues), (ii) the completion of certain
development milestones and (iii) other matters that may not come to pass. Few of the
appraisals were completed on an “as is” basis, and the few that were are now outdated.
Others appraisals are based on “as developed” values of the land premised on certain
assumptions regarding the eventual completion of the project. Further, there may be
projects where no appraisals are currently available.
66. In order to preserve and, to the extent possible, maximize recoveries for the Investors,
and to permit the Trustee to make prudent decisions regarding Investors’ interests, the
Trustee is of the view that in order to fulfill its Court-ordered mandate it needs to continue
to:
(a) complete a detailed review of each of the remaining 43 projects administered by
BDMC, including compiling complete information with respect to all debt owed in
respect of such projects, the applicable maturity dates of such debt, and the critical
project milestones so that the Trustee can proactively engage with borrowers,
lenders and other stakeholders rather than being forced to react to unanticipated
and urgent demands;
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(b) assess the priority waterfall contained in the applicable loan agreements, including
the validity and enforceability of such waterfall;
(c) engage in discussions with the respective borrowers and senior lenders regarding
options for the projects and recoveries for Investors;
(d) retain real estate experts to conduct appraisals on an “as is” basis with appropriate
assumptions (“New Appraisals”) for a number of the projects, to the extent
deemed necessary by the Trustee;
(e) continue to engage with Investors and respond to Investor inquiries; and
(f) continue to execute BDMC’s administration duties that arise in the ordinary course,
including reviewing and responding to borrower and senior lender requests, and
engaging proactively with senior lenders considering enforcement actions,
marketing processes or any other action that may have an adverse impact on the
ultimate return to Investors.
67. As noted above, there are costs associated with these activities, and these costs are high
because the Trustee faces many urgent and unanticipated demands on a daily basis. The
Trustee’s Charge gives the Trustee a first priority security interest in all funds held or
received by BDMC, including funds held or that are to be held in trust on behalf of
Investors, borrowers and other parties, to cover the Trustee’s expenses in connection with
its mandate. However, in order to (i) permit the Trustee to conduct necessary activities in
furtherance of its mandate, (ii) clarify and confirm the Trustee’s rights regarding certain
Property that is subject to the Trustee’s Charge; and (ii) put some temporary restrictions
on the Trustee’s rights with respect to these funds, the Trustee respectfully requests that
the Court issue the Stabilization Order with respect to funds held or received by the
Trustee, as follows:
(a) That the Trustee distribute 50% of the principal amount held by the Trustee in
respect of each of the Victoria Medical SML Loans to the applicable Investors pro
rata based on each such Investor’s respective portion of such Victoria Medical
SML Loans;
(b) That the Trustee hold in a separate account, until further Order of the Court, all (I)
funds that are currently in BDMC’s or the Trustee’s possession or that may come
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into BDMC’s or the Trustee’s possession, in each case as a result of a repayment
(in whole or in part) of principal on any loan or other indebtedness owing to or
administered by BDMC on behalf of Investors (including, for greater certainty, the
remaining portion of the repayments on the Victoria Medical SML Loans held by
the Trustee after making the distributions previously described), whether or not (i)
secured by any Real Property Charges in the name of the Respondent or in the
name of OTC, Computershare or any other person acting for Investors in respect
of investments held through RRSPs or other registered accounts or funds (each
an “RRSP Trustee”), (ii) received before or after the date of the Appointment
Order, or (iii) paid or payable in trust, plus (II) all interest paid or payable to BDMC
or the Trustee at the time such repayment (in whole or in part) of principal is made
(collectively, “Realized Property”) and that the Trustee report to the Court prior to
the end of the Stabilization Period with a recommendation regarding next steps
with respect to the Realized Property, including any potential distribution of any
Realized Property to the Investors; and
(c) That the Trustee hold in a separate account all funds (other than Realized
Property) that were in BDMC’s possession on or prior to the date of the
Appointment Order as well as any amounts (other than Realized Property) paid or
payable to BDMC or the Trustee (in trust or otherwise) after the date of the
Appointment Order, including in respect of interest where principal is not repaid,
fees, expenses or other amounts (collectively, “Estate Property”) and shall be
authorized to use such Estate Property as set out in the Appointment Order and
as further confirmed by the Stabilization Order.
68. The Trustee proposes to hold the Realized Property separate and apart from the Estate
Property and any other Property and not to use the Realized Property for any purpose
until further order of the Court. The Trustee will, however, use the Estate Property and any
other Property in conformance with the Appointment Order and in accordance with the
proposed Stabilization Order to permit the Trustee to carry out its mandate, including
without limitation, at the Trustee’s sole discretion, any of the following:
(a) to provide a retainer for and to pay the professional fees, expenses and
disbursements of the Trustee, its counsel, and any experts or other advisors
retained by the Trustee pursuant to the Appointment Order;
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(b) to pay expenses of BDMC, including, without limitation, payroll, rent, utilities, taxes,
and other statutory remittances;
(c) to pay expenses incurred in the administration of any loan or indebtedness
administered by BDMC, including, without limitation, in connection with obtaining
New Appraisals of any property or, if necessary, taking or responding to any
enforcement action;
(d) to make protective disbursements to or on behalf of a borrower or in respect of a
project, provided that any such disbursement shall be considered an advance
made to the applicable borrower in respect of such project and the amount of such
advance plus any applicable expenses incurred in connection therewith shall be
added to the sum owing by the borrower and shall be added to the Real Property
Charge in respect of same (except to the extent that such borrower is already
indebted to BDMC for such amount); and
(e) to pay general expenses of BDMC or the Trustee, in that capacity, not covered by
the foregoing.
69. As noted above, the Trustee has moved the Realized Property currently in its possession
into an interest bearing GIC account and intends to move any further Realized Property
received during the Stabilization Period into this account so that interest is earned on all
Realized Property. The Trustee is considering whether it is appropriate to take similar
steps with respect to Estate Property.
70. As noted above, the Trustee intends to report to the Court prior to October 31, 2018
regarding its progress on the foregoing matters, including its recommended proposal with
respect to the Realized Property. The Trustee is of the view that, by the end of the
proposed Stabilization Period, it should be in a much better position to provide the Court
and Investors with a detailed update on the status of each project, and will have much
better information regarding the potential timing of any repayments on the existing
syndicated mortgage loans and the likely outcome for Investors in such loans. At that time,
the Trustee will be in a better position to determine the amount of Realized Property or
any other Property that can be disbursed to the applicable Investors and to make
recommendations to the Court with respect to same.
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71. The Realized Property includes 50% of the principal amounts received in repayment of
the Victoria Medical SML Loans and all interest received. 50% of the principal amount
recovered on the Victoria Medical SML Loans is proposed to be distributed to the
applicable Investors and the remaining sums are proposed to be held by the Trustee
during the Stabilization Period and not used.
72. The Estate Property includes the interest paid by the Braestone Borrower and the QEWN
Borrower.
73. The Trustee and its legal counsel are tracking their time by project. For certain tasks that
affect all Investors, including general notices and the preparation of this Report and the
related Court materials, the time will be charged to a general account that will, at a later
date, be allocated to the various projects based on appropriate considerations and in
accordance with further Court orders. Time spent on project specific tasks, such as
attending to matters on the Brookdale Project and the Bowmanville Project, are recorded
as pertaining to the project in question. Fees incurred in respect of project specific tasks
will be paid out of Estate Property, but it is contemplated that any realizations on specific
projects will be used to reimburse such amounts. Given the lack of revenue available to
BDMC, there is no other option to fund the Trustee’s activities for the benefit of the
Investors.
REPRESENTATION FOR INVESTORS
74. As noted previously, there are approximately 11,000 Investors who participate in
mortgages administered by BDMC. Although Investors reside throughout Canada, the
vast majority of Investors are located in Ontario. FAAN Mortgage has been engaging with
Investors since its appointment as manager of the Administration Business and has
continued to do so after its appointment as Trustee.
75. The Trustee’s mandate does not include providing legal advice to BDMC’s Investors, and
the Trustee has recommended that Investors seek independent legal advice with respect
to certain matters when the Trustee has determined that it was appropriate to seek
consent of Investors to certain actions to be taken by the Trustee in respect of syndicated
mortgage loans. Similarly, the Trustee understands that RRSP Trustees typically advise
Investors who have invested in BDMC syndicated mortgage loans to seek independent
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legal advice with respect to enforcement matters and other significant developments in
respect of projects and loans made in respect of such projects.
76. Given the large number of individual Investors, the Trustee is of the view that it is in the
best interests of the Investors to appoint Representative Counsel in order to provide the
Investors with legal representation to protect their common interests, while keeping
professional fees for Investors as low as possible. If Representative Counsel is appointed,
various Investors will not need to retain their own counsel to assist them in considering
proposals put to them by the Trustee or responses to enforcement steps. Instead,
Representative Counsel will be available to assist Investors with respect to their common
interests in loans administered by BDMC and in assessing all matters in these
proceedings. In appropriate circumstances, Representative Counsel will be able to provide
feedback to the Trustee in connection with its mandate and, where necessary, Investor
consent to certain material actions. Representative Counsel’s involvement will result in
more timely and cost-effective decisions, especially given the circumstances that the
Trustee has faced to date.
77. Appointing Representative Counsel will enable the Trustee to put in place an efficient and
effective communication plan, and will assist in the implementation of various value-
preserving strategies for Investors' interests. In addition, Representative Counsel will
ensure that those investors who do not opt-out of representation will be adequately
represented in these proceedings.
78. The Trustee is therefore seeking an order that appoints Chaitons LLP (“Chaitons”) as
Representative Counsel and grants Representative Counsel a charge on the assets of
BDMC already secured by the Trustee’s Charge, as security for the legal fees and
disbursements of Representative Counsel. Chaitons has extensive experience in
proceedings similar to this, including those involving real estate investment firms,
developers and numerous investors, including the MBLAA proceedings in respect of the
entities known as the Tier 1 Trustee Corporations.
79. Chaitons acts for the Court-appointed receiver on the Dunsire Project and therefore will
not represent the Investors with respect to the Dunsire Project.
80. The proposed Stabilization Order provides that, subject to prior approval by the Trustee
or order of the Court, Representative Counsel shall be paid its reasonable fees and
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disbursements. Representative Counsel will deliver its invoices to the Trustee, subject to
such redactions to the invoices as are necessary to maintain solicitor-client privilege
between Representative Counsel and the Investors, and the Trustee will approve the
invoices and arrange for payment of same from the proceeds of realization on a project.
81. It is also proposed that Representative Counsel’s fees and disbursements may be paid
from any distributions to be made to Investors in respect of these proceedings. When
realizations are generated from a specific project, Representative Counsel would receive
payments for the work on that project. Certain amounts may also need to be reserved
from distributions on a given project to address circumstances where no proceeds are
realized sufficient to pay Representative Counsel for its work on a given project. This will
allow for a fair and reasonable allocation of legal representation for the Investors. .
82. While the Trustee is cognizant of the interests of the Investors, the Trustee is also
concerned that the costs of Representative Counsel are adequately managed, so that
while discharging its responsibilities, Representative Counsel can add value from the
perspective of Investors. Accordingly, the Trustee has had preliminary discussions with
the proposed Representative Counsel, to ensure that there is a streamlined
communication strategy, and to ensure that there is no duplication of services as currently
provided by the Trustee or its counsel.
83. The following is a summary of the proposed Representative Counsel's mandate:
(a) Representative Counsel would act for all Investors in respect of these proceedings
regarding their common interests in the loans and other indebtedness
administered by BDMC, including the common interests of Investors in any
particular loan or other indebtedness administered by BDMC;
(b) Representative Counsel would act in the best interests of the Investors and take
such necessary and appropriate actions as Representative Counsel deems fit from
time to time;
(c) Representative Counsel shall have no obligation to consult with, follow the
instructions of, or provide an opinion to, any individual Investor in connection with
the discharge of its duties under the proposed Stabilization Order;
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(d) any Investor that does not wish to be represented by Representative Counsel
would be required to provide notice of same in writing to Representative Counsel;
(e) Representative Counsel would be permitted to communicate with the Investors by
posting communications on the Trustee’s website;
(f) Representative Counsel would be entitled to a charge (“Representative Counsel Charge”) on the Property as security for its fees and disbursements in respect of
these proceedings, both before and after the making of the proposed Order; the
Representative Counsel Charge shall form a charge on the Property ranking
immediately subordinate in priority to the Trustee’s Charge;
(g) Representative Counsel would be at liberty to apply to this Court for advice and
directions in respect of its appointment; and
(h) notice of Representative Counsel’s appointment would be posted on the Trustee's
website and sent to Investors by Representative Counsel (or by the Trustee on
behalf of Representative Counsel) within 7 business days of the receipt by
Representative Counsel of certain contact information for the Investors.
84. The Trustee has discussed the proposed appointment of Representative Counsel with
FSCO and its counsel, who have advised that they are supportive of same.
CONCLUSION AND RECOMMENDATION
85. The purpose of the Trustee’s appointment is to protect the Investors. The Trustee was
appointed to administer the loans made by BDMC on behalf of the investing public and to
make prudent decisions that are in the best interests of the Investors with respect to the
administration and enforcement of the relevant loans. The Appointment Order also
granted the Trustee’s Charge to secure the payment of the Trustee’s and its legal
counsel’s fees and disbursements as well as other costs of these proceedings.
86. The Trustee has determined that, in order to discharge its Court-ordered mandate, it
needs to (a) complete a detailed evaluation of the condition of each of the projects and
the associated syndicated mortgage loans made by BDMC, and (b) proactively engage
with stakeholders on a project by project basis. Among other things, the Trustee needs to
develop a strategy to maximize recoveries for Investors in difficult circumstances. In
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furtherance of these matters, the Trustee is seeking the Stabilization Order to clarify and
confirm the scope of the Trustee’s Charge and to put some additional restrictions on the
Trustee’s rights with respect to the funds charged to give comfort to Investors, brokers
and borrowers who have expressed concerns about these matters, including the Investors
and brokers who have raised concerns regarding the proceeds of the Victoria Medical
SML Loans and borrowers who have raised concerns regarding funds held in Interest
Reserve Account.
87. The Trustee has also determined that it is advisable to appoint Representative Counsel
on behalf of the Investors.
88. The proposed Stabilization Order will facilitate the Trustee in carrying out its mandate for
the benefit of all Investors and other stakeholders of BDMC.
89. In light of the foregoing, the Trustee respectfully recommends that the Court issue the
Stabilization Order in the form attached to the Trustee’s motion record.
ALL OF WHICH IS RESPECTFULLY SUBMITTED this 19th day of June, 2018.
FAAN MORTGAGE ADMINISTRATORS INC., SOLELY IN ITS CAPACITY AS COURT-APPOINTED TRUSTEE OF BUSINESS & DEVELOPMENT MORTGAGES CANADA INC., AND NOT IN ITS PERSONAL OR ANY OTHER CAPACITY
Faan Mortgage Administrators Inc.
57
Appendix 1: Appointment Order dated April 20, 2018
58
Court File No. CV-18-596204-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE HONOURABLE MR. ) FRIDAY, THE 20™ DAY)
JUSTICE HAINEY ) OF APRIL, 2018
BETWEEN:
THE SUPERINTENDENT OF FINANCIAL SERVICES
- and -
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Applicant
Respondent
APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c.
29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43
APPOINTMENT ORDER
THIS APPLICATION, made by The Superintendent of Financial Services (the
"Superintendent”), for an Order, inter alia, pursuant to section 37 of the Mortgage Brokerages,
Lenders and Administrators Act, 2006, S.O. 2006, c. 29, as amended (the “MBLAA”), and
section 101 of the Courts of Justice Act, R.S.O. 1990, c, C.43, as amended (the "CJA”), appointing FAAN Mortgage Administrators Inc. (“FAAN Mortgage") as trustee (in such capacity,
the “Trustee”), without security, of all of the assets, undertakings and properties of Building &
Development Mortgages Canada Inc. (the “Respondent”), was heard this day at 330 University
Avenue, Toronto, Ontario;
ON READING the affidavit of Brendan Forbes sworn April 19, 2018 and the exhibits
thereto (the "Supporting Affidavit") and the consent of FAAN Mortgage to act as the Trustee,
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and on hearing the submissions of counsel for the Superintendent, counsel for FAAN Mortgage
and such other counsel as were present, no one appearing for any other person on the service
list, as appears from the affidavit of service of Miranda Spence sworn April 19, 2018, filed;
SERVICE
1. THIS COURT ORDERS that the time for service and filing of the notice of application
and the application record is hereby abridged and validated so that this application is properly
returnable today and hereby dispenses with further service thereof.
