Second mortgage brokerage firm tied to real estate developer Fortress Real Developments shuts down - Canadanewsmedia
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Second mortgage brokerage firm tied to real estate developer Fortress Real Developments shuts down

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A second mortgage brokerage firm that raised money to finance projects for Fortress Real Developments Inc. has closed its doors, marking another setback for the troubled real estate developer.

FDS Broker Services Inc. filed for bankruptcy effective Sept. 17, according to licensing information filed with the Financial Services Commission of Ontario, the province’s mortgage industry regulator.

FDS, initially known as Fortress Distribution Services Inc., was owned by its chief executive Zafar Khawaja, a licensed mortgage broker. Mr. Khawaja could not be reached for comment on Monday and FDS’s main phone number went straight to voicemail.

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Mississauga-based FDS was one of three brokerage firms that were dedicated to raising syndicated mortgage funds from investors to provide loans to real estate developers for new projects being co-ordinated by Fortress, a real estate consulting firm based in Richmond Hill, north of Toronto.

Another of the three firms, FMP Mortgage Investments Inc., told clients in April it was surrendering its mortgage brokerage licence and suspending business operations. A third firm, FFM Capital Inc., is still in business.

Fortress raised a total of $920-million from investors between 2009 and 2017 to help finance new real estate developments, including many condominium construction projects.

Much of the financing was arranged by mortgage brokers at FDS, FMP Mortgage and FFM Capital. In 2016 alone, FDS raised $67-million from 1,174 syndicated mortgage investors, according to regulatory filings.

FDS reported having 102 brokers and agents as of Dec. 31, 2016, including 23 who worked full-time, according to its filings with FSCO. The firm’s bankruptcy filing lists liabilities of $550,453 and assets of $16,000 as of Sept. 12.

Many of the Fortress development projects financed by syndicated investors have faced long delays and investors have not been repaid their principal or accrued interest payments, spurring many complaints to regulators.

The RCMP searched Fortress’s head office location in April, and also executed search warrants at the offices of FDS, FMP Mortgage and FFM Capital. The search warrant application said the force is investigating alleged syndicated mortgage fraud. No charges have been laid.

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FDS, FMP Mortgage and FFM Capital were founded between 2011 and 2013 by former employees of mortgage brokerage firm Building & Development Mortgages Canada Inc. (BDMC), which was based at Fortress’s head office location and co-ordinated all syndicated mortgage financing for the real estate projects. An affidavit filed in court by FSCO in April said BDMC’s owner directed employees to leave and set up the companies to “provide some degree of separation” between the brokers helping investors lend money for Fortress projects, and BDMC, which represented Fortress and the project borrowers.

FSCO reached a settlement agreement in March with the four brokerages following an investigation into syndicated mortgage investments. Under the voluntary settlement, FDS, FMP Mortgage and FFM Capital agreed to pay $235,000 each and BDMC agreed to pay $400,000. The principal brokers for FDS, FMP Mortgage and FFM Capital had their mortgage broker licences revoked, while the owner and principal broker for BDMC agreed to surrender her licence.

Since March, senior lenders on many Fortress projects have filed court applications to take control of the projects because the loans are in default. Among the development projects in Ontario that are under the control of a receiver are Fortress Brookdale and Harmony Village Sheppard in Toronto; Union Waterfront in Port Dalhousie; and Glens of Halton Hills.

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These New York Real Estate Billionaires Stand To Profit From Amazon's HQ2

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From left to right: Tom Elghanayan, Fred Elghanayan and Henry Elghanayan. Chester Higgins Jr/The New York Times/Redux

Amid the news about Amazon’s HQ2 announcement—the e-commerce giant chose New York’s Long Island City and northern Virginia’s Crystal City as the victors of its nationwide search—there’s the question of who in the real estate world is jumping for joy at the new opportunities. That likely includes a pair of low-profile billionaire brothers and real estate titan Jerry Speyer.

The Elghanayan family, which was worth more than $2 billion in 2015 when Forbes last estimated their fortune, traces their wealth back to Nourollah Elghanayan, an Iranian-native who started buying land in Manhattan in the 1950s and 1960s. His three sons, Tom, Fred and Henry, expanded the family business throughout Manhattan and Queens, acquiring and developing iconic buildings such as FBI’s former New York City headquarters and the Carnegie Hall Tower. In 2009, the family split up their holdings amid disagreements over succession plans. Henry reportedly won a coin toss and chose the Rockrose name and a portfolio of development sites and residential buildings; Tom and Fred took the rest, including more than 5,000 apartment units and properties in Long Island City, and rolled them into an entity called TF Cornerstone.

