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Court File No. CV-18-596204-00CL
OntarioSUPERIOR COURT OF JUSTICE
(COMMERCTAL LrST)
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC
Respondent
APPLICATION UNDER SECTION 37 OF'THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006,
c.29 and SECTION 101 OF THE COURTS OX'JUSTICE ACT, R.S.O. 1990 c. C.43
MOTION RECORD OX'FAAI\ MORTGAGE ADMTNISTRATORS INC.,IN ITSCAPACITY AS COURT-APPOINTED TRUSTEE
November 19,2018 osLE& HOSKTN & HARCOURT LLPP.O. Box 50, I First Canadian PlaceToronto, ON M5X lB8
Michael De Lellis (LSUC# 48038U)Jeremy Dacks (LSUC# 41851R)Patrick Riesterer (LSUC# 60258G)
Tel: 416.362.2111Fax: 416.862.6666
Lawyers for FAAN Mortgage AdministratorsInc., in its capacity as Court-appointed Trustee ofBuilding & Development Mortgages Canada Inc.
a
TO: SERVICE LIST
Court File No. CV-18-596204-00CLOntario
SUPERIOR COURT OF JUSTICECOMMERCIAL LIST
THE SUPERINTENDENT OF FINANCIAL SERVICESApplicant
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.Respondent
APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT,2006, S.O. 2006, c. 29
and SECTION 101 OF THE COURTS OF JaSTICE ACT, R.S.O. 1990 c. C.43
SERVICE LIST
TO OSLERO IIOSKIN & HARCOURT LLP100 King Street West1 First Canadian PlaceSuite 6200, P.O.Box 50Toronto, ON M5X 188
Michael De LellisTel. +1.416.862.5997Jeremy DacksTel. +1.416.862.4923Patrick RiestererTel. +1.416.862.5947
mdelellis@osler.c_omjdacks@osler.com
.com
Counsel for the Trustee
F'AAN MORTGAGEADMINISTRATORS INC.20 Adelaide Street EastSuite 920Torontci, ON M5C 2T6
Naveed ManzoorTel. +1.416.258.6415Daniel SobelTel. +1.647.272.8383Lana BeznerTel. +1.416.966.7646
naveed@faanmortsa geadmin. comdaniel@faanmortga geadmin. comlana@faanmort gageadmin. com
Trustee
ANDTO:
ANDTO:
ANDTO:
ANDTO:
AIRD & BERLIS LLPBrookfield Place181 Bay Street, Suite 1800Toronto, ON M5J 2T9
Steven L. GraffTel. +1.416.865.7726Ian AversaTel. +1.416.865.3082Miranda SpenceTel. +416.865.6414
s grafl(@ airdberl is. comiaversa@airdberl is. commspence@airdberlis.com
Counsel for the Superintendent of FinancialServices
HER MAJESTY THE QUEEN INRIGHT OF THE PROVINCE OFONTARIO AS REPRESENTED BYTHE MINISTER OF' FINANCEP.O. Box 62033 King Street West, 6th FloorOshawa, ON LlH 8E9
Kevin O'HaraTel: +1.905.433.6934Fax: +1.905.436.4510
kevin. ohara@ontario. ca
F'INANCIAL SERVICESCOMMISSION OF'ONTARIO("FSCO")5160 Yonge Street, 16th FloorToronto, Ontario M2N 6L9
Mark BaileyTel: +1.416.250.7250Brendan ForbesTel: +1.416.250.7250Fax: +1.416.590 .7070
mark.bailey@f sco. gov. on.caBrendan. Forbes@fsco. gov.on. ca
CHAITONS LLP5000 Yonge Street, 10th FloorToronto, Ontario M2N 7E9
Harvey ChaitonTel. +t.416.218.1129George BenchetritTel. +1.4t6.218.1141
harvey@chaitons.comgeorge(@shaitons.com
Court-Appointed Representative Counsel forInvestors
NORTON ROSE FULBRIGHT CANADALLPRoyal Bank Plaza, South Tower200Bay Street, Suite 3800, P.O.Box 84Toronto, Ontario lll/.sJ 224
ANDTO:
ANDTO:
Jennifer TeskeyTel: +L416.216.2303Jeremy DevereuxTel: +1.416.216.4073
Fax: +1.416.216.3930
Jennifer.teskey@nortonro sefulbri sht. com
AND BRAUTI THORNING ZIBARRAS LLPTO: 161 Bay Street, Suite 2900,
Toronto, ON M5J 2S1
Jay NasterTel. +1.416.507.2442
jnaster@btzlaw.ca
Counsel to Building and DevelopmentMortgages Canada Inc., CanadianDevelopment Capital & Mortgage ServicesInc. and Ildina Galati
2
TO:AND BUILDING AND DEVELOPMENT
MORTGAGES CANADA INC.("BDMC")25 Brodie Drive, Unit 8Richmond Hill, ONL4B 3K7
Ildina Galati
igalati@bdmc.ca
AND ROBINS APPLEBY LLP120 Adelaide Street WestSuite 2600Toronto, ON M5H 1T1
David TaubTel. +1.416.360.3354John FoxTel. +1.416.360.3349
dtaub@robapp.comifox@robaoo.com
Counsel to Fortress Real DevelopmentsInc.
AND BLANEY MCMURTRY LLP2 Queen Street East, Suite 1500Toronto, Ontario M5C 3G5
David UllmannTel. +1.416.596.4289
dullqatrn@blaney.com
AND NOBLETON SOUTH HOLDINGS INC.TO: 56 The Esplanade, Suite 206
Toronto, Ontario M5E 1A7
Domenic Fazari
dfazari@cityzen.ca
Borrower
CANADIAN DEVELOPMENT CAPITAL& MORTGAGE SERVICES INC.(,'cDcM")25 Brodie Drive, Unit 7Richmond Hill, ONL4B 3K7
Julie Galati
igalati@cdcminc.ca
FORTRESS REAL DEVELOPMENTSINC.25 Brodie Drive, Unit IRichmond Hill, ON L4B 3K7
vince@ fortressrdi. com
i awad@fortressrdi. com
PAUL BATES BARRISTER100 Lombard St., Suite 302Toronto, ON M5C 1M3
ANDTO:
ANDTO:TO
TOANDTO:
Paul Bates
pbates@bates bamisters.com
AND NOBLETON NORTH HOLDING INCTO: 368 Four Valley Drive
Concord, Ontario L4K 5ZI
Giuseppe Valela
jvalela@tercot.com
3
Borrower
TOAND
ANDTO:
AND
AND
AND
BROOKHILL HOLDINGS INC.56 The Esplanade, Suite 206Toronto, ON M5E 1A7
Giuseppe Valela
ivalela@tercot.com
Borrower for Bowmanville
OWENS WRIGHT20 Holly Street, Suite 300Toronto, Ontario M4S 3Bl
David Forgione
dfbr gi one@ owenswri ght. corn
Counsel to numerous Borrowers
WELLINGTON HOUSE INC.778 King Street WestToronto, Ontario M5V 1N6
Brad Lamb
iliana(@.lambdevcorp. com
Borrower
O'CONNOR MACLEOD HANNA LLP700 Kerr StreetOakville, ON L6K 3W5
Orie Niedzvieckiniedzviecki@on:rh.ca
Counsel to JW Roberts Enterprises Inc.
FDS BROKER SERVICES INC.160 Traders Blvd, Suite 202Mississauga, ON L4Z3K7
Zafar Khawaja
zafar@fclsbroker.com
SOUTH WEST QUEENSVILLEHOLDINGS INC.56 The Esplanade, Suite 206Toronto, Ontario M5E lA7
Giuseppe Valela
jvalela@tercot.com
Borrower for Highlands of York
MILLER THOMSON LLP40 King Street West, Suite 5800Toronto, ON MsH 3S1
Craig Mitls
crnills@
Counsel to Brookhill Holdings Inc
GOLDMAN, SLOAN, NASH & HARBERLLP480 University Avenue, Suite 1600Toronto, ON M5G 1V2
David Nakelskydavidn@gsnh.com
Counsel to Wellington House Inc.
ANDTO:
ANDTO:
ANDTO:
ANDTO:
TO
TOAND FFM CAPITAL INC.TO: 35 Silton Road
Woodbridge, ON L4L7Z8
Tony NlazzoliKrish Kochhar
trnazzoli @ffmcapi tal. comkkochhar@ffmcapital. com
ROSEN GOLDBERG INC.5255 Yonge Street, Suite 804Toronto, ON, M2N 6P4
Info @rosen goldbelg, cotn
Trustee to FDS Broker Services Inc.
4
TO
TOAND
ANDTO:
AND
ANDTO:
ROYAL CANADIAN MOUNTEDPOLICEIntegrated Market Enforcement Team20 Queen Street West, 15th FloorToronto, ON M5H 3R3
Sgt. Dominic Milotte
Dominic.Milotte@rcmp-grc. gc.ca
COMPUTERSHARE TRUSTCOMPANY OF CANADA100 University Avenue12th Floor, South TowerToronto, ON M5J 2Yl
David KerrDavid.Kerr@computershare. com
Robert ArmstrongRobert.Arm stron g@ cornputershare. com
DUNSTRE (LANDSDOWN) rNC.203 A-465 Phillip StreetWaterloo, Ontario N2L 6C7
Shawn Keeper
shawn. keeper@dunsire. com
Borrower
LAMB BAUHAUS INC.778 King Street WestToronto, ON M5V 1N6
Brad Lamb
iliana@lambdevcorp. com
Borrower
AND TSUNAMI TECHNOLOGY GROUP INC.TO: 215 Truders Blvd. East, Suite 16
Mississauga, ON L4Z3K5
Don Tanner
dontanner@technolo gy. ca
AND OLYMPIA TRUST COMPANYTO: 200,125-9 Avenue SE
Calgary, AB T2G 0P6
Jonathan BahnuikJohnny Luong
BahnuikJ@olyrnpiatrust. comLuon gJ@,olympiatrust. com
TOANDTO:
ANDTO:
RSM CANADA LIMITEI)11 King Street WestSuite 700, PO Box 27Toronto, Ontario i|;lI.SH 4C7
Jeffrey Berger
J eff. b er ger @r smcanada. c orn
Court-appointed Receiver of Dunsire(Landsdown) Inc.
BEL CALGARY INC.778King Street WestToronto, ON M5V 1N6
Brad Lamb
iliana@ lambdevcorp. com
Borrower
5
TO
ANDTO:
AND
ANDTO:
ANDTO:
SUNRISE ACQUISITIONS (BONDHEAD) rNC.50 West Wilmot Street, Suite 100
Richmond Hill, ON L4B lM5
Sajjad Hussain
shussai n (@sunrisehome s. ca
Borrower
FORTRE,SS BROOKDALE INC.| -25 Brodie DriveRichmond Hill, ON L4B 3K7
Jawad RathoreVincenzo Petrozza
j awad@ forlressrdi. comvinc e @ fortres srdi. com
Borrower
MEYER, WASSENAAR & BANACHLLPRoyal Bank Bldg. 301-5001 Yonge St.
North York, Ontario M2N 6P6
Joseph Friedjfiied@mwb.ca
Counsel to Private Receiver of BrookdaleProject
AVERTON (RUTHERFORD) rNC.101 Riele Drive, Suite 310St. Alberta, Alberta T8N 3X4
Paul Lanni
planni@averton.ca
BRAESTONE DEVELOPMENTCORPORATION85 Bayfield Street, Suite 500Barrie, ON L4M 3A7
J. David BunstonJames Massey
dbunston@ geor gianinternational. com
Borrower
RSM CANADA LIMITEDl l King Street West, Suite 700Toronto, ON M5H 4C7
Arif Dhananiari f. dhanani @rsmcanada. com
Private Receiver of Brookdale
EMERALD CASTLE DEVELOPMENTSINC.361 Connie Crescent, Suite 200Concord, ON L4K 5R2
Desi Auciello
ramsey@cachetdeveloprnents. com
Borrower
CARLYLE COMMUNITIES(CRESTVTEW) rNC.20 Rivermede Road, Suite 204Concord, ON
Naram Mansour
naram.mansour@ carl )rlecommunities. com
ANDTO:
ANDTO:
ANDTO:
ANDTO:
6
Borrower Borrower
AND LAMBEDMONTONCORP.TO: 778 King Street West
Toronto, ON M5V 1N6
Brad Lamb
il iana@lambdevcorp.com
Borrower
AND AVERTON HOMES (PRESCOTT) rNC.TO: 101 Riele Drive, Suite 310
St. Alberta, AB T8N 3X4
Paul Lanni
planni@averton.ca
Borrower
ANDTO:
ANDTO:
AND
THE HARLOWE INC.778 King Street WestToronto, ON M5V 1N6
Brad Lamb
il i ana(@ I am bd evco rp. co m
Borrower
THICKSON ROAD 407, WHITBYLIMITED9000 Keele Street, Unit 4Concord, Ontario L4K 0B3
Mario Bottero
mario @) ro sewater gro up. com
Borrower
2309918 ONTARIO INC.30 Wertheim Court, Unit 3, Building A,Richmond Hill, Ontario L4B 189
Dino Sciavilla
sales(g)pacedev.ca
Eden Borrower
GOLDMAN SLOAN NASH & HARBERLLP480 University Avenue Suite 1600Toronto, ON M5G 1V2
Robert JacksonJackson@gsnh.com
Counsel to The Harlowe Inc.
HARRIS, SHEAFFER LLP4100 Yonge Street, Suite 610Toronto, ON M2P 285
Raz Nicolaernicolae@harri s- sheaffer. com
Counsel to Whitby Borrower
DAVID CHONG1370 Don Mills RoadDon Mills, ON M3B 3N7
David ChongTel. +1.416.510.2233
David@davidchong.ca
Counsel to 2309918 Ontario Inc.
ANDTO:
ANDTO:
ANDTO:TO:
7
TOAND
ANDTO:
AND
ANDTO:
23OII32 ONTARIO INC.11025 Lakeridge RoadPort Perry, Ontario LgL lV7
Brian Tilley
catalinadevelopments@,gmail. com
Borrower
DLA PIPERI First Canadian Place100 King Street West, Suite 6000Toronto, ON M5X 1E2
Edmund LamekEdmond. lamek@dlapiper. com
Danny Nunesdanny. nunes @dlapiper. com
Counsel to2301132 Ontario Inc. and2309840 Ontario Inc.
BENNETT JONES LLPI First Canadian Place100 King Street West, Suite 3400Toronto, ON M5X lA4
Sean Zweig
zwe i g s @)bgung1li sggs. cslq
Counsel to Georgetown Proposal Trustee
BEL-EDMONTON INC.778King Street WestToronto, Ontario M5V 1N6
Brad Lamb
iliana@lambdevcorp.com
Borrower
2309840 ONTARIO INC.11025 Lakeridge RoadPort Perry, Ontario L9L lV7
ANDTO:
ANDTO:
ANDTO:
Brian Tilley
catalinadevelopments@ smail.com
Borrower
AND KSV KOf,'MAN INC.TO: 150 King Street Westm Suite 2308
Toronto, ON M5H lJ9
TO
Bobby Kofmanbko fman (a).k svadvi s ory. c om
Jonathan Joffeil .com
Proposal Trustee for Georgetown Borrower
WORTHINGTON HOMES(HUMBERTON) rNC.164 Nelson StreetOakville, Ontario L6L 3J2
Daniel Marion
dan@kinqridgedeveloprnents. ca
Borrower
KING SQUARE LTD.50 AcadiaAvenue, Suite 310Markham, Ontario L3R 0B3
Wen Yi Wang
oswin@kinggquare.ca
Borrower
AND KINGRIDGE DEVELOPMENT AND WORTHINGTON HOMES TO: CORPORATION TO: (HUMBERTON) INC.
235 Speers Road 164 Nelson Street Oakville, Ontario L6K 2E8 Oakville, Ontario L6L 312
Daniel Marion Daniel Marion
dan@kingridgedevelopments.ca dan@kingridgedevelopments.ca
Borrower Borrower
AND DUNSIRE (1041 LAKESHORE) INC. AND DUNSIRE (1407 LAKESHORE) INC. TO: 203A-465 Phillip Street TO: 203A-465 Phillip Street
Waterloo, Ontario N2L 6C7 Waterloo, Ontario N2L 6C7
Shawn Keeper Shawn Keeper
shawn.keeper@dunsire.com shawn.keeper@dunsire.com
Borrower Borrower AND KINGRIDGE (OAKVILLE EAST) INC. AND L RICHMOND CORP. TO: 1660 North Service Road East, Suite 109B TO: 778 King Street West
Oakville, Ontario N6H 703 Toronto, Ontario M5V 1N6
Daniel Marion Brad Lamb
dan@kingridgedevelopments.ca iliana(m,lambdevcorp.com
Borrower Borrower
AND 2382917 ONTARIO INC. AND MILLER THOMSON LLP TO: 500 Hanlon Creek Blvd TO: 40 King Street West, Suite 5800
Guelph, Ontario NlC 0Al Toronto, ON M5H 3Sl
Lee Piccolo Kyle Hampson
info(cv,fusionhomes.com khampson@millerthomson.com
Borrower Counsel to 2382917 Ontario Inc
AND 1177 DANFORTH A VENUE LTD. AND GORDIN & TARR LLP
TO: 156 Duncan Mill Road, Suite 23A TO: 1 Director Court, Suite 105 Toronto, Ontario M3B 3N2 Woodbridge, ON L4L 4S5
Jessica Tarr
itarr(a),gtlawyers.ca
Morris Kansun
morris@sicrra.ca
Borrower Counsel to 1177 Danforth Borrower
9
TOAND
ANDTO:
ANDTO
ANDTO:
Mike Petrovski
mike@enginedevelopments. ca
Borrower
AND TENENBAUM & SOLOMON LLPTO: 7181 Woodbine Avenue
Markham, ON L3R 1A3
Samantha Solomonsamantha@tsklaw.ca
Counsel to Borrower to Halo and Smygine
LAMB CALGARY INC.778 King Street WestToronto, Ontario M5V 1N6
Brad Lamb
ili ana@lambdevcorp. com
Borrower
SMYGINE (LAKEEAST) INC.6021 Yonge Street, Suite 229Toronto, Ontario M2M 3W2
UNION WATERFRONT INC.1-25 Brodie DriveRichmond Hill, Ontario L4B 3K7
Vincenzo Petrozza
vince@ fortressrdi. com
Borrower
LEVINE SHERKIN BOUSSIDANBARRISTERS23 Lesmill Road, Suite 300Toronto, ON M3B 3P6
ANDTO:
ANDTO:
ANDTO:
ANDTO:
AND MCAP INC.TO: 400-200 King Street West
Toronto, ON M5H 3T4
Mark AdamsMark.Adams@mcap.com
TORIilN MANES LLP151 Yonge Street, Suite 1500Toronto, ON M5C 2W7
Michael TamblynTel. +1.416.777.5366
rntamblyn@torkinmanes. com
HALO TOWNHOMES INC.229-6021Yonge StreetToronto, Ontario M2M 3W2
Mike PetrovskiSayf HassanKonstantine Simionopoulos
rnike@enginedevelopments.ca
Borrower
AMADON.WESTWATER PROJE CTSLTD.4268 William StreetVictoria, British Columbia V9A 3Y9
Max Tomaszewski
mtomaszewski @,amadongroup. com
Borrower
MSI SPERGELmsi Spergel Inc.21 King Street West, Suite 1602Hamilton, Ontario, L8P 4W7
tpringle@spereel.ca
Court Appointed Receiver of Union Waterfront
Kevin Sherkin
10
TO
AND WESTGATE PROPERTIES LTD.TO: I -25 Brodie Drive
Richmond Hill, ON L4B 3K7
Jawad Rathore
Vincenzo Petrozza
j awad@ forlre ssrdi. cornvince@fortressrdi.com
Borrower
AND
Tel: +1.416.224.2400 ext. 120Mitchell WineTel: +1.416.224.2400 ext. 116
kevin(Olsblaw.comrnitch@lsblaw.com
Counsel for certain proposed representativeplaintiffs in class action proceedingsagainst BDMC and other parties
FORTRESS COLLIER CENTRE LTD.1 - 25 Brodie DriveRichmond Hill, ON L4B 3K7
Jawad Rathore
Vincenzo Petrozza
i aw ad(dfortre s srdi. comv" inc-e @ fbrtre s srdi. com
Borrower
6566074 MANITOBA LTD.l-25 Brodie DriveRichmond Hill, OntarioL4B 3K7
Jawad RathoreVincenzo Petrozza
i awad@ fo-rtres srdi. comvinc e (@fbrlre s srdi. co m
Phitip FrankPhilip. Frank@mcap. com
Bruno IacovettaBruno. Iacovetta(@mcap. com
AND F'ORTRESS CHARLOTTE 2014INC.TO: I -25 Brodie Drive
Richmond Hill, ON L4B 3K7
Jawad Rathore
j awad@fortressrdi. com
Borrower
ANDTO:
ANDTO:
FORTRESS CARLYLE PETER STREETINC.20 Rivermede Road, Suite 204Concord, Ontario L4K 3N3
Naram MansourJawad Rathore
j awad@fortressrdi. com
Borrower
FORTRESS KEMPENFELTBAYDEVELOPMENTS INC.1-25 Brodie DriveRichmond Hill, OntarioL4B 3K7
Jawad Rathore
Vincenzo Petrozza
j awad@tbrtressrdi. comvince@fortressrdi. com
ANDTO:
Borrower
11
ANDTO:
AND
OLD MARI(ET LANE INC.1-25 Brodie DriveRichmond Hill, Ontario L4B 3K7
Vincenzo Petrozza
vince@).lbrtressrdi. com
Borrower
2221563 ONTARIO INC.l-25 Brodie DriveRichmond Hill, Ontario L4B 3K7
Vincenzo Petrozza
vi n ce (@fortre ssrd i. com
Borrower
Borrower
F'ORTRESS TRIPLE CREEK INC.1-25 Brodie DriveRichmond Hill, Ontario L4B 3K7
Vincenzo Petrozza
vi nce@ fbrtressrdi. com
Borrower
2283020 ONTARIO INC.FORTRESS PORT PLACE (2014) rNC.| -25 Brodie DriveRichmond Hill, ON L4B 3K7
Jawad Rathore
Vincenzo Petrozza
j awad@fortressrdi. comvi nc e@fortre s srd i. c om
Borrower
ANDTO:
ANDTO:TO:
12
Email List:
rndelellis@osler.com: jdacks@osler.com; rlriesterer(@osler.corn; naveed@faanmortgageadmin.com;daniel@faanmortgageadmin.com; lana@faanmortgageadmLl.com: sgratf@airdberlis.com;
lis.com JenniferJeremy.devereux@norlonrosefulbright.com; dtaub@robapp.com; jfqx@robapp.corn; jnaster@btzlaw.ca;dullmann(@blaney.com; harve)r@chaitons.corn; george@chaitons.oom: mark.bailey@fsco. gov.on. ca;Brendan.Forbes@fsco.gov.on.ca; kevin.ohara@ontario.ca; vince@.fortressrdi.com;j awad@fo*ressrdi.com; BahnuikJ@olympiatrust.com; Luon g.I@olyrnpiatrust.corn;Dominic.Milotte@rcrnp-grc.ec.ca:dontanner@technology.ca; sales@pacedev.ca; dfazari@,cityzen.ca:catalinadevelopments@gmail.com; ivalela@tercot.com; dan@kingridgedeveloprnents.ca;iliana@lambdevcorp.com; oswin@kinesquare.ca; mike@enginedevelopments.ca;shawn.keeper@dunsire.com; planni@averton.sa; infb@f usionhomes.com;mtornaszewski@amadongrouo.com; mario@rosewatergroup.com: David.Ken@computersharci.com;
naram ramsey@cachetdevelopments. com;shussain@jiunri sehomes.ca; dbunston@georgianinternational.com;pqoldfischer@solotexcorporation.com; pbates@batesbarristers.com; Jeff .berger@rsmcanada.com;tmazzoli@ffrncapital.com; kkochhar@fimcapital.com: zafar@fdsbroker.com; iealati@bdmc.ca;cmills@millerthomson.corn; davidn@gsnh.corn; niedzviecki@omh.ca; kevin@.lsblaw.com;
mtamblPhilip.Frank@mcap.corn; Bruno.Iacovetta@mcap.com; jgalati@cdcminc.ca: tprinele@spergel.ca;arif.dhanani@rsmcanada.com; danny.nunes@.dlapiper.com; Edmond.lamek@dlapiper.com;jjoffe@ksvadvisory.corn; bkothran@ksvadvisory.oom; zweigs@bennettjones.com;samantha(g)tsklaw.ca; jfried@mwb.ca; jtarr@gtlawyers.ca; khampson@millerthomson.com;Jackson@.gsnh.com; rnicolae@harris-sheaffer.corn; Robert.Armstrong@computershare.com:
13
INDEX
Tab
I
2
J
INDEX
Document
Notice of Motion dated November 19,2018
Third Report of the Trustee dated November 19,2018
Draft Braestone Settlement Approval Order
Page No.
