Fortress Exits the Braestone project near Horseshoe Valley
Thursday January 31, 2019
Fortress has completed its role in the master planned development of Braestone located in the township of Oro-Medonte in the Horseshoe Valley community.
Fortress’ role in the project was that of a development consultant to Georgian International. In 2017, a variety of environmental issues arose including several specific to the preservation of certain wildlife and flora. There was uncertainty of exactly how much time it would take to address these concerns with the Ministry of Natural Resources, and environmental consultants projected a delay of anywhere between 2 and 7 years. Upon review of the potential delays, Fortress determined there was sufficient achieved value to successfully exit the syndicate mortgage lenders now rather than wait until project completion and the construction of Phase 2 homes. The landowner successfully executed a larger land loan on the parcel to attain a net positive return for all the lenders.
In its report to court on November 19, 2018, FAAN Mortgage Administration noted the following:
The Trustee has negotiated a settlement agreement with the Braestone Borrower… the proposed payout would result in a full payment of the principal owing on the BDMC loan plus compensation of approximately 15% on that principal amount.
All real estate development has risk, and in this case, the initial time frame to complete the project had the potential to extend far beyond what was initially contemplated. Lenders agreed to the settlement offer and received a payout equal to 115% of their initial investment. The payout comes 6 months in advance of their loan term expiration.
At the time of exit, the first two phases consisting of 59 and 37 units, have sold out. Construction of homes in Phase One is almost complete, while construction is underway on the homes in Phase Two. The next phase consists of 22 homes and site servicing is underway for this third phase.
“Braestone was one of the largest land parcels we had taken on at the time,” remarks Fortress CEO Jawad Rathore. “Georgian is a great partner with tremendous experience and acumen. This project won several awards including 2016’s Community Development Award (by CHBA) and we commend their team for being open to the solution we suggested to complete the exit for all stakeholders.”
This exit marks the 32nd project that has exited from the Fortress portfolio over the past 10 years. These projects have been funded in part through syndicated mortgages arranged by mortgage brokerages. Fortress has assisted in delivering over 2,000 residential units (almost 2 million square feet) with another 4.1 million square feet currently under construction. Our historical data demonstrates that in 32 projects where Fortress has completed its role, stakeholders have substantially benefitted from value created including repayment of approximately $250M to syndicated mortgage investors. Even in projects where unforeseen circumstances arise, it is still possible for those lenders to receive a net positive return on their investment. These statistics reflect a track record of considerable success by Fortress in a competitive industry.