September 2020

For more than five years, Fortress Real Developments Inc. (Fortress) has been the subject of various unproven allegations. It’s founders, Jawad Rathore and Vince Petrozza, have navigated the development company through several successful civil defenses (including landmark victories in the Ontario Superior Court), and various regulatory inquiries.  Regarding the ongoing RCMP investigation, now well in its third year, Fortress is adamant that it committed no wrongful acts and that, in all instances, Fortress-backed property development projects funded by syndicated mortgage investments involved the full and proper disclosure of all salient risks.

In August 2017, four proposed class action lawsuits were struck by the Ontario Superior Court and claims against Rathore and Petrozza were also dismissed by the court on the basis that the statements of claim “did not disclose any legal causes of action against them”. Read the press release.

The appellants sought a sensationalistic approach by using words such as fraud, deceit and dishonesty. Fortress directly responded “that there was no specific pleading of fraud, deceit or dishonesty by the individual respondents. The Court agreed with (Fortress).”

Extensive news coverage was devoted to covering lawsuits that the courts found lacked any actual “legal cause of action”; a significant finding that was disappointingly never reported on at all. Most successful lawsuits usually contain legal causes of action or can appear specious. 

Simply, the appellants wanted the ‘shock and awe’ of wild accusations knowing that it would be reported on broadly and salaciously. And then showed up to court without the ability to even plead where or how any of those accusations had happened despite the judge providing three opportunities for them to amend their claim. They used those allegations as the crux of their argument and talking points to media and then left the section that required actual facts empty on their own filing. Media reports were quick to pick up and run with this narrative despite all the allegations being unproven and then failed to show the same vigor in reporting the ultimate truth.

In February 2018, FSCO (the Financial Services Commission of Ontario) completed what their press release described as “a complex and detailed investigation” into eight parties that were involved in the sales, compliance and client selection & vetting process. As a result, those third party sales brokerages were fined and their compliance officers had their licenses revoked on consent.

The press release specifically notes that “Fortress Real Developments Inc is not a mortgage broker or administrator and is not a party to the settlement or the subject of any of the orders”. A complex and detailed investigation into the brokerages that sold investments to the public and the people in charge of vetting the suitability of those investors resulted in fines to those brokerages but specifically no fine or orders against Fortress. Fortress has never dealt with the public directly or sold any investments to them.

Earlier this month, after a lengthy investigation, FSRA (Financial Services Regulatory Authority) has now also settled with Fortress. The settlement does not affect or relate to Fortress’ conduct towards syndicated mortgage lenders or members of the public. In fact, they specifically found that Fortress, unlike what has been alleged in several media reports and spurious allegations, did not deal with the general public at all.

Key facts about the settlement & investigation include: 

  1. The uses of funds arising from developer-paid fees to Fortress were disclosed in writing in the Development Consulting Agreements (the DCAs) (Appendix A, Section 33)
  2. The Fortress DCAs did not relate to advising lenders or members of the general public and the FSRA did not assert that Fortress acted as a broker or advisor to individual lenders (Minutes of Settlement, Paragraph 2)
  3. Fortress dealings were with borrowers/developers who had representation and advice from their own independent legal counsel in entering the transactions. (Appendix A, section 45)
  4. FSRA did not assert or identify any harm caused to any borrower or lender as a result of the contraventions described in the settlement.(Appendix A, section 44) “The DCAs did not relate to advising lenders or members of the general public or conduct directed at lenders or members of the general public.”

As for impact to certain investors, lawyers reviewing the settlement note the fault of some of the licensed brokers & advisors (who actually dealt with the investors) and their failure to “advise (investors) of the risks as disclosed by the sales material or read the detailed materials themselves” and “it is those advisors who should be criticized and held to account”. (Read the review)

FSRA notes the “DCAs did not relate to advising lenders or members of the general public or conduct directed at lenders or members of the general public.” (Minutes of Settlement, Section 2). Specifically, Fortress and its predecessor (Fortress Real Capital Inc.) were found on 12 occasions to have assisted borrowers/developers in connecting to various third party mortgage brokers and administrators; which were contraventions. Fortress has participated in over 80 land development projects and, as noted, dealt with provincially licensed parties and not with the public.

After years of rumours about what Fortress was alleged to have done, Fortress is pleased that this matter is resolved. These findings speak for themselves. The settlement with FSRA touches on matters regarding Fortress that have been the subject of prejudicial and unseemly rumors and claims. Media reports have often included allegations of lack of disclosure or “hidden fees”. FSRA notes that Fortress development fees were in fact disclosed in the DCAs; (Minutes of Settlement, Paragraph 33). Justice Perell also made similar findings years previously that disclosures regarding fees had, in fact, been made.

A robust exculpatory website was launched earlier this year that clearly details the extensive materials and disclosures that were made to every investor that participated in transactions. For unknown reasons, the media that reported so regularly on all matters declined to respond to the contents of the site or even report on its existence. Fortress is, and always has been, a development company (not an investment company) that partnered and advised other developers on projects, markets and some financial modeling.

FSRA noted that in giving that advice to those developers that no harm was identified. Fortress was also found to not have acted as a broker or advisor to any individual lenders (the investors). 

Fortress continues to manage the wind up of its portfolio and deliver results to all stakeholders. We are pleased to have been part of several recent transactions that have resulted in returns to individual lenders of 100% or more even during the pandemic. So far in 2020, seven Fortress projects have completed payouts to investors in the range of 95% to 119% of their initial investment for a total return $97.65M. 

Media have reported extensively on the $912M provided by syndicate mortgage lenders to various projects. What those reports always seem to fail to include is the rest of the data in the package: The portfolio includes 82 different sites of which 52 have successfully discharged investors. This has resulted in payback to investors of $478M of the $912M; that’s almost half a billion dollars paid back to syndicate lenders while another 30 projects remain active. Certain projects have experienced challenges driven by changes in local markets, particularly in Western Canada and the Prairies. The portfolio was also significantly impacted by the surprise insolvency of a major partner with a 40-year track record; Fortress scrambled to salvage as much of the Mady portfolio as possible but was significantly impacted by the state of affairs on 5 of their projects.

Of the 52 completed projects, 80% (4 out of 5) have resulted in payout to investors between 80% to 150% of their original invested amount. Just under half a billion dollars has generated substantial returns and profits or a significant recovery of capital; it is disappointing that these significant quantums are ignored in all media reporting on Fortress matters.

In the few instances where projects failed and some investors lost money,  the very same syndicate mortgage structures were used, with all the same disclosures by the independent mortgage brokers (Fortress was not a broker), as the successful projects. Fortress has always given best efforts to bring all projects to a positive conclusion and has been largely successful in doing so. 

Fortress set out to improve communities across the country and create opportunities for all Canadians; efforts that were recognized in 2017 when the CEO was nominated for E&Y’s Entrepreneur of the Year. The company is proud of the more than 6,000,000 square feet of new builds that are finished or nearing completion from their partnerships. This has resulted in more than 3500 units delivered to Canadians as places to live, work & play and the creation of more than 24,000 construction sector jobs.

The company stands by its original vision to improve the landscape of Canada and is proud of what it has achieved. Fortress wanted to finish what we started properly and commend our team for their work in navigating these unprecedented and challenging times in continuing to deliver successful results (another $100M of profitable returns so far this year). 

If the wind will not serve, take to the oars

Latin proverb, unknown source

Units Delivered


Square Feet Built

6 million

Construction Jobs


Paid back in 2020

$100 million

Total Paid Back

$478 million