APPOINTMENT
2. THIS COURT ORDERS that pursuant to section 37 of the MBLAA and section 101 of
the CJA, FAAN Mortgage is hereby appointed Trustee, without security, of all of the assets,
undertakings and properties of the Respondent, including, without limitation, all of the assets in
the possession or under the control of the Respondent, its counsel, agents and/or assignees but
held on behalf of any other party, including, but not limited to, lenders under any syndicate
mortgage ("Investors”), brokers, or borrowers, in each case whether or not such property is
held in trust or is required to be held in trust (collectively, the “Property”), which Property, for
greater certainty, includes any and all real property charges in favour of the Respondent (the
"Real Property Charges”), including, without limitation, any and all monetary and non-monetary
entitlements in respect to the assets and values thereunder, the period of which appointment
shall run from 12:01 a.m. on the date hereof until such date that all assets under all syndicated
mortgage loans have been realized and all Property has been distributed to those entitled to it.
TRUSTEE’S POWERS
3. THIS COURT ORDERS that the Trustee is hereby empowered and authorized, but not
obligated, to act at once in respect of the Property and, without in any way limiting the generality
of the foregoing, the Trustee is hereby expressly empowered and authorized to do any of the
following where the Trustee considers it necessary or desirable:
(a) to take possession of and exercise control over the Property and any and all
proceeds, receipts and disbursements arising out of or from the Property;
(b) to receive, preserve, protect and maintain control of the Property, or any part or
parts thereof, including, but not limited to, the holding of mortgage security in
60
trust on behalf of Investors, the administering of the mortgages, the changing of
locks and security codes, the relocating of Property to safeguard it, the engaging
of independent security personnel, the taking of physical inventories and the
placement of such insurance coverage as may be necessary or desirable;
to manage, operate, and carry on the business of the Respondent, including,
without limitation, the powers to enter into any agreements, incur any obligations
in the ordinary course of business, cease to carry on all or any part of the
business, or cease to perform any contracts of the Respondent;
to engage consultants, appraisers, agents, experts, auditors, accountants,
managers, counsel and such other persons from time to time and on whatever
basis, including on a temporary basis, to assist with the exercise of the Trustee's
powers and duties, including, without limitation, those conferred by this Order;
to purchase or lease such machinery, equipment, inventories, supplies, premises
or other assets to continue the business of the Respondent or any part or parts
thereof;
to receive and collect all monies and accounts now owed or hereafter owing to
the Respondent and to exercise all remedies of the Respondent in collecting
such monies, including, without limitation, to enforce any security held by the
Respondent, including, without limitation, such security held on behalf of
Investors;
to settle, extend or compromise any indebtedness owing to the Respondent;
to execute, assign, issue and endorse documents of whatever nature in respect
of any of the Property, whether in the Trustee’s name or in the name and on
behalf of the Respondent for any purpose pursuant to this Order, including,
without limitation, any documents in connection with any registration, discharge,
partial discharge, transfer, assignment or similar dealings in respect of any
mortgage (“Land Title Document”) and, for greater certainty, the applicable land
registry office, registrar or other official under the Land Registration Reform Act
(Ontario), the Land Titles Act (Alberta), or any other comparable legislation in any
other jurisdiction be and is hereby directed, upon being presented with a certified
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true copy of this Order and such Land Title Document, to register, discharge,
partially discharge, transfer or otherwise deal with such mortgage in accordance
with such Land Title Document without any obligation to inquire into the propriety
of the execution or effect of such Land Title Document;
(i) to initiate, prosecute and continue the prosecution of any and all proceedings and
to defend all proceedings now pending or hereafter instituted with respect to the
Respondent, the Property or the Trustee, and to settle or compromise any such
proceedings. The authority hereby conveyed shall extend to such appeals or
applications for judicial review in respect of any order or judgment pronounced in
any such proceeding;
(j) to market any or all of the Property, including advertising and soliciting offers in
respect of the Property or any part or parts thereof and negotiating such terms
and conditions of sale as the Trustee in its discretion may deem appropriate;
(k) with the approval of this Court, to sell, convey, transfer, lease or assign the
Property or any part or parts thereof out of the ordinary course of business, and
in such case notice under subsection 63(4) of the Ontario Personal Property
Security Act or section 31 of the Ontario Mortgages Act, as the case may be,
shall not be required;
(l) with the approval of this Court, to restructure the Property in a manner that the
Trustee considers reasonable, including, without limitation, the conversion, in
whole or in part, of the Property or any part or parts thereof, out of the ordinary
course of business, into an alternative or different interest in the capital structure
of the Property or any part or parts thereof, including, without limitation, an
ownership interest therein;
(m) to apply for any vesting order or other orders necessary to convey the Property
or any part or parts thereof to a purchaser or purchasers thereof, free and clear
of any liens or encumbrances affecting such Property;
(n) to report to, meet with and discuss with such affected Persons (as defined below)
as the Trustee deems appropriate on all matters relating to the Property and the
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Trustee’s mandate, and to share information, subject to such terms as to
confidentiality as the Trustee deems advisable;
(o) to register a copy of this Order and any other Orders in respect of the Property
against title to any of the Property;
(p) to apply for any permits, licences, approvals or permissions as may be required
by any governmental authority and any renewals thereof for and on behalf of
and, if thought desirable by the Trustee, in the name of the Respondent;
(q) to enter into agreements with any trustee in bankruptcy appointed in respect of
the Respondent, including, without limiting the generality of the foregoing, the
ability to enter into occupation agreements for any property owned or leased by
the Respondent;
(r) to exercise any shareholder, partnership, joint venture or other rights which the
Respondent may have; and
(s) to take any steps reasonably incidental to the exercise of these powers or the
performance of any statutory obligations,
and in each case where the Trustee takes any such actions or steps, it shall be exclusively
authorized and empowered to do so, to the exclusion of all other Persons (as defined below),
including the Respondent, without interference from any other Person and without regard to any
arrangement in existence as of the date hereof between the Respondent and Investors as to
how and when such actions or steps are to be taken. For greater certainty, the Trustee shall be
and is empowered to take such actions or steps without seeking instructions from Investors
where the Trustee determines, in its sole discretion, that it is necessary and appropriate to do so
(having regard for the interests of Investors), and in all other cases, the Trustee is specifically
authorized to continue to comply with the existing arrangements, including any deemed consent
provisions contained therein.
DUTY TO PROVIDE ACCESS AND CO-OPERATION TO THE TRUSTEE
4. THIS COURT ORDERS that: (i) the Respondent; (ii) all of its current and former
directors, officers, employees, agents, accountants, legal counsel and shareholders, and all
other persons acting on its instructions or behalf; (iii) all other individuals, firms, corporations,
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Ccn«lt«f)fc C^sM, 4 3€/’¥4|aIr^e,- 6 -
governmental bodies or agencies/or other entities having notice of this Order, including, without
limitation, Tsunami Technology ®roup Inc., Fortress Real Developments Inc. (“FRDI”), all of its
direct or indirect affiliates, and (any entity under common control with FRDI (collectively with
FRDI, the "Fortress Entities"), any entity that is a joint venture among a Fortress Entity and
another entity, and each director, officer, employee and agent of any Fortress Entity^aTofthe"
foregoing, collectively, being "Persons” and each being a "Person”) shall forthwith advise the
Trustee of the existence of any Property in such Person’s possession or control, shall grant
immediate and continued access to the Property to the Trustee, and shall deliver all such
Property to the Trustee upon the Trustee’s request.
5. THIS COURT ORDERS that, pursuant to and without limiting the generality of paragraph
4 of this Order, all Persons shall, unless otherwise instructed by the Trustee: (i) deliver to the
Trustee (or, in the case of RRSP or other registered funds administered by Olympia Trust
Company (“OTC") or Computershare Trust Company of Canada ("Computershare”), not
release to any Person without further Order of this Court) any and all monies held in trust that
are related to the Respondent or its business (collectively, the "Trust Funds’), which Trust
Funds, for greater certainty, include any and all monies in any OTC or Computershare account
that are purported to be held in trust for the Investors in or beneficiaries under any of the Real
Property Charges, including, without limitation, all monies held by way of interest reserves to
satisfy interest payments to such Investors or beneficiaries, which Trust Funds are to be held or
used by the Trustee in accordance with the terms of this Order and any further Order of this
Court; and (ii) upon the Trustee’s request, provide an accounting of all funds received from or
on behalf of the Respondent or its associated businesses.
6. THIS COURT ORDERS that all Persons shall forthwith advise the Trustee of the
existence of any books, emails, user accounts, documents, securities, contracts, orders,
corporate and accounting records, and any other papers, records and information of any kind
related to the business or affairs of the Respondent, and any computer programs, computer
tapes, computer disks, or other data storage media containing any such information, including
copies of any previously performed electronic back ups (the foregoing, collectively, the
"Records”) in that Person’s possession or control, and shall provide to the Trustee or permit the
Trustee to make, retain and take away copies thereof and grant to the Trustee unfettered
access to and use of accounting, computer, software and physical facilities relating thereto,
provided however that nothing in this paragraph 6 or in paragraph 7 of this Order shall require
the delivery of Records, or the granting of access to Records, which may not be disclosed or
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provided to the Trustee due to the privilege attaching to solicitor-client communication or due to
statutory provisions prohibiting such disclosure.
7. THIS COURT ORDERS that if any Records are stored or otherwise contained on a
computer or other electronic system of information storage, whether by independent service
provider or otherwise, all Persons in possession or control of such Records shall forthwith give
unfettered access to the Trustee for the purpose of allowing the Trustee to recover and fully
copy all of the information contained therein whether by way of printing the information onto
paper or making copies of computer disks or such other manner of retrieving and copying the
information as the Trustee in its discretion deems expedient, and shall not alter, erase or
destroy any Records without the prior written consent of the Trustee. Further, for the purposes
of this paragraph, all Persons shall provide the Trustee with all such assistance in gaining
immediate access to the information in the Records as the Trustee may in its discretion require
including providing the Trustee with instructions on the use of any computer or other system and
providing the Trustee with any and all access codes, account names and account numbers that
may be required to gain access to the information. Paragraphs 6 and 7 of this Order do not
apply to any materials obtained by the Royal Canadian Mounted Police pursuant to any warrant
issued under the Criminal Code, R.S.C. 1985, c. C-46.
8. THIS COURT ORDERS that the Trustee shall provide each of the relevant landlords
with notice of the Trustee’s intention to remove any fixtures from any leased premises at least
seven (7) days prior to the date of the intended removal. The relevant landlord shall be entitled
to have a representative present in the leased premises to observe such removal and, if the
landlord disputes the Trustee's entitlement to remove any such fixture under the provisions of
the lease, such fixture shall remain on the premises and shall be dealt with as agreed between
any applicable secured creditors, such landlord and the Trustee, or by further Order of this
Court upon application by the Trustee on at least two (2) days’ notice to such landlord and any
such secured creditors.
NO PROCEEDINGS AGAINST THE TRUSTEE
9. THIS COURT ORDERS that no proceeding or enforcement process in any court or
tribunal (each, a "Proceeding”), shall be commenced or continued against the Trustee except
with the written consent of the Trustee or with leave of this Court.
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NO PROCEEDINGS AGAINST THE RESPONDENT OR THE PROPERTY
10. THIS COURT ORDERS that, with the exception of the Suspension and Penalty Orders
(as such term is defined in the Supporting Affidavit): (i) no Proceeding against or in respect of
any of the Respondent, the Property or the Superintendent (in the last case, with respect to any
matters arising from the Respondent or the Property) shall be commenced or continued except
with the written consent of the Trustee or with leave of this Court; and (ii) any and all
Proceedings currently under way against or in respect of any of the Respondent or the Property
are hereby stayed and suspended pending further Order of this Court.
NO EXERCISE OF RIGHTS OR REMEDIES
11. THIS COURT ORDERS that, with the exception of the Suspension and Penalty Orders,
all rights and remedies against the Respondent, the Trustee, or affecting the Property
(including, without limitation, pursuant to any arrangement in existence as of the date hereof
between the Respondent and Investors as to how and when the actions or steps contemplated
by paragraph 3 of this Order are to be taken), are hereby stayed and suspended except with the
written consent of the Trustee or leave of this Court, provided however that this stay and
suspension does not apply in respect of any "eligible financial contract” as defined in the
Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the “BIA”), and further
provided that nothing in this paragraph shall: (i) empower the Trustee or the Respondent to
carry on any business which the Respondent is not lawfully entitled to carry on; (ii) exempt the
Trustee or the Respondent from compliance with statutory or regulatory provisions relating to
health, safety or the environment; (iii) prevent the filing of any registration to preserve or perfect
a security interest; (iv) prevent the registration of a claim for lien; or (v) prevent the filing and
service of a statement of claim solely to permit the perfection of a lien, provided that no further
proceedings on such statement of claim shall be permitted other than pursuant to paragraph 10.
NO INTERFERENCE WITH THE TRUSTEE
12. THIS COURT ORDERS that no Person shall discontinue, fail to honour, alter, interfere
with, repudiate, terminate or cease to perform any right, renewal right, contract, agreement,
licence or permit in favour of or held by the Respondent, without written consent of the Trustee
or leave of this Court, including, for greater certainty, any licenses granted to the Respondent to
act as an administrator of or lender under or administer syndicated mortgage loans under the
MBLAA, The Mortgage Brokers Act (Manitoba), The Mortgage Brokerages and Mortgage
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Administrators Act (Saskatchewan), the Real Estate Act (Alberta), the Mortgage Brokers Act
(British Columbia) or any other comparable legislation in any other jurisdiction where the
Respondent is currently licensed.
CONTINUATION OF SERVICES
13. THIS COURT ORDERS that all Persons having oral or written agreements with the
Respondent, or statutory or regulatory mandates for the supply of goods and/or services,
including, without limitation, all computer software, communication and other data services
(including, for greater certainty, all goods and/or services provided by Tsunami Technology
Group Inc. in respect of the Respondent), centralized banking services, payroll services,
insurance, transportation services, utility or other services to the Respondent are hereby
restrained until further Order of this Court from discontinuing, altering, interfering with or
terminating the supply of such goods or services as may be required by the Trustee, and that
the Trustee shall be entitled to the continued use of the Respondent’s current telephone
numbers, facsimile numbers, internet addresses and domain names, provided in each case that
the normal prices or charges for all such goods or services received after the date of this Order
are paid by the Trustee in accordance with normal payment practices of the Respondent or
such other practices as may be agreed upon by the supplier or service provider and the
Trustee, or as may be ordered by this Court.
TRUSTEE TO HOLD FUNDS
14. THIS COURT ORDERS that all funds, monies, cheques, instruments, and other forms of
payments received or collected by the Trustee from and after the making of this Order from any
source whatsoever, including, without limitation, the sale of all or any of the Property and the
collection of any accounts receivable in whole or in part, whether in existence on the date of this
Order or hereafter coming into existence, shall be deposited into one or more accounts
controlled by the Trustee or, if the Trustee determines it is advisable, new accounts to be
opened by the Trustee (the “Post Trusteeship Accounts") and the monies standing to the
credit of such Post Trusteeship Accounts from time to time, net of any disbursements provided
for herein, shall be held by the Trustee to be paid in accordance with the terms of this Order or
any further Order of this Court.
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EMPLOYEES
15. THIS COURT ORDERS that all employees of the Respondent shall remain the
employees of the Respondent until such time as the Trustee, on the Respondent’s behalf, may
terminate the employment of such employees. The Trustee shall not be liable for any
employee-related liabilities, including any successor employer liabilities as provided for in
subsection 14.06(1.2) of the BIA, other than such amounts as the Trustee may specifically
agree in writing to pay, or in respect of its obligations under subsections 81.4(5) and 81.6(3) of
the BIA or under the Wage Earner Protection Program Act.
PIPEDA
16. THIS COURT ORDERS that, pursuant to clause 7(3)(c) of the Canada Personal
Information Protection and Electronic Documents Act and any other applicable privacy
legislation, the Trustee shall disclose personal information of identifiable individuals to
prospective purchasers or bidders for the Property and to their advisors, but only to the extent
desirable or required to negotiate and attempt to complete one or more sales of the Property
(each, a "Sale”). Each prospective purchaser or bidder to whom such personal information is
disclosed shall maintain and protect the privacy of such information and limit the use of such
information to its evaluation of the Sale, and if it does not complete a Sale, shall return all such
information to the Trustee, or in the alternative destroy all such information. The purchaser of
any Property shall be entitled to continue to use the personal information provided to it, and
related to the Property purchased, in a manner which is in all material respects identical to the
prior use of such information by the Respondent, and shall return all other personal information
to the Trustee, or ensure that all other personal information is destroyed.
LIMITATION ON ENVIRONMENTAL LIABILITIES
17. THIS COURT ORDERS that nothing herein contained shall require the Trustee to
occupy or to take control, care, charge, possession or management (separately and/or
collectively, "Possession”) of any of the Property that might be environmentally contaminated,
might be a pollutant or a contaminant, or might cause or contribute to a spill, discharge, release
or deposit of a substance contrary to any federal, provincial or other law respecting the
protection, conservation, enhancement, remediation or rehabilitation of the environment or
relating to the disposal of waste or other contamination including, without limitation, the
Canadian Environmental Protection Act, the Ontario Environmental Protection Act, the Ontario
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Water Resources Act, or the Ontario Occupational Health and Safety Act and regulations
thereunder (the "Environmental Legislation”), provided however that nothing herein shall
exempt the Trustee from any duty to report or make disclosure imposed by applicable
Environmental Legislation. The Trustee shall not, as a result of this Order or anything done in
pursuance of the Trustee’s duties and powers under this Order, be deemed to be in Possession
of any of the Property within the meaning of any Environmental Legislation, unless it is actually
in possession.