Since then, Tom and Fred Elghanayan have capitalized on New York’s up-and-coming neighborhoods, building gleaming luxury rental apartment towers in Manhattan’s Hell’s Kitchen and in downtown Brooklyn. But it’s their bet in Long Island City that may prove to be the most prescient. In addition to two rental apartment towers the Elghanayans transferred to TF Cornerstone, the brothers have purchased or built four more rental buildings in the past six years, giving them over 3,000 rental units in Long Island City’s waterfront community of Queens West.

In July 2017, TF Cornerstone furthered its move into Long Island City, winning a proposal to redevelop two city-owned sites in Anable Basin, a waterfront district neighboring Queens West. Its winning bid calls for a 1.5 million square feet mixed-use project with 1,000 rental units, commercial, retail and light industrial spaces, and public park areas. Just months later, Plaxall—another family firm that manages over one million square feet of real estate—submitted plans to rezone nearly 15 acres of the Anable Basin into a mixed-use development spanning almost 6 million square feet.

Now the sketches of glass towers and open air parks have been fast tracked to reality as Amazon sets its sights on the Anable Basin. According to the Seattle company’s memorandum of understanding with New York, it has circled the Anable Basin area as its target site for HQ2. TF Cornerstone confirmed that it will partner with Amazon to build out its project. “As a family-owned company founded by Queens natives, TF Cornerstone is proud to welcome Amazon to Long Island City, bringing new jobs to the borough and preserving significant public benefits,” says Jake Elghanayan, a principal at TF Cornerstone and a son of Tom Elghanayan.

With Amazon planning to take up 4 million square feet of office space over the next decade (and bringing on 25,000 workers), the Elghanayans are in prime position to take advantage of the increasing demand for office real estate and new apartments. With excitement already building in Long Island City, Tom and Fred’s fortune looks to be getting a boost in the near future. 

Jerry Speyer, cofounder and chairman of Tishman Speyer.

Jerry Speyer, cofounder and chairman of Tishman Speyer.Getty

Another big winner in Amazon’s decision is real estate firm Tishman Speyer’s billionaire chairman Jerry Speyer. Speyer started the real estate giant, which has developed over 167 million square feet of space from Chicago to Berlin, in 1978 with his father-in-law Robert Tishman. Son Rob Speyer is now CEO and oversees the company’s operations. While famous for redeveloping iconic skyscrapers like Manhattan’s Chrysler building and Rockefeller Center, Tishman Speyer has also become a major player in the transformation of Long Island City. The firm claims to be the area’s most prolific residential and office developer and says it will have completed construction on 3.7 million square feet in the neighborhood by end of next year.

A decade ago, the New York firm broke ground on Two Gotham Center, a 22-story office tower just a 20-minutes stroll from Anable Basin. Tishman Speyer sold the completed building to Canadian firm H&R REIT in 2011 but continued on, partnering with H&R and Qatar’s sovereign wealth fund to develop two office and retail towers named the JACX, and three rental apartment towers named Jackson Park.

With Amazon planning to begin hiring for HQ2 in 2019, the tech behemoth has agreed to lease one million square feet of office space at One Court Square, a 50-floor tower only blocks away from Tishman Speyer’s JACX and Jackson Park. Now the JACX, scheduled to open in 2019 with Macy’s and WeWork taking up 800,000 square feet of its 1.2 million square feet space, may not need to look far for new tenants to fill the rest of the floors. And Jackson Park, with amenities like indoor and outdoor swimming pools and a 1.5 acre private park, could be the new place to be for relocating Amazon executives.

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Suddenly, a pair of quiet real estate markets are white-hot

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WASHINGTON — Amazon has just sparked a real estate frenzy to rival Cyber Monday.

A three-bedroom condo with Manhattan views that had sat on the market for months, priced at $1.7 million, is suddenly drawing would-be buyers now that Amazon has announced plans to build part of its new second headquarters in Long Island City.

Online searches for homes in the Long Island City — long an industrial area in the Queens borough of New York — soared 248 per cent last week, real estate brokerage Redfin said. Searches in the other winner of Amazon’s sweepstakes, Crystal City, Virginia, jumped 84 per cent. Real estate agents say they’re hearing from investors who’d like to become landlords and from sellers who’ve decided to pull their homes off the market and wait for prices to rise.

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Sam Zell Is Selling More Than Property After Real Estate Warning

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  1. Sam Zell Is Selling More Than Property After Real Estate Warning  Bloomberg
  2. Full coverage



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