1
l3
232
TAB 1
1
Court File No. CV-18-596204-00CL
OntarioSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006,5.0. 2006,
c.29 and SECTION 101 OF TH.E COaRTS OF JaSTICE ACT, R.S.O. 1990 c. C.43
NOTICE OF MOTION(Motion for Approval of Braestone Settlement)
FAAN Mortgage Administrators Inc., in its capacity as Court-appointed trustee
("Trustee") of all of the assets, undertakings and properties of Building & Development
Mortgages Canada Inc. ("BDMC") pursuant to section 37 of the Mortgage Brokerages, Lenders
and Administrators Act, 2006, S.O. 2006, c.29, as amended, ("MBT,AA") and section 101 of the
Courts of Justicelcr, R.S.O . 1990, c. C.43, as amended, will make a motion before a judge of the
Ontario Superior Court of Justice (Commercial List) on November 28, 2018 at 10:00 a.m., or as
soon after that time as the motion can be heard, at 330 University Avenue, Toronto, Ontario.
PROPOSED METHOD OF HEARING: The motion is to be heard orally
THE MOTION IS FOR:
1. An Order (the "Braestone Settlement Approval Order") substantially in the form
attached to the Motion Record, inter alia:
a-L-
(a) if necessary, abridging the time for service of this Notice of Motion and the Motion
Record and dispensing with service on any person other than those served;
(b) approving the Settlement Agreement dated as of October 7'7,2018 (the "Braestone
Settlement Agreement") among Braestone Development Corporation
("Braestone"), the Trustee and Olympia Trust Company ("OTC"), with such minor
amendments as the parties to the Braestone Settlement Agreement may agree upon
to permit the completion of the transaction contemplated thereby;
(c) directing Braestone to pay $10 million forthwith to the Trustee in accordance with
the terms of the Braestone Settlement Agreement (such funds, the "Braestone
Realized Property");
(d) approving and ratifying the execution of the Braestone Settlement Agreement by the
Trustee and OTC and authorizingand directing the Trustee and OTC to comply with
all of their obligations under the Braestone Settlement Agreement;
(e) releasing, extinguishing, expunging and discharging all of the Braestone Loan
Obligations and the Loan Encumbrances (each as defined below) upon the delivery
of the Trustee's Certificate (as defined below), and ordering that none of the Trustee,
BDMC, OTC or any Braestone Individual Lenders (as defined below) have any
claim against Braestone in respect of the Braestone Loan Obligations or the Loan
Encumbrances; provided, however, that Braestone is not released from any
obligations under the Braestone Settlement Agreement;
(0 declaring that the Release Agreement be given to the Releasees (as defined below)
by Braestone on behalf of itself, its affiliates, and their respective shareholders,
agents, directors, officers, employees, and each of their respective successors and
assigns (collectively, the "Releasors") and shall be binding and effective on the
Releasors in favour of the Releasees upon the delivery of the Trustee's Certificate;
(g) authorizing the Trustee to make a further distribution to Investors of Realized
Property following the filing of the Trustee's Certificate with the Court in an amount
equal to lQo/o of the Realized Property held on April 20, 2018;
2
-J- 3
(h) amending the Realized Property Order upon delivery of the Trustee's Certificate to
require the Trustee to distribute 80% of all other Realized Property obtained,
including the Braestone Realized Property,pro rata to the Investors entitled to such
funds, whether received before or after the date of the proposed Braestone
Settlement Approval Order;
(i) approving the First Report, the Second Report, the Third Report, and all of the
actions, conduct and activities of the Trustee as set out therein;
0) approving the fees and disbursements of the Trustee and its counsel, as set out in the
Third Report, the affidavit of Naveed Manzoor sworn November 19, 2018 and
attached as Appendix 8 to the Third Report (the "Manzoor Affidavit"), and the
affidavit of Michael De Lellis sworn November 19, 2018 and attached as Appendix
9 to the Third Report (the "De Lellis Affidavit");
(k) sealing from the public record certain commercially-sensitive information and
documents (as described below); and
2. Such further and other relief as this Court may deem just.
THE GROUNDS FOR THE MOTION ARE:
Background
1. Pursuant to the Order of the Court in respect of BDMC dated April 20, 2018 (the
"Appointment Order"), FAAN Mortgage was appointed as the Trustee, without security, of all
of the assets, undertakings and properties of BDMC, including, without limitation, all of the assets
in the possession or under the control of BDMC, its counsel, agents and/or assignees but held on
behalf of any other party, including, but not limited to, Investors (as defined below), brokers, or
borrowers, in each case whether or not such property is held in trust or is required to be held in
trust;
2. The purpose of the Trustee's appointment is to protect the interests of the members of
the investing public who invested in syndicated mortgage loans made by BDMC in respect of
-4-
certain real estate developrnent projects secured by mortgages (typically third-ranking or lower
priority charges) registered on title to the applicable real property (the "Investors");
3. Concurrently with the filing of this notice of motion, the Trustee is filing the Third
Report of the Trustee dated November 19, 2018 (the "Third Report") with the Court, which
describes the Trustee's activities to date in carrying out its mandate under the Appointment Order.
Capitalized terms used but not defined herein have the meanings given in the Third Report;
4. The First Report of the Trustee dated June 19, 2018 (the "First Report") described the
need for certain interim stabilization measures, including, among other things, clarification related
to the use of certain funds held in BDMC's accounts, to allow the Trustee to discharge its
obligations pursuant to the Appointment Order, perform BDMC's administrative tasks, and to
commence an in-depth review of the real estate development projects that were funded in part
through the syndicated mortgage loans that were administered by BDMC;
4
5 The Interim Stabilization Order was issued on June 26,2018 and, among other things:
(a) appointed Chaitons LLP as representative counsel inrespect of the common interests
of all Investors in these proceedings unless and until an Investor opts out of such
representation ("Representative Counsel");
(b) authorized the Trustee to retain all of the funds held by BDMC on the date of the
Appointment Order, or paid or payable to BDMC or the Trustee thereafter, including
interest where principal is not repaid, other than Realized Property ("Estate
Properfy") and to use the Estate Property to fund certain matters in connection with
the administration of BDMC's estate;
(c) required the Trustee to hold, in a separate account, until further order of the Court
(I) all funds held or received by the Trustee as a result of a repayment (in whole or
in part) of principal on any loan or other indebtedness administered by BDMC on
behalf of Investors, whether or not (i) secured by any Real Property Charges in the
name of BDMC or an RRSP Trustee, (ii) received before or after the date of the
Appointment Order, or (iii) paid or payable in trust, plus (II) all interest paid or
payable to BDMC or the Trustee at the time such repayment (in whole or in part) of
5
principal is made (collectively, "Realized Property") other than 50% of the
Realized Property consisting of realizations on the Victoria Medical SML Loans;
directed the Trustee to pay 50% of the Realized Property consisting of realizations
on the Victoria Medical SML Loans pro rata to the Investors entitled to such funds;
and
5
(d)
(e) required the Trustee to report to the Court by October 31, 20T8 with a
recommendation regarding next steps with respect to the Realized Property,
including any potential distribution of Realized Property to the Investors;
6. The Second Report of the Trustee dated October 23, 2018 (the "Second Report")
provided a further comprehensive update on the Trustee's activities undertaken since the date of
the First Report, including a detailed description of the in-depth analysis the Trustee is conducting
with respect to each real estate development project and a status update for each of those projects.
The Second Report contained information in support of the Realized Property Order;
7. The Realized Property Order was issued on October 30, 2018 and, among other things
(a) required the Trustee to distribute (when aggregated withprevious distributions)7}oh
of the Realized Property (including funds originally obtained with respect to the
Victoria Medical SML Loans);
(b) required the Trustee to retain 30o/o of all Realized Property; and
(c) authorized the Trustee to use the retained Realized Property to aid the Trustee in
complying with the Appointment Order and in carrying out its mandate, as the
Trustee, in its sole discretion, considered necessary or desirable for the
administration of the estate, including in respect of those matters set out in paragraph
11 of the Interim Stabilization Order (collectively, the "Required Trustee
Activities");
-6-
Need for the Braestone Settlement Approval Order
8. The Trustee understands that Braestone faces significant environmental issues on certain
aspects of its real estate development project in Moonstone, Ontario (the "Braestone Project").
BDMC is party to a loan agreement with Braestone dated December l, 2012 (the "Loan
Agreement"). The Trustee understands that the environmental issues on the Braestone Project
would likely result in material delays in the progress of the Braestone Project;
9. Braestone has advised the Trustee that it does not expect to be able to pay the amounts
due under the Loan Agreement in full prior to July 2019, the extended maturity date under the
Loan Agreement, and that it may take 2 to 7 years to remedy the environmental conditions.
Braestone is seeking to refinance the Braestone Project to address the market and environmental
challenges, but has advised the Trustee that it must reduce its overall debt in order to do so.
Accordingly, Braestone is seeking to repay the debt owing to the individual lenders under the Loan
Agreement (the "Braestone Individual Lenders") at a discount to the total amount that would be
owing at the completion of the Braestone Project;
10. The Trustee's negotiations with Braestone in respect of a potential payout culminated
when, on October 17,2018, Braestone presented the Trustee with an offer to accept payment by
Braestone of $10 million in full satisfaction of the amounts due under the Loan Agreement, which
contained the proposed Braestone Settlement Agreement (the "Braestone Offer");
11. As described in the Third Report, the full amount due under the Braestone loan
(including interest and certain deferred lender fees) exceeds $16 million; however, when
previously paid interest of approximately $5.4 million is included, the proposed payout would
result in a full payment of the principal owing on the BDMC loan plus compensation of
approximately l5o/o on the principal amount of the BDMC loan;
12. The Braestone Offer is conditional upon the release and discharge of all of Braestone's
obligations to BDMC, OTC, and the Braestone Individual Lenders under the Braestone Loan
Agreement, the Security and the Lodn Documents (each as defined in the Braestone Loan
Agreement) (collectively, the "Braestone Loan Obligations") and all security interests granted
to BDMC, OTC or the Braestone Individual Lenders in and to the assets of Braestone to secure
the Braestone Loan Obligations (the "Loan Encumbrances") and provides that Braestone is to
6
-7 - 7
deliver a release agreement ("Release Agreement") to the Trustee, BDMC, OTC, and the
Braestone Individual Lenders, each of their respective officers, directors, agents, employees, and
each of their respective successors and assigns (collectively, the "Releasees"), which would
release such Releasees from all obligations under the Braestone Loan Documents;
13. The Trustee consulted extensively with Representative Counsel regarding the Braestone
Offer and has been informed by Representative Counsel that it also supports the acceptance of the
Braestone Offer;
14. The Trustee delivered a notice to the Braestone Individual Lenders on October 23,2078
advising the Braestone Individual Lenders of the Trustee's recommendation in support of
accepting the Braestone Offer and requesting the Braestone Individual Lenders to provide their
feedback, whether for or against the acceptance of the Braestone Offer, and any other general
feedback (the "Braestone Consent Request");
15. As described in the Third Report, the Trustee received 86 formal votes in response to
the Braestone Consent Request. Over 96Yo of the Braestone Individual Lenders that voted in
response to the Braestone Consent Request, representing over 99o/o in value of such loans, voted
in favour of the Trustee accepting the Braestone Offer; whereas less than 4o/o of voting Braestone
Individual Lenders, representing less thanlo/o in value of such loans, voted against the Braestone
Offer;
16. The rate of response to the Braestone Consent Request was much higher than the rate of
response to any other notice or request for consent that the Trustee has sent to date;
ll. Following receipt of feedback from the Braestone Individual Lenders and
Representative Counsel, the Trustee has accepted the Braestone Offer and the Trustee and OTC
executed the Braestone Settlement Agreement. However, the Braestone Settlement Agreement is
only binding on the Trustee, BDMC and OTC upon approval of the agreement by the Court. The
Trustee is therefore seeking the Braestone Settlement Approval Order from the Court;
18. If the Court issues the proposed Braestone Settlement Approval Order, then the
settlement set out therein would become effective upon the issuance by the Trustee of a Trustee's
-8-
certificate confirming, among other things, the Trustee's receipt of the $10 million payrnent (the
"Trusteets Certificate") ;
Need for Approval of Certain Realized Property Matters
19. Since the approval of the Realized Property Order, the Trustee has distributed (when
aggregated with previous distributions) 70% of the Realized Property and has retained the
remaining Realized Property as required by the Realized Property Order;
20. The Trustee has determined, based on its expectations regarding the ability to generate
further Realized Property in the next reporting period, that, should the $10 million in Braestone
Realized Property be received, it will be appropriate to further reduce the percentage of Realized
Property that it needs to retain to fund the Required Trustee Activities;
21. Therefore, the Trustee is seeking the Court's authorization to distribute an additional
amount equal to l\Yo of the Realized Property held by the Trustee on April 20,2018, such that
80% of the Realized Property received to date will have been distributed by the Trustee;
22. The Trustee is also, subject to the delivery of the Trustee's Certificate, seeking an
amendment to paragraph 3(b) of the Realized Property Order to authorize the Trustee to distribute
80% of any future Realized Property received by the Trustee after the date of the Braestone
Settlement Approval Order;
23. As described in the Second Report, the Trustee predicts that there will be a limited
number of projects that give rise to recoveries in the near term and that recoveries on many of the
syndicated mortgage loans are at risk. The Trustee understands that Representative Counsel agrees
with the proposed retention of 20%o of all Realized Property and the proposed distribution of all
other Realized Property in the circumstances;
Approval of Reports, Trustee's Activities, and Trustee's and its Counsel's Fees and
Disbursements
24. As part of the Braestone Settlernent Approval Order, the Trustee seeks this Court's
approval ofthe First Report, the Second Report and the Third Report and all of the actions, conduct
and activities of the Trustee as set out in therein, including the Trustee's and its counsel's fees and
8
-9-
disbursements incurred in respect of such activities, as more fully set out in the Manzoor Affidavit
(including the Confidential Manzoor Exhibit) and the De Lellis Affrdavit (including the
Confidential De Lellis Exhibit);
Sealing Order
25. The following two-part test applies when determining whether a sealing order should be
granted:
(a) Is the order necessary to prevent a serious risk to an important interest, including a
commercial interest, in the context of litigation because reasonably altemative
measures will not prevent the risk?
(b) Do the salutary effects of the order, including the effects on the right of civil litigants to
a fair trial, outweigh its deleterious effects, including the effects on the right to free
expression, which in this context includes the public interest in open and accessible
court proceedings?r;
26. The Confidential Manzoor Exhibit and the Confidential De Lellis Exhibit filed in
connection with this motion contain confidential, privileged and commercially sensitive
information regarding the projects and BDMC generally which, if made public, would be
materially prejudicial to the Trustee and BDMC and could have a material adverse effect on the
recoveries that may ultimately be available to Investors in these proceedings;
21. There are no reasonable measures available to protect this information as an altemative
to an Order sealing this information from the public record. However, to mitigate any detrimental
consequences of the sealing Order and to promote a fair and open proceeding, the Manzoor
Affidavit and the De Lellis Affidavit contain detailed summaries of the activities of the Trustee
and its counsel that are more fully reported in the Confidential Manzoor Exhibit and the
Confidential De Leliis Exhibit, as well as detailed information regarding the fees incurred to date;
and
9
I Sierra Club of Canads v Canada (Minister of Finance) ,2002 SCC 41 at para 53
-10-
28. The salutary effects of a sealing Order outweigh the deleterious effects, as the sealing
Order would protect the interests of the Investors and their potential recoveries in these
proceedings, while the deleterious effects are minimizedby the inclusion of detailed summaries of
the Trustee's and its counsel's activities in the Manzoor Affidavit and the De Lellis Affidavit;
General
29. The provisions of the MBLAA, including section 37 thereof;
30. The Appointment Order;
31. The Interim Stabilization Order;
32. The Realized Property Order;
33. Rules 1,04, 1.05,2.03,3.02, 16,37 and 4l of the Ontario Rules of Civil Procedure,
R.R.O. 7990, Reg. 194, as amended;
34. Sections 101 and 106 of the Ontario Courts of Justice lcf, R.S.O. 1990, c. C.43 as
amended;
35. The inherent and equitable jurisdiction of this Honourable Court; and
36. Such further and other grounds as counsel may advise and this Court may permit
THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of this
motion:
10
1 The Appointment Order;
2.