LIMITATION ON THE TRUSTEE’S LIABILITY
18. THIS COURT ORDERS that the Trustee shall incur no liability or obligation as a result of
its appointment or the carrying out the provisions of this Order, save and except for any gross
negligence or wilful misconduct on its part, or in respect of its obligations under subsections
81.4(5) or 81.6(3) of the BIA or under the Wage Earner Protection Program Act. Nothing in this
Order shall derogate from the protections afforded the Trustee by section 14.06 of the BIA or by
any other applicable legislation.
TRUSTEE’S ACCOUNTS
19. THIS COURT ORDERS that the Trustee and counsel to the Trustee shall be paid their
reasonable fees and disbursements, in each case at their standard rates and charges unless
otherwise ordered by the Court on the passing of accounts, which fees and disbursements shall
be added to the indebtedness secured by the Real Property Charges and that the Trustee and
counsel to the Trustee shall be entitled to and are hereby granted a charge (the Trustee’s
Charge") on the Property, as security for such fees and disbursements, both before and after
the making of this Order in respect of these proceedings, and that the Trustee’s Charge shall
form a first charge on the Property in priority to all security interests, trusts, liens, charges and
encumbrances, statutory or otherwise, in favour of any Person, but subject to subsections
' 4.06(7), 81.4(4) and 81.6(2) of the BIA.
20. THIS COURT ORDERS that the Trustee and its legal counsel shall pass their accounts
from time to time, and for this purpose the accounts of the Trustee and its legal counsel are
hereby referred to a judge of the Commercial List of the Ontario Superior Court of Justice.
21. THIS COURT ORDERS that prior to the passing of its accounts, the Trustee shall be at
liberty from time to time to apply reasonable amounts, out of the monies in its hands, against its
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fees and disbursements, including legal fees and disbursements, incurred at the standard rates
and charges of the Trustee or its counsel, and such amounts shall constitute advances against
its remuneration and disbursements when and as approved by this Court.
FUNDING OF THE APPOINTMENT
22. THIS COURT ORDERS that the Trustee be at liberty and it is hereby empowered to
borrow by way of a revolving credit or otherwise, such monies from time to time as it may
consider necessary or desirable, provided that the outstanding principal amount does not
exceed $1,000,000 (or such greater amount as this Court may by further Order authorize) at
any time, at such rate or rates of interest as it deems advisable for such period or periods of
time as it may arrange, for the purpose of funding the exercise of the powers and duties
conferred upon the Trustee by this Order, including interim expenditures. The whole of the
Property shall be and is hereby charged by way of a fixed and specific charge (the "Trustee’s
Borrowings Charge”) as security for the payment of the monies borrowed, together with
interest and charges thereon, in priority to all security interests, trusts, liens, charges and
encumbrances, statutory or otherwise, in favour of any Person, but subordinate in priority to the
Trustee's Charge and the charges as set out in subsections 14.06(7), 81.4(4) and 81.6(2) of the
BIA.
23. THIS COURT ORDERS that neither the Trustee’s Borrowings Charge nor any other
security granted by the Trustee in connection with its borrowings under this Order shall be
enforced without leave of this Court.
24. THIS COURT ORDERS that the Trustee is at liberty and authorized to issue certificates
substantially in the form annexed as Schedule “A” hereto (the “Trustee’s Certificates ”) for
any amount borrowed by it pursuant to this Order.
25. THIS COURT ORDERS that the monies from time to time borrowed by the Trustee
pursuant to this Order or any further order of this Court and any and all Trustee's Certificates
evidencing the same or any part thereof shall rank on a pari passu basis, unless otherwise
agreed to by the holders of any prior issued Trustee’s Certificates.
SERVICE AND NOTICE
26. THIS COURT ORDERS that the E-Service Protocol of the Commercial List (the
“Protocol”) is approved and adopted by reference herein and, in these proceedings, the service
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of documents made in accordance with the Protocol (which can be found on the Commercial
List website at http://www.ontariocourts.ca/sci/practice/practice-directions/toronto/eservice-
commercial/) shall be valid and effective service. Subject to Rule 17.05 of the Rules of Civil
Procedure (the "Rules"), this Order shall constitute an order for substituted service pursuant to
Rule 16.04 of the Rules. Subject to Rule 3.01(d) of the Rules and paragraph 21 of the Protocol,
service of documents in accordance with the Protocol will be effective on transmission. This
Court further orders that a Case Website shall be established in accordance with the Protocol
with the following URL: www.faanmortgaqeadmin.com.
27. THIS COURT ORDERS that if the service or distribution of documents in accordance
with the Protocol is not practicable, the Trustee is at liberty to serve or distribute this Order, any
other materials and orders in these proceedings, any notices or other correspondence, by
forwarding true copies thereof by prepaid ordinary mail, courier, personal delivery or facsimile
transmission to the Respondent’s creditors or other interested parties at their respective
addresses as last shown on the records of the Respondent and that any such service or
distribution by courier, personal delivery or facsimile transmission shall be deemed to be
received on the next business day following the date of forwarding thereof, or if sent by ordinary
mail, on the third business day after mailing.
GENERAL
28. THIS COURT ORDERS that the Trustee may from time to time apply to this Court for
advice and directions in the discharge of its powers and duties hereunder.
29. THIS COURT ORDERS that nothing in this Order shall prevent the Trustee from acting
as a trustee in bankruptcy of the Respondent.
30. THIS COURT ORDERS that Confidential Exhibits (as defined in the Supporting Affidavit)
be and are hereby sealed until further Order of this Court.
31. THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,
regulatory or administrative body having jurisdiction in Canada or in the United States to give
effect to this Order and to assist the Trustee and its agents in carrying out the terms of this
Order. All courts, tribunals, regulatory and administrative bodies are hereby respectfully
requested to make such orders and to provide such assistance to the Trustee, as an officer of
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this Court, as may be necessary or desirable to give effect to this Order or to assist the Trustee
and its agents in carrying out the terms of this Order.
32. THIS COURT ORDERS that the Trustee be at liberty and is hereby authorized and
empowered to apply to any court, tribunal, regulatory or administrative body, wherever located,
for the recognition of this Order and for assistance in carrying out the terms of this Order, and
that the Trustee is authorized and empowered to act as a representative in respect of the within
proceedings for the purpose of having these proceedings recognized in a jurisdiction outside
Canada.
33. THIS COURT ORDERS that any interested party may apply to this Court to vary or
amend this Order on not less than seven (7) days’ notice, or such shorter period of time as the
Court may permit, to the Trustee and to any other party likely to be affected by the order sought
or upon such other notice, if any, as this Court m;
ENTERED AT /INSCRITATOHUmw
APR 2 Q 2018
mimi
72
SCHEDULE“A”
TRUSTEE CERTIFICATE
CERTIFICATE NO.______________
AMOUNT $______________________
1. THIS IS TO CERTIFY that FAAN Mortgage Administrators Inc., the Trustee (in such
capacity, the "Trustee") of all of the assets, undertakings and properties of Building &
Development Mortgages Canada Inc. (the "Respondent”), including, without limitation, all of the
assets in possession or under the control of the Respondent, its counsel, agents and/or
assignees but held on behalf of any other party, including, but not limited to, lenders under any
syndicate mortgage (“Investors”), brokers, or borrowers, in each case whether or not such
property is held in trust or is required to be held in trust (collectively, the “Property”) appointed
by Order of the Ontario Superior Court of Justice (Commercial List) (the "Court") dated the 20th
day of April, 2018 (the "Order”) made in an application having Court file number CV-18-596204-
OOCL, has received as such Trustee from the holder of this certificate (the "Lender”) the
principal sum of $<:*>|, being part of the total principal sum of $'<*> which the Trustee is
authorized to borrow under and pursuant to the Order.
2. The principal sum evidenced by this certificate is payable on demand by the Lender with
interest thereon calculated and compounded [daily][monthly not in advance on the <*>. day of
each month] after the date hereof at a notional rate per annum equal to the rate of <*>' per cent
above the prime commercial lending rate of Royal Bank of Canada from time to time.
3. Such principal sum with interest thereon is, by the terms of the Order, together with the
principal sums and interest thereon of ail other certificates issued by the Trustee pursuant to the
Order or to any further order of the Court, a charge upon the whole of the Property (as defined
in the Order), in priority to the security interests of any other person, but subject to the priority of
the charges set out in the Order and in the Bankruptcy and Insolvency Act, and the right of the
Trustee to indemnify itself out of such Property in respect of its remuneration and expenses.
4. All sums payable in respect of principal and interest under this certificate are payable at
the main office of the Lender at Toronto, Ontario.
5. Until all liability in respect of this certificate has been terminated, no certificates creating
charges ranking or purporting to rank in priority to this certificate shall be issued by the Trustee
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to any person other than the holder of this certificate without the prior written consent of the
holder of this certificate.
6. The charge securing this certificate shall operate so as to permit the Trustee to deal with
the Property (as defined in the Order) as authorized by the Order and as authorized by any
further or other order of the Court.
7. The Trustee does not undertake, and it is not under any personal liability, to pay any
sum in respect of which it may issue certificates under the terms of the Order.
DATED the_____ day of_______________ , 2018.
FAAN MORTGAGE ADMINISTRATORS INC.,solely in its capacity as Trustee of the Property (as defined in the Order), and not in its personal capacity
Per: ____________________________________Name:Title:
74
the
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Appendix 2:
Forbes Affidavit sworn on April 19, 2018, without exhibits
76
Court File No. CV-18-596204-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
BETWEEN:
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
- and -
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c.
29 AND SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43
AFFIDAVIT OF BRENDAN FORBES * 1
I, BRENDAN FORBES, of the City of Toronto, in the Province of Ontario, MAKE OATH
AND SAY:
INTRODUCTION1. lam Legal Counsel at the Ministry of the Attorney General Civil Law Division, FSCO
Branch. In this role, I work regularly with senior compliance officers and other staff at
the Financial Services Commission of Ontario (“FSCO”) to, among other things,
prosecute regulatory proceedings relating to the regulated sectors defined in the
Financial Services Commission of Ontario Act, 1997, S.O. 1997, chap. 28 (the “FSCO
Act”). I have held this position from August 2016 until March 2017, and again between
LEGALJ :48998041.4
77
June 2017 and the present. Prior to this, I was an Articling Student with FSCO from July
2015 to June 2016.
2. The mortgage brokering industry is one of the regulated sectors defined in the FSCO
Act, and includes mortgage agents, mortgage brokers, mortgage brokerages and
mortgage administrators, as defined in the Mortgage Brokerages, Lenders and
Administrators Act, 2006, S.O. 2006, c. 29 (the “MBLAA”).
3. As set out in greater detail below, FSCO investigated the Respondent, Building &
Development Mortgages Canada Inc. ("BDMC”), for potential breaches of the MBLAA
and its associated regulations. Prior to February 1, 2018, BDMC brokered and
administered investments in syndicated mortgage loans (“SML(s)”) sold to the investing
public, principally relating to development projects in which Fortress Real Capital Inc.
(“FRCI”) or Fortress Real Developments Inc. (“FRDI” and, together with FRCI,
"Fortress”) are involved (the “BDMC SML(s)”). Fortress’s involvement is either as
development consultant, or certain related or subsidiary corporations to Fortress are the
owners or co-owners of the development projects. The individual investors who are the
lenders under the the BDMC SMLs are referred to herein as the "Investors”.
4. Over $600 million has been invested in BDMC SMLs by over 11,000 individual Investors,
many of whom have invested significant portions of their savings in these loans. FSCO
has received numerous complaints from Investors regarding BDMC’s activities and the
performance of their investments in BDMC compared to the promises made to them at
the time they invested. As a result of its investigations, FSCO is of the view that there
are serious regulatory issues associated with BDMC SMLs.
5. FSCO’s investigation ultimately resulted in the Superintendent and BDMC entering into a
settlement agreement executed on January 31, 2018 (the “Settlement Agreement”). A
LEGAL_I ;48998041.42
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key condition of the Settlement Agreement was that BDMC enter into and comply with a
management and administration agreement (“MAA”) appointing FAAN Mortgage
Administrators Inc. (“FAAN Mortgage”) as the arm’s length, independent manager of
BDMC’s SML administration business (“BDMC’s Administration Business”). FAAN
Mortgage is a licensed mortgage administrator under the MBLAA.
6. FAAN Mortgage assumed the role of arm’s length, independent manager of BDMC’s
Administration Business on February 7, 2018, but I am advised by FAAN Mortgage that
the transition has not been smooth. BDMC has struggled to comply with certain terms of
the MAA from its inception. Given that books and records relating to the development
projects that are required for BDMC’s Administration Business are either stored on
servers maintained by FRDI or Canadian Development Capital & Mortgage Services Inc.
(“CDCM”), or are in the possession of those parties. Notwithstanding that FRDI and
CDCM have advised FAAN Mortgage that they would transfer all of the books and
records to FAAN Mortgage, to date this has not occurred. As such, FAAN Mortgage has
had difficulty performing its responsibilities as it remains dependent on representatives
of CDCM and others to provide it with the required information. In addition, and on at
least one occasion, CDCM has interfered with FAAN Mortgage’s duties by sending a
notice directly to Investors, and FAAN Mortgage has not been provided with
administrator access to BDMC's email accounts that were in existence as at the date of
FAAN Mortgage’s appointment and thereafter.
7. As set out in more detail below, it is apparent that a number of the SML borrowers are
facing financial distress. Further, I have been advised by FAAN Mortgage that BDMC is
also in financial distress and has been struggling to make a number of important
payments, including payroll, rent and payments due under the MAA.
LEGAL_1:48998041A3
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8. On April 13, 2018, the RCMP executed search warrants at BDMC’s offices. According to
media reports, five other locations were also searched pursuant to issued search
warrants. The RCMP reportedly advised The Globe and Mail that it was investigating
“syndicated mortgage fraud”. The police searches were widely reported in the media and
have resulted in a significant increase in the distress faced by BDMC. Attached hereto
as Exhibit A is a copy of The Globe and Mail article on the searches dated April 13,
2018. There have been many subsequent media reports.
9. I am advised by FAAN Mortgage that the RCMP investigation has had three immediate
effects on FAAN Mortgage’s management of BDMC’s Administration Business: (i)
Investor inquiries and concerns have increased exponentially; (ii) SML borrowers and
other parties have markedly increased the pressure on FAAN Mortgage to execute
various documents to postpone the Investors’ interests to those of other lenders; and (iii)
FAAN Mortgage has determined that it is not prepared to continue to act without court
protection and direction, as required.
10. In light of the RCMP investigation and FAAN Mortgage’s difficulties in obtaining and
verifying the accuracy of certain information, I am advised by FAAN Mortgage that it is
concerned about compliance with its obligation under s. 10.1 of the Mortgage
Administrator Standards of Practice, O. Reg. 189/08, under the MBLAA (the
"Standards”), which requires a mortgage administrator not to take or omit to take any
action that facilitates dishonesty, fraud, crime or illegal conduct. Section 10.1 of the
Standards provides: "A mortgage administrator shall not act, or do anything or omit to do
anything, in circumstances where the mortgage administrator ought to know that by
acting, doing the thing or omitting to do the thing, the mortgage administrator is being
used by a borrower, lender, investor or any other person to facilitate dishonesty, fraud,
4LEGAL_1:48998041.4
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crime or illegal conduct". Accordingly, as described below, FAAN Mortgage has
terminated the MAA effective upon the granting of the proposed order.
11. FAAN Mortgage has advised that a number of events of default under the MAA (the
"BDMC Events of Default”) have occurred and that FAAN Mortgage has reason to
believe that additional BDMC Events of Default have occurred or will occur in the near
term. FAAN Mortgage advises that it has lost all confidence in BDMC’s ability to comply
with the MAA.
12. If FAAN Mortgage terminates the MAA and the order sought herein is not granted, there
will be no independent third party to perform mortgage administration functions and
protect the Investors’ interests. This situation is untenable and puts the 11,000 individual
Investors and their investments at risk. As such, it is critical that an order appointing
FAAN Mortgage as trustee pursuant to section 37 of the MBLAA be granted forthwith.
FAAN Mortgage has been closely involved with the Investors, BDMC, and BDMC’s
Administration Business to date, and has intimate knowledge of BDMC’s business
structure.
13. I have been involved in the investigation of BDMC by FSCO. The investigation involved
the collection of a large volume of documentation provided by the Respondent and other
parties, and the examination of the principal of BDMC, lldina Galati, and of Fortress,
Vince Petrozza. I also have been involved throughout the attempted implementation of
the Settlement Agreement. Accordingly, I have knowledge of the matters to which I
hereinafter depose. To the extent that I have relied on the information and advice of
others, I have identified the source of such information and advice and verily believe that
information to be true. In particular, where I identify information that has been provided
to me by FAAN Mortgage, that information has been collected and conveyed by one or
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more of the three FAAN Mortgage representatives who are working on the BDMC
mandate, being Naveed Manzoor, Daniel Sobel and Lana Bezner.
