Fortress Exits Interest in Downtown Toronto Development
Monday April 29, 2019
James, a condo project in downtown Toronto in partnership with Lamb Development Inc. has been refinanced with Fortress concurrently exiting its interest in the project.
James was planned as an 18-storey tower and received approval for only 17 storeys. The OMB process was lengthy (lasting 18 months) and the loss of an entire floor was a significant reduction of sellable square footage (approximately $6M in lost revenue). Since launching the project, development and construction costs have also risen considerably. Due to the ruling, all sales were cancelled and the project had to be relaunched. The new project is a smaller development comprised of a 17 storey, 125 unit condominium, to be marketed as “The Woodsworth”. The project has received its Zoning By- Law approval, with Site Plan approval still pending. The revised timeline for completion of the condo is projected to be 4-5 years.
With this new timeline and significant changes in the marketplace, the current first mortgagee, Kingsett Mortgage, advised that they would not renew their loan. The developer was able to secure a new loan on the condition that there would be no syndicate mortgage remaining on title. The developer worked with all stakeholders on the project and after several months of negotiations an agreement was reached to approve the refinance and exit syndicate lenders from this project.
On April 26, 2019 the court approved a refinance of the project site. The details of the settlement can be found in FAAN Mortgage Administrators’ latest report to court. FAAN who is the court appointed trustee for these mortgages, completed their own due diligence in advance of accepting the offer and stated, “Although the James Offer does not provide a full principal repayment to the James Loan, there is value in the certainty provided by accepting the James Offer and crystalizing the outcome of the James Loan at this time.”
The settlement has been reached ahead of the maturity of the project term and provides an 85% return of principal as explained in the report from FAAN. This exit also represents an opportunity for an early exit years ahead of the planned schedule of building construction, completion and registration. Fortress continues to work diligently with its partners and FAAN to bring the best value forth for all projects within their portfolio. This exit is an example of retained value despite an extended delay and loss of revenue from the OMB ruling.