J
The Interim Stabilization Order;
The Realized Property Order;
4.
5
The First Report;
The Second Report;
- 11-
The Third Report;
The Manzoor Affidavit, including the Confidential Manzoor Exhibit;
The De Lellis Affidavit, including the Confidential De Lellis Exhibit; and
9 Such further and other evidence as counsel may advise and this Court may permit.
November 19,2018 osLER, HOSKIN & HARCOURT LLPBox 50, 1 First Canadian PlaceToronto, ON M5X 1B8
Michael De Lellis (LSUC# 48038U)Jeremy Dacks (LSUC# 4185lR)Patrick Riesterer (LSUC# 60258G)
Tel: (416) 362-2111Fax: (416) 862-6666
Lawyers for FAAN Mortgage Administrators Inc.,in its capacity as Court-appointed Trustee
TO SERVICE LIST
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13
Court File No. CV-18-596204-00C1
ONTARIOSUPERIOR COURT OF JUSTICE
(coMMERCTAL L|ST)
BETWEEN
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AA'D ADMINISTRATORS ACT, 2006, S.O. 2006, C.
29 and SECTION 101 OF THE COURIS OF JUSTICE ACI R.S.O. 1990 c. C.43
THIRD REPORT OF THE TRUSTEE
NOVEMBER 19,20{8
FAAN Mortgage Administrators lnc.Court-Appointed Trustee of the Respondent
{ NFAAilIORTOAOErBilrlilsTRAT0[S
T4
TABLE OF CONTENTS
INTRODUCTION
PURPOSE OF THE THIRD REPORT.......,.
SCOPE AND TERMS OF REFERENCE .....
BRAESTONE SETTLEMENT OFFER ........
NEGOTIATIONS REGARDING OTHER PAYOUTS.
RECOMMENDATION REGARDING REALIZED PROPERTY
APPROVAL OF THE TRUSTEE'S REPORTS, ACTIVITIES AND FEES
CONCLUSION AN D RECOM M EN DATION
.1
.4
.6
.713
15
16
T9
15
INDEX OF APPENDICES
Appendix 1
Appendix 2
Appendix 3
Appendix 4
Appendix 5
Appendix 6
Appendix 7
Appendix 8
Appendix 9
Appointment Order dated April 20, 2018
First Report of the Trustee dated June 19, 2018, without exhibits
Second Report of the Trustee dated October 23,2018, without
exhibits
Realized ProperW Order dated October 30, 2018
Braestone Updates
Braestone Offer and Braestone Settlement Agreement
Braestone Consent Request dated October 23,2018
Manzoor Fee Affidavit
De Lellis Fee Affidavit
16
Court File No. CV-18-596204-00C1
ONTARIOSUPERIOR COURT OF JUSTICE
(coMMERCTAL LIST)
BETWEEN
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS A'VD ADMINISTRATORS ACT, 2006, S.O. 2006, C.
29 and SECTION 101 OF THE COURIS OF JUSTICE ACI R.S.O. 1990 c. C.43
THIRD REPORT OF THE TRUSTEE
November 19, 2018
INTRODUCTION
On April 20,2018, pursuant to an order ("Appointment Orde/') of the Honourable Mr.
Justice Hainey of the Ontario Superior Court of Justice (Commercial List) ("Gourt'),
FAAN Mortgage Administrators lnc. ('FAAN Mortgage") was appointed as trustee
("Trustee") over all of the assets, undertakings and properties of Building &
Development Mortgages Canada lnc. ("BDMC") including, without limitation, all of the
assets in the possession or under the control of BDMC, its counsel, agents and/or
assignees but held on behalf of any other party, including, but not limited to, lenders
under syndicated mortgage loans ("lnvestors"), brokers, or borrowers, in each case
whether or not such property was or is held in trust or was or is required to be held in
trust (collectively, the "Property"). The Appointment Order was issued following an
application made by the Superintendent of Financial Services ("superintendent")
pursuant to section 37 of the Mortgage Brokerages, Lenders and Administrators Act,
2006 (Ontario), as amended, and section 101 of the Couds of Justice Acf (Ontario), as
1
T7
2
amended. A copy of the Appointment Order is attached as Appendix "1'
On June 19, 2018, the Trustee submitted its first report in these proceedings ("First
Report"). The First Report provided a comprehensive update on the Trustee's activities
during the first two months of these proceedings, including additional background
information regarding BDMC and its business and updated information on the status of
the real estate development projects in which the lnvestors hold syndicated mortgage
loans. A copy of the First Report, without exhibits, is attached as Appendix"2".
On October 23, 2018, the Trustee submitted its second report in these proceedings
("Second Report"). The Second Report provided a further comprehensive update on the
Trustee's activities undertaken since the date of the First Report, including a detailed
description of the in-depth analysis the Trustee is conducting with respect to each real
estate development project and a status update for each of those projects. The Second
Report also included information in support of the Realized Property Order (described
below). A copy of the Second Report, without exhibits, is attached as Appendix "3".
Capitalized terms not otherwise defined in this Report have the meanings ascribed to
them in the Second Report.
On October 30, 2018, this Court issued an Order ("Realized Property Order") that,
among other things,
(a) required the Trustee to distribute (when aggregated with previous distributions)
7Oo/o of (l) all funds held or received by the Trustee as a result of a repayment (in
whole or in part) of principal on any loan or other indebtedness administered by
BDMC on behalf of lnvestors (including funds originally obtained with respect to
the Victoria Medical SML Loans), whether or not (i) secured by any Real Property
Charges in the name of BDMC or an RRSP Trustee, (ii) received before or after
the date of the Appointment Order, or (iii) paid or payable in trust, plus (ll) all
interest paid or payable to BDMC or the Trustee at the time such repayment (in
whole or in part) of principal is made (collectively, "Realized Property");
(b) required the Trustee to retain 30% of all Realized Property; and
(c) authorized the Trustee to use the retained Realized Property to aid the Trustee in
complying with the Appointment Order and in carrying out its mandate, as the
3
4
2
18
5
6.
Trustee, in its sole discretion, considered necessary or desirable for the
administration of the estate, including in respect of those matters set out in
paragraph 17 of the lnterim Stabilization Order (collectively, the "Required
Trustee Activities").
A copy of the Realized Property Order is attached as Appendix'n4'
The Trustee indicated in the Second Report that it intended to return to Court in the near
term to seek this Court's approval of a settlement agreement with respect to the
obligations owing by Braestone Development Corporation ("Braestone") to BDMC under
the loan agreement dated December 1, 2012 ("Loan Agreement") relating to
Braestone's real estate development project in Moonstone, Ontario ("Braestone
Proiect"), and to seek a further distribution of Realized Property to lnvestors upon
receipt of the payment contemplated by that settlement.
At the time of the Second Report, the Trustee had recommended that the Braestone
lnvestors accept the Braestone settlement and was seeking feedback from the
Braestone lnvestors in that regard. This Third Report sets out the Trustee's
recommendation regarding the Braestone Project based on lnvestor feedback, and
supports the Trustee's motion for an Order, among other things, approving the
Settlement Agreement made as of October 17, 2018 (the "Braestone Settlement
Agreement") among Braestone, the Trustee and Olympia Trust Company ("OTC") that
provides for a payment to the Trustee of $10 million in full and final satisfaction of
Braestone's obligations under the Loan Agreement, as more fully described in this Third
Report.
Materials filed with the Court with respect to these proceedings (other than confidential
materials filed under seal), including the First Report, the Second Report, the affidavit of
Brendan Forbes, legal counsel at the Ministry of the Attorney General Civil Law Division,
Financial Services Commission of Ontario ("FSGO") branch, sworn on April 19,2018,
the Superintendent's application record, the Appointment Order, the Interim Stabilization
Order, the Realized Property Order and the endorsements issued by the Court, are
accessible on the Trustee's website at: unrvw.faanmortgageadmin.com ("Trustee's
Website"). The Trustee intends to maintain the Trustee's Website for the currency of
these proceedings and will be updating it as appropriate.
7
3
1,9
8.
PURPOSE OF THE THIRD REPORT
The purpose of this third report of the Trustee ("Third Report') is to provide the Court
and stakeholders with the Trustee's recommendation regarding the Braestone
Settlement and to support the Trustee's request for an Order (the "Braestone
Settlement Approval Order") that, among other things:
(a) approves the Braestone Settlement Agreement, with such minor amendments as
the Trustee and the other parties to the Braestone Settlement Agreement may
agree upon to permit the completion of the transaction contemplated thereby; (ii)
directs Braestone to pay $10 million forthwith to the Trustee in accordance with
the terms of the Braestone Settlement Agreement (such funds the "Braestone
Realized Property"); and (iii) approves and ratifies the execution of the
Braestone Settlement Agreement by the Trustee and OTC and authorizes and
directs the Trustee and OTC to comply with all of their obligations under the
Braestone Settlement Agreement;
(b) releases, extinguishes, expunges and discharges all of Braestone's obligations to
BDMC, OTC, and the individual lenders under the Braestone Loan Agreement
("Braestone lndividual Lenders"), the Security and the Loan Documents (each
as defined in the Braestone Loan Agreement) (collectively, the "Braestone Loan
Obligations") and all security interests granted to BDMC, OTC or the Braestone
lndividual Lenders in and to the assets of Braestone to secure the Braestone
Loan Obligations (the "Loan Encumbrances") upon the delivery of a Trustee's
certificate confirming, among other things, the Trustee's receipt of the $10 million
payment (the "Trustee's Gertificate"), and ordering that none of the Trustee,
BDMC, OTC or any Braestone lndividual Lender have any claim against
Braestone in respect of the Braestone Loan Obligations or the Loan
Encumbrances; provided, however, that Braestone is not released from any
obligations under the Braestone Settlement Agreement;
(c) declares that the release agreement ("Release Agreement') to be given to the
Trustee, BDMC, OTC, and each Braestone lndividual Lender who loaned funds
through BDMC or OTC to Braestone pursuant to the Loan Agreement and all
related Loan Documents, each of their respective officers, directors, agents,
4
20
I
employees, and each of their respective successors and assigns (collectively, the
"Releasees") by Braestone on behalf of itself, its affiliates, and their respective
shareholders, agents, directors, officers, employees, and each of their respective
successors and assigns (collectively, the "Releasors") shall be binding and
effective on the Releasors in favour of the Releasees upon the delivery of the
Trustee's Certificate;
(d) orders the Trustee to make a further distribution to lnvestors following the filing of
the Trustee's Certificate with the Court in an amount equal to 10% of the
Realized Property held on the date of the Appointment Order, including the
Realized Property obtained with respect to the Victoria Medical SML Loans, pro
rata lo the lnvestors entitled to such funds, such that, when combined with the
distribution made pursuant to the lnterim Stabilization Order and the Realized
Property Order, 80% of such funds shall have been distributed on a pro rata
basis to the lnvestors entitled to such funds; and
(e) amends paragraph 3(b) of the Realized Property Order upon the delivery of the
Trustee's Certificate to require the Trustee to distribute 80% of all other Realized
Property obtained, including the Braestone Realized Property, pro rafa to the
lnvestors entitled to such funds, whether received before or after the date of the
proposed Braestone Settlement Approval Order.
ln addition, the Trustee is seeking this Court's approval of the First Report, the Second
Report, the Third Report, the activities described in each of the Reports, and the
professional fees of the Trustee and its counsel for the period from the date of the
Appointment Order to September 30, 2018, as more fully described herein and in the fee
affidavits attached hereto.
ln support of the Trustee's request for the Braestone Settlement Approval Order, this
Third Report describes the following matters:
(a) The details of the Braestone Settlement Agreement;
(b) lnformation that supports the Trustee's recommendation that the BraestoneSettlement Agreement be approved;
(c) A summary of the Trustee's activities to date: and
10
5
21,
(d) lnformation regarding the Trustee's and its counsel's fees and disbursements
from the date of the Appointment Order through to September 30, 2018.
11 The Trustee is required under the Realized Property Order to report back to the Court by
no later than April 30, 2019 with a further comprehensive update regarding these
proceedings. The Trustee anticipates that it will likely be necessary to prepare shorter
project specific reports similar to this Third Report during the intervening period and to
attend before the Court to seek relief or advice and directions from the Court regarding
project specific issues, which may include the approval of settlement and repayment
arrangements for other real estate development projects.
SCOPE AND TERMS OF REFERENCE
ln preparing this Third Report, the Trustee has relied upon unaudited financial
information provided by, inter a/r,a, BDMC, Fortress, Canadian Development Capital &
Mortgage Services lnc. ("CDGM"), the mortgage brokerage who assumed the mortgage
brokerage duties of BDMC, Braestone and certain other individual borrowers who have
borrowed funds from BDMC under various syndicated mortgage loans administered by
BDMC. While the Trustee reviewed various documents provided by BDMC, CDCM, and
applicable borrowers (including, among other things, unaudited internal information,
appraisals and financial projections), the Trustee's review does not constitute an audit or
verification of such information for accuracy, completeness or compliance with Generally
Accepted Assurance Standards ("GAAS"), Generally Accepted Accounting Principles
("GAAP'), or lnternational Financial Reporting Standards ("lFRS"). Accordingly, the
Trustee expresses no opinion or other form of assurance pursuant to GAAS, GAAP or
IFRS, or any other guidelines, with respect to such information.
12
13 Some of the information used and relied upon in preparing this Third Report consists of
financial projections and other information received from various third parties, including
appraisals and project cost information. The Trustee cautions that the projections and
other information used and relied upon are generally based upon assumptions and
estimates about future events and/or market conditions that are not ascertainable or that
could change. As such, the information presented in this Third Report may vary from the
projections and information used to prepare this Third Report and the actual results may
differ both from the results projected therein and herein. Even if the assumptions relied
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16.
upon therein or herein materialize, the variations from the projections could be
significant. The Trustee's review of the future oriented information used to prepare this
Third Report did not constitute an audit or review of such information under GAAS,
GAAP or IFRS or any other guidelines.
14 This Third Report has been prepared for the use of this Court and BDMC's stakeholders
as general information relating to BDMC and the Braestone Project and to assist the
Court with respect to the Trustee's request for the proposed Braestone Settlement
Approval Order. Accordingly, the reader is cautioned that this Third Report may not be
appropriate for any other purpose.
15. All references to dollars are in Canadian currency unless otherwise noted
BRAESTONE SETTLEMENT OFFER
As set out in the Second Report, the Trustee has been engaged in negotiations with
Braestone for some time regarding the payment of the amounts due to BDMC under the
Loan Agreement. These negotiations commenced after the Trustee was informed that
Braestone faces significant environmental issues on certain aspects of the Braestone
Project. The Trustee understands that these environmental issues will likely result in
material delays in the progress of the project and in the repayment of the BDMC loans
made to Braestone.
17 The Trustee has provided notices to lnvestors regarding certain matters related to the
Braestone Project, including through previous Reports and notices dated April 11,2018
and May 31, 2018 ("Braestone Updates"). Copies of the Braestone Updates are
attached hereto as Appendix "5".
18 On October 17, 2018, as part of the negotiations between the parties, Braestone
presented the Trustee with an irrevocable offerto accept payment by Braestone of $10
million in full satisfaction of the amounts due under the Loan Agreement and
incorporating other components negotiated by the Trustee ("Braestone Offe/'). The
Braestone Offer was open for acceptance until November 9, 2018. The Braestone Offer
was subsequently extended to November 16, 2018 by Braestone to permit OTC some
additional time to execute the Braestone Offer, subject to the terms of the Braestone
Settlement Approval Order.
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For the reasons set out below, the Trustee has accepted Braestone's offer and executed
the Braestone Settlement Agreement. The Braestone Settlement Agreement requires
the Trustee to use commercially reasonable efforts to seek the Braestone Settlement
Approval Order, but the remaining terms of the Braestone Settlement Agreement are
only binding on the Trustee, BDMC and OTC should the agreement be approved and
ratified by the Court.
The Braestone Offer and the Braestone Settlement Agreement provide for a lump sum
payment by Braestone of $10 million in respect of the outstanding principal balance
owing under the Loan Agreement of $13.35 million. The full amount due under the Loan
Agreement on project completion (including interest and certain deferred lender fees)
exceeds $16 million; however, when previously paid interest of approximately $5.4
million ("Paid lnterest") is factored into the analysis, the proposed payout plus the Paid
lnterest would result in the full repayment of the principal owing to the SMLs, plus a
further 15% above the outstandlng principal amount.
The Braestone Offer is conditional, among other things, upon the release and discharge
of all Braestone Loan Obligations and all Loan Encumbrances, and a Court order being
obtained providing that none of the Trustee, BDMC, OTC or any Braestone lndividual
Lenders have any claim against Braestone in respect of the Braestone Loan Obligations
or the Loan Encumbrances (though Braestone is not to be released from any obligations
under the Braestone Settlement Agreement) in consideration of the payment due under
the Braestone Settlement Agreement.
The Braestone Settlement Agreement also provides that Braestone is to deliver a
Release Agreement to the Trustee providing that Braestone, on behalf of itself and the
other Releasors, release all of the Releasees (namely, the Trustee, BDMC, OTC, and
each Braestone lndividual Lender who loaned funds through BDMC or OTC to
Braestone pursuant to the Loan Agreement and all related Loan Documents, each of
their respective officers, directors, agents, employees, and each of their respective
successors and assigns) from all obligations under the Braestone Loan Documents.
Braestone has also made certain customary representations and warranties and has
agreed to provide such further assurances as are necessary to effectuate the transaction
set out in the Braestone Offer.
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24 lf the Court issues the proposed Braestone Settlement Approval Order, then the
settlement set out therein will be effective upon the issuance by the Trustee of the
Trustee's Certificate certifying that the conditions precedent set out in the Braestone
Settlement Agreement are satisfied.
25. A copy of the Braestone Offer, including the executed Braestone Settlement Agreement
is attached as Appendix "6".
Overview of Current Status of Braestone Proiect
26. Braestone has developed Phase 1 of the Braestone Project, but is awaiting approvals to
complete Phase 2. Braestone has advised that it will be unable to complete the
Braestone Project prior to July 2019, being the end of the extended term as set out in
the Loan Agreement, due to unexpected delays and challenging market conditions.
Therefore, Braestone does not expect to be able to pay the amounts due under the Loan
Agreement in full on the extended maturity date.
27 The Trustee therefore engaged in discussions and negotiations with Braestone and
reviewed the information provided to it. On the basis of these discussions and
information, the Trustee understands that the market and other challenges affecting the
completion of the Braestone Project include, but are not limited to:
(a) the slowdown in the overall real estate market in the area, which has resulted in
slower than expected home sales; and
(b) unforeseen environmental issues that have stalled the environmental approvals
required for the development of Phase 2. The Trustee understands that the
delay in environmental approvals relate to the following outstanding issues:
i. Species at risk (specifically, brown bats);
ii. Forestry at risk (specifically, butternut trees);
iii. Fisheries;
Approval for a river crossing which accesses Phase 28; and
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v. A re-assessment of previously approved wetland boundaries.
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28.
Braestone has provided the Trustee with a copy of an environmental report dated May
11,2018 prepared by its environmental consultants.
Braestone has advised that there are no established guidelines to resolve certain of
these environmental issues, and therefore longer than usual delays may result.
Braestone further advised that it has sought advice from environmental consultants and
has been informed that it could take 2 to 7 years to remedy the environmental conditions
and prepare the lands to commence construction of Phase 2.
As a result of these developments, Braestone is seeking to refinance the Braestone
Project, but has advised that it must reduce its overall debt in order to do so.
Accordingly, Braestone is seeking to repay the debt owing to the Braestone lndividual
Lenders under the Loan Agreement at a discount to the total amount that would be
owing at the completion of the Braestone Project.
The Trustee has been engaged in negotiations with Braestone and its representatives
regarding the amount of any such discount and the other terms of a potential settlement
of the Braestone Loan Obligations. Braestone has advised that it is unable to repay the
full principal amount due under the Loan Agreement; however, given that BDMC
received the Paid lnterest when due (up to and including the July 15, 2018 interest
payment) of approximately $5.4 million, the payment of $10 million pursuant to the Offer
plus the Paid lnterest would result in full repayment of the principal amount advanced
and a net return of approximately 15o/o on that principal amount. The return is calculated
as follows:
$Principal outstanding (A) 13,350,100
29.
30.
Loan repaymentlnterest paidTotal payments (B)
Net recovery in excess of principal (B-A)
10,000,0005,455,870
15,455,870
2,105,770
Acceptance of the Braestone Offer by the Trustee would result in the lnvestors foregoing
the amounts set out in the table below, which would otherwise become due pursuant to
the Loan Agreement if the amounts due were repaid on or about October 15, 2018
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(assuming, with respect to the deferred lender fee, that the project had been completed
by October 15, 2018).