THE FINANCIAL SERVICES COMMISSION OF ONTARIO
14. On July 1, 1998, the FSCO Act established FSCO as an arm’s-length agency of the
Ministry of Finance. FSCO regulates pension plans, insurance companies, loan and trust
companies, credit unions, caisses populaires, co-operative corporations and mortgage
brokers and administrators licensed under the MBLAA. The FSCO Act states that one of
FSCO's purposes is “to provide regulatory services that protect the public interest and
enhance public confidence in the regulated sectors".
15. The chief executive of FSCO is the Superintendent of Financial Services (the
“Superintendent”), who is tasked with, among other duties, administering and enforcing
the FSCO Act and every other statute that confers powers on or assigns duties to the
Superintendent, including the MBLAA, and generally supervising the regulated sectors,
including the mortgage brokering industry.
16. The system of regulation created by the MBLAA and its regulations is designed to
ensure that the public receives ethical, competent and knowledgeable services from
those licensed under the MBLAA to carry on the business of dealing, trading or
administering mortgages in the Province of Ontario. In order to carry on the business of
dealing in, trading or administering mortgages in the Province of Ontario, an individual or
entity must be licensed pursuant to the MBLAA.
17. Under the MBLAA and its regulations, once licensed, mortgage brokerages and
administrators must comply with ongoing requirements, including minimum standards of
practice such as the Standards; for example, disclosure of conflicts of interest, notice of
LEGALJ:48998041.46
82
material events relating to administered mortgages, information regarding the suitability
of the investment for each investor, and disclosure of material risks.
18. All of these requirements are designed to protect the public. Mortgages are often
connected with complex financial transactions, which often involve significant amounts of
borrowed money. As a result, financial transparency in mortgage transactions is
essential.
SYNDICATED MORTGAGE LOANS
19. An SML is a mortgage for which there is more than one lender, or in which more than
one investor has made an investment. As with any mortgage, a charge is registered on
the title to the relevant property.
20. The regulations made under the MBLAA provide that, in the case of SMLs, licensed
mortgage brokers and mortgage administrators owe the duties imposed by the MBLAA
and the regulations thereto in respect of the mortgage to each individual lender or
investor in the SML. ■
21. FSCO is of the view that SMLs are high risk investments. As set out in FSCO consumer
communications posted on FSCO’s website, FSCO is of the view that several of the
techniques that are frequently used to market SMLs to the investing public often belie
the risk of SMLs. For instance, there is NOT a guaranteed high rate of return on SMLs,
SML investors are often subordinated to priority construction financing, and a ‘secured’
investment does not mean that it is guaranteed (i.e. the value of the land against which
the mortgage is registered may be inadequate to fully repay the prior-ranking
mortgagees and the investors’ SML). A copy of a consumer communication in respect of
SMLs posted on FSCO’s website are attached hereto as Exhibit B.
LEG AL_1:48998041.47
83
22. These concerns are among the reasons that led FSCO to investigate the BDMC SMLs,
as described in greater detail below.
THE PARTIES
(a) BDMC
23. BDMC is an Ontario corporation with its head office located at 25 Brodie Drive, Suite #8,
Richmond Hill, Ontario. It is wholly owned by lldina Galati, who is also its sole director
and officer. Up until December 2015, BDMC was known by the name Centro Mortgage
Inc. (“Centro”). In or around January 2016, it changed its name to BDMC. A copy of
BDMC’s corporation profile report is attached hereto as Exhibit C.
24. Prior to February 1, 2018, BDMC held both a mortgage brokerage (licence #10102) and
a mortgage administrator (licence #12304) licence under the MBLAA. Ms. Galati held a
mortgage broker licence (licence #M08003912) under the MBLAA, and acted as the
principal broker for BDMC. ■
25. Pursuant to an order issued by FSCO on February 1, 2018 (the “BDMC Suspension
and Penalty Order”), BDMC’s mortgage brokerage licence was revoked, on consent.
Ms. Galati agreed to surrender her mortgage broker licence effective February 5th, 2018.
26. The circumstances in which the BDMC Suspension and Penalty Order was issued are
described in greater detail below.
27. BDMC continues to hold its mortgage administrator licence. A copy of BDMC’s licence
status is attached hereto as Exhibit D.
28. In addition to Ms. Galati, the following Fortress executives and employees held
mortgage broker and/or mortgage agent licences under the MBLAA, and were
authorized to deal in mortgages on behalf of BDMC:
8LEGALJ:48998041.4
84
(a) Vince Petrozza, Director, Vice-President and Secretary (licence #M08007162);
(b) Ben Myers, Senior Vice President - Marketing Research and Analytics (licence
#M13001264);
(c) Mark Fogliato, Director, Acquisitions & Portfolio Management (licence
#M 14002065);
(d) Paul Demczak, Account Manager, Development Planning & Project Management
(licence #M15002344); and
(e) Michelle Ross, Event Co-ordinator (licence #14002011).
29. Upon the issuance of the BDMC Suspension and Penalty Order, each of these
individuals’ licences were also suspended, with the exception that the licence held by
Mr. Petrozza was revoked (as opposed to suspended) as described below. These
licence suspensions were effected pursuant to section 17(3)(b) of the MBLAA which
states that the licences of each broker and agent authorized to deal in mortgages on
behalf of a brokerage are suspended upon the revocation, suspension or surrender of
the sponsoring brokerage licence.
(b) Fortress
30. FRCI is a Federal corporation with its head office located at 25 Brodie Drive, Suite #1,
Richmond Hill, Ontario. Its sole director and shareholder is Mr. Petrozza. A copy of
FRCI’s corporation profile report is attached hereto as Exhibit E.
31. FRDI is an Ontario corporation with its head office located at 25 Brodie Drive, Suite #1,
Richmond Hill, Ontario. Its officers and directors are Mr. Petrozza and Jawad Rathore
(together, the “Fortress Principals”). FRDI is owned by Mr. Petrozza, who holds a 20%
LEGAL_1:48998041A9
85
interest, and Mr. Rathore, who holds an 80% interest. FRDI’s corporation profile report
is attached hereto as Exhibit F.
32. Fortress and/or the Fortress Principals are involved in a substantial number of the real
estate development projects which underlie the BDMC SMLs (the 'Fortress/BDMC
Project(s)”). In some cases, Fortress acts as the development consultant for the
project. In other cases, the Fortress Principals, wholly or partially, own the special
purpose corporation which acts as the developer for the project and is the borrower
under the relevant BDMC SML (the “Fortress Borrower(s)”). In cases where Fortress
acts solely as a development consultant, the borrowers under BDMC SMLs are not
Fortress Borrowers.
(c) Relationship between BDMC, FRDI and the Fortress Borrowers
33. BDMC plays a number of functions in respect of BDMC SMLs. Up until the issuance of
the BDMC Suspension and Penalty Order, BDMC was the exclusive brokerage on
behalf of the Fortress Borrowers. Since 2013, BDMC has acted as mortgage
administrator for approximately 60% to 70% of the development projects involving
Fortress. The other 30% to 40% of SMLs that relate to Fortress/BDMC projects are
administered by lawyers who operate under the MBLAA’s exemption from licensing
requirements applicable to lawyers.
34. In its capacity as mortgage administrator, BDMC holds title to the mortgages underlying
the BDMC SMLs on behalf of the Investors. BDMC also acts in a fiduciary capacity to
administer and enforce the BDMC SMLs, again on behalf of the Investors.
35. Prior to the issuance of the BDMC Suspension and Penalty Order, BDMC also
performed or assisted in the performance of certain MBLAA-mandated tasks which
would typically be performed by the brokerages who represent the lenders/investors in
LEGALJ :48998041.410
86
an SML. In the case of the BDMC SMLs, one of three brokerages acted on behalf of
Investors: FMP Mortgage Investments Inc. (“FMP”), FFM Capital Inc. (“FFM”) or FDS
Broker Services Inc. (“FDS” and, collectively with FMP and FFM, the “Investor
Brokerages”). The functions that would typically have been performed by the Investor
Brokerages, but which were in fact performed by BDMC, included, without limitation,
conducting project due diligence reviews and drafting required written disclosures,
including the statutorily mandated FSCO disclosure forms (Form 1 - Investor/Lender
Disclosure Statement for Brokered Transactions ("Form 1”) and Form 1.1 -
Investor/Lender Disclosure Statement for Brokered Transactions: Addendum for
Construction and Development Loans (“Form 1.1")).
36. BDMC also obtained valuations of the properties underlying the Fortress/BDMC Projects
(the “Development Property(ies)”) for the purposes of providing disclosure to the
Investors concerning the value of the properties and the resulting loan to value ("LTV”)
ratios, including disclosures on the applicable Forms 1 and 1.1.
(d) The Investor Brokerages
37. The Investor Brokerages broker BDMC SMLs on behalf of the Investors. In this capacity,
they market BDMC SMLs as investment opportunities to members of the public. The
Investor Brokerages typically contact Investors through mortgage brokers or agents
authorized to deal or trade in mortgages on behalf of the Investor Brokerages, and/or
through unlicensed persons or entities operating under referral arrangements with an
Investor Brokerage. These salespeople market and, ultimately, sell the SML
investment(s) to the Investor. Linder the MBLAA, Investor Brokerages have a statutory
duty to ensure compliance with certain point of sale requirements, which are prescribed
under O. Reg. 153/15, the Mortgage Brokerages: Standards of Practice.
LEGALJ .48998041.411
87
38. Prior to early 2013, the functions currently performed by the Investor Brokerages were
performed by BDMC. In early 2013, certain personnel formerly associated with BDMC
created the Investor Brokerages at the direction of Ms. Galati, and transferred the
relevant functions from BDMC to the Investor Brokerages. FSCO staff understand that,
in so directing, Ms. Galati intended to provide some degree of separation as between the
brokerage for the Fortress Borrower and the brokerage for the Investor. Most of the
shareholders and principal brokers of the Investor Brokerages, as described in more
detail below, formerly worked for BDMC. The specific details concerning the three
Investor Brokerages are set out below.
(i) FFM
39. FFM is an Ontario corporation with its registered head office located at 81 Zenway
Boulevard, Suite 4, Vaughan, Ontario. Its directors are Yvonne Ferguson, Krish
Kochhar, and Tony Mazzoli. Mr. Mazzoli is a former employee of BDMC. Ms. Ferguson
is its sole officer. Mr. Mazzoli and Mr. Kochhar are FFM’s shareholders. A copy of
FFM’s corporation profile report is attached hereto as Exhibit G.
40. FFM holds a mortgage brokerage licence (licence #12391) under the MBLAA. Prior to
the issuance of the Suspension and Penalty Orders (defined and described below),
Rosalia Spadafora (licence #M8007218) was the principal broker of FFM. Ms.
Spadafora’s mortgage broker’s licence was revoked on consent under the Suspension
and Penalty Orders. The current principal broker of FFM is Yvonne Ferguson.
41. According to the 2016 Annual Information Return (“AIR”) filed by FFM, FFM brokered 39
SMLs totaling $33,212,701 during the one-year period covered by the AIR. A copy of
the FFM AIR is attached hereto as Exhibit H.
LEGALJ:48998041.412
88
00 FMP
42. FMP is an Ontario corporation with its registered head office located at 930 The East
Mall, Toronto, Ontario. Its sole director is Tonino Amendola, and its officers were Mr.
Amendola and David Hysen. Mr. Amendola is also FMP’s sole shareholder. Both Mr.
Amendola and Mr. Hysen are former employees of BDMC. A copy of FMP’s corporation
profile report is attached hereto as Exhibit I.
43. FMP holds a mortgage brokerage licence (licence #12373 under the MBLAA). Prior to
the issuance of the Suspension and Penalty Orders, Michael Daramola (licence
#M08003647) was the principal broker of FMP, and was formerly one of its officers. Mr.
Daramola’s mortgage broker’s licence was revoked on consent under the Suspension
and Penalty Orders. The current principal broker of FMP listed within FSCO’s system is
David Hysen. However, I have been informed by FAAN Mortgage that Mr. Hysen had
resigned this position. '
44. According to the 2016 AIR filed by FMP, FMP brokered 1097 SMLs totaling $52,553,868
during the one year period covered by the AIR. A copy of the FMP AIR is attached
hereto as Exhibit J.
(iii) FDS
45. FDS is an Ontario corporation with its registered head office located at 1604 Spring
Road, Mississauga, Ontario. Its sole director, officer and shareholder is Zafar Khawaja,
who is a former employee of BDMC. A copy of FDS’ corporation profile report is
attached hereto as Exhibit K.
46. FDS holds a mortgage brokerage licence under the MBLAA (licence #12367) under the
MBLAA. Prior to the issuance of the Suspension and Penalty Orders, Glenn May-
LEGAL_! :48998041.413
89
Anderson (Licence #M08008875) was the principal broker of FDS, and was formerly one
of its officers. The current principal broker of FDS is Zafar Khawaja.
47. According to the 2016 AIR filed by FDS, FDS brokered 1502 SMLs totaling $67,509,565
during the one year period covered by the AIR. A copy of the FDS AIR is attached
hereto as Exhibit L.
(e) Trust Companies
48. Many Investors deployed funds held in various types of registered savings vehicles
under the Income Tax Act (the “ITA”) to make investments in BDMC SMLs. In order to
do so, a financial institution who is prepared to facilitate the SML transactions and enjoys
the required status under the ITA must hold the registered account. Until August 2017,
Olympia Trust Company (“Olympia”), a trust company based and licensed in the
Province of Alberta (but not licensed in the Province of Ontario), handled the vast
majority of BDMC SML transactions involving registered accounts. As of August 2017,
Olympia announced that it would’no longer accept new SML business from Ontario
lenders. I am advised by FAAN Mortgage that, since that date, Computershare Trust
Company of Canada (“Computershare”) has facilitated the investments in BDMC SMLs
by Investors who wish to invest funds held in registered accounts.
(f) Canadian Development Capital & Mortgage Services Inc.
49. CDCM is a Federal corporation with its registered head office located at 25 Brodie Drive,
Suites #2 and #8, Richmond Hill, Ontario. Its sole director is Julie Galati, who is Ms.
Galati’s mother.
LEGALJ:4899804I.414
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50. CDCM holds a mortgage brokerage licence (licence #12979) under the MBLAA. Julie
Galati (licence #M08007025) is the principal broker of CDCM. A copy of Ms. Galati’s
licence status is attached hereto as Exhibit M.
51. Following the execution of the Settlement Agreement, CDCM has been brokering BDMC
SMLs on behalf of the Fortress Borrowers and other borrowers. CDCM has assumed
the role that was previously carried out by BDMC as borrower’s broker, and many of
BDMC’s former employees are now employed by CDCM.
THE LOAN STRUCTURE
52. The BDMC SMLs are governed by a number of key agreements. Although specific
terms vary from project to project, the loan structure described below is generally
applicable to BDMC SMLs for all Fortress/BDMC Projects where BDMC has acted as a
mortgage administrator.
(a) Development Consultant Agreement
53. A development consultant agreement (“DCA(s)”) is entered into as between Fortress
(identified as the “Development Consultant” in the DCA) and the relevant Fortress
Borrower or other borrower. Each DCA references an SML which is referred to as the
“loan” in the DCA. A copy of a sample DCA is attached hereto as Exhibit N.
54. A recital within the DCA indicates that Fortress "arranged for the Loan” and "will be
providing consulting services as contemplated in the Loan Agreement. As a general
matter, the terms of the DCA relate almost exclusively to Fortress’s role in respect of the
applicable BDMC SML. There are virtually no provisions which relate to real estate
development consulting services apart from Fortress’s involvement with the BDMC
SMLs.
LEGAL_l :48998041.415
91
55. A number of the DCAs provided to FSCO staff all contain an acknowledgment by the
relevant Fortress Borrower or other borrower which states that BDMC’s "supervisory and
monitoring obligations" are delegated to Fortress, and that the Fortress Borrower or
other borrower acknowledges that “it will be dealing with Fortress in all of these matters
as agent' for BDMC. The provision contemplates that Fortress will complete a “review of
the initial due diligence materials” provided by the Fortress Borrower or other borrower
and that other reports to be received by BDMC under the applicable Loan Agreement
(defined below) will be delivered to Fortress. Similar provisions are found in some of the
Loan Agreements.
56. The DCAs also provide that Fortress may arrange additional loan amounts to
accommodate increased project size, cost overruns or excess equity requirements
insisted on by the priority construction lender.
57. The DCAs provide that Fortress shall be entitled to 50% of the project profit, subject to
potential deductions relating to interest paid under the BDMC SMLs and certain other
upfront fees. Additionally, the profit share payment is reduced according to a prescribed
formula in the event that the full amount of the BDMC SML is not advanced.
