The second claim filed against Fortress Real Capital will not be the last, according to the plaintiff’s real estate lawyer.
A month after it was reported
two investors were suing Fortress Real Capital – among others – following the bankruptcy of the Maddy Collier Centre in Barrie, one of the original plaintiffs has brought forth a second suit.
“The difference here is … the one in Barrie all the investors lost their money. In this case, the project is ongoing but the mortgage matured and it went into interest accrual. This is an ongoing project that is still being built up. The claim is for revision to get the money back because of misrepresentation,” David Franklin, real estate legal counsel for Arlene McDowell, a plaintiff in both cases, told MortgageBrokerNews.ca. “We’ve got about 14 more (claims) coming. At least another 11 more.”
The claim is against Fortress Real Capital, Fortress Real Developments, Jawad Rathore, Vincenzo Petrozza, Empire Pace (1088 Progress), Olympia Trust Company and a number of other entities and individuals, including the appraiser responsible for valuing the development.
The development in question this time is Empire Pace at 1088 Progress in Scarborough.
Franklin, who is not the litigation lawyer on the case, alleges the syndicated mortgage investment was misrepresented to investors.
“Just because the project is paying interest to people, they are still entitled to their money back even if they are getting paid,” he said. “Because the deal was misrepresented to the investors.”
The claim alleges investors were provided with an inflated value of the investment and that appraisals to determine current value aren’t done. It alleges the “current” value is based on hypthoteical future value that depends on milestones the project expects to reach.
“Investors are not told the true (lower) value of the property or that being behind a construction lender on a project under development is, in fact, a risky, not secure positio," the claim states.
The claim has been brought forward and will go before the courts. If successful, it can be certified as a class action. Every investor in the Empire Pace project would be covered by the class action, according to Franklin.
To read the entire claim, click here