$3,350,100
267,000400,000
2 003 0006, 020,100
Remaining principalAccrued interest to October 15,2018Extension fees (incl. additional deferred lender fee)Project completion/deferred lender feeTotal potential foregone recoveries (before additional accrued interest)
However, Braestone anticipates that the Braestone Project will not be completed for
many years and there can be no assurance that Braestone will be able to repay all
amounts due under the Loan Agreement upon completion of the Braestone Project.
32 Additional interest has continued to accrue since October 15, 2018, and would be
payable on the date that the BDMC Loan was repaid. As of July 1 5, 2018, Braestone
ceased paying interest due under the Loan Agreement. Braestone has advised that it
will not make further interest payments in the event the Braestone Offer is not accepted
and the Loan Agreement continues in force.
Assessment of the Offer and Recommendation
33. Braestone has advised that the Braestone Project will not be completed by the time the
Loan Agreement matures in July 2019, and that Braestone is unlikely to obtain
replacement financing sufficient to repay the amounts due under the Loan Agreement in
full on the maturity date. Further, given the terms of the Loan Agreement and
Braestone's expressed need to refinance the Braestone Project, BDMC would likely be
required to postpone and standstill to additional priority loans to permit the Braestone
Project to continue towards completion, and the standstill agreement would likely remain
in effect until such time as the priority loans are repaid (which the Trustee understands
would not be until such time that the Braestone Project is completed). Accordingly, and
based on the estimates provided by Braestone, it is possible that the amounts due under
Loan Agreement may not be repaid until 2025 and there is a risk that it will not be repaid
in full at that time, or ever.
ln completing its assessment of the Braestone Offer, the Trustee engaged a real estate
appraiser to provide a current as-is appraised value of the property. Based on its review
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of the appraisal and taking into account the approximately $10 million of outstanding
debt ranking in priority to the BDMC Loan that would be required to be repaid prior to the
amounts due under the Loan Agreement, the Trustee is of the view that the Braestone
Offer is reasonable in the circumstances.
Given the environmental issues encountered by Braestone, the uncertainty as to the
timing by which they will be remedied and the general uncertainty as to the future of the
market, the Trustee is of the view that, although the Braestone Offer potentially provides
discounted returns to the Investors, there is value in the certainty provided by accepting
the Braestone Offer and crystalizing the outcome of the Loan Agreement. Further, as
noted above, the Braestone Offer does result in an overall net positive return of
approximately 15% on the principalamount advanced by BDMC.
Consultation with Representative Gounsel and lnvestors
The Trustee consulted extensively with Representative Counsel regarding the Braestone
Offer, and, following that consultation, delivered a notice to lnvestors in the Braestone
Project on October 23, 2Q18 advising the lnvestors of the Trustee's recommendation in
support of accepting the Braestone Offer and requesting lnvestors to provide their
feedback, whether for or against the acceptance of the Braestone Offer, and any other
general feedback ("Braestone Consent Request"). Further, the Trustee advised that it
would serve all lnvestors with its motion materials seeking approval of the Braestone
Settlement Agreement should the Braestone Offer be accepted. A copy of the Braestone
Consent Request is attached as Appendix"7".
37 Following the delivery of the Braestone Consent Request, the Trustee and
Representative Counsel received and responded to a number of inquiries regarding the
Offer and the Trustee's and Representative Counsel's views on the Braestone Offer,
including the impact of the Realized Property Order on the amounts immediately payable
to lnvestors.
38 As of November 13, 2018, the Trustee has received 86 formal votes in response to the
Braestone Consent Request. 83 lnvestors representing approximately $5,292,700 of the
$13,350,100 in principal outstanding under the Loan Agreement voted in favour of the
Trustee accepting the Braestone Offer. 3 votes (from 2 lnvestors), representing
approximately $49,500 in principal outstanding under the Loan Agreement voted against
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the Trustee accepting the Braestone Offer. ln summary, over 96% of lnvestors voting on
the Braestone Offer, representing over 99% of the value of such loans, voted in favour of
the Trustee accepting the Braestone Otfer. Less than 4o/o ol lnvestors voting on the
Braestone Offer, representing less than 1% in value of such loans, voted against the
Trustee accepting the Braestone Offer. The lnvestors voting in favour of the acceptance
of the Braestone Offer represent approximately 33% in number and 40o/o in value of all
lnvestors under the Loan Agreement, whereas lnvestors voting against the acceptance
of the Braestone Offer represent approximately 1o/o in number and less than 0.4% in
value of all lnvestors under the Loan Agreement.
The Trustee notes that the rate of response to the Braestone Consent Request
(approximately of 34% ol lnvestors) is much higher than the rate of response to any
other notice or request for consent that the Trustee has sent to date.
On the basis of the Trustee's analysis of the facts and circumstances surrounding the
Braestone Project and the overwhelming positive responses received from lnvestors, the
Trustee has determined that the Braestone Offer should be accepted. The Trustee has
been informed by Representative Counsel that it also supports the acceptance of the
Braestone Offer. While the Trustee recognizes that a small number of lnvestors have
voted against the acceptance of the Braestone Offer, the Trustee must act in the best
interests of all lnvestors who made loans to the Braestone Project notwithstanding the
views expressed by certain lnvestors. The Trustee has determined that it is in the best
interests of all lnvestors to accept the Braestone Offer.
The Trustee therefore executed the Braestone Settlement Agreement and has brought a
motion seeking this Court's approval of the Braestone Settlement Agreement and the
issuance of the Braestone Settlement Approval Order.
NEGOTIATIONS REGARDING OTHER PAYOUTS
Since the date of the Second Report, the Trustee has continued to engage in
negotiations with certain borrowers and with Fortress and CDCM on behalf of certain
borrowers regarding potential payouts of the applicable loans. As recoveries under
certain of the projects are uncertain, the Trustee has actively engaged in discussions
with respect to a number of payout opportunities. Many of the payout discussions remain
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43.
at early stages, but the Trustee is seeking to advance these discussions in
circumstances where the Trustee believes a payout would be in the best interest of
lnvestors.
Notably, the Trustee has engaged in negotiations with The Harlowe lnc. ("Harlowe
Borrowe/') regarding the amounts due to BDMC under the loan agreement dated June
10,2013 in respect of a real estate development project in Toronto, Ontario ("Harlowe
Project"). The Trustee understands that the Harlowe Borrower has sold over 80% of
available units for the Harlowe Project, and registration of the building is estimated to
occur in the summer ol 2019. Upon registration of the building, the sale of the units
subject to existing sale agreements will be completed, at which time the majority of the
sale proceeds will be used to repay the priority loans. However, the Harlowe Borrower
has advised the Trustee that it must enter into an inventory loan to fund costs associated
with holding and selling the remaining units. The Harlowe Borrower has advised that
significant changes in the marketplace since the project commenced, combined with the
negative publicity related to Fortress and BDMC, has made it difficult to obtain additional
financing. ln particular, the Harlowe Borrower advises that it cannot obtain an inventory
loan while any portion of the BDMC debt remains on title. The Harlowe Borrower has
also advised that the final sale of outstanding units of the Harlowe Project are unlikely to
be completed until spring of 2Q21
The Trustee has negotiated a settlement agreement with the Harlowe Borrower whereby
the Harlowe Borrower would pay approximately $15.5 million to the Trustee in full and
final satisfaction and compromise of allthe Harlowe Borrower's obligations to BDMC and
the individual lenders who loaned funds to the Harlowe Borrower under the applicable
loan agreement. The principal owing to BDMC under the Harlowe loan is approximately
$15.9 million. lf the Harlowe Project had been completed on October 15,2018, and
certain assumptions regarding profitability had been realized, the full amount due under
the Harlowe loan (including interest and certain deferred lender fees) is estimated to
exceed $20 million; however, when previously paid interest of approximately $2.7 million
is factored into the analysis, the proposed payout would result in a full payment of the
principal owing to the lnvestors plus a further 15% above the principal amount. The
Trustee has recommended that the settlement agreement proceed and is currently
seeking feedback from lnvestors. The Trustee anticipates that it will be returning to Court
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in the near term to seek the Court's approval of the proposed settlement. Full details of
the proposed settlement will be provided when Court approval is sought.
45 As noted in the Second Report, the Trustee intends to follow a similar approval process
with respect to the potential payout by the Harlowe Borrower and other future repayment
opportunities in order to give clarity on the process to lnvestors and borrowers.
RECOMMENDATION REGARDING REALIZED PROPERTY
The Trustee has determined, based on its expectations regarding the ability to generate
further Realized Property in the next reporting period, that should the $10 million in
Braestone Realized Property be received, it will be appropriate to further reduce the
percentage of Realized Property that it needs to retain to fund the Required Trustee
Activities.
The Trustee is therefore seeking this Court's authorization to distribute an additional
amount equal to 10o/o of the Realized Property held by the Trustee on on the date of the
Appointment Order, including the Realized Property received in respect of the Victoria
Medical SML Loans. Following this distribution, 80% of the Realized Property received to
date will have been distributed by the Trustee.
48 The Trustee is also seeking an amendment to the Realized Property Order to authorize
the Trustee to distribute 80% of any future Realized Property received by the Trustee
after the date of the Braestone Settlement Approval Order.
49 The Trustee has consulted with Representative Counsel regarding this recommendation,
and Representative Counsel agrees that the proposed retention of 20o/o of all Realized
Property and the proposed distribution of all other Realized Property is fair and
reasonable in the circumstances.
50. As noted in the Second Report, the Trustee currently predicts that there will be a limited
number of projects that give rise to recoveries in the near term and that recoveries on
many of the syndicated mortgage loans are at risk. As such, the Trustee is of the view
that it must retain 20o/o of the Realized Property at this time and utilize the retained
Realized Property to maximize the recovery of additional Realized Property in the future.
As more Realized Property is generated, the Trustee will continue to reevaluate the
appropriate percentage of Realized Property that needs to be retained.
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51 The Trustee understands that these proceedings may have a disproportionate impact on
lnvestors whose projects have generated or will generate Realized Property at earlier
dates than other projects. As more fully described in the Second Report, the Trustee will
provide the Court with a recommendation regarding an appropriate allocation of the
costs that will be borne by specific projects, including the Braestone Project, at a later
date to fairly and equitably allocate the use of Realized Property among lnvestors.
APPROVAL OF THE TRUSTEE'S REPORTS, ACTIVITIES AND FEES
52. The Trustee is seeking the approval of the First Report, the Second Report, this Third
Report, its activities as set out in the First Report, the Second Report, and this Third
Report, and its fees and its counsel's fees from the date of the Appointment Order to
September 30, 2018.
53 The Trustee's activities are described at length in the First Report, attached hereto as
Appendix 2, the Second Report, attached hereto as Appendix 3, and this Third Report.
ln summary, the Trustee's activities have included, among other things:
(a) attending the ordinary course administration duties required in connection with
BDMC's syndicated mortgage loans;
(b) communicating with lnvestors;
(c) sending 46 of notices to lnvestors as of November 13, 2018;
(d) holding meetings with certain lnvestors;
(e) communicating with borrowers, senior lenders and other lenders;
(f) responding to enforcement actions by senior lenders on distressed projects;
(g) negotiating with borrowers regarding potential payouts and settlement offers in
respect of certain BDMC loans;
(h) seeking to recover amounts advanced by lnvestors where standstill
arrangements do not prevent the Trustee from taking action;
(i) responding to requests for postponements and taking other actions to permit the
projects to continue and to prevent enforcement by senior lenders;
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54.
0) performing an in-depth review of each real estate development project, including
obtaining new appraisals;
(k) investigating the BDMC loan structure;
(l) preparing three Reports to the Court and attending hearings before the Court;
(m)distributing 70% of the Realized Property to the applicable lnvestors pro rata as
required by the lnterim Stabilization Order and the Realized Property Order;
(n) attending to partial discharges of BDMC's security interests to facilitate sales of
individual units or the development of properties;
(o) continuing to engage with other stakeholders of BDMC and related parties,
including Ms. lldina Galati, BDMC's shareholder, and her counsel, Fortress and
its counsel, and CDCM and its counsel, regarding refinancing efforts,
enforcement actions, regulatory matters and the funding of these proceedings;
(p) continuing to engage with borrowers and with CDCM, as broker to some of the
borrowers, regarding the postponements and enforcement matters noted above
and to obtain detailed updates on the progress on projects and associated
financial reporting;
(q) engaging with FSCO and its legal counsel;
(r) engaging with mortgage brokerage and administration licensing authorities
outside of Ontario to discuss the Trustee's mandate and the Appointment Order
and to address matters related to BDMC's licenses in such jurisdictions, including
regulators in Manitoba, Saskatchewan, Alberta and British Columbia; and
(s) supervising the day to day business activities of BDMC, including supervising the
payment of payroll, rent and related matters.
Pursuant to the terms of the Appointment Order, the Trustee and its legal counsel shall
be paid their reasonable fees and disbursements and shall pass their accounts from time
to time.
The Trustee and its legal counsel are tracking their time by project. For certain tasks that
affect all lnvestors, including general notices and the preparation of the First Report, the
Second Report and certain components of this Third Report and the related Court
materials, the time will be charged to a general account that will, at a later date once the
55.
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totality of realizations are more clear, be allocated to the various projects based on
appropriate considerations and in accordance with further Court orders.
56.
Trustee Fees
57
The fees (excluding HST) of FAAN Mortgage Administrators lnc., in its capacity as
Trustee for the period April 20, 2018 to September 30, 2018, total $734,428.20; and HST
applicable to such amounts totals $95,475.67, for an aggregate amount of $829,903.87.
lnvoices for the fees of the Trustee, including summaries of the activities of the Trustee
for the applicable period are provided in the affidavit of Naveed Manzoor ("Manzoor
Affidavit"), attached as Appendix "8".
Detailed docket information in respect of the fees and disbursements of the Trustee for
this period are included in the confidential exhibit to the Manzoor Affidavit that is being
filed separately with this Court ("Confidential Manzoor Exhibit"). The Trustee is
seeking a sealing order with respect to the Confidential Manzoor Exhibit due to the fact
that the information contained in the Trustee's detailed invoices includes privileged and
commercially sensitive information regarding the projects and BDMC generally, and the
disclosure of that privileged and/or commercially sensitive information could have a
material adverse effect on the recoveries that may ultimately be available to lnvestors in
these proceedings.
The average hourly rate for the Trustee over the referenced billing period was
approximately $350.48/hour.
Fees of the Trustee's Counsel
The fees (excluding disbursements and HST) of Osler, Hoskin & Harcourt LLP ("Osler")
as counsel to the Trustee for the period April 20, 2018 to September 30, 2018, total
$782,270.50; Osler incurred $6,288.38 disbursements during the period; and HST
applicable to such amounts totals $102,427.65, for an aggregate amount of
$890,986.53. lnvoices for the fees, reimbursable expenses and applicable taxes of
Osler, including summaries of Osler's the activities in respect of the invoices, are
provided in the affidavit of Michael De Lellis ("De Lellis Affidavit"), attached as
Appendix "9".
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60 Full accounts in respect of the fees and disbursements of Osler for this period are
included in the confidential exhibit to the De Lellis Affidavit that is being separately filed
with this Court ("Confidential De Lellis Exhibit"). The Trustee is seeking a sealing
order with respect to the Confidential De Lellis Exhibit due to the fact that the information
contained in Osler's detailed invoices includes privileged and commercially sensitive
information regarding the projects and BDMC generally, and the disclosure of that
privileged and/or commercially sensitive information could have a material adverse effect
on the recoveries that may ultimately be available to lnvestors in these proceedings.
61. The average hourly rate for Osler over the referenced billing period was $691.91/hour
The Trustee is of the view that the hourly rates charged by Osler are consistent with the
rates charged by major law firms practicing in the area of insolvency and restructuring in
the Toronto market, and that the fees charged are reasonable in the circumstances.
Fee Recoveries
To date, the Trustee and its counsel have recovered approximately $153,500 on account of
professional fee reimbursements in connection with postponements, refinancings and other
significant transactions. The Trustee has succeeded in negotiating these fee recoveries on a
case by case basis and continues to seek to recover fees when appropriate.
CONCLUSION AND RECOMMENDATION
The Trustee recommends that the proposed Braestone Settlement Approval Order be
granted by the Court. The Trustee has negotiated the Braestone Settlement Agreement
and has obtained an ovenrvhelming positive response from affected lnvestors with
respect to the execution and implementation of the terms of the Braestone Settlement
Agreement. The Braestone Settlement Agreement contemplates the payment (when
combined with Paid lnterest) of the full principal amount due under the Loan Agreement
plus a further 15% recovery on that principal. lf implemented, the Braestone Settlement
Agreement will result in $10 million of Braestone Realized Property in the near term,
which will permit the Trustee to make a further distribution of Realized Property pro rata
to lnvestors who are entitled to same and will also provide additional funding for these
proceedings to facilitate Required Trustee Activities. The Trustee is of the view that it is
in the best interests of lnvestors to obtain the Braestone Realized Property now rather
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than to wait for an uncertain result in the future. The Trustee also seeks approval of its
activities to date and the fees and disbursements of the Trustee and its legal counsel in
connection with those activities. The Trustee will continue to attend to all BDMC matters
in an effort to maximize recoveries to Investors.
ALL OF WHICH lS RESPECTFULLY SUBMITTED this 19th day of November,2018.
tra,an, Mm$ ag v A) mi*ri.*tratwv I nrz.
FAAN MORTGAGE ADMINISTRATORS INC.,SOLELY IN ITS CAPACITY ASCOURT.APPOINTED TRUSTEE OFBUILDING & DEVELOPMENT MORTGAGES CANADA INC.,
AND NOT IN ITS PERSONAL OR ANY OTHER CAPACITY
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Appendix 1:
Appointment Order dated April 20,2018
37
Court File No. CV-18-596204-00C1
ONTARIOSUPERIOR COURT OF JUSTIGE
COMMERCIAL LIST
THE HONOURABLE MR
JUSTICE HAINEY
BETWEEN:
FRIDAY, THE 2OTH DAY
OF APRIL, 2018
t3 tQiiti;
THE SUPERINTENDENT OF FINANCIAL SERVICES
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Applicant
Respondent
s
a:i
{t
ittJ*Et:t+;. i
APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AA/D ADMINISTRATORS ACT, 2006, S.O. 2006, C.