58. The development consulting fee (the "DC Fee”) is defined in the DCAs as a lump sum
amount which generally appears to be equal to approximately 35% of the principal
amount of the BDMC SML. The DCA states that the DC Fee “shall be paid in part to
salespersons for commissions relating to raising investors funds, in part to Fortress (to
cover, inter alia, all professional costs and fees to be paid by Fortress) and as well, to
pay certain payments owing to investors herein." The DCAs contemplate that the
applicable percentage (i.e. typically 35%) of each loan advance shall be deducted from
LEGAL_l :4899804l .416
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the loan advance to pay the DC Fee, which "shall be payable concurrently with each
advance."
59. While the DCA is not entirely clear, FSCO staff understand that the DC Fee is used to
fund the payment of fees and commissions to intermediaries involved in the BDMC SML
transactions, including such amounts payable to the brokerages and individual agents,
brokers and unlicensed persons involved in the sale and brokering of BDMC SMLs. The
amount of the DC Fee paid to Fortress is the residue amount left over after these
payments are made, but is not specifically defined in the DCA. Based on information
provided to FSCO staff by Mr. Petrozza, the Fortress portion of the DC Fee typically
amounts to 2% to 5% of total project costs. CDCM staff have communicated to FAAN
Mortgage that the Fortress portion of the DC Fee may be as high as 12%.
60. The DCAs also provide for priority of payment assigned to certain obligations or parties,
which are paid out of the revenues generated by the project; The priority schedule for
the distribution of funds is referred to as the “Waterfall” in the DCA. Notably, it appears
that the Waterfall provides that the repayment of the principal amount of the BDMC SML
(less the amount of the DC Fee) ranks pari passu with the repayment of “cash equity
advances" made by the Fortress Borrower or other borrower. Further, the repayment of
the remaining amount of the BDMC SML principal attributable to the DC Fee purportedly
ranks below the repayment of the equity advances made by the Fortress Borrower or
other borrower.
61. The Investors are not parties to the DCAs, although the terms of the documents appear > •
to affect the Investors' interests, including with respect to the priority of their claims to the
proceeds from the Fortress/BDMC Projects under the Waterfall provisions, and the fact
LEG AL_l :4899804} .417
93
that BDMC’s supervisory and monitoring functions are delegated to Fortress. Despite
this fact, a copy of the relevant DCA is not provided to the Investors.
62. The substance of the Waterfall provision of the DCA is generally disclosed to the
Investors, but, in my experience, the Waterfall provision is drafted in a highly ambiguous
manner, definitions of material defined terms used in the Waterfall are not provided to
Investors and the text of the disclosure appears not to meet the clarity requirements set
out in section 33 of Ontario Regulation 188/08 (“Reg. 188/08”). In my view, it is highly
unlikely that Investors understand the legal effect of the Waterfall provision or its impact
on their recoveries under an SML.
(b) Loan Agreement
63. BDMC (in certain cases under its former name, Centro) entered into a separate loan
agreement with each relevant Fortress Borrower or other borrower (each, a “Loan
Agreement”). The parties to each Loan Agreement are BDMC (or Centro),1 in trust, as
“Lender”, and the applicable Fortress Borrower or other borrower, as “Borrower”.
Although the persons for whom BDMC is acting in trust are not specifically identified in
the Loan Agreements, FSCO staff understand that this provision is intended to refer to
the individual Investors under the BDMC SMLs. The Investors are not parties to the
Loan Agreements, although a copy of the applicable Loan Agreement is typically
included in the materials disclosed to the Investors. A copy of a sample Loan Agreement
is attached hereto as Exhibit O.
64. The specific provisions of the Loan Agreements vary from project to project; however,
the following provisions are generally included:
1 In some cases BDMC took over the administration of the loans from another party, so BDMC is the
18LEGALJ .48998041.4
94
(a) the term of the BDMC SML is at least two years;
(b) the term may be extended at the relevant Fortress Borrower’s or other borrower’s
option, for one year or more;
(c) a force majeure provision that allows the Fortress Borrower or other borrower to
extend the term of the loan for an additional two years following the occurrence
of a broad range of events beyond the narrow “acts of God” which force majeure
provisions usually cover, including, without limitation, delays in obtaining permits
or in ability to obtain supplies or services;* 2
(d) the principal, interest, and all other amounts owing under the Loan Agreement
are required to be repaid at the end of the term, or on demand if there is an
unremedied default (but subject to the Waterfall provision discussed above and
the subordination provisions described below);
(e) there is no requirement to make payments against the principal prior to the end
of the term;
(f) interest payments will be paid out of a reserve fund created by a holdback from
the initial loan advance (if any), or will accrue but will not be repaid until the end
of the term;
(g) the loan is to be secured by a mortgage on the applicable Development Property
(the “SML Charge"), which typically begins as a second-ranking or third-ranking
mortgage registered behind charges in favour of other lenders and may be
lender pursuant to an assignment of the relevant loan documents. This distinction is not important for present purposes.2 In some cases the force majeure or adverse development condition is contained in the PSA (defined below).
LEGALJ:48998041.419
95
further subordinated thereafter as a result of the postponement and
subordination provisions described immediately below. Copies of an example of
an SML Charge and parcel register for the applicable Development Property are
attached hereto as Exhibit P;
(h) BDMC is required to postpone and subordinate the SML Charge to “First-
Ranking Construction Loan Security”, as defined in the Loan Agreement. The
definition of “First-Ranking Construction Loan Security” is broadly drafted to
include security for any “construction loans”, which term is frequently not defined
or is defined using very broad language. In practice, BDMC regularly postponed
and subordinated SML Charges in favour of loans advanced by non-financial
institution lenders, to pay for, among other things, a wide variety of soft costs and
fees that may not typically be included in the industry-standard definition of
“construction financing”;
(i) BDMC is also required to postpone and subordinate the SML Charge to various
"Bridge Lenders” and “Replacement Lenders” if BDMC is unable to raise
sufficient funds from Investors to fully fund the loan;
(j) BDMC is required to discharge the SML Charge where all or any part of the
Development Property is being sold, including where there will not be sufficient
funding to repay the SML in full; and
(k) BDMC is required to discharge the SML Charge in respect of any part of the
Development Property which is not material to the development and/or the
market value of the Development Property, or which is required by any municipal
or governmental authority, in each case without requirement for payment or
prepayment of any part of the BDMC SML.
20LEGAL_1:48998041.4
96
(c) Participation and Servicing Agreement
65. BDMC (in certain cases under its former name, Centro) entered into a participation and
servicing agreement (each, a "PSA”) with each Investor, pursuant to which the Investor
agreed to participate in the applicable BDMC SML. Each PSA relates to a specific
BDMC SML, in relation to a specific Fortress/BDMC Project, and sets out the terms and
conditions under which BDMC will administer the applicable BDMC SML.
66. Although the specific provisions of each PSA vary, the following provisions are generally
included:
(a) BDMC is exclusively responsible for implementing, processing, administering and
servicing the BDMC SML on behalf of the Investor and other participants,
including obtaining and administering the security documents. BDMC is required
to exercise these functions in accordance with normal lending practice and with
the same degree of care and skill as a prudent lending institution would exercise
for its own account; ■
(b) BDMC is required to consult with the Investor prior to agreeing to any renewal or
any material amendment, modification or waiver (each, a “Change") of any of the
terms of the Loan Agreement, the security documents (i.e. the SML Charge), or
any agreement or document relating thereto. However, if BDMC requests the
Investor’s consent to any such action, the Investor shall be deemed to have
consented to the proposed Change unless it responds to BDMC within ten
business days of the mailing, delivery or emailing of BDMC’s request for consent.
Further, if BDMC receives the written consent or agreement to the proposed
Change from Investors holding at least 50.1% of the amount of the applicable
BDMC SML, the remaining Investors are deemed to consent to such Change.
LEGAL_1:48998041.421
97
The documents obtained during the course of FSCO’s examination disclose
cases where BDMC sent out requests for consent that did not give Investors an
option to refuse to grant consent or any clear method to express such a refusal;
and
(c) Investors are prohibited from directly or indirectly contacting the relevant Fortress
Borrower or other borrower, or any other person, with respect to the servicing of
the BDMC SML or the enforcement of the SML Charge, without the consent of
BDMC.
A copy of a sample PSA is attached hereto as Exhibit Q.
67. Taken together, and in light of BDMC’s obligation under the Loan Agreement to
postpone and subordinate the SML Charges to broadly-defined “construction loans” and
other financing sources, the PSAs give BDMC very broad authority to effect changes to
the BDMC SMLs and related SML Charges, that could have the effect of prejudicing the
Investors’ potential recovery under the BDMC SMLs.
(d) Confirmation of Lender’s Interest
68. In addition to the PSA, each of the Investor, BDMC, and the relevant Fortress Borrower
would execute a Confirmation of Lender’s Interest (each, a "Confirmation”). Pursuant
to the Confirmation, BDMC (in certain cases under its former name, Centro),
(a) confirms that it is holding the Investor’s interest in the BDMC SML, in trust;
(b) covenants to provide the Investor with notice of any material default by the
relevant Fortress Borrower or other borrower; and
LEGAL J :48998041.422
98
(c) agrees to enforce the BDMC SML “as would a prudent lender, having regard to
the quantum of the Loan and nature of the development against which the Loan
security is registered'.
69. In addition, the Investor covenants and agrees:
(a) to postpone and subordinate its interest in the BDMC SML in favour of one or
more construction loans in favour of arm’s-length lenders, including bridge
lenders and lenders under mezzanine financing, in an aggregate principal
amount not to exceed a prescribed sum;
(b) to postpone and subordinate its interest in the BDMC SML in favour of each
financial and non-financial encumbrance which is reasonable for a development
such as the relevant Fortress/BDMC Project, and which individually does not
materially adversely affect the market value of the Development Property; and
(c) to discharge its interest in the BDMC SML in respect of any part of the
Development Property which is not material to the development and/or the
market value of the Development Property, or which is required by any municipal
or governmental authority, without requirement for payment or prepayment of any
part of the BDMC SML.
A copy of a sample Confirmation is attached hereto as Exhibit R.
(e) Acknowledgement and Consent Agreement - Lender
70. As referenced above, in order for the Investor to invest in a BDMC SML using funds held
in a registered account (including an RRSP, RESP, or TFSA account), the registered
account has to be held at a financial institution which would administer the investment in
LEGAL_1:48998041A23
99
the BDMC SML. In cases where the registered account was held by Olympia (which was
the case for almost all registered accounts prior to August 2017), Olympia required the
Investor to execute an Acknowledgement and Consent Agreement - Lender (each, a
“LAC”). Each of the Investor, BDMC (or its predecessor, Centro), Olympia, and Fortress,
were parties to each LAC. A copy of a sample LAC is attached hereto as Exhibit S.
THE SETTLEMENT AGREEMENT AND MAA
71. In or around December 2015, FSCO began an investigation into Fortress, BDMC, and
the Investor Brokerages, arising from, among other things, certain concerns it had
identified regarding the administration of the BDMC SMLs.
72. On or about August 15, 2016, counsel to FRDI, on FRDI’s behalf, retained FAAN
Advisors Group Inc. (“FAAN Advisors”) to assist, among other things, with liaising with
regulatory bodies, including FSCO. FAAN Advisors is an affiliate of FAAN Mortgage.
73. FSCO’s investigation ultimately resulted in the Superintendent and BDMC entering into a
the Settlement Agreement. A copy of the Settlement Agreement is attached hereto as
Confidential Exhibit A.
74. In accordance with the Settlement Agreement, among other things:
(a) BDMC agreed to the revocation of its mortgage brokerage licence, while its
mortgage administrator’s licence was not revoked;
(b) BDMC agreed to pay administrative penalties in the amount of $400,000;
(c) FSCO issued the BDMC Suspension and Penalty Order, which formalized the
above licence revocation and penalty. In addition, it issued seven other orders,
24LEGAL 1:48998041.4
100
on consent, also dated February 1, 2018 (collectively with the BDMC Suspension
Order, the “Suspension and Penalty Orders”), as follows:
(i) requiring each of FFM, FMP, and FDS to pay an administrative penalty in
the amount of $235,000 (i.e. totaling $705,000); and
(ii) revoking the mortgage broker licences of Mr. Petrozza, Ms. Spadafora
(i.e. the principal broker of FFM), Mr. Daramola (i.e. the principal broker of
FMP), and Mr. May-Anderson (i.e. the principal broker of FDS). Copies of
the Suspension and Penalty Orders are collectively attached hereto as
Exhibit T;
(d) BDMC agreed to execute the MAA appointing FAAN Mortgage, as an
independent, arm’s-length party, to manage and direct BDMC’s Administration
Business; and
(e) BDMC agreed that, upon the termination of the MAA for any reason other than
the completion of the BDMC SMLs, it would consent to an order of this Court
under section 37 of the MBLAA appointing a receiver, receiver and manager,
trustee and/or liquidator of the property in the possession or under the control of
BDMC, including the BDMC SMLs.
75. The Settlement Agreement expressly provides that its terms and any related documents,
information or records are to remain confidential and subject to settlement privilege,
except in certain limited circumstances.
76. On or about February 7, 2018, BDMC and FAAN Mortgage executed the MAA. A copy
of the MAA is attached hereto as Confidential Exhibit B.
LEGAL_I 48998041.425
101
77. On the same day, the engagement of FAAN Advisors was terminated. A copy of the
termination agreement is attached hereto as Confidential Exhibit C.
78. As a result of having entered into the Settlement Agreement, BDMC is no longer
permitted to operate as a mortgage brokerage. Since the date of the Settlement
Agreement, FSCO staff has been advised that CDCM has been brokering BDMC SMLs
on behalf of the Fortress Borrowers and other borrowers, having assumed the role that
was previously carried out by BDMC as borrower’s brokerage. Many former BDMC staff
are now employed by CDCM.
FAAN MORTGAGE’S EXPERIENCE UNDER THE MAA
79. Following the execution of the MAA, and in accordance with its terms, FAAN Mortgage
began providing the services that comprise BDMC’s Administration Business.
80. I am advised by FAAN Mortgage that it spent the initial weeks following its engagement
attending to urgent matters in an effort to normalize BDMC’s business and
administration operations, including addressing enforcement actions by senior lenders
on Fortress/BDMC Projects and responding to a great deal of pent-up Investor
frustration concerning the status of their loans and progress of the various
Fortress/BDMC Projects.
81. FAAN Mortgage began administering approximately 66 BDMC SMLs, in relation to
approximately 45 Fortress/BDMC Projects. Attached hereto as Exhibit U is a table
identifying the BDMC SMLs and briefly describing the outstanding enforcement actions
that have been taken to date in respect of the related Fortress/BDMC Projects by other
parties.
LEGAL 1:48998041.426
102
82. Since its appointment, I am advised by FAAN Mortgage that it has received hundreds of
calls and emails from concerned Investors who require clarification and/or information
concerning the BDMC SMLs in which they are invested, and the underlying
Fortress/BDMC Projects. FAAN Mortgage has been communicating regularly with
Investors to, among other things, provide updates on Fortress/BDMC Projects (to the
extent that information is made available to FAAN Mortgage by CDCM on behalf of the
Fortress Borrowers, or other borrowers) and respond to questions generally regarding
their investments. FAAN Mortgage also established a website
(www.faanmortgageadmin.com), an information email address
([email protected]) and a toll free number to communicate with Investors.
A copy of the letter provided by FAAN Mortgage as Manager of BDMC advising
Investors of its role and contact information is attached hereto as Exhibit V.
83. Regrettably, the MAA has proven to be unworkable. BDMC did not retain a full
complement of staff, contrary to the provisions of the MAA. Many key staff members
moved to CDCM, where they were not under the supervision of FAAN Mortgage. One
critical staff member has not been paid.
84. FAAN Mortgage has not been granted full and unfettered access to BDMC’s documents,
servers or records. I am advised by FAAN Mortgage that requests for documents and
information must go through CDCM and Mr. Petrozza, where they have often been met
with resistance and demands for explanations to justify the information requests. FAAN
Mortgage has been required to explain that it needs to review the documents to form an
independent view of whether certain documents should be executed or other steps taken
(including, without limitation, providing notices to Investors) so that FAAN Mortgage can
perform its duties to the Investors and comply with the Standards.
LEGAL_1:48998041.427
103
85. CDCM has also attempted to influence FAAN Mortgage’s communications with
Investors. CDCM controls the servers and software that are used to send Investor
communications, and maintains a record of all BDMC Investors and their contact
information. On more than one occasion, Investor notices have been delayed while
CDCM attempts to negotiate the content of the notice with FAAN Mortgage.
86. In addition, I am advised by FAAN Mortgage that on or about March 21, 2018, CDCM or
its representatives deprived FAAN Mortgage of access to Investor information
maintained by CDCM. I am advised by FAAN Mortgage that CDCM took this action as a
result of FAAN Mortgage, in accordance with its duties under the MAA, having advised
Olympia that Olympia should only be taking direction from a FAAN Mortgage
representative in respect of BDMC’s affairs.
