Fortress Real Developments has acquired at least two major projects, one in Toronto and the other in Barrie, from distressed Windsor-based Mady Developments.
On July 17, the Richmond Hill-based company announced that it had executed an agreement to purchase Barrie’s failed $100 million Collier Centre project. This agreement is pending court approval and will give Fortress sole ownership of the mixed-use project.
Fortress also acquired the Brookdale on Avenue Rd., originally owned by Mady. The developer plans to start construction there later this year with partners from Fernbrook Homes and Cityzen Development Group.
The Barrie project, which began construction in 2012, is now 65 per cent complete and is expected to need another year of work before full occupancy can take place. In its retail/commercial component, there are currently leases in place with several Triple-A tenants including Bank of Montreal, which took possession of its space last year. The residential component, LakeView Condominiums, is 100 per cent sold.
“Situated right across from City Hall and overlooking Kempenfelt Bay, this will be the best address in Barrie for residents and retailers alike when it’s finished,” said Fortress CEO Jawad Rathore.
Fortress has been working closely with a large-scale national builder who will be brought on to complete this project. Work is expected to begin immediately following the completion of the sale. “We’ve put an exceptional team in place to complete the project. This is a complex build, and we recognized early on the importance of bringing in the best,” said Fortress chief operating officer Vince Petrozza.
“We’re very fortunate to have a fantastic team that allows us the flexibility to step in and take over projects as needed. It doesn’t happen often but when the situation presents itself we have the savvy and the capital strength to do what needs to be done,” Rathore said. “The best part of this deal is that it was done to make right a situation that the previous owner had let go so wrong.”
“The tradespeople will soon be back to work, the condo buyers are going to get a wonderful building, the mortgage lenders and stakeholders have a clear plan to exit and potentially earn even more profit and, best of all, the residents of Barrie will soon have new exciting shops and businesses at which to spend their time.”
The Collier Centre project ran into trouble with mounting construction liens and missed leasehold deadlines. Mady sought court protection from creditors when grocer Sobeys could not gain possession to open its store in February, as the project ground to a halt with a flurry of unpaid bills and construction liens from upwards of 200 creditors.
Court documents indicate construction was frozen because of tradespeople walking off the job, as construction liens escalated from about $4 million at the end of November (the project’s originally scheduled conclusion date), to more than $11 million at year’s end.
Laurentian Bank demanded a $29-million payment on Dec. 17 and warned the developer it would enforce its $52-million mortgage security conditions under the Bankruptcy and Insolvency Act. Mady reported to the court he has spent $51 million and needed another $29 million to finish it.
The Toronto Avenue Rd. project was at an earlier stage.
The site had been approved but work had stalled because of Mady’s financial troubles, causing the site to go into power-of sale.
Fortress reported in June that it plans to start construction later this year.
The Brookdale on Avenue Rd. comprises a full block on the west side of Avenue Rd. from Brookdale north to Fairlawn. With a total site area of just over an acre, the project is approved for 146,917 sq. ft. of residential and another 20,129 sq. ft. of at grade commercial and a small rental component.
“We had three other projects with Mady beyond Brookdale and our teams have been working overtime on those as a result of them closing their doors,” said Fortress president and CEO Jawad Rathore. “We have exited our interest in Burlington, we are the leads in Winnipeg and our team has an excellent bid ready for Barrie,” he said before the Collier Centre take-over announcement.
“The last item was Brookdale and we’re thrilled to now control it and own it with such excellent partners in Fernbrook and Cityzen,” he said. “It was left as a huge mess; all the mortgages were in arrears, taxes were unpaid, and there were many registered liens. But in a matter of weeks we navigated a series of complicated legal maneuvers and came out on top. It was amazing how hotly contested this property was . . . probably one of the most sought after sites in Toronto so far in 2015.”
With 50 per cent of units already presold, the rest are expected to move quickly. “Our office has received numerous inquiries and offers to purchase already,” said Sam Crignano, president and partner of Cityzen Development Group. “In anticipation of our involvement, our sales team has a number of deals awaiting approval. We look forward to starting construction over the next few months. This is a great site and we are pleased to be working with our partners at Fortress and Fernbrook.”
The site garnered tremendous interest as many other developers sought to outbid each other on the prime asset on which Fortress was eventually able to control.
Vince Petrozza, Fortress chief operating officer, helmed the team that navigated this complicated process. “It was incredible. We were putting together our deal with our new partners at the same time as we were cleaning up arrears and liens that the previous owners had left behind on both the first and second mortgages,” he said. “Our counsel at Robins Appleby and I put in some late nights and early mornings to win this site. Multiple parties were bidding aggressively early on in the process on a site that we knew ourselves has tremendous value. That shows the depth of this market, the open market value of this site and the tremendous value we were able to obtain it for.”
With permits already paid for and multiple offers for complete project financing, construction is expected to start in the next few months. “The team at Fortress prides itself on being creative and innovative. We really showed all of that off on this deal and are very excited to move ahead with top shelf partners in Fernbrook and Cityzen,” said Frank Margani, Fortress’s executive vice-president of strategy and development.
With more than 70 projects across Canada under construction, development or already completed, Fortress is adept in seeing projects through to completion even if the original plan changes course, the developer said in its news release.