29 and SECTION 101 0F THE COURTS OF JUSTICE AC1, R.S.O. 1990 c. C.43
APPOINTMENT ORDER
THtS APPLICATION, made by The Superintendent of Financial Services (the
"superintendent"), for an Order, inter alia, pursuant to section 37 of the Moftgage Brokerages,
Lenders and Adminislrafors Act, 2006, S.O. 2006, c. 29, as amended (the "MBLAA"), and
section 101 of the Courts of Justice Acf, R,S.O. 1990, c, C'43, as amended (the "CJA"),
appointing FAAN Mortgage Administrators lnc, ("FAAN Mortgage") as trustee (in such capacity,
the "Trustee"), without security, of all of the assets, undertakings and properties of Building &
Development Mortgages Canada lnc. (the "Respondent"), was heard this day at 330 University
Avenue, Toronto, Ontario;
ON READING the affidavit of Brendan Forbes sworn April 19,2018 and the exhibits
thereto (the "supporting Affidavit") and the consent of FAAN Mortgage to act as the Trustee,
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and on hearing the submissions of counsel for the Superintendent, counsel for FAAN Modgage
and such other counsel as were present, no one appearing for any other person on the service
list, as appears from the affidavit of service of Miranda Spence sworn April 19, 2018, filed;
SERVICE
1. THIS COURT ORDERS that the time for service and filing of the notice of application
and the application record is hereby abridged and validated so that this application is properly
returnable today and hereby dispenses with further service thereof,
APPOINTMENT
2, THIS COURT ORDERS that pursuant to section 37 of the MBLM and section 101 of
the CJA, FAAN Mortgage is hereby appointed Trustee, without security, of all of the assets,
underlakings and propefties of the Respondent, including, withoul limitation, all of the assets in
the possession or under the control of the Respondent, its counsel, agents and/or assignees but
held on behalf of any other party, including, but not limited to, lenders under any syndicate
morlgage ("lnvestors"), brokers, or borrowers, in each case whether or not such property is
held in trust or is required to be held in trust (collectively, the "Property"), which Property, for
greater certainty, includes any and all real property charges in favour of the Respondent (the
"Real Property Charges"), including, without limitation, any and all monetary and non-monetary
entitlements in respect to the assets and values thereunder, the period of which appointment
shall run from 12:01 a,m, on the date hereof until such date that all assets under all syndicated
mortgage loans have been realized and all Property has been distributed to those entitled to it,
TRUSTEE'S POWERS
3. THIS COURT ORDERS that the Trustee is hereby empowered and authorized, but not
obligated, to act at once in respect of the Property and, without in any way limiting the generality
of the foregoing, the Trustee is hereby expressly empowered and authorized to do any of the
following where the Trustee considers it necessary or desirable:
(a) to take possession of and exercise control over the Properly and any and all
proceeds, receipts and disbursements arising out of or front the Propedy;
to receive, preserve, protect and maintain control of the Property, or any part or
parts thereof, including, but not limited to, the holding of mortgage security in(b)
39
aJ
trust on behalf of lnvestors, the administering of the mortgages, the changing of
locks and security codes, the relocating of Property to safeguard it, the engaging
of independent security personnel, the taking of physical inventories and the
placement of such insurance coverage as may be necessary or desirable;
(c) to manage, operate, and carry on the business of the Respondent, including,
without limitation, the powers to enter into any agreements, incur any obligations
in the ordinary course of business, cease to carry on all or any part of the
business, or cease to perform any contracts of the Respondent;
(d) to engage consultants, appraisers, agents, expefis, auditors, accountants,
managers, counsel and such other persons from time to time and on whatever
basis, including on a temporary basis, to assist with the exercise of the Trustee's
powers and duties, including, without limitation, those conferred by this Order;
(e) to purchase or lease such machinery, equipment, inventories, supplies, premises
or other assets to continue the business of the Respondent or any part or parts
thereof;
to receive and collect all monies and accounts now owed or hereafter owing to
the Respondent and to exercise all remedies of the Respondent in collecting
such monies, including, without limitation, to enforce any security held by the
Respondent, including, without limitation, such security held on behalf of
lnvestors;
(g) to settle, extend or compromise any indebtedness owing to the Respondent;
(h) to execgte, assign, issue and endorse documents of whatever nature in respect
of any of the Property, whether in the Trustee's name or in the name and on
behalf of the Respondent for any purpose pursuant to this Order, including,
without limitation, any documents in connection with any registration, discharge,
partial discharge, transfer, assignment or similar dealings in respect of any
mortgage ("Land Title Document") and, for greater ceftainty, the applicable land
registry office, registrar or other official under the Land Registration Reform Act
(Ontario), lhe Land Titles Act (Alberta), or any other comparable legislation in any
other jurisdiction be and is hereby directed, upon being presented with a certified
(0
4A
0)
-4
true copy of this Order and such Land Title Document, to register, discharge,
parlially discharge, transfer or otherwise deal with such mortgage in accordance
with such Land Title Document without any obligation to inquire into the propriety
of the execution or effect of such Land Title Document;
(i) to initiate, prosecute and continue the prosecution of any and all proceedings and
to defend all proceedings now pending or hereafter instituted with respect to the
Respondent, the Properly or the Trustee, and to settle or compromise any such
proceedings, The authority hereby conveyed shall extend to such appeals or
applications for judicial review in respect of any order or judgment pronounced in
any such proceeding;
to market any or all of the Property, including advertising and soliciting offers in
respect of the Property or any part or pafis thereof and negotiating such terms
and conditions of sale as the Trustee in its discretion may deem appropriate;
(k) with the approval of this Court, to sell, convey, transfer, lease or assign the
Property or any pafi or pafts thereof out of the ordinary course of business, and
in such case notice under subsection 63(4) of the Ontario Personal Propefty
Security Aet or section 31 of the Ontario Mortgages Acf, as the case may be,
shall not be required;
(l) with the approval of this Court, to restructure the Property in a manner that the
Trustee considers reasonable, including, without limitation, the conversion, in
whole or in part, of the Property or any part or parts thereof, out of the ordinary
course of business, into an alternative or different interest in the capital structure
of the Property or any part or parts thereof, including, without limitation, an
ownership interest therein;
(m) to apply for any vesting order or other orders necessary to convey the Propefty
or any part or parts thereof to a purchaser or purchasers thereof, free and clear
of any liens or encumbrances affecting such Property;
to report to, meet with and discuss with such affected Persons (as defined below)
as the Trustee deems appropriate on all matters relating to the Property and the
(n)
4L
-5-
Trustee's mandate, and to share information, subject to such terms as to
confidentiality as the Trustee deems advisable;
(o) to register a copy of this Order and any other Orders in respect of the Property
against title to any of the Property;
(p) to apply for any permits, licences, approvals or permissions as may be required
by any governmental authority and any renewals thereof for and on behalf of
and, if thought desirable by the Trustee, in the name of the Respondent;
(q) to enter into agreements with any trustee in bankruptcy appointed in respect of
the Respondent, including, without limiting the generality of the foregoing, the
ability to enter into occupation agreements for any propefiy owned or leased by
the Respondent;
to exercise any shareholder, partnership, joint venture or other rights which the
Respondent may have; and
(s) to take any steps reasonably incidental to the exercise of these powers or the
performance of any statutory obligations,
and in each case where the Trustee takes any such actions or steps, it shall be exclusively
authorized and empowered to do so, to the exclusion of all other Persons (as defined below),
including the Respondent, without interference from any other Person and without regard to any
arrangement in existence as of the'date hereof between the Respondent and lnvestors as to
how and when such actions or steps are to be taken. For greater cedainty, the Trustee shall be
and is empowered to take such actions or steps without seeking instructions from lnvestors
where the Trustee determines, in its sole discretion, that it is necessary and appropriate to do so
(having regard for the interests of lnvestors), and in all other cases, the Trustee is specifically
authorized to continue to comply with the existing arrangements, including any deemed consent
provisions contained therein.
DUTY TO PROVIDE ACCESS AND CO.OPERATION TO THE TRUSTEE
4. THIS COURT ORDERS that: (i) the Respondent; (ii) all of its current and former
directors, officers, employees, agents, accountants, legal counsel and shareholders, and all
other persons acting on its instructions or behalf; (iii) all other individuals, firms, corporations,
(r)
fe n q drsl'
-6-fuv o I np ,"eo I faprld { ft ,, {1 ny -* r, .'*
\ n t. 1,, g-Depa -')
42
flfc \)d&
governmental bodies or agencies or other entities having notice of this Order, including, without
limitation, Tsunami TechnologY
direct or indirect affiliates, and
FRDI, the "Fortress Entities"),
roup lnc., Fortress Real Developments lnc. ("FRDI"), all of its
entity under common control with FRDI (collectively with
any entity that is a joint venture among a Fortress Entity and
another entity, and each director, officer, employee and agent of any Fortress Entity all of the
foregoing, collectively, being "Persons" and each being a "Person") shall forthwith advise the
tee of the existence of any Properly in such Person's possession or control, shall grant
immediate and continued access to the Property to the Trustee, and shall deliver all such
roperly to the Trustee uPon the Trustee's request.
S, TH;S COURT ORDERS that, pursuant to and without limiting the generality of paragraph
4 of this Order, all Persons shall, unless otherwise instructed by the Trustee: (i) deliver to the
Trustee (or, in the case of RRSP or other registered funds administered by Olympia Trust
Company ("OTC') or Computershare Trust Company of Canada ("Gomputershare"), not
release to any Person without further Order of this Courl) any and all monies held in trust that
are related to the Respondent or its business (collectively, the "Trust Funds"), which Trust
Funds, for greater certainty, include any and all monies in any OTC or Computershare account
that are purported to be held in trust for the lnvestors in or beneficiaries under any of the Real
property Charges, including, without limitation, all monies held by way of interest reserves to
satisfy interest payments to such lnvestors or beneficiaries, which Trust Funds are to be held or
used by the Trustee in accordance with the terms of this Order and any further Order of this
Court; and (ii) upon the Trustee's request, provide an accounting of all funds received from or
on behalf of the Respondent or its associated businesses'
6. THIS COURT ORDERS that all Persons shall forthwith advise the Trustee of the
existence of any books, emails, user accounts, documents, securities, contracts, orders,
corporate and accounting records, and any other papers, records and information of any kind
related to the business or affairs of the Respondent, and any computer programs, computer
tapes, computer disks, or other data storage media containing any such information, including
copies of any previously performed electronic back ups (the foregoing, collectively, the
,,Records") in that Person's possession or control, and shall provide to the Trustee or permit the
Trustee to make, retain and take away copies thereof and grant to the Trustee unfettered
access to and use of accounting, computer, software and physical facilities relating thereto,
provided however that nothing in this paragraph 6 or in paragraph 7 of this Order shall require
the delivery of Records, or the granting of access to Records, which may not be disclosed or
43
1
provided to the Trustee due to the privilege attaching to solicitor-client communication or due to
statutory provisions prohibiting such disclosure.
7, THIS COURT ORDERS that if any Records are stored or othenruise contained on a
computer or other electronic system of information storage, whether by independent service
provider or otherwise, all Persons in possession or control of such Records shall forthwith give
unfettered access to the Trustee for the putpose of allowing the Trustee to recover and fully
copy all of the information contained therein whether by way of printing the information onto
paper or making copies of computer disks or such other manner of retrieving and copying the
information as the Trustee in its discretion deems expedient, and shall not alter, erase or
c.lestroy any Records without the prior written consent of the Trustee. Further, for the purposes
of this paragraph, all Persons shall provide the Trustee with all such assistance in gaining
immediate access to the information in the Records as the Trustee may in its discretion require
including providing the Trustee with instructions on the use of any computer of other system and
providing the Trustee with any and all access codes, account names and account numbers that
may be required to gain access to the information. Paragraphs 6 and 7 of this Order do not
apply to any materials obtained by the Royal Canadian Mounted Police pursuant to any warrant
issued under the CriminalCode, R'S'C. 1985, c. C-46'
L THIS COURT ORDERS that the Trustee shall provide each of the relevant landlords
with notice of the Trustee's intention to remove any fixtures from any leased premises at least
seven (7) days prior to the date of the intended removal. The relevant landlord shall be entitled
to have a representative present in the leased premises to observe such removal and, if the
landlord disputes the Trustee's entitlement to remove any such fixture under the provisions of
the lease, such fixture shall remain on the premises and shall be dealt with as agreed between
any applicable secured creditors, such landlord and the Trustee, or by further Order of this
Court upon application by the Trustee on at least two (2) days' notice to such landlord and any
such secured creditors,
NO PROCEEDINGS AGAINST THE T'RUSTEE
g. THIS COURT ORDERS that no proceeding or enforcement process in any court or
tribunal (each, a "Proceeding"), shall be commenced or continued against the Trustee except
with tlre written consent of the Trustee or with leave of this court.
44
-8-
NO PROCEEDINGS AGAINST THE RESPONDENT OR THE PROPERTY
10. THIS COURT ORDERS that, with the exception of the Suspension and Penalty Orders
(as such term is defined in the Supporting Affidavit): (i) no Proceeding against or in respect of
any of the Respondent, the Property or the Superintendent (in the last case, with respect to any
matters arising from the Respondent or the Property) shall be cornmenced or continued except
with the written consent of the Trustee or with leave of this Court; and (ii) any and all
proceedings currently under way against or in respect of any of the Respondent or the Property
are hereby stayed and suspended pending further Order of this Court,
NO EXERCISE OF RIGHTS OR REMEDIES
11. THIS COURT ORDERS that, with the exception of the Suspension and Penalty Orders,
all rights and remedies against the Respondent, the Trustee, or affecting the Properly
(including, without limitation, pursuant to any arrangement in existence as of the date hereof
between the Respondent and lnvestors as to how and when the actions or steps contemplated
by paragraph 3 of this Order are to be taken), are hereby stayed and suspended except with the
written consent of the Trustee or leave of this Court, provided however that this stay and
suspension does not apply in respect of any "eligible financial contract" as defined in the
Bankruptcy and Insolvency Act, R,S,C. 1985, c. B-3, as amended (the "BlA"), and further
provided that nothing in this paragraph shall: (i) empower the Trustee or the Respondent to
carry on any business which the Respondent is not lawfully entitled to carry on; (ii) exempt the
Trustee or the Respondent from compliance with statutory or regulatory provisions relating to
health, safety or the environment; (iii) prevent the filing of any registration to preserve or perfect
a security interest; (iv) prevent the registration of a claim for lien; or (v) prevent the filing and
service of a statement of claim solely to permit the per-fection of a lien, provided that no further
proceedings on such statement of claim shall be permitted other than pursuant to paragraph 10'
NO INTERFERENCE WITH THE TRUSTEE
12. THIS COURT ORDERS that no Person shall discontinue, fail to honour, alter, interfere
with, repudiate, terminale or cease to perform any right, renewal right, contract, agreement,
licence or permit in favour of or held by the Respondent, without written consent of the Trustee
or leave of this Court, including, for greater certainty, any licenses granted to the Respondent to
act as an administrator of or lender under or administer syndicated modgage loans under the
MBLAA, The Mortgage Brokers Acf (Manitoba), Ihe Mortgage Brokerages and Morlgage
45
9-
Administrators Act (Saskatchewan), the Real Estate Acf (Alberta), lhe Mortgage Brokers Act
(British Columbia) or any other comparable legislation in any other jurisdiction where the
Respondent is currently licensed.
CONTINUATION OF SERVICES
'13, THIS COURT ORDERS that all Persons having oral or written agreements with the
Respondent, or statutory or regulatory mandates for the supply of goods and/or services,
including, without limitation, all computer software, communication and other data services
(including, for greater cedainty, all goods and/or services provided by Tsunami Technology
Group lnc. in respect of the Respondent), centralized banking services, payroll services,
insurance, transportation services, utility or other services to the Respondent are hereby
restrained until further Order of this Court from discontinuing, altering, interfering with or
terminating the supply of such goods or services as may be required by the Trustee, and that
the Trustee shall be entitled to the continued use of the Respondent's current telephone
numbers, facsimile numbers, internet addresses and domain names, provided in each case that
the normal prices or charges for all such goods or services received after the date of this Order
are paid by the Trustee in accordance with normal payment practices of the Respondent or
such other practices as may be agreed upon by the supplier or service provider and the
Trustee, or as may be ordered by this Court,
TRUSTEE TO HOLD FUNDS
14. THIS COURT ORDERS that allfunds, monies, cheques, instruments, and other forms of
payments received or collected by the Trustee from and after the making of this Order from any
source whatsoever, including, without limitation, the sale of all or any of the Property and the
collection of any accounts receivable in whole or in part, whether in existence on the date of this
Order or hereafter coming into existence, shall be deposited into one or more accounts
controlled by the Trustee or, if the Trustee determines it is advisable, new accounts to be
opened by the Trustee (the "Post Trusteeship Accounts") and the monies standing to the
credit of such Post Trusteeship Accounts from time to time, net of any disbursements provided
for herein, shall be held by the Trustee to be paid in accordance with the terms of this Order or
any further Order of this Court.
46
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EMPLOYEES
15. THIS COURT ORDERS that all employees of the Respondent shall remain the
employees of the Respondent until such time as the Trustee, on the Respondent's behalf, may
terminate the employment of such employees, The Trustee shall not be liable for any
employee-related liabilities, including any successor employer liabilities as provided for in
subsection 14,06(1.2) of the BlA, other than such amounts as the Trustee may specifically
agree in writing to pay, or in respect of its obligations under subsections 81.4(5) and 81.6(3) of
the BIA or under the Wage Earner Protection Program Act'
PIPEDA
16, THIS COURT ORDERS that, pursuant to clause 7(3Xc) of the Canada Personal
lnformation Protection and Electronic Documents Act and any other applicable privacy
legislation, the Trustee shall disclose personal information of identifiable individuals to
prospective purchasers or bidders for the Property and to their advisors, but only to the extent
desirable or required io negotiate and attempt to complete one or more sales of the Property
(each, a "Sale"), Each prospective purchaser or bidder to whom such personal information is
disclosed shall maintain and protect the privacy of such information and limit the use of such
information to its evaluation of the Sale, and if it does not complete a Sale, shall return all such
information to the Trustee, or in the alternative destroy atl such information, The purchaser of
any propedy shall be entitled to continue to use the personal information provided to it, and
related to the Property purchased, in a manner which is in all material respects identical to the
prior use of such information by the Respondent, and shall return all other personal information
to the Trustee, or ensure that all other personal information is destroyed.
LIMITATION ON ENVIRONMENTAL LIABILITIES
j7. THIS COURT ORDERS that nothing herein contained shall require the Trustee to
occupy or to take control, care, charge, possession or management (separately and/or
collectively, "Possession") of any of the Property that might be environmentally contaminated,
might be a pollutant or a contaminant, or might cause or contribute to a spill, discharge, release
or deposit of a substance contrary to any federal, provincial or other law respecting the
protection, conservation, enhancement, remediation or rehabilitation of the environment or
relating to the disposal of waste or other contamination including, without limitation, the
Canadian Environmentat Protection Act,lhe Ontario Environmental Protection Act,lhe Ontario
47
- ll -
Water Resources Act, or lhe Ontario Occupational Health and Safety Acf and regulations
thereunder (the "Environmental Legislation"), provided however that nothing herein shall
exempt the Trustee from any duty to report or make disclosure imposed by applicable
Environmental Legislation, The Trustee shall not, as a result of this Order or anything done in
pursuance of the Trustee's duties and powers under this Order, be deemed to be in Possession
of any of the Property within the meaning of any Environmental Legislation, unless it is actually
in possession.
LIMITATION ON THE TRUSTEE'S LIABILITY
18. THIS COURT ORDERS that the Trustee shall incur no liability or obligation as a result of
its appointment or the carrying out the provisions of this Order, save and except for any gross
negligehce or wilful misconduct on its part, or in respect of its obligations under subsections
81,4(5) or 81.6(3) of the BIA or under lhe Wage Earner Protection Program Acl. Nothing in this
Order shall derogate from the protections afforded the Trustee by section 14,06 of the BIA or by
any other applicable legislation.
TRUSTEE'S ACCOUNTS
19. THIS COURT ORDERS that the Trustee and counsel to the Trustee shall be paid their
reasonable fees and disbursements, in each case at their standard rates and charges unless
othenrvise ordered by the Court on the passing of accounts, which fees and disbursements shall
be added to the indebtedness secured by the Real Property Charges and that the Trustee and
counsel to the Trustee shall be entitled to and are hereby granted a charge (the "Trustee's
Charge") on the Property, as security for such fees and disbursements, both before and after
the making of this Order in respect of these proceedings, and that the Trustee's Charge shall
rm a first charge on the Property in priority to all security interests, trLlsts, liens, charges and
ncumbrances, statutory or otherwise, in favour of any Person, but subject to subsections
4.06(7), 81,4(4) and 81.6(2) of the BlA,
0, THIS COURT ORDERS that the Trustee and its legal counsel shall pass their accounts
m time to time, and for this purpose the accounts of the Trustee and its legal counsel are
ereby referred to a judge of the Commercial List of the Ontario Superior Court of Justice.
1. THIS COURT ORDERS that prior to the passing of its accounts, the Trustee shall be at
berty from time to time to apply reasonable amounts, out of the monies in its hands, against its
4B
-12-
fees and disbursements, including legal fees and disbursements, incurred at the standard rates
and charges of the Trustee or its counsel, and such amounts shall constitute advances against
its remuneration and disbursements when and as approved by this Court'
FUNDING OF TI-IE APPOINTMENT
22. TH|S COURT ORDERS that the Trustee be at liberty and it is hereby empowered to
borrow by way of a revolving credit or othenivise, such monies from time to time as it may
consider necessary or desirable, provided that the outstanding principal amount does not
exceed $1,000,000 (or such greater amount as this Court may by furlher Order authorize) at
any time; at such rate or rates of interest as it deems advisable for such period or periods of
time as it may arrange, for the purpose of funding the exercise of the powers and duties
conferred upon the Trustee by this Order, including interim expenditures. The whole of the
properly shall be and is hereby charged by way of a fixed and specific charge (the "Trustee's
Borrowings Charge") as security for the payment of the monies borrowed, together with
interest and charges thereon, in priority to all security interests, trusts, liens, charges and
encumbrances, statutory or othenvise, in favour of any Person, but subordinate in priority to the
Trustee's Charge and the charges as set out in subsections 14.06(7), 81'4(4) and 81'6(2)of the
BIA.
23. THIS COURT ORDERS that neither the Trustee's Borrowings charge nor any other
security granted by the Trustee in connection with its borrowings under this Order shall be
enforced without leave of this Court.