87. On or about March 26, 2018, CDCM sent communications directly to Investors to seek
their consent to certain matters related to a Fortress/BDMC Project, effectively assuming
BDMC’s Administration Business and usurping FAAN Mortgage’s role. FAAN Mortgage
had expressly advised CDCM not to send any such communications, but was ignored.
CDCM subsequently retracted the communication at FAAN Mortgage’s request. A copy
of the notice sent by CDCM is attached as Exhibit W.
88. I am further advised by FAAN Mortgage that CDCM and FRDI staff have instructed
FAAN Mortgage on certain occasions that neither FAAN Mortgage nor its counsel should
contact borrowers or lenders directly (unless expressly authorized to do so), because
any such action could have a detrimental impact on the negotiations with such parties or
that certain information is confidential and should not be disclosed. FAAN Mortgage has
been advised that such unauthorized contact might be grounds for litigation being
commenced against FAAN Mortgage by a third party.
LEGAL J .48998041.428
104
89. Notwithstanding the lack of information or ability to consult with key stakeholders, I am
advised by FAAN Mortgage that it has been under significant and, in some cases,
inappropriate, pressure from parties involved in the various Fortress/BDMC Projects,
including, among others, co-developers and senior lenders, to sign various documents in
order to facilitate refinancings, sales and other matters. FAAN Mortgage is provided with
a very short period to review such documents. FAAN Mortgage frequently faces
complaints regarding the length of time it takes FAAN Mortgage to execute documents,
including in circumstances where FAAN Mortgage’s requests for further information have
been delayed and/or FAAN Mortgage has advised that it wishes to consult with its legal
counsel and that legal counsel needs time to review documents.
90. I am advised by FAAN Mortgage that it has been working to complete its due diligence
as fast as possible and to respond to the various requests made on it in accordance with
its duties under the MAA and the Standards, but the events of April 13, 2018, described
below, have caused FAAN Mortgage to have heightened concern regarding BDMC’s
business, particularly given FAAN Mortgage’s difficulties, in getting information to date in
a timely manner.
RCMP EXECUTION OF SEARCH WARRANTS ON APRIL 13, 2018
91. On April 13, 2018, at approximately 9:30 a.m., several RCMP officers arrived at BDMC’s
premises. The officers presented Lana Bezner, an employee of FAAN Mortgage who
was on site to manage BDMC’s Administration Business, with a copy of a search
warrant dated April 10, 2018, permitting officers to search and retrieve documents from
the BDMC premises (the "Search Warrant”). A copy of the Search Warrant is attached
hereto as Confidential Exhibit D.
LEGAL_J :48998041429
105
92. Media reports indicated that the RCMP executed five other search warrants at five other
locations also on April 13, 2018.
93. In light of the Search Warrant, FAAN Mortgage has been placed in an extremely difficult
position. I am advised by FAAN Mortgage that it is receiving large volumes of inquiries
from Investors, who are concerned that their investments are at risk. Further, FAAN
Mortgage is continuously receiving requests, in some cases accompanied by threats of
litigation, to execute documents to postpone the SML Charges to mortgages to be
granted to other lenders and to take other substantive steps to continue to operate
BDMC's Administration Business. Flowever, FAAN Mortgage continues to be operating
without access to sufficient data and with limited opportunities to speak to relevant
stakeholders, which delays FAAN Mortgage’s ability to complete proper diligence to
satisfy itself that it is appropriate to accede to any given request.
94. Accordingly, FAAN Mortgage is of the view that it cannot take any steps to continue to
operate BDMC’s Administration Business without the supervision, direction and
protection of this Court.
EVENTS OF DEFAULT UNDER MAA
95. BDMC failed to adhere to a number of its obligations under the MAA. Among other
things, BDMC has failed to meet its funding requirements. Funding of FAAN Mortgage is
an important component of the MAA for FSCO. As such, the MAA included an obligation
on BDMC to fund and maintain a reserve fund to pay FAAN Mortgage’s costs for a
period of time. FRDI and certain of its affiliates (collectively the “Contributing Entities”)
provided a guarantee and indemnity to FAAN Mortgage in respect of BDMC’s funding
obligations under the MAA.
LEGAL_l:4899804l 430
106
96. As a result of BDMC’s failure to comply with the MAA, FAAN Mortgage has issued
default and other notices to BDMC, which are set out below.
97. On March 28, 2018, FAAN Mortgage issued to BDMC a notice of default in respect of
CDCM’s communications with Investors described above (the “March 28 Notice of
Default”). Also as described above, CDCM subsequently advised Investors that it was
withdrawing the notice. A copy of the March 28 Notice of Default is attached hereto as
Exhibit X.
98. On April 3, 2018, FAAN Mortgage issued to a notice of default (the "April 3 Notice of
Default”) in respect of BDMC’s failure to make required payments to the reserve fund
(as established under the MAA), and to pay FAAN Mortgage’s invoices when due,
constituting BDMC Events of Default pursuant to sections 8.3(a)(iv) and (ii) of the MAA.
A copy of the April 3 Notice of Default is attached hereto as Exhibit Y.
99. On April 3, 2018, FAAN Mortgage issued a demand to pay to FRDI and the Contributing
Entities. A copy of the demand is attached hereto as Exhibit Z.
100. In addition, on April 3, 2018, FAAN Mortgage issued to BDMC a "Notice of Withdrawal
from Reserve Fund” in accordance with section 9.3(d) of the MAA (the “Notice of
Withdrawal”), a copy of which is attached hereto as Exhibit AA. As set out in the
Notice of Withdrawal, FAAN Mortgage advised BDMC that the reserve fund established
pursuant to section 9.3 of the MAA (the “Reserve Fund”) had reached a balance of $0,
and required BDMC to deposit $100,000 into the Reserve Fund immediately. FAAN
Mortgage further advised that if an additional $100,000 was not deposited within five
days of the date of the Notice of Withdrawal (i.e. by April 8, 2018), this would constitute a
further BDMC Event of Default under section 8.3(a)(iii) of the MAA.
LEGAL_1:48998041.431
107
101. BDMC did not cure the defaults identified in the April 3 Default Notice within the
prescribed five day period following delivery of the notices, as required pursuant to
section 8.3(b) of the MAA, and failed to deposit the $100,000 into the Reserve Fund as
required.
102. On April 19, 2018, FAAN Mortgage issued to BDMC an additional notice of default and
termination (the “April 19 Notice of Default”) advising of the following defaults:
(a) BDMC has not cured the BDMC Events of Default specified in the April 3 Notice
of Default in respect of FAAN Mortgage’s outstanding invoices and reimbursable
expenses;
(b) Several additional BDMC Events of Default have occurred since April 3, 2018,
including:
(i) BDMC is in default of its obligations to fund the reserve fund to a
minimum of $300,000 by April 15, 2018, as required by section 9.3(b) of
the MAA;
(ii) BDMC is in default of its obligations to pay into the reserve fund a
minimum of $100,000 to replenish the Reserve Fund Balance to
$100,000 within five days of the Notice of Withdrawal from Reserve Fund
dated April 3, 2018, as required by section 9.3(d) of the MAA;
(iii) BDMC is insolvent;
(iv) FRDI and the Contributing Entities have failed to make the payments
required under such agreement, including the payments demanded on
April 3, 2018; and
LEGAL_l:48998041.432
108
(v) FAAN Mortgage has reason to believe that additional BDMC Events of
Default have occurred or will occur in the near term and has lost all
confidence in BDMC’s ability to comply with the MAA.
103. The April 19 Termination Notice provides that the MAA will be terminated pursuant to
section 8.3(b) of the MAA effective as of the date an order is issued appointing a trustee
over BDMC pursuant to section 37 of the MBLAA and that FAAN Mortgage reserved all
of its rights under the MAA and other related agreements, including the right to terminate
the MAA immediately should FAAN Mortgage determine, in its sole discretion, that
circumstances so warrant.
A copy of the April 19 Termination Notice is attached hereto as Exhibit BB.
104. As set out above, BDMC has already consented to the appointment of a trustee upon
the termination of the MAA, and the existing defaults in the MAA entitle FAAN Mortgage
to terminate the MAA, which it gave notice of on April 19, 2018, effective on the issuance
of an order of this court under section 37 of the MBLAA . The events of April 13, 2018,
together with the pressure being applied to FAAN Mortgage by various parties, heighten
the need to obtain the relief requested in this application.
THE TRUSTEE MUST BE APPOINTED URGENTLY
105. FAAN Mortgage has advised that it has lost all confidence in BDMC’s ability to comply
with the MAA, is not willing to continue its mandate under the MAA in the circumstances
and requires the protection and direction of a court order if it is to continue to manage
BDMC’s Administration Business.
106. If FAAN Mortgage terminates the MAA and the order sought herein is not granted, there
will be no independent third party to perform mortgage administration functions and
33LEGAL_1:48998041.4
109
protect the Investors' interests. This situation is untenable and puts the 11,000 individual
Investors and their investments at risk. As such, it is critical that an order appointing a
trustee pursuant to section 37 of the MBLAA be granted forthwith.
107. FAAN Mortgage’s involvement with the Investors, BDMC and BDMC’s Administration
Business and its intimate knowledge of the business structure makes FAAN Mortgage
uniquely positioned to fulfill a mandate to the protect the interests of the Investors.
Further, a court order can alleviate a number of the issues that FAAN Mortgage has
encountered in attempting to fulfill its mandate.
108. In light of the concerns identified herein with regard to:
(a) the provisions of the agreements that underpin the structure of the BDMC SMLs,
which grant broad powers to BDMC and/or Fortress, to the potential prejudice of
the Investors;
(b) the need to continue to operate BDMC’s Administration Business, in light of the
current status of the various Fortress/BDMC Projects; and
(c) the existence of the RCMP investigation,
FSCO is of the view that the immediate appointment of the trustee is necessary to
adequately protect the Investors’ interests, and that such an appointment is therefore in
the public interest.
109. As more fully described below, the order sought will give FAAN Mortgage the required
protection and better equip FAAN Mortgage to attempt to stabilize BDMC’s
Administration Business, including by facilitating unfettered access to servers,
documents, and electronic data systems as well as providing a clear mandate and path
. LEGAL_1 ;48998041 A34
110
for FAAN Mortgage to engage with relevant borrower and lender stakeholders without
interference, in each case as initially contemplated under the MAA.
THE ORDER SOUGHT
110. The proposed form of Order (the "Proposed Order”) is based on the model receivership
order used in this Court, with certain modifications to reflect the particular circumstances
of the proposed appointment.
111. The Proposed Order will allow FAAN Mortgage, in its capacity as trustee of BDMC (in
such capacity, the "Trustee”) to receive, preserve, protect and maintain control of all of
BDMC’s property, including, without limitation, all of the assets in the possession or
under the control of BDMC, its counsel, agents and/or assignees but held on behalf of
any other party, including, but not limited to Investors, brokers, or borrowers, in each
case whether or not such property is held in trust or is required to be held in trust,
including the SML Charges (collectively, the “Property”), and to administer the BDMC
SMLs on behalf of Investors. In this regard, the Proposal Trustee will be empowered to
execute documents in place of BDMC, including documents in connection with
registrations in the applicable land registry office.
112. The Proposed Order will allow the Trustee to sell the Property and to restructure the
Property, with Court approval. This will permit the Trustee to deal with the Property in a
manner that it believes is in the best interests of the Investors, subject to the protections
inherent in requiring Court approval of such steps.
113. The Proposed Order will ensure that all of the registered funds that were raised from
Investors and are being administered by Olympia or Computershare, will be protected.
LEGAL_1:48998G41.435
111
114. The Proposed Order includes a stay of proceedings, as is commonly found in insolvency
proceedings, which will have the effect of ensuring that all creditors are treated equally,
without affording any undue advantage to any party.
115. The Proposed Order will ensure the continuation of services by requiring all persons who
supply goods and/or services to BDMC to continue to do so in accordance with normal
payment practices.
116. Perhaps most crucially in the circumstances, the Proposed Order will empower the
Trustee to gain unfettered access to BDMC’s information, documents, and electronic
data systems, and to deal directly with the various parties involved, including the
Fortress Borrowers and other borrowers under the BDMC SMLs, and the Investors.
Currently, as set out above, CDMC, Fortress, and/or the Fortress Principals have at
times interfered with FAAN Mortgage’s efforts to access this information and
communicate with these parties, to the detriment of FAAN Mortgage’s ability to manage
and direct BDMC’s Administration Business.
CONCLUSION
117. Based on the foregoing, FSCO staff are of the opinion that FAAN Mortgage should be
appointed as Trustee.
118. I make this affidavit in support of the Superintendent’s application pursuant to section 37
of the MBLAA and section 101 of the Courts of Justice Act for an order appointing FAAN
Mortgage as trustee over the property, assets and undertakings of BDMC, and for no
improper purpose.
LEGALl :48998041.436
112
SWORNToronto
E at the City of of April, 2018.
Cpmmiss/prner for taking affidavits
))))))))
BRENDAN FORBES
LEGALJ;48998041.437
113
Appendix 3:
Project Status Chart as of May 31, 2018
114
Deriv
ed fr
om B
DMC
reco
rds,
info
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ided
by
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ress
and
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M a
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ay 3
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tee
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aine
d he
rein
Build
ing
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ortg
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Inc.
Sum
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Pro
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tus a
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ay 3
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udite
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tRe
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evel
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ent a
ppro
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elop
men
t app
rova
ls ar
e su
bmitt
ed/f
ully
app
rove
d an
d th
e m
arke
ting,
sale
s and
/or l
easin
g pr
ogra
m h
as c
omm
ence
d.Co
nstr
uctio
nDe
mol
ition
or c
lear
ing
of o
n-sit
e st
ruct
ures
/impr
ovem
ents
com
plet
e, c
onst
ruct
ion
has s
tart
ed v
ia si
te se
rvic
ing,
exc
avat
ion,
reno
vatio
n or
har
d co
nstr
uctio
n.Co
mpl
eted
Cons
truc
tion
is co
mpl
ete,
uni
ts re
mai
n un
sold
.
NO
.PR
OJE
CT N
AME
BORR
OW
ER N
AME
PRO
JECT
ADD
RESS
Nat
ure
of P
roje
ct (C
ondo
, Tow
n, C
omm
erci
al,
hom
es)
# of
uni
tsSt
atus
Com
men
tary
der
vied
from
info
rmat
ion
prov
ided
by
Fort
ress
, CDC
M, n
ews r
epor
ts o
r oth
er
sour
ces
118
9 Du
ndas
189
Dund
as S
tree
t Wes
t Inc
.18
9 Du
ndas
St W
, Miss
issau
ga, O
N10
(ten
), 4-
stor
ey, s
tack
ed, b
ack-
to-b
ack
tow
nhou
se b
lock
s10
Deve
lopm
ent
Deve
lopm
ent a
ppro
vals
need
ed.
A fo
rmal
pla
nnin
g su
bmiss
ion
is te
ntat
ivel
y pl
anne
d fo
r end
of
2018
. The
re is
cur
rent
ly n
o SM
L on
this
proj
ect.
26t
h an
d Te
nth
Bel C
alga
ry In
c.63
3-10
th A
ve S
W, C
alga
ry, A
BCo
ndom
iniu
m23
0Co
mpl
eted
Com
plet
ed c
ondo
min
ium
, with
uni
ts re
mai
ning
for s
ale.
3Ba
uhau
sLa
mb
Bauh
aus I
nc.
284
King
Str
eet E
, Tor
onto
, ON
Cond
o an
d 19
05 sf
of r
etai
l spa
ce o
n gr
ound
flo
or20
5Pr
e-co
nstr
uctio
n
Deve
lopm
ent a
ppro
vals
need
ed. A
n ap
peal
was
file
d w
ith th
e O
ntar
io M
unic
ipal
Boa
rd ("
OM
B") i
n N
ovem
ber,
2017
with
resp
ect t
o th
e co
nstr
uctio
n of
the
prop
osed
30-
stor
ey b
uild
ing.
It is
an
ticip
ated
a h
earin
g da
te w
ill b
e sc
hedu
led
12-1
8 m
onth
s fol
low
ing
filin
g of
the
appe
al.
4Bo
wm
anvi
lleBr
ookh
ill H
oldi
ngs I
nc.
299
Nas
h Ro
ad &
253
8, 2
494
Regi
onal
Roa
d 57
; Cl
arin
gton
, ON
190
hom
es, s
plit
betw
een
tow
ns (8
4) a
nd si
ngle
-de
tach
ed h
omes
190
Deve
lopm
ent
Borr
ower
in d
efau
lt on
var
ious
seni
or lo
ans,
but
enf
orce
men
t pro
ceed
ings
in a
beya
nce
whi
le
refin
anci
ng is
neg
otia
ted.
Dev
elop
men
t app
rova
ls ne
eded
. Loc
al to
wns
hip
need
s to
appr
ove
an
upda
ted
seco
ndar
y pl
an, t
arge
ted
for t
he su
mm
er o
f 201
9. B
orro
wer
's fo
rmal
subd
ivisi
on p
lan
will
no
t be
subm
itted
unt
il af
ter t
he se
cond
ary
plan
is a
ppro
ved,
like
ly in
Q2
2020
.
