Syndicated mortgage payments delayed

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Investors in Calgary’s Orchard project have been told of delays to interest payments.

“Funds raised to date have been appropriately utilized towards project costs keeping the development moving forward. Orchard has surpassed 60% in sales on the first tower, with discussions already in place to have tower 2 purpose built rental. This would reduce timelines, increase cash flow, and allow for a more flexible development plan,” Building & Development Mortgages Canada Inc., the broker offering the syndicated mortgages, said in a memo to investors. “This allocation has resulted in the payments due April 16th and July 16th to be delayed, as there have been a lack of funds closing into the project’s interest reserve (IR) as originally anticipated.

“Brokers are actively raising money for the project to bring the development budget up to date, and top up the IR for current and future payments.”

The memo, which was shared with by a lawyer who represents one of the project’s investors, also states further delays could happen.

“Funds will continue to be used for project costs to ensure the current momentum is kept, until such funds can be moved towards soft costs such as interest payments,” the broker said.

Despite this, both developers of the project – Lamb Development Corp. and Fortress Real Capital – remain unconcerned about the health of the project.

“Orchard is an incredible project at a fantastic location. It is no secret that the housing market in Alberta has changed quite a bit over the past few years,” Brad Lamb said. “LDC and Fortress are completing and occupying one tower called 6th & Tenth in spring 2017, and plan to break ground on Orchard shortly afterwards.

“All lenders will be paid out on 6th & Tenth upon completion, and I anticipate the same for Orchard when it finishes also.”

A rep for fortress added: “Fortress is very pleased that 60% of the Orchard project is sold. Consultants and the development team are working on detailed design drawings and the project will be advancing to the construction financing stage next year.”
  • Ron Butler on 2016-11-15 10:21:26 AM

    Stopping interest payments on a mortgage is a worrisome thing for any investor. What is also quite concerning is that the borrower seems to be in a position to say to the investors "Hey, nothing to see here, just be patient and all will be well". In most mortgage situations, if the borrowers stop paying the mortgage, the investor / lenders can take legal action to take over the property and attempt to recover their capital. That does not seem to be a viable option here. Looks like another example of the massive concerns arising from mortgage brokers recommending investments in a program that does not resemble the way most mortgages are managed.

  • David Landing on 2016-11-15 10:30:50 AM

    Article about delayed interest payments.

    How about an article on delayed principle payouts with intrest hopefully accruing?
    There are many and the list is getting longer.

  • John Benstead on 2016-11-15 3:19:51 PM

    They appear to be avoiding any mention of the percentage sold of the 6th and Tenth tower. If the Orchard is somehow dependant on that for continuation, I would be horribly concerned for the investors.

  • Paul Redley on 2016-11-15 4:43:05 PM

    These syndicated mortgage interest delays and law suites are beginning to sound like Groundhog Day. It appears that the funds raised to date in the Calgary's Orchard project "have been utilized" however as John Benstead said, the other purposely built towers are not mentioned. The construction loan would be contingent on the substantial completion of ALL of the project before any syndicated investor gets $1 back of their capital. Also, any existing investor that is not being paid interest should realize that the investment is not liquid and can't be sold even at a substantial discount.

  • DeJong on 2016-11-15 11:32:17 PM

    “Brokers are actively raising money for the project to bring the development budget up to date, and top up the IR for current and future payments.”

    Let that statement sink in.

  • Michele Hall on 2016-11-21 11:56:10 AM

    You have to question if the project is 60% sold and deposits taken , and funds have been raised for soft cost ... clearly there are accounting issues here .... there should be funds to make payments to investors and keep the project going ... there seems to be creative accounting going on and where is the audit of financial statements... investors should be staying clear !!!

  • Mortgage Mike on 2016-11-21 3:10:00 PM

    I'm fully with DeJong on this; that very statement unabashedly screams "Ponzi Scheme".

  • NotBuzzed on 2016-11-21 4:21:50 PM

    I think they pay brokers 8% or 15% for new money, very generous.

  • Jesse D on 2016-11-22 8:40:31 AM

    How many developments don't have delays? No one mentions developments that have delays aside from the ones attached to syndicated mortgages. All investors know this can happen. Perhap the brokers investing in private mortgages should be more concerned about their clients who are consistently getting burned by private investors and mics.

  • Michele Hall on 2016-11-22 11:39:18 AM

    does anyone know how many of these projects have successfully paid out to investors ? What has been the return on investment ? Is this just a Fortress issue or is this typical of all syndicated mortgages ?

  • Michele Hall on 2016-11-22 11:41:30 AM

    If this is a Fortress issue why are they continuing to sell ?Why are they not being criminally charged and brokers selling this being dealt with accordingly ?

  • Zak on 2016-11-30 7:01:05 PM

    Ponzi, all right.

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