24. THIS COURT ORDERS that the Trustee is at liberty and authorized to issue certificates
substantially in the form annexed as Schedule "A" hereto (the "Trustee's Gertificates") for
any amount borrowed by it pursuant to this Order,
25. TH]S COURT ORDERS that the monies from time to time borrowed by the Trustee
pursuant to this order or any further order of this Court and any and all Trustee's Certificates
evidencing the same or any part thereof shall rank on a paripassu basis, unless otherwise
agreed to by the holders of any prior issued Trustee',s certificates,
SERVICE AND NOTICE
26. TH|S COURT ORDERS that the E-Service Protocol of ihe Commercial List (the
,,protocol,,) is approved and adopted by reference herein and, in these proceedings, the service
49
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of documents made in accordance with the Protocol (which can be found on the Commercial
List website at http:/lwww.ontariocourts.ca/sci/practice/practice-directions/toronto/eservice-
commercial/) shall be valid and effective service, Subject to Rule 17.05 of the Rules of Civil
procedure (the "Rules"), this Order shall constitute an order for substituted service pursuant to
Rule 16.04 of the Rules. Subjectto Rule 3.01(d)of the Rules and paragraph 21 of the Protocol,
service of documents in accordance with the Protocol will be effective on transmission, This
Court furlher orders that a Case Website shall be established in accordance with the Protocol
with the following U RL: www, fa anmotgagead m in' com'
27, THIS COURT ORDERS that if the service or distribution of documents in accordance
with the Protocol is not practicable, the Trustee is at liberly to serve or distribute this Order, any
other materials and orders in these proceedings, any notices or other correspondence, by
forwarding true copies thereof by prepaid ordinary mail, courier, personal delivery or facsimile
transmission to the Respondent's creditors or other interested parties at their respective
addresses as last shown on the records of the Respondent and that any such service or
distribution by courier, personal delivery or facsimile transmission shall be deemed to be
received on the next business day following the date of forwarding thereof, or if sent by ordinary
mail, on the third business day after mailing'
GENERAL
Zg. THIS COURT ORDERS that the Trustee may from time to time apply to this Court for
advice and directions in the discharge of its powers and duties hereunder'
29, TH|S GOURT ORDERS that nothing in this Order shall prevent the Trustee from acting
as a trustee in bankruptcy of the Respondent'
30, TH1S COURT ORDERS that Confidential Exhibits (as defined in the Supporting Affidavit)
be and are hereby sealed until further Order of this Court.
31. THIS COURT HEREBY REQUESTS the aid and recognition of any coutl, tribunal,
regulatory or administrative body having jurisdiction in Canada or in the United States to give
effect to this Order and to assist the Trustee and its agenis in carrying out the terms of this
Order, All courts, tribunals, regulatory .and administrative bodies are hereby respectfully
requested to make such orders and to provide such assistance to the Trustee, as an officer of
50
-14-
this Court, as may be necessary or desirable to give effect to this Order or to assist the Trustee
and its agents in carrying out the terms of this Order,
32, TH|S COURT ORDERS that the Trustee be at liberly and is hereby authorized and
empowered to apply to any court, tr,ibunal, regulatory or administrative body, wherever located,
for the recognition of this Order and for assistance in carrying out the terms of this Order, and
that the Trustee is authorized and empowered to act as a representative in respect of the within
proceedings for the purpose of having these proceedings recognized in a jurisdiction outside
Canada.
33, THIS COURT ORDERS that any interested party may apply to this Court to vary or
amend this Order on not less than seven (7) days' notice, or such shorter period of time as the
Coufi may permit, to the Trustee and to any other party likely to be affected by the order sought
or upon such other notice, if any, as this Court may order\-
ENTERED AT /INSCRIT ATORONTO
lJ /#^t-tJt}?t o I sT B E No I
APR ? O ?O1O
{\ilPFEHI FAru
51
SCHEDULE "A''
TRUSTEE CERTIFICATE
CERTIFICATE NO
AMOUNT *
1. THIS lS TO CERTIFY that FAAN Morlgage Administrators lnc,, the Trustee (in such
capacity, the "Trustee") of all of the assets, undertakings and properties of Building &
Development Mortgages Canada lnc. (the "Respondent"), including, without limitation, all of the
assets in possession or under the control of the Respondent, its counsel, agents and/or
assignees but held on behalf of any other party, including, but not limited to, lenders under any
syndicate modgage ("lnvestors"), brokers, or borrowers, in each case whether or not such
property is held in trust or is required to be held in trust (collectively, the "Property") appointed
by Order of the Ontario Superior Courl of Justice (Commercial List) (the "Court") dated the 20th
day of April, 20'18 (the "Order") made in an application having Court file number CV-18-596204-
gOCL, has received as such Trustee from the holder of this certificate (ihe "Lender") the
principal sum of $i*.r,>;, Oeing part of the total principal sum of $,€"s# which the Trustee is
authorized to borrow under and pursuant to the Order.
2. The principal sum evidenced by this certificate is payable on demand by the Lender with
interest thereon calculated and compounded [daily][monthly not in advance on the 't1; day of
each monthl after the date hereof at a notional rate per annum equal to the rate of '*# per cent
above the prime commercial lending rate of Royal Bank of Canada from time to tirne.
3. Such principal sum with interest thereon is, by the terms of the Order, together with the
principal sums and interest thereon of all other certificates issued by the Trustee pursuant to the
Order or to any further order of the Court, a charge upon the whole of the Property (as defined
in the Order), in priority to the security interests of any other person, but subject to the priority of
the charges set out in the Order and in lhe Bankruptcy and lnsolvency Acf, and the right of the
Trustee to indemnify itself out of such Properly in respect of its remuneration and expenses.
4. All sums payable in respect of principal and interest under this certificate are payable at
the main office of the Lender at Toronto, Ontario.
S. Until all liability in respect of this certificate has been terminated, no certificates creating
charges ranking or purporting to rank in priority to this certificate shall be issued by the Trustee
52
a
to any person other than the holder of this certificate without the prior written eonsent of the
holder of this certificate.
6, The charge securing this certificate shall operate so as to permit the Trustee to deal with
the Properly (as defined in the Order) as authorized by the Order and as authorized by any
fufiher or other order of the Cou11,
7, The Trustee does not undertake, and it is not under any personal liability, to pay any
sum in respect of which it may issue certificates under the terms of the Order.
DATED the
-
day of 2018
FAAN MORTGAGE ADMINISTRATORS INC.,solely in its capacity as Trustee of the Property (as
defined in the Order), and not in its personalcapacity
Per:
Name:
Title:
TI-
IE S
UP
ER
INT
EN
DE
NT
OF
FIN
AN
CIA
L S
ER
VIC
ES
App
lican
t
-and
-B
UIL
DiN
G &
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54
Appendix 2:
First Report of the Trustee dated June 20,2018, without exhibits
55
Court File No. CV-18-596204-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
(coMMERCIAL LIST)
BETWEEN
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THE
MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006' C.
29 and sEcTloN 101 OF THE COURTS OF JUSTICE AC4 R.S.O. 1990 c. G'43
FIRST REPORT OF THE TRUSTEE
JUNE 19,2018
FAANMORIBAIDMiXISIRA
FAAN Mortgage Administrators lnc.Court-Appointed Trustee of the Respondent
$tTORS
56
TABLE OF CONTENTS
TNTRODUCTION........
PURPOSE OF THE FIRST REPORT...........".
SCOPE AND TERMS OF REFERENCE ..............
BACKG ROU N D.............
ACTIVITIES OF THE TRUSTEE TO DATE
FUNDING OF THESE PROCEEDINGS AND CASH FLOW PROJECTION
FUNDS HELD IN BDMC BANK ACCOUNTS.""....
FUNDS RECEIVED FROM BORROWERS SINCE THE TRUSTEE,S APPOINTMENT':.."..
REPRESENTATION FOR INVESTORS...........,
CONCLUSION AND RECOMMENDATION
L
2
3
4
9
15
.. 18
22
29
32
57
INDEX OF APPENDICES
Appendix 1
Appendix 2
Appendix 3
Appendix 4
Appointment Order dated April 20,2018
Forbes Affidavit sworn on April 19,20'|'8, without exhibits
Project Status Ghart as of May 31,2018
Gash Flow Projection to October 31,2018
58
Court File No. CV-18-596204-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
(coMMERCIAL LIST)
BETWEEN
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THE
MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, C'
. 29 and SECTION 101 0F THE GOURTS OF JUSTICE ACT, R.S.O' 1990 c. C.43
FIRST REPORT OF THE TRUSTEE
JUNE 19,2018
INTRODUCTION
On April 20,2018, pursuant to an order ("Appointment Order") of the Honourable Mr.
Justice Hainey of the Ontario Superior Court of Justice (Commercial List) ("Court"), FAAN
Mortgage Administrators lnc. ('FAAN Mortgage") was appointed as trustee ("Trustee")
over all of the assets, undertakings and properties of Building & Development Mortgages
Canada lnc. ("BDMG") including, without limitation, all of the assets in the possession or
under the control of BDMC, its counsel, agents and/or assignees but held on behalf of any
other party, including, but not limited to, lenders under syndicated mortgage loans
("lnvestors"), brokers, or borrowers, in each case whether or not such property was or is
held in trust or was or is required to be held in trust (collectively, the "Property"). The
Appointment Order was issued following an application made by the Superintendent of
Financial services ("superintendent") pursuant to section 37 of the Mortgage
Brokerages, Lenders and Administrators Act, 2006 (Ontario), as amended ("MBLAA'),
and section 101 of the Courfs of Justice Acf (Ontario), as amended. A copy of the
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3.
Appointment Order is attached as Appendixul'hereto'
The affidavit of Brendan Forbes, legal counsel at the Ministry of the Attorney General Civil
Law Division, Financial Services Commission of Ontario ('FSCO') branch, sworn on April
19,2O1B,was filed in connection with the Superintendent's application for the Appointment
Order ("Forbes Affidavit"). The Forbes Affidavit contains detailed background information
regarding BDMC, its business and affairs, the circumstances leading to the Trustee's
appointment, and the regulation of syndicated mortgage loans in Ontario generally.
Capitalized terms not othenruise defined in this Report have the meanings ascribed to them
in the Forbes Affidavit, a copy of which is attached as Appendix"2", without appendices.
Materials filed w1h the Court with respect to these proceedings (other than confidential
materials filed under seal), including the Forbes Affidavit, the Superintendent's application
record, motion materials, court reports and the Orders and endorsements issued by the
Court, are accessible on the Trustee's website at: www.faanmortgageadmin'com
("Trustee's Website").
4.
PURPOSE OF THE FIRST REPORT
5.
The purpose of this first report of the Trustee ("Report") is to provide stakeholders with an
update on the Trustee's activities since the date of the Appointment Order and to support
the Trustee's request for an order ("stabilization order"), inter alia:
(a) approving certain interim stabilization measures in connection with BDMC's estate,
including in respect of funds held by BDMC as at the date of the Trustee's
appointment and the funds received by the Trustee following its appointment;
(b) appointing representative counsel to represent lnvestors in respect of these
proceedings; and
(c) clarifying the Trustee's powers with respect to the registration, discharge, partial
discharge, postponement and subordination of any mortgages so as to address
any concerns of the applicable land titles offices.
ln support of the Trustee's request for the Stabilization Order, the Report describes the
following matters:
(a) background information concerning BDMC and its business;
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(b) the Trustee's activities to date;
(c) the need for certainty with respect to funding of these proceedings, including
BDMC's projected cash flow until October 31,2018 ("stabilization Period");
(d) details regarding funds held in bank accounts maintained by BDMC, including
funds received by the Trustee following its appointment, and the Trustee's
proposed use of such funds during the stabilization Period; and
(e) the need for collective representation for the lnvestors'
The Trustee is seeking the Stabilization Order, among other things, to clarify and confirm
the Trustee's rights and responsibilities under the Appointment Order in respect of certain
property that is subject to a Court-ordered priority charge to secure the payment of the
Trustee's and its legal counsel's fees, disbursements and other costs of these proceedings
(,,Trustee's Charge") and to put some temporary restrictions on the Trustee's rights with
respect to these funds during the Stabilization Period in order to give clarity to BDMC's
numerous stakeholders. During the Stabilization Period, the Trustee intends to continue
to analyze the remaining 43 projects that are subject to syndicated mortgage loans
administered by BDMC and develop a strategy to maximize recoveries for the members
of the investing public who have made loans through BDMC'
The Trustee will report back to the Court prior to the expiration of the Stabilization Period
to give the Court, lnvestors, borrowers, brokers and other stakeholders further information
regarding BDMC and its business and affairs, to seek further advice and directions from
the Court regarding the use of the funds held or received by the Trustee and subject to
the Trustee's Charge, and the proposed next steps in these proceedings.
SCOPE AND TERMS OF REFERENCE
ln preparing this Report, the Trustee has relied upon unaudited financial information
provided by, inter a/ra, BDMC, Fortress (defined below), Canadian Development Capital
& Mortgage Services lnc. ("CDCM"), the mortgage brokerage who assumed the mortgage
duties of BDMC (as explained further below), and certain of the individual borrowers who
have borrowed funds from BDMC under various syndicated mortgage loans administered
by BDMC. While the Trustee reviewed various documents provided by BDMC, CDCM,
and applicable borrowers (including, among other things, unaudited internal information,
appraisals and financial projections), the Trustee's review does not constitute an audit or
7
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I
verification of such information for accuracy, completeness or compliance with Generally
Accepted Assurance Standards ("GAAS'), Generally Accepted Accounting Principles
('GAAP"), or lnternational Financial Reporting Standards ("|FRS"). Accordingly, the
Trustee expresses no opinion or other form of assurance pursuant to GAAS, GAAP or
IFRS, or any other guidelines, with respect to such information-
Some of the information used and relied upon in preparing this Report consists of financial
projections. The Trustee cautions that these projections are based upon assumptions
about future events and conditions that are not ascertainable. The actual results may vary
from the projections, even if the assumptions set forth therein materialize, and the
variations from the projections could be significant. The Trustee's review of the future
oriented information used to prepare this Report did not constitute an audit or review of
such information under GAAS, GAAP or IFRS or any other guidelines'
10. This Report has been prepared for the use of this Court and BDMC's stakeholders as
general information relating to BDMC and to assist the Court with respect to the Trustee's
request for the proposed Stabilization Order. Accordingly, the reader is cautioned that this
Report may not be appropriate for any other purpose. The Trustee will not assume
responsibility or liability for losses incurred by the reader as a result of the circulation,
publication, reproduction or use of this Report contrary to the provisions of this paragraph.
11. All references to dollars are in Canadian currency unless othenryise noted.
BACKGROUND
BDMC is an Ontario corporation with its head office located at25 Brodie Drive, Unit #8,
Richmond Hill, Ontario. The Trustee understands that BDMC is wholly owned by lldina
Galati, who is also BDMC's sole director and officer. BDMC was formerly known by the
name Centro Mortgage lnc. and changed its name to BDMC in or around January 2016.
13. BDMC was the principal mortgage broker and administrator used by Fortress Real
Developments lnc. and certain related entities (collectively, "Fortress") to raise initial
financing or "equity" from the investing public for early stage real estate developments.
Fortress and its affiliates are development consultants or borrowers with respect to various
real property development projects. Often, the real property in question consisted of
vacant lands or of projects taken over from other developers, including, in some cases,
12
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14.
15.
16.
projects that were facing financial difficulties. BDMC acted as lender (in trust for members
of the investing public), who made loans to borrowers through syndicated mortgage loan
agreements where BDMC acied as lender to the Borrower and administrator for the
lnvestors. Syndicated mortgage loans are regulated by FSCO and are more fully
described in the Forbes Affidavit.
The funds loaned through BDMC were generally advanced for the purpose of providing
financing for the early stages of a real estate development project. The use of proceeds
from these loans included repaying vendor take back mortgages and bridge loans,
obtaining initial planning consents, attending to zoning changes, funding various
consultants involved in conceiving and commencing a real estate development and other
"soft costs" associated with the development. Funds were also used to pay interest on
other loans made to the applicable borrower in question'
According to the Forbes Affidavit, significant portions of the sums advanced by lnvestors
through BDMC were used to pay "development consultant fees". The development
consultant fees were in an amount that generally appears to be equal to approximately
35% of the principal amount advanced under the applicable BDMC syndicated mortgage
loan. A portion of this fee (approximately 50%) would be paid to the lnvestors' brokers,
FMP Mortgage lnvestments lnc., FFM Capital lnc. and FSDS Broker Services lnc. (who
are generally referred to by BDMC and Fortress as the "F Brokers"); a portion would be
paid to BDMC (now CDCM) in its capacity as the borrowers' broker; and the balance, net
of any additional fees, would be paid to Fortress. As described in the Forbes Affidavit, the
portion of the fees paid to Fortress typically ranged between 2oh and 5% of project costs.
ln some instances, another portion of the funds advanced by lnvestors was retained by
BDMC to pay interest owing to those same lnvestors on the syndicated mortgage loan.
The funds held to pay interest on the BDMC loan were retained as an "interest reserve" in
a separate BDMC account established for that purpose ("lnterest Reserve Account").
Depending on the terms of the applicable loan agreement, interest reserve funds were
paid or to be paid to lnvestors periodically in accordance with the applicable loan
agreement until the reserve funds were exhausted or held until the time when the
syndicated mortgage loan is repaid. However, as more particularly described below in the
section "Funds Held in BDMC Bank Accounts", the Trustee has become aware that certain
of the funds held in the lnterest Reserve Account are held for the benefit of borrowers and
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have been historically deployed to or on behalf of borrowers for purposes unrelated to the
payment of interest to lnvestors, including paying interest amounts owing to priority
lenders and paying expenses incurred on projects.
Although the funds advanced by lnvestors were secured by mortgages held by BDMC on
the related real property, the lnvestors typically expressly agreed to subordinate their
mortgages to current or future lenders who agreed to provide construction financing.l ln
most cases, the BDMC mortgages rank third or lower in priority in respect of the specific
real property in issue, and behind the mortgages securing the sums owing to senior
lenders, in amounts that are often significant. Moreover, many lnvestors agreed to terms
that permit repayment "waterfalls" that, at least in some instances, appear to permit
owners of the real estate (including the borrowers and owners of the borrowers) to recover
some of the amounts they invested in the developments in priority to the amounts loaned
by the lnvestors. The Trustee is still in the process of investigating these complex priority
arrangements and notes that the priority arrangements vary from project to project.
Approximately $560 million is currently invested in syndicated mortgage loans
administered by BDMC by over 11,000 individual lnvestors. These funds have been
advanced in connection with 44 different projects that are in various stages of
development. The following table summarizes the status of the various projects
administered by BDMC, based on BDMC's records as of May 31,2O18:
Proiect Status Number of Proiects
BDMCSML Debt
($000s)
DevelopmentPre-constructionConstructionCompletedTotal
24b
122
260,06673,042
216,27410 905
$560,287
I Construction financing in very broadly construed in the syndicated mortgage loan documents and
generally includes all the funds needed to complete the project that are not financed by BDMC, includingfurther "mezzanine" debt. The Trustee has been advised by borrowers and others that the agreementsrequire BDMC to subordinate up to a certain maximum amount of construction financing specified in the
syndicated mortgage loan documents as being permitted to rank in priority to BDMC's mortgages.
44
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19.
20
21
A detailed schedule of the status of the ongoing projects, based on BDMC's records as of
May 31 , 2018, is provided as Appendix "3".2 As discussed in more detail below, all
amounts owing on BDMC loans made to the Victoria Medical Borrower (defined below)
have been repaid, BDMC's security in respect of such loans has been discharged and the
Trustee is holding the amounts that have been repaid. Further, the Dunsire Project
(defined below) is subject to a receivership proceeding and an order authorizing the sale
of the property free and clear of the security in favour of BDMC was approved by the Court.
More details on these matters are described below.
As described in more detail in the Forbes Affidavit, FSCO had received numerous
complaints from lnvestors regarding BDMC's activities and the performance of their
investments in BDMC compared to the promises the lnvestors say were made to them at
the time they invested. These complaints prompted FSCO to engage in a lengthy
investigation of BDMC's business and activities. As a result of its investigations, FSCO
concluded that there were significant regulatory issues associated with BDMC's
syndicated mortgages activities.
FSCO's investigation into BDMC ultimately resulted in the Superintendent and BDMC
entering into a settlement agreement executed on January 31,2018 ("Settlement
Agreement"). Key conditions of the Settlement Agreement included: (i) that BDMC
consent to the revocation of its Ontario mortgage brokerage license; (ii) that BDMC retain
its Ontario mortgage administration license; (iii) that BDMC enter into and comply with a
management and administration agreement ("MAA") appointing FAAN Mortgage as the
arm's length, independent manager of BDMC's syndicated mortgage loan administration
business ("Administration Business"); and (iv) that BDMC agreed to pay an
administrative penalty of $400,000 by no later than July 31,2019'
On February 1,2018, FSCO revoked BDMC's Ontario mortgage brokerage license with
BDMC's consent pursuant to the Settlement Agreement. However, CDCM, an entity also
owned by BDMC's principal, has received a mortgage brokerage license from FSCO and
has assumed the functions as brokerage for the borrowers that were previously carried
out by BDMC on many existing projects. A relative of the owner of BDMC is the principal
broker of CDCM. Many of BDMC's former employees are now employed by CDCM'
2 Although funds have only been advanced in respect of 44 projects, the chart includes a 45th project, 189 Dundas,
for completeness because BDMC has had some involvement with the 189 Dundas project.