5Br
adfo
rd B
ond
Head
Sunr
ise A
cqui
sitio
ns (B
ond
Head
) Inc
.28
75 H
ighw
ay 2
7, T
owns
hip
of W
est G
will
imbu
ry,
ON
Deta
ched
hou
sing
(sub
divi
sion)
and
To
wnh
omes
50 d
etac
hed
and
44
tow
nhou
ses
Deve
lopm
ent
Deve
lopm
ent a
ppro
vals
need
ed. D
raft
Plan
of S
ubdi
visio
n an
d Zo
ning
By-
law
Am
endm
ent
appl
icat
ions
hav
e be
en d
eem
ed c
ompl
ete
by th
e lo
cal m
unic
ipal
ity .
It is
poss
ible
that
a
reco
mm
enda
tion
will
be
brou
ght f
orw
ard
to c
ounc
il in
Q4-
2018
/Q1-
2019
.
6Br
aest
one
Brae
ston
e De
velo
pmen
t Cor
pora
tion
3009
Lin
e 8
Nor
th, M
oons
tone
, ON
Hom
es22
9Co
nstr
uctio
nDe
liver
y of
hom
es fr
om P
hase
s 1 a
nd 2
is o
ngoi
ng. P
hase
2 fa
ces e
nviro
nmen
tal c
halle
nges
and
co
st o
verr
uns.
7Br
ookd
ale
Fort
ress
Bro
okda
le In
c.37
5 &
377
Fai
rlaw
n Av
e, 1
678-
1704
Ave
nue
Rd, 4
12
Broo
kdal
e Av
e, T
oron
to, O
NCo
ndom
iniu
m80
Cons
truc
tion
Borr
ower
in d
efau
lt on
all
proj
ect l
oans
. Con
stru
ctio
n at
Bro
okda
le h
as h
alte
d an
d th
e pr
ojec
t is
subj
ect t
o a
pow
er o
f sal
e en
forc
emen
t pro
ceed
ing.
8Ca
pita
l Poi
nte
Wes
tgat
e Pr
oper
ties L
td.
1971
Alb
ert S
t, Re
gina
, SK
Cond
omin
ium
183
Cons
truc
tion
Cons
truc
tion
has c
ease
d an
d th
e bo
rrow
er is
app
ealin
g an
ord
er re
quiri
ng it
to re
clai
m th
e sit
e.
The
borr
ower
is c
onsid
erin
g its
opt
ions
rega
rdin
g th
is pr
ojec
t. Gi
ven
the
stat
us o
f the
cur
rent
co
ndo
mar
ket i
n Re
gina
, the
bor
row
er is
con
sider
ing
rent
al u
nits
or s
enio
rs re
siden
ce a
s opt
ions
fo
r the
pro
ject
.
9Ca
stle
mor
e (C
ache
t)Em
eral
d Ca
stle
Dev
elop
men
ts In
c.10
431
Gore
Roa
d, B
ram
pton
, ON
49-a
cre
low
-rise
dev
elop
men
t, w
ill in
clud
e a
mix
of si
ngle
-det
ache
d an
d se
mi-d
etac
hed
hom
es.
unkn
own
Deve
lopm
ent
Deve
lopm
ent a
ppro
vals
need
ed. T
he O
ffici
al P
lan
Amen
dmen
t app
licat
ion
has b
een
appe
aled
to
the
OM
B as
the
mun
icip
ality
has
not
mad
e a
deci
sion
on th
e ap
plic
atio
n. A
n O
MB
pre-
hear
ing
is an
ticip
ated
to ta
ke p
lace
in e
arly
201
9.
10Ch
arlo
tte
Adel
aide
Tow
erFo
rtre
ss C
harlo
tte
2014
Inc.
477
Rich
mon
d St
W, T
oron
to, O
NCo
ndom
iniu
mun
know
nDe
velo
pmen
tDe
velo
pmen
t app
rova
ls ne
eded
. An
OM
B he
arin
g w
as h
eld
in N
ovem
ber 2
017.
A d
ecisi
on b
y th
e O
MB
is an
ticip
ated
late
r in
2018
.
11Co
llier
Cen
ter
Fort
ress
Col
lier C
entr
e Lt
d.55
Mul
cast
er S
t, Ba
rrie
, ON
Com
mer
cial
reta
il w
hich
may
be c
onve
rted
to
resid
entia
lun
know
nCo
nstr
uctio
n
The
Borr
ower
is in
def
ault
of c
erta
in se
nior
loan
s and
may
face
enf
orce
men
t in
the
near
term
. The
bo
row
er is
wor
king
on
alte
rnat
ives
for t
his p
rope
rty
in a
n ef
fort
to p
reve
nt th
e en
forc
emen
t pr
ocee
ding
s. A
ssum
ing
the
proj
ect p
roce
eds,
the
plan
is to
con
vert
the
com
mer
cial
tow
er in
to a
re
siden
tial t
ower
.
12Cr
estv
iew
Com
mon
sCa
rlyle
Com
mun
ities
(Cre
stvi
ew) I
nc.
1640
Cre
stvi
ew A
ve, M
ississ
auga
, ON
Tow
nhou
ses
20Pr
e-co
nstr
uctio
nTh
e bo
rrow
er h
as a
dvise
d th
at a
few
mor
e un
its n
eed
to b
e so
ld b
efor
e co
nditi
ons p
rece
dent
to
cons
truc
tion
finan
cing
will
be
sats
ified
and
fund
s can
be
adva
nced
.
13Ed
en (K
ing
City
)23
0991
8 O
ntar
io In
c.23
0, 2
30A,
240
, 250
Dew
St,
King
City
, ON
16 S
emi-d
etac
hed
hom
es a
nd 1
2 sin
gle-
deta
ched
hom
es28
Cons
truc
tion
Cons
truc
tion
of h
omes
has
bee
n co
mpl
eted
. Fin
ishin
g al
l ext
erio
r, la
ndsc
apin
g an
d st
reet
re
quire
men
ts is
in p
roce
ss.
14N
oble
ton
Sout
hN
oble
ton
Sout
h Ho
ldin
gs In
c.92
Dia
na D
r, N
oble
ton,
ON
Sing
le d
etac
hed
hom
es96
Deve
lopm
ent
Deve
lopm
ent a
ppro
vals
need
ed. C
onsu
ltatio
n w
ith re
gion
al a
nd p
rovi
ncia
l gov
ernm
ents
con
tinue
, af
ter w
hich
tim
e a
form
al p
lann
ing
appl
icat
ion
to th
e m
unic
ipal
ity w
ill b
e su
bmitt
ed.
15Gl
ens o
f Hal
ton
Hills
(G
eorg
etow
n)23
0113
2 O
ntar
io In
c. &
230
9840
Ont
ario
Inc.
1375
8 &
137
64 H
wy
7, 2
2 &
24
Dayf
oot D
r, 8
Lind
say
Ct, G
eorg
etow
n, O
NTo
wnh
ouse
s and
Con
dom
iniu
m
Firs
t par
cel (
off L
inds
ayCo
urt)
plan
is fo
r 109
to
wns
; 2nd
pro
pert
y (D
ayfo
ot) 4
stor
ey 3
5 un
it Co
ndo
Pre-
cons
truc
tion
The
Borr
ower
is in
def
ault
of c
erta
in se
nior
loan
s and
may
face
enf
orce
men
t in
the
near
term
. Bo
rrow
er h
as b
een
wor
king
to se
cure
fina
ncin
g to
repa
y th
e se
nior
loan
s and
pre
vent
the
enfo
rcem
ent p
roce
edin
gs, a
dra
ft co
mm
itmen
t let
ter h
as b
een
rece
ived
in th
at re
gard
.
16Hi
ghla
nds o
f Yor
k Re
gion
Sout
h W
est Q
ueen
svill
e Ho
ldin
gs In
c.19
935,
198
51, 1
9879
2nd
Con
cess
ion
Que
ensv
ille,
O
NSi
ngle
det
ache
d ho
mes
102
Deve
lopm
ent
Deve
lopm
ent a
ppro
vals
need
ed. T
he re
port
s and
stud
ies p
acka
ge n
eede
d fo
r the
Dra
ft Pl
an o
f Su
bdiv
ision
and
Zon
ing
By-la
w A
men
dmen
t app
licat
ions
nea
ring
com
plet
ion.
Sub
miss
ion
of
plan
ning
app
licat
ions
to th
e M
unic
ipal
ity a
ntic
ipat
ed in
late
201
8.
17Hu
mbe
rsto
neW
orth
ingt
on H
omes
(Hum
bers
tone
) Inc
.3
Halto
n Hi
lls D
r, Ha
lton
Hills
, ON
Tow
nhou
ses
102
Deve
lopm
ent
Deve
lopm
ent a
ppro
vals
need
ed. O
MB
appe
al w
as fi
led,
app
eal w
as d
ismiss
ed. T
he m
unic
ipal
ity
had
prev
ious
ly g
rant
ed D
raft
Plan
of S
ubdi
visio
n an
d Zo
ning
By-
law
Am
endm
ent a
ppro
val b
y Co
unci
l in
July
201
7.
1 of
3
115
115
Deriv
ed fr
om B
DMC
reco
rds,
info
rmat
ion
prov
ided
by
Fort
ress
and
CDC
M a
nd n
ews r
epor
ts a
s of M
ay 3
1, 2
018
The
Trus
tee
has n
ot a
udite
d, re
view
ed o
r oth
erw
ise a
ttem
pted
to v
erify
the
accu
racy
or c
ompl
eten
ess o
f the
info
rmat
ion
cont
aine
d he
rein
Build
ing
& D
evel
opm
ent M
ortg
ages
Can
ada
Inc.
Sum
mar
y of
Pro
ject
Sta
tus a
s at M
ay 3
1, 2
018
(Una
udite
d)
LEGE
ND:
De
velo
pmen
tRe
zoni
ng a
nd d
evel
opm
ent a
ppro
vals
are
bein
g so
ught
prio
r to
the
laun
ch o
f sal
es a
nd m
arke
ting
or le
ase
up.
Pre-
cons
truc
tion
Rezo
ning
and
dev
elop
men
t app
rova
ls ar
e su
bmitt
ed/f
ully
app
rove
d an
d th
e m
arke
ting,
sale
s and
/or l
easin
g pr
ogra
m h
as c
omm
ence
d.Co
nstr
uctio
nDe
mol
ition
or c
lear
ing
of o
n-sit
e st
ruct
ures
/impr
ovem
ents
com
plet
e, c
onst
ruct
ion
has s
tart
ed v
ia si
te se
rvic
ing,
exc
avat
ion,
reno
vatio
n or
har
d co
nstr
uctio
n.Co
mpl
eted
Cons
truc
tion
is co
mpl
ete,
uni
ts re
mai
n un
sold
.
NO
.PR
OJE
CT N
AME
BORR
OW
ER N
AME
PRO
JECT
ADD
RESS
Nat
ure
of P
roje
ct (C
ondo
, Tow
n, C
omm
erci
al,
hom
es)
# of
uni
tsSt
atus
Com
men
tary
der
vied
from
info
rmat
ion
prov
ided
by
Fort
ress
, CDC
M, n
ews r
epor
ts o
r oth
er
sour
ces
18Ja
sper
Hou
seBe
l-Edm
onto
n In
c.10
160/
68 1
06th
St N
W, E
dmon
ton,
AB
Cond
o or
igin
ally
now
con
sider
ing
conv
ersio
n to
a
rent
al b
uild
ing
unkn
own
Deve
lopm
ent
No
signi
fican
t mov
emen
t on
this
proj
ect.
The
bor
row
er is
look
ing
to c
onve
rt th
is pr
ojec
t to
a re
ntal
bui
ldin
g du
e to
the
curr
ent m
arke
t con
ditio
ns in
Alb
erta
.
19Ki
ng S
quar
eKi
ng S
quar
e Lt
d.93
90 W
oodb
ine
Ave,
Mar
kham
, ON
Com
mer
cial
, ret
ail a
nd c
onve
ntio
n ce
ntre
co
mpl
ex (f
irst p
hase
of 3
, For
tres
s onl
y in
pha
se
1)un
know
nCo
nstr
uctio
nCo
nstr
uctio
n is
ongo
ing.
Ten
ants
are
sche
dule
d to
mov
e in
late
sum
mer
201
8. A
n ex
it is
plan
ned
for t
he sy
ndic
ate
with
in th
e ne
xt 1
2 m
onth
s.
20Ki
ngrid
ge S
quar
e (S
peer
s)Ki
ngrid
ge D
evel
opm
ent C
orpo
ratio
n23
5 Sp
eers
Rd,
Oak
ville
, ON
Offi
ce/c
omm
erci
al c
ondo
min
ium
dev
elop
men
t un
know
nCo
mpl
eted
Com
plet
ed a
nd re
gist
ered
com
mer
cial
pro
ject
, with
uni
ts re
mai
ning
for s
ale.
65%
of t
he sy
ndic
ate
has a
lread
y be
en e
xite
d.
21La
ke &
Eas
tSy
mgi
ne (L
akeE
ast)
Inc.
2266
Lak
esho
re R
d W
& 8
3 Ea
st S
t, O
akvi
lle, O
NCo
ndom
iniu
m11
4De
velo
pmen
t
Deve
lopm
ent a
ppro
vals
need
ed. T
he re
desig
n to
alig
n th
e pr
opos
al w
ith th
e lo
cal O
ffici
al P
lan
is cl
ose
to c
ompl
etio
n an
d w
ill b
e su
bmitt
ed sh
ortly
. The
bui
ldin
g is
now
10
stor
eys w
ith a
sella
ble
area
that
is si
mila
r to
the
prev
ious
tow
er d
esig
n.
22M
ississ
auga
Mea
dow
s 1Fo
rtre
ss L
akes
hore
201
7 In
c.10
41 L
akes
hore
Ave
E, M
ississ
auga
, ON
Tow
nhou
ses
62De
velo
pmen
tTh
e sit
e is
fully
exc
avat
ed a
nd h
as b
een
dew
ater
ed in
ant
icip
atio
n of
con
stru
ctio
n co
ntin
uatio
n la
ter t
his y
ear.
The
site
plan
, bui
ldin
g ex
terio
r and
inte
rior a
re b
eing
revi
sed
to im
prov
e ef
ficie
ncy,
bu
dget
com
plia
nce
and
mar
keta
bilit
y. A
ntic
ipat
e br
ingi
ng th
e pr
ojec
t to
mar
ket i
n Q
3/Q
4.
23M
ississ
auga
Mea
dow
s 2Du
nsire
(140
7 La
kesh
ore)
Inc.
1407
Lak
esho
re A
ve E
, Miss
issau
ga, O
NTo
wnh
ouse
s25
Deve
lopm
ent
We
are
advi
sed
that
For
tres
s is i
n th
e pr
oces
s of t
akin
g ov
er th
is pr
ojec
t. Th
e pl
an is
to le
vera
ge th
e w
ork
done
on
Miss
issau
ga M
eado
ws I
.
24Es
tate
s of N
oble
ton
(Nob
leto
n N
orth
)N
oble
ton
Nor
th H
oldi
ng In
c.13
735
Hwy
27, N
oble
ton,
ON
Sing
le d
etac
hed
hom
es15
0De
velo
pmen
tAp
prov
als r
ecei
ved.
Bac
kgro
und
repo
rts a
nd st
udie
s ong
oing
, pot
entia
l dra
ft pl
an o
f sub
divi
sion
subm
issio
n to
the
mun
icip
ality
is a
ntic
ipat
ed la
te 2
018/
early
201
9.
25N
orth
Lam
b Ed
mon
ton
Corp
.10
305/
21 1
06th
St N
W, E
dmon
ton,
AB
Cond
o or
igin
ally
now
con
sider
ing
conv
ersio
n to
a
rent
al b
uild
ing
unkn
own
Deve
lopm
ent
Due
to m
arke
t con
ditio
ns in
Alb
erta
the
borr
ower
is lo
okin
g to
cha
nge
the
proj
ect f
rom
con
dos t
o re
ntal
apa
rtm
ents
.
26O
ld M
arke
t Lan
eO
ld M
arke
t Lan
e In
c.17
7, 1
85, 1
97 W
oodb
ridge
Ave
, Woo
dbrid
ge, O
N85
con
dos +
3, 2
-sto
rey
tow
ns88
Deve
lopm
ent
OM
B ap
prov
ed c
ondo
min
ium
pro
ject
. Sal
es a
nd m
arke
ting
prog
ram
exp
ecte
d to
laun
ch in
Q3
of
this
year
.
27Pe
ter R
ichm
ond
Land
As
sem
bly
Fort
ress
Car
lyle
Pet
er S
t. In
c.
477
Rich
mon
d St
W, T
oron
to, O
NCo
ndom
iniu
m34
5De
velo
pmen
tDe
velo
pmen
t app
rova
ls ne
eded
. Zon
ing
By-la
w A
men
dmen
t app
licat
ion
was
pre
viou
sly a
ppea
led
to th
e O
MB.
