A couple of investors in Fortress Real Developments’ syndicated mortgages claim the brokers who sold them the products elided to inform them of the risks.
A Halifax-based investor, who requested anonymity because he works in the mortgage industry, says that he and his wife are out $175,000—the entirety of their retirement savings—and with three children and nearing retirement, they’re worried about their family’s future.
“This week, my wife was having chest pains worrying about this,” said the 50-year-old investor. “She’s a year older than me and thought she was having a heart attack. It’s not pretty. If we knew our money was safe and growing, we wouldn’t have these anxieties.”
In 2014, the investor pulled his money out of Apple stocks and invested it a Fortress Real mortgage for a development called Capital Point in Regina. He earned quarterly dividends of $2,504, the last of which arrived in Nov. 2016. A $12 monthly fee is still being drawn from the investor’s bank account.
A mortgage agent, who worked for Centro Mortgage Inc.—which eventually became Building Development and Mortgages Canada, a brokerage controlled by Fortress Real—is alleged to have convinced the investor to invest in Capital Point.
The agent, reached by MortgageBrokerNews.ca, refused to answer questions and abruptly hung up the phone.
“The early days were fine,” said the investor. They were paying us interest and the money was growing for probably the first two years, and then I started seeing news releases about Fortress. I’d reach out to (the agent) and he said there’s nothing to worry about, everyone is getting their money back. The last email I got from him was in June.
“Around 2016, I started reading the news articles and asking questions about getting my money back. It was a locked investment, not liquid; it was supposed to mature in 2017, and nothing. Now it’s 2018, and nothing. They’re not even paying quarterly dividends, yet they’re still taking money out of my account.”
The investor had previous experience with Fortress Real, working with the company to secure funding for a project a client of his planned to develop in Mont-Tremblant. The planned project eventually fell through, but the investor says nothing about Fortress Real appeared askew.
“It’s frustrating because they seemed professional. When I was dealing with my client’s project in Quebec, they asked all the right questions and did all the normal due diligence that all the other lenders do, but in hindsight it seems like a big pyramid scheme.”
A Fortress Real contact introduced the investor to the mortgage agent, the latter of whom has not returned the investor’s innumerable phone calls.
“For weeks, I’d try (the agent) 10 or 12 times a week. It’d be convenient if he’d pick up the damn phone,” said the investor. “That was all of our retirement money. I’d have had over $450,000 had I left it in the Apple stock.”
Another investor in Ontario, who also requested anonymity because he is an Ontario Provincial Police officer and the RCMP investigation into Fortress Real Developments is ongoing, told MortgageBrokerNews.ca that he was not informed about being bumped down the creditor ladder on a projected called Old Market Lane.
“I was told it was low risk and that my name would be on title should anything go wrong with the development,” he said. “Mine and other investors’ names would be on the mortgage. I was told I would be in the number two position behind the bigger lenders, the bigger banks, which I was told was still a relatively safe position to be in. I dropped to fourth position without my knowledge. I had to find out through a special interview after tagging along with a friend who had also invested.”
The OPP officer invested $30,000, and alleges that the mortgage broker who sold him the syndicated mortgage, Jenny Hong of Mortgage Alliance Lending Superstore, did not inform him of the risks.
“There was paperwork, but those warnings were never laid out verbally.”
According to the officer, Hong, whose husband works for the Toronto Police Service, invited other officers to Fortress Real-hosted dinners where they were pitched on developments. He says many police officers have money invested in Fortress Real’s syndicated mortgages.
MortgageBrokerNews.ca spoke to Hong, but she would not confirm whether or not she sold syndicated mortgages on Fortress Real’s behalf, only saying, “I’m not going to confirm anything with you. I would suggest you talk to Fortress directly. I’m not internally at Fortress to know what’s going on with the details.”
The officer says that, had the risks been communicated, he never would have invested in the project.
“I would have invested in something safe and secure. I’m not a high-risk investor,” said the officer. “When things went south, I reached out to (Hong) and was told not to worry about it. She was the intermediary and I had to go through her to get to Fortress and she provided me some answers, and so did somebody at Fortress. I was given multiple explanations as to why things were happening, which to me don’t make sense, but that’s the way I was told.”
The investors’ claims that the risks of investing in Fortress Real’s syndicated mortgages were not communicated orally runs contrary to a statement released by the embattled company’s legal counsel, Scott Fenton.
The statement claims investors were apprised of all “material risks involved in the projects.” Moreover, according to Fenton’s statement, “all investors were fully advised in writing of the assumptions and methodologies used by respected industry valuators in the development-based ‘opinions of value’ for the projects as opposed to bare ‘as is’ appraisals as incorrectly alleged by the RCMP.”