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25.
CDCM is often the pdncipal entity facilitating contact between BDMC and the borrowers;
however, the Trustee is working, with the assistance of CDCM, on establishing direct
communications with all borrowers.
On February 7,2018, the MAA was executed and FAAN Mortgage assumed the role of
arm's length, independent manager of the Administration Business. As noted in the Forbes
Affidavit, the Settlement Agreement expressly provides that its terms and any related
documents, information or records are to remain confidential and subject to settlement
privilege, except in certain limited circumstances. As such, the specific terms of the MAA
cannot be disclosed.
During the period from February 7,2018 to the date of the Appointment Order, FAAN
Mortgage acted as the independent manager of the Administration Business. During this
period, FMN Mortgage was presented with a number of urgent demands for
postponements of security granted to BDMC (in trust for lnvestors) to new loans. CDCM
and certain borrowers advised FAAN Mortgage that new loans were needed either to
prevent enforcement action by senior lenders and the immediate failure of a project or to
fund critical steps necessary for projects to continue. ln addition, FAAN Mortgage
responded to a number of enforcement steps that were taken by senior lenders.
On April 20, 2018, as a result of events that were detailed extensively in the Forbes
Affidavit, including the RCMP's execution of a search warrant at BDMC's premises on
April 13,2018, the Superintendent brought an application to Court seeking the
Appointment Order to appoint FAAN Mortgage as Trustee. Among other things, there had
been a number of defaults under the MAA, including access to documents and other
information and failure to make mandatory payments, each as more particularly described
in the Forbes Affidavit. As a result, FAAN Mortgage was operating with insufficient
information regarding BDMC's arrangements and the status of the various projects where
BDMC was lender to respond effectively to the urgent requests described above.
Since its formal appointment as Trustee, the flow of information from Fortress and CDCM
has improved significantly, but BDMC's mortgage loans remain under considerable stress.
As noted above and as described in more detail in the Forbes Affidavit, BDMC's security
is often in third place or lower and, in many cases, BDMC is required under the applicable
loan agreements to subordinate its security to facilitate further advances by senior lenders
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under existing loans or the advancement of funds under new loans. The Trustee has been
advised that many of the projects need further funding to permit developments to continue
and that such funding is only available if the security interests granted to BDMC are further
postponed and subordinated to new financing.
As discussed in more detail under "Activities of the Trustee to Date", the Trustee continues
to face many urgent demands to execute postponements and subordinations to new
lenders and to address various types of enforcement activities by senior lenders. ln
addition, the Trustee has received demands to turn over certain funds held by BDMC for
borrowers, lnvestors and others'
Under the Appointment Order, the Trustee was granted the Trustee's Charge over all of
the amounts held by BDMC and to be received by BDMC or the Trustee on its behalf going
forward. Among other things, the Trustee is seeking the Stabilization Order to clarify the
status of these proceedings, set expectations around the use of the funds subject to the
Trustee's Charge and to put certain temporary limits on the Trustee's ability to use those
funds during the Stabilization Period-
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ACTIVITIES OF THE TRUSTEE TO DATE
29.
To date, the Trustee has been principally engaged in three broad types of activities: (i)
responding to enforcement actions by senior lenders on distressed projects; (ii)
responding to urgent requests for postponements and other actions to prevent
enforcement by senior lenders and to permit the projects in question to continue; and (iii)
responding to a multitude of borrower and lnvestor inquiries'
The Trustee has also been working to obtain recovery for lnvestors whenever possible.
For example, and as discussed in more detail below, the Trustee was able to obtain
payment in full from the Victoria Medical Borrower notwithstanding initial indications that
a portion of the debt in question would be compromised'
ln addition, in the short time since its appointment, the Trustee has familiarized itself with
certain of the distressed projects and engaged with stakeholders regarding the lnvestor's
interests. For example, on the Dunsire Project, it initially appeared that there would be no
recoveries for the lnvestors, but the Trustee has since learned that some recovery should
be available.
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Enforcement Matters:
A number of BDMC's borrowers face enforcement actions taken by one or more senior
lenders as a result of borrower defaults under the senior loans. The Trustee is responding
to these enforcement actions in an effort to obtain the best possible result for the lnvestors
in the circumstances, but in some cases, the lnvestors' interests have already been
severely compromised and, in other cases, the lnvestors' interests are at risk of being
severely compromised. lt is critical that the Trustee take an active role in any enforcement
process, including reviewing and negotiating any proposed enforcement steps and
working with other creditors and stakeholders to ensure that any process that is
undertaken protects the lnvestors to the maximum extent possible. A summary of certain
projects currently facing material enforcement actions and the Trustee's efforts in respect
of these actions follows.
Brookdale Proiect: A real estate development project in midtown Toronto ("Brookdale
project"), with over $20 million of subordinate syndicated mortgage loan debt
administered by BDMC and approximately $4.7 million of "mezzanine" syndicated
mortgage loan debt also administered by BDMC.3 The lnvestors rank in 4th and Sth position
on this project. ln addition, the Brookdale Project is subject to two separate enforcement
processes by the senior lender: (i) a receivership application brought by Firm Capital
Mortgage Fund lnc. ("Firm") in respect of construction financing that has matured; and (ii)
a notice of sale under mortgage proceeding also brought by Firm in respect of the same
debt. The Trustee understands that the receivership application was put into abeyance to
permit the negotiation of a settlement agreement among a number of stakeholders who
have asserted claims on the Brookdale Project, including a number of construction lien
claimants and certain bondholders. A notice of sale was issued to preserve Firm's rights
while a settlement was negotiated. The settlement negotiations have stalled and Firm is
seeking to sell the Brookdale Project pursuant to its notice of sale under Firm's mortgage
enforcement proceeding. FAAN Mortgage has been involved in discussions with the
various stakeholders both before and after its appointment as Trustee and continues to
seek to maximize value for the lnvestors in loans made by BDMC to the Brookdale Project.
3 A mezzanine syndicated mortgage loan debt is a BDMC syndicated mortgage loan debt that is in priority
to other BDMC syndicated mortgage loan debt but still subordinate to debt owed to senior lenders. Typically,
BDMC mezzanine syndicated mortgage loan agreements contain the same mandatory subordination
provisions as are found in other BDMC syndicated mortgage loan agreements'
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FAAN Mortgage has invested a significant amount of time in reviewing and commenting
on multiple proposed settlement arrangements that it has been presented in an attempt to
protect the lnvestors' interests in the Brookdale Project, including engaging in extensive
communications with lnvestors. FAAN Mortgage is now in the process of engaging directly
with counsel to Firm in order to better understand the steps it is taking in its mortgage
enforcement proceeding to help ensure that steps are not taken that would be to the
detriment of the lnvestors and the Trustee has contacted the private receiver to offer its
assistance in developing a process to maximize value for all stakeholders, including the
lnvestors. At this time, it is unclear what the outcome for the Brookdale Project will be due
to the existing defaults under senior loans in excess of $23 million and the numerous
additional construction liens that have been asseded. The Trustee notes that a sale of the
property could result in significant losses to the lnvestors.
Bowmanville Proiect: a real estate development project in Clarington, Ontario
("Bowmanville Project"), consisting of three separate parcels of land that secure
approximately $5.a million of syndicated mortgage loan debt administered by BDMC. Each
parcel has a separate first priority mortgage holder and all three mortgage holders have
sought to enforce their rights to sell or foreclose on the portion of the Bowmanville Project
that is subject to their mortgages. FAAN Mortgage has been involved in discussions with
the borrower and the lenders both before and after its appointment as Trustee in an effort
to defend against foreclosure and to maximize recoveries for the lnvestors. The Trustee
continues to seek to maximize value for the lnvestors in loans made by BDMC to the
borrower in connection with the Bowmanville Project and is working cooperatively with
counselto the first priority mortgage holders. At this time, it appears that the Bowmanville
Project will be refinanced, with sufficient new funds to repay the three first priority
mortgages on the property that comprises the Bowmanville Project but leaving BDMC's
mortgage in its current third place position (and subordinate to the new financing). The
syndicated mortgage loan documents contemplate BDMC subordinating its mortgages to
additional loan facilities, including the facility that is anticipated to be the source of the
funding to repay the existing mortgages on the Bowmanville Project. The borrower has
advised that once the senior mortgage debt is refinanced and the project is no longer in a
distressed state, the borrower will be in a position to obtain the required planning
approvals and to meet related milestones for the project. lf the project continues to
advance, the value of the project will likely be enhanced and the potential recoveries to
11
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35
lnvestors should be higher than what would be available if the refinancing was not
completed and the project was sold in its current state.
Dunsire Proiect: a realestate development project in Guelph, Ontario ("Dunsire Project").
On May 15,2018, the Trustee was served with an application for a vesting order sought
by RSM Canada Limited (.RSM') in its capacity as receiver of the Dunsire Project to vest
tile to the Dunsire Project in a new owner related to the current owner, free and clear of
certain encumbrances, including approximately $1.7 million of subordinate, secured debt
owed to BDMC in trust for lnvestors. lmmediately after service of the motion record, the
Trustee and its counsel engaged in comprehensive discussions with RSM regarding the
proposed vesting order. The Trustee sought clarifications regarding the sales process
conducted and the potential value available to BDMC and its lnvestors. Despite the
Trustee's request that RSM seek an adjournment for a period of thirty days to permit
further marketing of the property, RSM was only prepared to provide a short adjournment.
RSM ultimately obtained a vesting order on May 25, 2018. Once the transaction closes,
BDMC's security interest will be expunged from title with very little recovery to BDMC or
the lnvestors due to the purchase price payable for the Dunsire Project and the quantum
of secured debt in priority to BDMC's loans. ln the course of the Trustee's diligence on the
Dunsire Project, it learned that that there may be HST refunds available for benefit of the
lnvestors, which will likely result in at least a partial recovery for lnvestors.
Georgetown Proiect: A real estate development project in Georgetown, Ontario
("Georgetown Project"), consisting of seven different parcels of land collectively securing
approximately $14.4 million of debt owing to BDMC under various syndicated mortgage
loans, including subordinate and mezzanine loans. There are a number of different senior
lenders with priority mortgages on different parcels of land comprising the Georgetown
project. The senior lenders on certain parcels of land comprising the Georgetown Project
have issued notices of sale with respect to the property that is subject to their mortgages
and the period set by the lenders for repayment of their loans has expired. As such, the
Trustee has been engaged in discussions with Fortress and other stakeholders regarding
the Georgetown Project and potential options to address the defaults. The Trustee is also
seeking additional details regarding the senior lenders' intentions with respect to the
Georgetown Project to ensure that the Trustee is satisfied that any sales or marketing
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process is appropriate in the circumstances. However, the Trustee notes that despite its
efforts, a sale of the property could result in significant losses to the lnvestors.
Colliers Proiect: A realestate development project in Barrie, Ontario ("Colliers Proiect"),
with approximately $53 million of debt owing to BDMC under various syndicated mortgage
loans, including subordinate and mezzanine loans. The senior lender to the Colliers
Project has issued a notice of sale under mortgage with respect to the property that is
subject to its mortgage and the period set by the lender for repayment of its loan has
expired. As such, the Trustee has been engaged in discussions with Fortress and other
stakeholders regarding the Colliers Project and potential options to address the defaults.
The Trustee is also seeking additional details regarding the senior lenders' intentions with
respect to the Colliers Project to ensure that the Trustee is satisfied that any sales or
marketing process is appropriate in the circumstances. However, the Trustee notes that
despite its efforts, a sale of the property could result in significant losses to the lnvestors.
Postponements:
ln addition to the enforcement actions described above, the Trustee has been attending
to various postponement and subordination requests, often sought by a borrower on an
urgent basis to prevent senior lenders from taking enforcement action.
Prior and subsequent to the Trustee's appointment, many of the senior loans on real
estate developments that also secure BDMC syndicated mortgage loans have matured or
otherwise come due. ln addition, borrowers have faced funding shortfalls with respect to
achieving development milestones on a project, including planning approvals. The Trustee
has been asked to agree to postpone the security granted to BDMC to new loans to be
made by other lenders that are intended to permit the development to continue. ln many
cases, the Trustee has been advised that failure to grant the postponement would (i)
breach the applicable BDMC loan agreement; and (ii) cause the project to fail and
enforcement steps to occur in the near term.
ln response to these requests, the Trustee, on behalf of BDMC and its lnvestors, has
requested detailed information regarding the applicable project and the proposed use of
funds. ln most instances, the Trustee has concluded that the loan agreement requires
BDMC to postpone to the new loan and that permitting further advances to be made to
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40
41
42
43
the borrower in priority to BDMC's loan(s) is in the best interests of the lnvestors as well
as increases the likelihood of completion of the project.
The Trustee is considering its options with respect to postponement requests, but
recognizes that many of the projects will fail if further funding is not advanced to permit
the borrower to achieve development milestones and make payments on senior
indebtedness. Further, in many cases the BDMC loan documentation requires that a
postponement be granted in these circumstances. The Trustee is in the process of
obtaining detailed information regarding each project, including development milestones
and senior loan maturity dates, so that it can more proactively address these matters. As
discussed in more detail below, the proposed Stabilization Order is intended to facilitate
the desired proactive aPProach.
I nvestor Communications:
FAAN Mortgage has been engaging with lnvestors since its appointment as manager of
the Administration Business and has continued to do so after its appointment as Trustee.
ln addition to providing lnvestors information about the matters described above and,
where appropriate, seeking consent of lnvestors to material actions to be taken by the
Trustee, the Trustee has provided lnvestors with notice of the Trustee's appointment,
notice of significant developments on the projects that are the subject of their investments
and responded to large volumes of telephone calls and email correspondence from
lnvestors regarding the Trustee's appointment and the status of their investments and the
related projects. lnvestor communications are a critical part of the Trustee's mandate and
are also very time consuming and labour intensive.
ln circumstances where FAAN Mortgage has determined that it was appropriate to seek
lnvestor consent, it has received very few responses and has been required to rely on
ceftain deemed consent provisions of the applicable Participation and Servicing
Agreement (as more fully described in the Forbes Affidavit)'
Other Matters:
ln addition to the activities described above, since the Trustee's appointment, the
Trustee's activities have included, among other things:
(a) commencing a detailed analysis of each project and the associated senior loans,
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72
syndicated mortgage loans and other relevant information, including the status of
the project, the principal development milestones to completion and any known
impediments to achieving such milestones;
(b) attending to partial discharges of BDMC's security interests to facilitate sales of
units or the development of properties;
(c) engaging with the lnvestors' brokerages, including FFM and FDS, who acted as
brokers on behalf of individual lnvestors;
(d) engaging with other stakeholders of BDMC and related parties, including Ms. lldina
Galati, BDMC's shareholder, and her counsel, Fortress and its counsel, and CDCM
and its counsel;
(e) engaging with borrowers and with the borrowers' broker, CDCM, regarding the
postponements and enforcement matters noted above and to obtain detailed
updates on the progress on projects and associated financial reporting;
(f) engaging with FSCO and its legal counsel, including responding to inquiries made
by FSCO in respect of BDMC's activities and records and the Trustee's ongoing
activities;
(g) engaging with mortgage brokerage and administration licensing authorities outside
of Ontario to discuss the Trustee's mandate and the Appointment Order and to
address matters related to BDMC's licenses in such jurisdictions, including
regulators in Manitoba, Saskatchewan, Alberta and British Columbia;
(h) supervising the day to day business activities of BDMC, including supervising the
payment of payroll, rent and related matters;
(i) engaging with BDMC's bank regarding the Trustee's appointment and its mandate;
(j) obtaining access to and, in some cases, possession of, BDMC's records, including
electronic records (primarily in the form of emails) from BDMC's third party lT
service provider; and
(k) engaging with BDMC's insurance broker regarding the Trustee's appointment and
mandate.
FUNDING OF THESE PROCEEDINGS AND CASH FLOW PROJECTION
The Trustee was required to engage in, and to continue to engage in, the activities
described in the foregoing section in order to protect the interests of lnvestors. These
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45
46
47
4B
activities are time consuming and costly and are being carried out in circumstances where
BDMC has little to no revenue.
As noted in the Forbes Affidavit, BDMC is functionally insolvent. BDMC has a number of
regular expenses, including payroll, rent, utilities and other normal business expenses, but
it has no material revenue source. BDMC previously relied upon fees payable when new
loans were established and upon funding from Fortress, neither of which may be
forthcoming in the future.
Since many of BDMC's borrowers are Fortress entities or otheruvise related to Fortress,
the Trustee is of the view that the Trustee's and BDMC's costs associated with
administering the syndicated mortgage loans should not be borne solely by the lnvestors,
but rather should be paid for by Fortress and the borrowers. The Appointment Order
provides for the payment of the Trustee's fees, disbursements and costs (including
professional advisory fees incurred) without delay and also provides that unpaid fees,
disbursements and costs shall be added to the mortgages securing the amounts advanced
by BDMC.
As such, the Trustee has been engaged in discussions with Fortress with respect to
ongoing funding not only of BDMC's operating expenses but also of BDMC's professional
fees (i.e., the fees of the Trustee and its counsel). The Trustee is hopeful that Fortress
and the borrowers will agree to a mechanism whereby BDMC's and the Trustee's costs,
including professional fees for administering the loans made by BDMC, are not borne
solely by the lnvestors. Further, the Trustee understands that it was Fortress's practice,
prior to the appointment of the Trustee, to fund BDMC's expenses (including professional
fees) to the extent BDMC had insufficient revenue to pay its own expenses.
As a result of the above, the Trustee has succeeded in obtaining funding in the amount of
approximately $35,000 from Fortress (which has been funded through CDCM)on account
of certain of BDMC's operating expenses that were incurred prior to the date of the
Appointment Order. Fortress has also funded payroll and certain other operating expenses
following the date of the Appointment Order in the amount of approximately $65,000.
ln addition, the Trustee has succeeded in obtaining some amounts for BDMC's legal and
other professional expenses primarily incurred prior to FAAN Mortgage's appointment
under the MAA from Fortress on account of a certain guarantee and indemnity to FAAN
49.
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50.
51
52
53
Mortgage under the MAA (as more particularly described below). There are, however,
significant arrears owing for the period prior to the issuance of the Appointment Order and
significant expenses incurred following the issuance of the Appointment Order.
The Trustee has no assurance that further contributions by Fortress or CDCM will be
forthcoming; nevertheless, the Trustee continues to work with Fortress and CDCM
regarding funding of certain of BDMC's costs. The Trustee intends to keep the Court
informed regarding these matters.
ln addition, as noted in the Forbes Affidavit, priorto the issuance of the Appointment Order,
Fortress and certain of its affiliates provided a guarantee and indemnity to FAAN Mortgage
in respect of BDMC's funding obligations under the MAA. Notwithstanding the termination
of the MAA, pursuant to the terms of the MAA, Fortress is still responsible for the
outstanding obligations up to April 20,2018. Fortress has made certain payments under
the indemnity, but significant amounts are still owing to the Trustee and its counsel and
the Trustee continues to seek to recover these amounts from Fortress.
Notwithstanding that Fortress has been paying certain of BDMC's expenses and has paid
certain debts it owes to the Trustee, the Trustee has no assurance that such funding will
continue. The Trustee has access to certain limited additional amounts (described below
under "Funds held in BDMC Bank Accounts"), and it needs immediate access to certain
portions of these funds and to preserve portions of these amounts during the Stabilization
Period for the benefit of the estate and all its stakeholders. The Trustee is in the process
of obtaining detailed information regarding each project and will use this information to
develop a plan to maximize value for all the lnvestors.
The Trustee has prepared a Cash Flow Projection, on a monthly basis through to the
conclusion of the Stabilization Period on October 31, 2018 ("Gash Flow Period")' The
Cash Flow Projection is attached as Appendix"4". The Cash Flow Projection has been
prepared by the Trustee using the information provided to it by BDMC's employees and
representatives, based on the Trustee's review of BDMC's records and third-party
estimates. A summary of the Cash Flow Projection is provided in the following table:
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June(2wks) July Auq Sept. Oct. Total
Receipts
DisbursementsStaffing costsRent and utilitiesOffice expenses and lTBank chargesOther expenses
Total Operating DisbursementsNew Appraisal feesProfessional feesTotal disbursements
15061 344 346 261 205 1.217
6I4
5
61
29254
4B
33751
105526
35
3333 46
1
B
I1
3
741
0
631
10 ,|
54140150
56140150
7635
150
267350600
54 It should be noted that there are no cash receipts projected during the Cash Flow Period.
Historically, BDMC's primary source of revenue was funds raised from lnvestors in the
form of an administration fee of $1 13, per lnvestor per year of the term of the loan. These
funds were collected at the time of the initial advance of the funds from the lnvestors.
