Did you Know?
Remember the day you heard about Syndicated Mortgage Investments? When you were sold on Syndicated Mortgage Investments, (apart from being told it was a safe investment), it was on the basis that 8% was a great return, because it was more than you were making on your investments.
8% was better than stocks, GIC's, or bonds. What you weren't told, was about returns provided in the mortgage market. Under MBLAA, the following comparative information was required by law to be disclosed to you by FSCO licensed parties. Why was it not disclosed to you?
Did you know that the private lenders who lend on first mortgages on commercial properties only lend 65% of their as-is appraised value at 9-12%. Land loans on farmland are done by few private lenders and they loan 50% of their as-is appraised value.
Private lenders will provide first mortgages on houses up to 80% at 8% return, and on second mortgages lend up to 85% of as-is appraised value at 10-15% for a one year term.
Compare these loan to values and returns, to your 8% return at well over 100% of as-is appraised value. Fortress did not provide as-is values. They provided opinions of value, which are not appraisals. Fortress opinions of value were based on future value.
Fortress opinions of value were based on future values. ie, the value of the completed project, based on many, many assumptions.
Visit our timeline on our website for more information.
You were equity investors in these projects, which means that you should have received an ownership interest in the project and/or share of profits, as you were taking a lot of risk. Even as an equity investor you would not invest if your investment was much more than 100% of as-is appraised value.
There are a few lenders who provide soft cost loans to developers by way of a first mortgage at
20-30%, plus fees, and these lenders do not postpone to construction financing. Meaning, if they lend money towards a project, they only do so on the condition that their position in rank cannot be moved or postponed. If they lend as 2nd mortgage, they stay at 2nd without any sneaky clauses that postpone them to 3rd. Do you think that this is a good comparison to the Fortress mortgages you invested in? Your return was 8%. Remember how you were promised 2nd mortgage, but you were moved like a hot potato to 3rd, 4th or even 5th mortgage? A private lender would never, ever, sign-off on such an agreement. The reason the lenders charge these rates and fees is because they know that they can lose money if the land is not rezoned and even if it is, that the developer does not get the necessary presales, that they will lose money.
All the benefits went to Fortress. They collected a 35% fee and 50% of the profits. The investors took all of the risk and only were to be paid 8%. This structure was completely unfair to investors.
Now you understand why the RCMP obtained its search warrant. Fraud, section 380 of the Criminal Code, includes misrepresenting the value and placing the victim at risk of economic harm.
Do you think this section of the Criminal Code applies to what Fortress did to you?