Senior lenders have moved to seize control of 13 real estate development projects co-ordinated by Fortress Real Developments Inc. as the loans mature or fall into default.
A new report from FAAN Mortgage Administrators Inc., a court-appointed receiver that took control of Fortress’s affiliated mortgage brokerage firm, says 24 of the 45 syndicated mortgage loans it is overseeing have matured but the principal has not been repaid, while 13 projects are now facing enforcement actions from senior lenders who rank first on any prospective claim.
Fortress, based in Richmond Hill, Ont., helped developers raise financing for new construction projects by raising money from retail investors who funded syndicated mortgages. Mortgage brokerage firm Business & Development Mortgages Canada Inc., which was based at Fortress’s head-office location, raised $920-million from 14,000 investors between 2008 and 2017, including $560-million of syndicated mortgage loans that are still outstanding and are now being administered by FAAN.
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Ontario’s financial regulator got court approval in April to have FAAN take control of BDMC, saying it was concerned about improper lending practices. More than 11,000 investors who lent money for the projects have not been repaid.
Many of the loans are now in jeopardy as higher-ranking lenders with first-priority mortgage claims are moving to seize control of the properties and sell them to recoup their loans. The syndicated mortgage investors typically have the lowest-ranking claim on the properties, in some cases ranking fifth behind other lenders.
FAAN’s latest report said senior lenders most recently have moved to seize the Treehouse project in Scarborough, where syndicated lenders have $5.4-million in subordinated loans outstanding; the Lake & East project in Oakville, where syndicated lenders are owed $9.1-million; and both phases of the Mississauga Meadows project, where syndicated mortgage investors are owed a total of $8.8-million.
Lenders are also taking control of the Charlotte Adelaide Tower project in downtown Toronto, which has a $16.2-million syndicated mortgage loan outstanding, as well as the Whitby Commercial Park project, which has $14.8-million in syndicated debt.
FAAN has warned syndicated lenders they may not be fully repaid in many of these cases. For example, it said it believes there may be some money available for syndicated lenders from the sale of Fortress’s Brookdale condominium project on Avenue Road in Toronto, but “the quantum and timing of any such distribution are unknown.”
Empire (Water Wave) Inc. has struck a deal to buy Brookdale, which was placed in receivership in June. The sale price has not been disclosed.
Syndicated lenders, owed $25.3-million, have the fourth- and fifth-ranking mortgage claims on the Brookdale property behind three higher-ranking lenders owed a total of $25.4-million.
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Senior lenders have also moved to take control of the Triple Creek project in Calgary, where syndicated lenders are owed $15.4-million, but FAAN said the value of the land is “likely too low under current market conditions … for there to be any material recoveries to the investors.” A sale process has not been launched yet.
Lenders are also seeking buyers for the Collier Centre project in Barrie, Ont., the Union Waterfront project in St. Catharines, Ont., and the Glens of Halton Hills project in Georgetown, Ont.
FAAN also revealed it is trying to recover $7-million owed to syndicated lenders for the Eden residential housing project in King City north of Toronto, which was completed by PACE Developments Inc. this year.
Fortress officials told the Eden syndicated lenders this spring that their loan would be fully repaid within months because the project had been completed. But PACE notified FAAN in early July that it would not repay any of the loan because “certain cost overruns not previously accounted for had absorbed the over $7-million payable to investors,” FAAN said.
FAAN said the news was “very concerning” and has asked to see documents to explain the significant change in the borrower’s financial position “over such a short time frame.” FAAN has refused to discharge the mortgage on the Eden property, and last week it filed notice that it will take possession of the property on behalf of the syndicated mortgage lenders.
FAAN has also been negotiating a payout for investors in the Braestone project north of Barrie. Syndicated lenders provided a $13.35-million loan to Braestone Development Corp. in 2012, but the project has faced long delays.
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Braestone has offered to pay $10-million to satisfy the loan, which means investors would take a loss. But FAAN said including previous interest payments of about $5.4-million, investors would recoup more than the face value of their principal.
FAAN is seeking feedback from the Braestone lenders, but is recommending the deal.
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.
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.
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.