A fo
rmal
upd
ate
on th
e st
atus
of t
he O
MB
appe
al is
ant
icip
ated
late
r in
2018
.
28Pi
vot (
Ruth
erfo
rd)
Aver
ton
(Rut
herf
ord)
Inc.
1304
Rut
herf
ord
Rd S
W, E
dmon
ton,
AB
Tow
nhou
ses
136
Cons
truc
tion
Ther
e ar
e 30
uni
ts c
urre
ntly
und
er c
onst
ruct
ion
and
26%
of t
otal
uni
ts h
avin
g be
en so
ld. C
losin
gs
bega
n to
take
pla
ce in
Q2,
201
8.
29Pr
esco
ttAv
erto
n Ho
mes
(Pre
scot
t) In
c.32
Res
iden
tial l
ots i
n Sp
ruce
Gro
ve, A
BSi
ngle
det
ache
d ho
mes
32Co
nstr
uctio
nAp
prox
imat
ely
60%
of t
he u
nits
for t
his p
roje
ct a
re so
ld. T
here
are
two
spec
hom
es c
urre
ntly
und
er
cons
truc
tion
30Q
EWN
– O
akvi
lle E
ast
King
ridge
(Oak
ville
Eas
t) In
c.16
70 N
orth
Ser
vice
Rd,
Oak
ville
, ON
unkn
own
Deve
lopm
ent
Floo
r pla
ns a
nd e
xter
ior e
leva
tions
hav
e be
en fi
naliz
ed. I
t is e
xpec
ted
that
the
sale
and
mar
ketin
g pr
ogra
m w
ill la
unch
soon
.
31Sk
yCity
Win
nipe
g65
6607
4 M
anito
ba L
td.
245
Grah
am A
ve, W
inni
peg,
MB
45 -
stor
ey C
ondo
380
resid
entia
l uni
ts, a
25
,000
sf g
roun
d flo
or
groc
ery
stor
e, 6
0,00
0 sf
of
offi
ce sp
ace,
and
co
vere
d pa
rkin
g
Pre-
cons
truc
tion
The
Proj
ect i
s sig
nific
antly
beh
ind
sche
dule
. Dep
osits
hav
e be
en re
turn
ed to
con
do b
uyer
s. T
he
borr
ower
is c
onsid
erin
g its
opt
ions
for t
his p
roje
ct.
32So
lterr
a (F
usio
n)23
8291
7 O
ntar
io In
c.10
23 V
icto
ria R
d, G
uelp
h, O
NM
aste
r pla
nned
resid
entia
l com
mun
ity
44 se
mi-d
etac
hed
and
26 si
ngle
-det
ache
d ho
mes
; 205
lots
, with
a
mix
of s
emi-d
etac
hed
and
singl
e-de
tach
ed
hom
es
Cons
truc
tion
Cons
truc
tion
is in
ear
ly p
hase
s.
33Th
e Gr
eenw
ood
1177
Dan
fort
h Av
enue
Ltd
.11
77 D
anfo
rth
Ave,
Tor
onto
, ON
9-st
orey
con
dom
iniu
m92
Pre-
cons
truc
tion
Dem
oliti
on is
com
plet
e an
d ex
cava
tion/
shor
ing
will
com
men
ce sh
ortly
.
34Th
e Ha
rlow
eTh
e Ha
rlow
e In
c.60
4-61
8 Ri
chm
ond
St W
, Tor
onto
, ON
Cond
o To
wer
218
units
Cons
truc
tion
Cons
truc
tion
on T
he H
arlo
we
is on
goin
g an
d th
e ex
terio
r win
dow
s and
bric
k ar
e no
w b
eing
in
stal
led.
Occ
upan
cy fo
r the
dev
elop
men
t is s
ched
uled
to b
egin
in Q
3-20
18.
2 of
3
116
116
Deriv
ed fr
om B
DMC
reco
rds,
info
rmat
ion
prov
ided
by
Fort
ress
and
CDC
M a
nd n
ews r
epor
ts a
s of M
ay 3
1, 2
018
The
Trus
tee
has n
ot a
udite
d, re
view
ed o
r oth
erw
ise a
ttem
pted
to v
erify
the
accu
racy
or c
ompl
eten
ess o
f the
info
rmat
ion
cont
aine
d he
rein
Build
ing
& D
evel
opm
ent M
ortg
ages
Can
ada
Inc.
Sum
mar
y of
Pro
ject
Sta
tus a
s at M
ay 3
1, 2
018
(Una
udite
d)
LEGE
ND:
De
velo
pmen
tRe
zoni
ng a
nd d
evel
opm
ent a
ppro
vals
are
bein
g so
ught
prio
r to
the
laun
ch o
f sal
es a
nd m
arke
ting
or le
ase
up.
Pre-
cons
truc
tion
Rezo
ning
and
dev
elop
men
t app
rova
ls ar
e su
bmitt
ed/f
ully
app
rove
d an
d th
e m
arke
ting,
sale
s and
/or l
easin
g pr
ogra
m h
as c
omm
ence
d.Co
nstr
uctio
nDe
mol
ition
or c
lear
ing
of o
n-sit
e st
ruct
ures
/impr
ovem
ents
com
plet
e, c
onst
ruct
ion
has s
tart
ed v
ia si
te se
rvic
ing,
exc
avat
ion,
reno
vatio
n or
har
d co
nstr
uctio
n.Co
mpl
eted
Cons
truc
tion
is co
mpl
ete,
uni
ts re
mai
n un
sold
.
NO
.PR
OJE
CT N
AME
BORR
OW
ER N
AME
PRO
JECT
ADD
RESS
Nat
ure
of P
roje
ct (C
ondo
, Tow
n, C
omm
erci
al,
hom
es)
# of
uni
tsSt
atus
Com
men
tary
der
vied
from
info
rmat
ion
prov
ided
by
Fort
ress
, CDC
M, n
ews r
epor
ts o
r oth
er
sour
ces
35Th
e Ja
mes
L Ri
chm
ond
Corp
.45
2-45
8 Ri
chm
ond
St W
, Tor
onto
, ON
High
-rise
dev
elop
men
tth
in to
wer
of 1
8 st
orey
s De
velo
pmen
t
Deve
lopm
ent a
ppro
vals
obta
ined
. De
cisio
n m
ade
on M
arch
21,
201
8 by
the
OM
B ap
prov
ing
the
Zoni
ng B
y-la
w a
pplic
atio
n, su
bjec
t to
min
or a
men
dmen
ts, f
or a
17-
stor
ey st
ruct
ure.
The
app
rova
l is
for a
smal
ler s
truc
ture
than
was
ant
icip
ated
.
36Th
e Ke
mp
Fort
ress
Kem
penf
eltb
ay D
evel
opm
ents
Inc.
51, 5
3, 5
5, &
75
Brad
ford
St,
Barr
ie, O
N (A
ctua
l Site
: 18
Lak
esho
re D
r)M
ixed
-use
dev
elop
men
t N
/ADe
velo
pmen
tAp
prov
als r
ecei
ved,
how
ever
bor
row
er w
ants
to m
odify
cur
rent
app
rova
ls. W
e ar
e ad
vise
d th
at
the
pros
pect
ive
purc
hase
r has
ext
ende
d th
e co
nditi
onal
sale
of t
his s
ite to
Q3-
2018
.
37Th
e O
rcha
rdLa
mb
Calg
ary
Inc.
602,
606
, 610
, 620
, 624
, 626
, 628
12t
h Av
e SE
, Ca
lgar
y, A
BRe
ntal
Apa
rtm
ent D
evel
opm
ent
N/A
Deve
lopm
ent
Deve
lopm
ent a
ppro
vals
need
ed.
Borr
ower
is lo
okin
g to
con
vert
this
proj
ect f
rom
con
do u
nits
to a
re
ntal
apa
rtm
ent d
evel
opm
ent
38Th
e So
uth
Shor
e22
2156
3 O
ntar
io In
c.23
0-24
0 Ca
mer
on C
res,
Kes
wic
k, O
NCo
ndom
iniu
m88
Uni
ts a
nd 6
7 un
itsCo
nstr
uctio
nW
e ar
e ad
vise
d th
at a
bove
gro
und
cons
truc
tion
is an
ticip
ated
to c
omm
ence
shor
tly.
39Th
e W
ade
(Vic
toria
Med
ical
)Am
adon
-Wes
twat
er P
roje
cts L
td.
1105
Pan
dora
Ave
, 111
0 Jo
hnso
n St
, 112
0 Jo
hnso
n St
, Vic
toria
, BC
Cond
omin
ium
con
vers
ion
of a
n ex
istin
g of
fice
build
ing
in V
icto
ria, B
ritish
Col
umbi
a
102
resid
entia
l co
ndom
iniu
m u
nits
w
ith a
ppro
xim
atel
y 24
,000
squa
re fe
et o
f gr
ound
floo
r re
tail/
com
mer
cial
spac
e
Cons
truc
tion
The
cons
truc
tion
loan
was
adv
ance
d on
this
proj
ect a
nd th
e sy
ndic
ated
mor
tgag
e lo
ans w
ere
repa
id in
full.
The
Tru
stee
is h
oldi
ng th
e fu
nds r
ecei
ved.
40Tr
eeho
use
Halo
Tow
nhom
es In
c.25
35 G
erra
rd S
t E, S
carb
orou
gh, O
NSt
acke
d To
wnh
ouse
Dev
elop
men
t
The
proj
ect i
s pla
nned
as
a 3
7 un
it st
acke
d to
wnh
ouse
de
velo
pmen
t in
the
Birc
h Cl
iff c
omm
unity
in
Toro
nto’
s eas
t end
nea
r W
arde
n an
d Ge
rrar
d.
Deve
lopm
ent
Deve
lopm
ent a
ppro
vals
need
ed. T
he si
te is
fully
zone
d an
d Si
te P
lan
appr
oval
is e
xpec
ted
by Q
3 20
18.
41Tr
iple
Cre
ekFo
rtre
ss T
riple
Cre
ek In
c.So
uth
of H
wy
8, R
ange
Rd
40, R
ocky
Vie
w C
ount
y,
AB
A pa
rcel
of 1
55 a
cres
that
will
be
serv
iced
and
zo
ned
for r
esid
entia
l use
. 115
acr
es to
be
assig
ned
for s
ingl
e fa
mily
lots
, 35
acre
s for
mul
ti-fa
mily
lots
and
the
rem
aini
ng fi
ve w
ill b
e us
ed
for c
omm
erci
al d
evel
opm
ent
N/A
Deve
lopm
ent
The
Borr
ower
is in
def
ault
of c
erta
in se
nior
loan
s and
may
face
enf
orce
men
t in
the
near
term
. De
velo
pmen
t app
rova
ls ne
eded
. Giv
en th
e cu
rren
t pro
pert
y va
lues
in su
burb
an C
alga
ry, l
imite
d ac
tivity
is o
ngoi
ng w
ith th
is pr
ojec
t at t
his t
ime.
The
bor
row
er is
look
ing
at it
s opt
ions
for
deve
lopm
ent o
f thi
s lan
d.
42U
nion
Wat
erfr
ont
Uni
on W
ater
fron
t Inc
.1
Hoga
ns A
lley,
11
Mai
n St
, 12
Lake
port
Rd,
16
Lock
St
, 20
Lock
St,
22A
Lock
St,
St. C
atha
rines
, ON
14-s
tore
y m
ixed
-use
bui
ldin
g
157
units
, and
ove
r23
,000
squa
re fe
et o
f co
mm
erci
al fl
oor s
pace
an
d a
tota
l of 2
58
unde
rgro
und
park
ing
spac
es
Deve
lopm
ent
The
borr
ower
is in
def
ault
of c
erta
in se
nior
loan
s and
may
face
enf
orce
men
t in
the
near
term
. Ap
prov
als n
eede
d. T
he b
orro
wer
is w
orki
ng o
n op
tions
to p
reve
nt th
e en
forc
emen
t pro
ceed
ings
in
ord
er to
see
the
proj
ect c
ontin
ue.
43W
ellin
gton
Hou
seW
ellin
gton
Hou
se In
c.42
2-42
4 W
ellin
gton
St W
, Tor
onto
, ON
High
-rise
dev
elop
men
t; p
roje
ct w
ill c
onsis
t of a
20
to 2
5-st
orey
tow
er
with
app
roxi
mat
ely
100
to 1
20 re
siden
tial u
nits
, w
ith o
ne b
edro
om to
tw
o-be
droo
m p
lus d
en
suite
s ran
ging
from
ap
prox
imat
ely
470
to
1,89
0 sf
.
Pre-
cons
truc
tion
Deve
lopm
ent a
ppro
vals
need
ed. T
he Z
onin
g By
-law
Am
endm
ent h
as b
een
appe
aled
to th
e O
MB
and
a he
arin
g da
te h
as b
een
sche
dule
d fo
r Oct
29,
201
8. A
dec
ision
is a
ntic
ipat
ed b
y Q
1-20
19 w
ith
cons
truc
tion
plan
ned
to c
omm
ence
by
Q2/
Q3-
2019
.
44W
hitb
y Co
mm
erci
al P
ark
Thic
kson
Roa
d 40
7, W
hitb
y Li
mite
d53
60, 5
400,
567
5 Th
icks
on R
d N
, Whi
tby,
ON
Rose
wat
er D
evel
opm
ents
and
For
tres
s Rea
l De
velo
pmen
ts a
re p
lann
ing
a m
ultiu
se
com
mer
cial
cam
pus i
n no
rth
Whi
tby.
The
net
11
7 ac
res w
ill b
e m
oved
thro
ugh
the
appr
oval
pr
oces
s to
full
com
mer
cial
zoni
ng.
Indu
stria
l: U
p to
1,40
0,00
0 sq
. ft.
Serv
ice
Com
mer
cial
: Up
to 2
00,0
00 sq
. ft.
Offi
ce S
pace
: Up
to
350,
000
sq. f
t.
Deve
lopm
ent
Deve
lopm
ent a
ppro
vals
need
ed. M
unic
ipal
ity h
as a
ppro
ved
its S
econ
dary
Pla
n an
d is
now
subj
ect
to a
ppro
val b
y th
e Re
gion
. Onc
e ap
prov
ed, a
Zon
ing
By-la
w A
men
dmen
t app
licat
ion
will
be
subm
itted
to th
e M
unic
ipal
ity. S
ubm
issio
n is
antic
ipat
ed la
te 2
018.
45W
hite
Ced
ar E
stat
esDu
nsire
(Lan
dsow
n) In
c.24
, 26,
28
& 3
2 La
nsdo
wn
Dr, G
uelp
h, O
NLo
w-R
ise si
ngle
fam
ily h
ome
in G
uelp
h27
Hom
esDe
velo
pmen
tPr
ojec
t is s
ubje
ct to
rece
iver
ship
pro
ceed
ings
. A c
ourt
ord
er w
as g
rant
ed o
n M
ay 2
5, 2
018
appr
ovin
g th
e sa
le o
f the
land
to a
par
ty th
at is
not
at a
rm's
leng
th fr
om th
e bo
rrow
er.
3 of
3
117
Appendix 4:
Cash Flow Projection to October 31, 2018
118
Building Development & Mortgages Canada Inc.Cash Flow Projection for the Period Ending October 31, 2018(Unaudited; $C)
NoteJune
(2 weeks) July August September October TotalStaff 1 16,400 33,000 33,000 46,000 33,000 161,400 Rent 2 - 4,520 4,520 4,520 4,520 18,080 Utilities 2 500 500 1,000 1,250 1,000 4,250 Maintenance 2 750 1,000 1,000 2,000 1,000 5,750 IT fees 1,400 1,400 1,400 2,100 1,400 7,700 Office expenses 3 3,060 1,981 2,827 6,427 4,081 18,376 Other expenses 5,000 10,000 10,000 12,500 10,000 47,500 Interest & bank charges - 800 800 1,000 800 3,400 Operating costs 27,110 53,201 54,547 75,797 55,801 266,456 Appraisals 4 35,000 140,000 140,000 35,000 - 350,000 Professional fees - 150,000 150,000 150,000 150,000 600,000
62,110 343,201 344,547 260,797 205,801 1,216,456
Notes1. Represents gross BDMC employee and contractor costs.2. Contemplates the payment of these costs in full by BDMC; however, a portion of these amounts are to be reimbursed by CDCM.3. Includes photocopier, telephone and accounting system subscription costs.4. Based on estimates obtained from two appraisal firms.
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THE SUPERINTENDENT OF FINANCIAL SERVICES - and - BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Applicant Respondent Court File No. CV-18-596204-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceedings commenced at Toronto
MOTION RECORD OF FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee
OSLER, HOSKIN & HARCOURT LLP P.O. Box 50, 1 First Canadian Place Toronto, ON M5X 1B8
Jeremy Dacks (LSUC# 41851R) Michael De Lellis (LSUC# 48038U) Patrick Riesterer (LSUC# 60258G) Tel: (416) 362-2111 Fax: (416) 862-6666 Lawyers for FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee