They may be the most polarizing product in the mortgage industry, and Glenn May-Anderson, broker of record for FDS Brokers Services, argues there have been inaccuracies in some of the reports about syndicated mortgages.
The Toronto Star recently took syndicated mortgage provider Fortress Real Developments to task after one of its projects, the Mady Collier Centre in Barrie, filed bankruptcy and protection from creditors. May-Anderson argues the article left out some key facts.
“There is … no discussion (in the article) of the 13 successful exits so far, returning a minimum 8% annual simple interest and full principal to investors,” May-Anderson told MortgageBrokerNews.ca. “There is also no discussion of the additional eight exits planned for this year.”
The Star piece, entitled “The high-risk world of syndicated mortgages,” features David Franklin, a real estate lawyers currently representing an investor who put $80,000 into the Mady Collier project. Franklin argues his client would not have invested had the risks been disclosed up-front.
However, May-Anderson says the risks are always disclosed to potential investors.
“All risks are disclosed multiple times prior to a client lending their money to a developer. More importantly, we take care to ensure potential clients understand the risks associated with this type of lending before they proceed,” he said.
May-Anderson also took issue with the article’s subtitle – and general undertone – that Syndicated mortgages “are now being pitched to ordinary consumers with promises of low risk and high returns.”
“We do not market these investments as low-risk. We do not market them to ‘ordinary people,’” he said. “Our customers typically have over $100,000 in investable assets, and our minimum investment is $30,000.”
In the case of the Mady Collier Centre -- which the Star article says investors’ claims against the property were “wiped” -- May-Anderson says the project was purchased by Fortress Collier Inc., a single-purpose entity created to take over the project, and investors were issued new mortgage charges worth the same as their original investments.
“The project construction is currently being completed by EllisDon, and there is a plan in place to exit all syndicate investors in the next 18-24 months,” he said.
Following a deluge of criticism in the mainstream media, one industry professional who specializes in syndicated mortgages tackles – what he argues to be – misleading information.