Although there is deferred revenue of approximately $750,0004 on BDMC's balance sheet,
it represents funds that were collected at the time a loan was established, which revenue
was to be earned over the term of the loan. The Trustee has been advised that the cash
was utilized by BDMC at or around the time it was collected. As noted above, Fortress
covered BDMC costs to the extent that such costs exceeded BDMC's revenues.
Among other things, the Cash Flow Projection estimates total operating disbursements of
approximately $267,000, plus approximately $350,000 for New Appraisals (defined and
discussed below).
FUNDS HELD IN BDMC BANK ACCOUNTS
As at the date of the Appointment Order, BDMC maintained five bank accounts at The
Toronto-Dominion Bank and a sixth account has since been opened. A summary of these
accounts is as follows:
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4 As at December 3]-,2017
1B
76
Accountname/Reference
Primary Purpose ofaccount (per BDMC)
Balance onApril 20, 2018(appointment)
Current PBalance
ropertyI ype"
Account #1(763 Account)
Account #2(420 Account)
Account #3(455 Account)
Account #4(214 Account)
Account #5(term deposit)
Account #6(GlC account)
Operating account
To hold funds topotentially be paid tothird parties
To hold funds forlnvestors
lnterest ReserveAccount
Regulatory capitalrequired to bemaintained under theMBLAATo hold Victoria MedicalSML Loan repayments
480 2,519
71,329 52,594
EstateProperty
EstateProperty
469,882
1,403,496
25,752
486,874
1,461,471
25,777
RealizedProperty
EstateProperty
EstateProperty
4,511,218 RealizedPropertY
Total 1,970,939 6,540,453
763 Account - this is BDMC's main operating account, used to pay BDMC's operating
expenses, such as payroll, rent, and other general and administrative expenses. There
are almost no funds in this account. Where funds are made available by Fortress, the
Trustee understands that these funds are typically paid first to CDCM and thereafter by
CDMC to the 763 Account. These funds are then immediately paid out by BDMC to meet
critical business needs and, to date, there have not been any surplus sums available for
future needs. The funds currently in this account represent amounts transferred from the
420 Account (described below) or amounts funded by CDCM, to satisfy outstanding
cheques that were issued to pay critical operating costs.
420 Account - BDMC advises it used this account as a "segregated funds account" to
hold fees and other amounts received by BDMC that it believes to be payable to another
party, including brokers but excluding lnvestors. The balance currently in the account is
comprised primarily of a returned bank draft that was never cashed from 2015. The
s Estate Property and Realized Property are defined and described below
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Trustee has been investigating why the bank draft was not deposited by the payee, but
based on a preliminary review it appears that it may have been a duplicate payment that
was issued in error by BDMC. As such, it appears that these funds are not payable to
another party. Since the Trustee's appointment certain critical operating costs that have
not been funded by Fortress were paid from this account'
455 Account - BDMC advises that it used this account to hold funds for lnvestors. There
are two types of balances that are held in this account, (i) funds advanced by lnvestors to
BDMC for investment in future syndicated mortgage loans where such loans have not yet
been executed or other conditions to the advance are incomplete; and (ii) principal
repayments received from borrowers to be ultimately repaid to lnvestors.6 The funds
repaid in respect of the Victoria Medical SML Loans (defined and discussed below) were
paid into this account and subsequently transferred to the interest bearing GIC account.
214 Account - BDMC advises that the 214 Account is the lnterest Reserve Account
described above. BDMC advises that this account is used to hold certain funds that were
originally advanced by Investors to specific projects for the benefit of the respective
borrowers under the applicable syndicated mortgage loan agreement for a project' All
amounts received that were not immediately advanced to a borrower, regardless of the
project, were deposited into this one bank account.T Certain of these funds consist of
interest reserve amounts payable to lnvestors. Additionally, despite the fact that the 214
Account is called the lnterest Reserve Account, the Trustee has been advised that certain
of the funds held in this account are funds that are for the account of certain borrowers,
and, in the past, the Trustee understands that the borrowers have requested BDMC to
issue payments from this account to pay for matters other than interest owing to lnvestors,
such as interest payments on senior loans and bridge loans as well as certain
development costs. ln addition, the Trustee understands that in the past, BDMC received
and complied w1h instructions to apply funds held in the lnterest Reserve Account on
behalf of one borrower to satisfy expenses incurred by another borrower on a distinct
project.
6 Notwithstanding the fact that payments of interest and repayments of principal for all projects were
advanced into one bank accouni, ihe balances are tracked separately by project in BDMC's accounting
software, QuickBooks.7 Notwithstanding the fact that funds for all projects were advanced into one bank account, the balances
are tracked separately by project in BDMC's accounting software, QuickBooks'
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57
Since the issuance of the Appointment Order, the Trustee has received a number of
requests from borrowers for disbursements out of the lnterest Reserve Account. On or
about May 3, 2018, the Trustee forurrarded letters to CDCM, in its capacity as the
borrowers' broker, addressed to borrowers who appearto have an interest in the lnterest
Reserve Account and requested that CDCM distribute the letters to the applicable
borrowers. The letters advised the respective borrowers of the Trustee's appointment and
that no funds could be distributed to the borrowers from the lnterest Reserve Account for
a period of time because, among other things, the funds are subject to the Trustee's
Charge. Further, the borrowers were advised that the Trustee was in the process of
investigating the lnterest Reserve Account and BDMC's other accounts and considering
the various competing claims on BDMC's funds and other property. ln addition, the letters
stated that the Trustee needs additional time to assess the status of all projects, the
anticipated overall administration costs of the estate and the potential sources of funding
for same. The Trustee's absessment of these matters is ongoing. A sample copy of one
of these letters sent is attached as Appendix "4" .
Account #5 - BDMC is required under the MBLAA to have a certain financial guarantee
of $25,000 available, which may include unimpaired working capital. BDMC maintains
$25,777 in satisfaction of this obligation in Account #5.
ln addition to the funds maintained in the various bank accounts. BDMC also has 13
cheques totaling $815,000 ("lnvestor Cheques") that were received by BDMC in October
2O17. The lnvestor Cheques were received from Sorrenti Law Professional Corporation
("Sorrenti"), a law firm that administered certain syndicated mortgage loans brokered by
BDMC. The lnvestor Cheques were issued by Sorrenti in its capacity as administrator of
syndicated mortgage loans owing in connection with a project called Masonary that was
repaid on or about October 5,2017. At that time, certain lnvestors in the Masonary project
requested that their payments be redeployed to projects administered by BDMC; however,
as a result of the FSCO investigation and related regulatory actions, the Trustee has been
advised that BDMC could not deposit the cheques or redeploy the funds. With the
exception of one cheque that was adjusted and re-issued on February 27 ,2018, all of the
lnvestor Cheques are now stale dated. The Trustee has written to Sorrentito advise that
the cheques are stale dated and will therefore not be deposited by BDMC. ln addition,
the Trustee has advised the lnvestors to whom the lnvestor Cheques relate that they
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5B
should contact Sorrenti regarding the return of their funds. The Trustee is in the process
of returning the lnvestor Cheques to Sorrenti.
The Trustee understands that BDMC does not have any other funds other than the bank
balances and cheques described above and the Trustee expects to receive no additional
funds other than intermittent funding from Fortress (both in accordance with its past
practices and its obligations in respect of the MAA) and occasional expense
reimbursements and loan repayments from borrowers. The timing and quantum of any
such payments is unknown.
FUNDS RECEIVED FROM BORROWERS SINCE THE TRUSTEE'S APPOINTMENT
Since the Trustee's appointment, the amounts set out below have been received by BDMC
from borrowers. These amounts are in addition to the amounts received from Fortress
(through CDCM) described above. Funds received from Fortress were immediately
disbursed to pay BDMC's operating expenses. The following amounts paid by borrowers
continue to be retained by the Trustee on behalf of BDMC:
(a) Approximately $1.75 million for the payment of interest and the repayment of
principal to lnvestors that advanced funds pursuant to a loan agreement dated
September 23, 2015, between BDMC and Amadon-Westwater Projects Ltd.
("Victoria Medical Borrower") and $2.75 million for the payment of interest and
the repayment of principal to lnvestors that advanced funds pursuant to a loan
agreement dated September 16,2016, between BDMC and the Victoria Medical
Borrower (collectively, the "Victoria Medical SML Loans"). The Victoria Medical
Borrower had initially advised FAAN Mortgage that it would not be able to repay
the Victoria Medical SML Loans in full and sought a discharge of BDMC's security
' in respect of such loans upon payment of a lower amount. FAAN Mortgage refused
to release BDMC's security and instead engaged in negotiations with Fortress and
the Victoria Medical Borrower that resulted in the full repayment of the principal
and interest owing up to May '1,2018 under the respective Victoria Medical SML
Loans. After receiving payment in full, FAAN Mortgage consented to the discharge
of BDMC's mortgages on the Victoria Medical Borrowe/s property. The Trustee
received the funds paid by the Victoria Medical Borrower in the 455 Account and
these funds were subsequently transferred to an interest bearing GIC account.
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Certain of the lnvestors' brokers and certain lnvestors have expressed concerns
regarding the Trustee's continued retention of these funds. The Trustee has
responded to these brokers and lnvestors with a similar message that it delivered
to borrowers with an interest in the lnterest Reserve Account to advise that the
Trustee is an officer of the Court and needs additional time to assess the status of
all projects in accordance with its mandate under the Appointment Order, including
the anticipated overall administration costs of the estate and the potential sources
of funding for same.
At this time, the Trustee is seeking the Court's authorization to distribute 50% of
the principal amounts it is holding in respect of the Victoria Medical SML Loans to
the lnvestors who invested in such loans, pro rata based on the amount of each
such lnvestor's investment, in the aggregate amount of approximately $2.2 million.
The Trustee has determined that the remaining amounts it is holding in respect of
these loans should be retained during the lnterim Stabilization Period while the
Trustee continues to assess the status of all projects, As discussed in more detail
below, the remaining portion of the recovery on the Victoria Medical SML Loans
will be treated as Realized Property (as defined below), and will continue to be
held in a separate account and not used for any purpose until further order of the
Court.
(b) lnterest in the amount of approximately $178,0008 was received from Braestone
Development Corporation ("Braestone Borrower") in respect of the May 15 and
June 15, 2018 interest payments. Pursuant to the loan agreement dated
December 1,2012, between BDMC and the Braestone Borrower, the Braestone
Borrower is to pay interest on a monthly basis to BDMC, which is then typically
distributed to the Braestone lnvestors. The Trustee continues to hold the funds
that have been paid to BDMC in the lnterest Reserve Account.
(c) lnterest in the amount of $8,667, received from Kingridge (Oakville East) lnc.
("QEWN Borrower") in respect of the monthly interest payment for March, 2018.
Pursuant to the loan agreement dated December 4,2015, between BDMC and the
QEWN Borrower, the QEWN Borrower is to pay interest on a monthly basis to
8 As of the date of this Report approximately 5100,000 of this amount has not yet been deposited into the lnterest
Reserve Account and accordingly is not included in the lnterest Reserve Account balance in the chart above.
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BDMC, which is then typically distributed to the QEWN lnvestors. The last monthly
payment was made to BDMC on April 12, 2018, however, it had not yet been
distributed to lnvestors prior to the Trustee's appointment and accordingly
continues to be held in the lnterest Reserve Account. No further interest payments
have been received from the QEWN Borrower.
60 The Trustee notes that interest has been paid on only two projects since FAAN Mortgage's
appointment in February, 2017. The majority of the syndicated mortgage loans
administered by BDMC provide that interest accrues until the applicable loan is paid out.
The Trustee notes that many of the syndicated mortgage loans administered by BDMC
have matured, but that the loans are subject to postponement and standstill arrangements
with senior lenders that require BDMC to wait until the senior loans are repaid before
seeking repayment of its loans. The Trustee is investigating these arrangements.
INTERIM STABILIZATION MEASURES AND USE OF FUNDS TO ADMINISTER ESTATE
61 Since the issuance of the Appointment Order, and as detailed above, the Trustee has
been primarily focused on dealing with urgent issues related to certain projects in various
states of distress and obtaining information from the borrowers, CDCM and other
stakeholders with respect to the status of the projects.
62 ln responding to these urgent matters and in assessing the status of projects generally,
the Trustee has been analyzing BDMC's rights and lnvestors' interests under the various
syndicated mortgage loans administered by BDMC as well as the impact of any requested
postponement or threatened enforcement action on such rights and interests. The Trustee
has also begun a detailed analysis of each project and the associated senior loans,
syndicated mortgage loans and other relevant information, including the status of the
project, the principal development milestones to completion and any known impediments
to achieving such milestones.
63. The Trustee has not yet obtained sufficient information regarding the status of each
project, the funding needs of the projects, the maturity dates of third party loans made to
the projects, or the next milestones associated with the completion of the projects. As
noted above, the Trustee is working to complete a detailed analysis of these matters so
that it is in a better position to act proactively to protect lnvestors' interest in these projects.
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64.
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One important element of the Trustee's analysis is the potential recoveries to lnvestors if
senior lenders attempt to enforce their security in the near term compared to the likely
outcome for lnvestors if the Trustee decides to agree to a requested further postponement
of BDMC's security to permit the development of a particular project to continue for a
period of time. This process is dependent on a legal analysis by the Trustee's counsel and
a number of factual assumptions and business judgments by the Trustee, including
whether the Trustee's decision is likely to permit the project to continue towards
development and completion (or to the achievement of a critical development milestone)
or whether enforcement prior to the achievement of a potential milestone is likely, and, in
circumstances where enforcement is the likely outcome, the anticipated timing of any such
enforcement.
ln making its assessments, the Trustee must rely, in part, on appraisals prepared in
connection with the applicable project. Unfortunately, many of the available appraisals
suffer from significant shortcomings, including relying on assumptions regarding (i) the
outcome of completion of the applicable project (including the timing of completion, the
cost to complete and the projected sales revenues), (ii) the completion of certain
development milestones and (iii) other matters that may not come to pass. Few of the
appraisals were completed on an "as is" basis, and the few that were are now outdated.
Others appraisals are based on "as developed" values of the land premised on certain
assumptions regarding the eventual completion of the project. Further, there may be
projects where no appraisals are currently available.
ln order to preserve and, to the extent possible, maximize recoveries for the lnvestors,
and to permit the Trustee to make prudent decisions regarding lnvestors' interests, the
Trustee is of the view that in order to fulfill its Court-ordered mandate it needs to continue
to:
(a) complete a detailed review of each of the remaining 43 projects administered by
BDMC, including compiling complete information with respect to all debt owed in
respect of such projects, the applicable maturity dates of such debt, and the critical
project milestones so that the Trustee can proactively engage with borrowers,
lenders and other stakeholders rather than being forced to react to unanticipated
and urgent demands;
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67
(b) assess the priority waterfall contained in the applicable loan agreements, including
the validity and enforceability of such waterfall;
(c) engage in discussions with the respective borrowers and senior lenders regarding
options for the projects and recoveries for lnvestors;
(d) retain real estate experts to conduct appraisals on an "as is" basis with appropriate
assumptions ("New Appraisals") for a number of the projects, to the extent
deemed necessary by the Trustee;
(e) continue to engage with lnvestors and respond to lnvestor inquiries; and
(f) continue to execute BDMC's administration duties that arise in the ordinary course,
including reviewing and responding to borrower and senior lender requests, and
engaging proactively with senior lenders considering enforcement actions,
marketing processes or any other action that may have an adverse impact on the
ultimate return to lnvestors.
As noted above, there are costs associated with these activities, and these costs are high
because the Trustee faces many urgent and unanticipated demands on a daily basis. The
Trustee's Charge gives the Trustee a first priority security interest in all funds held or
received by BDMC, including funds held or that are to be held in trust on behalf of
lnvestors, borrowers and other parties, to cover the Trustee's expenses in connection with
its mandate. However, in order to (i) permit the Trustee to conduct necessary activities in
furtherance of its mandate, (ii) clarify and confirm the Trustee's rights regarding certain
Property that is subject to the Trustee's Charge; and (ii) put some temporary restrictions
on the Trustee's rights with respect to these funds, the Trustee respectfully requests that
the Court issue the Stabilization Order with respect to funds held or received by the
Trustee, as follows:
(a) That the Trustee distribute 50% of the principal amount held by the Trustee in
respect of each of the Victoria Medical SML Loans to the applicable lnvestors pro
rata based on each such lnvestor's respective portion of such Victoria Medical
SML Loans;
(b) That the Trustee hold in a separate account, until further Order of the Court, all (l)
funds that are currently in BDMC's or the Trustee's possession or that may come
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into BDMC's or the Trustee's possession, in each case as a result of a repayment
(in whole or in part) of principal on any loan or other indebtedness owing to or
administered by BDMC on behalf of lnvestors (including, for greater certainty, the
remaining portion of the repayments on the Victoria Medical SML Loans held by
the Trustee after making the distributions previously described), whether or not (i)
secured by any Real Property Charges in the name of the Respondent or in the
name of OTC, Computershare or any other person acting for lnvestors in respect
of investments held through RRSPs or other registered accounts or funds (each
an "RRSP Trustee"), (ii) received before or after the date of the Appointment
Order, or (iii) paid or payable in trust, plus (ll) all interest paid or payable to BDMC
or the Trustee at the time such repayment (in whole or in part) of principal is made
(collectively, "Realized Property") and that the Trustee report to the Court prior to
the end of the Stabilization Period with a recommendation regarding next steps
with respect to the Realized Property, including any potential distribution of any
Realized Property to the lnvestors; and
(c) That the Trustee hold in a separate account all funds (other than Realized
Property) that were in BDMC's possession on or prior to the date of the
Appointment Order as well as any amounts (other than Realized Property) paid or
payable to BDMC or the Trustee (in trust or otheruvise) after the date of the
Appointment Order, including in respect of interest where principal is not repaid,
fees, expenses or other amounts (collectively, "Estate Property") and shall be
authorized to use such Estate Property as set out in the Appointment Order and
as further confirmed by the Stabilization Order.
The Trustee proposes to hold the Realized Property separate and apart from the Estate
property and any other Property and not to use the Realized Property for any purpose
until further order of the Court. The Trustee will, however, use the Estate Property and any
other Property in conformance with the Appointment Order and in accordance with the
proposed Stabilization Order to permit the Trustee to carry out its mandate, including
without limitation, at the Trustee's sole discretion, any of the following:
(a) to provide a retainer for and to pay the professional fees, expenses and
disbursements of the Trustee, its counsel, and any experts or other advisors
retained by the Trustee pursuant to the Appointment Order;
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(b) to pay expenses of BDMC, including, without limitation, payroll, rent, utilities, taxes,
and other statutory remittances;
(c) to pay expenses incurred in the administration of any loan or indebtedness
administered by BDMC, including, without limitation, in connection with obtaining
New Appraisals of any property or, if necessary, taking or responding to any
enforcement action;
(d) to make protective disbursements to or on behalf of a borrower or in respect of a
project, provided that any such disbursement shall be considered an advance
made to the applicable borrower in respect of such project and the amount of such
advance plus any applicable expenses incurred in connection therewith shall be
added to the sum owing by the borrower and shall be added to the Real Property
Charge in respect of same (except to the extent that such borrower is already
indebted to BDMC for such amount); and
(e) to pay general expenses of BDMC or the Trustee, in that capacity, not covered by
the foregoing.
As noted above, the Trustee has moved the Realized Property currently in its possession
into an interest bearing GIC account and intends to move any further Realized Property
received during the Stabilization Period into this account so that interest is earned on all
Realized Property. The Trustee is considering whether it is appropriate to take similar
steps with respect to Estate Property.
As noted above, the Trustee intends to report to the Court prior to October 31,2018
regarding its progress on the foregoing matters, including its recommended proposalwith
respect to the Realized Property. The Trustee is of the view that, by the end of the
proposed Stabilization Period, it should be in a much better position to provide the Court
and lnvestors with a detailed update on the status of each project, and will have much
better information regarding the potential timing of any repayments on the existing
syndicated mortgage loans and the likely outcome for lnvestors in such loans. At that time,
the Trustee will be in a better position to determine the amount of Realized Property or
any other Property that can be disbursed to the applicable lnvestors and to make
recommendations to the Court with respect to same.
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71 The Realized Property includes 50% of the principal amounts received in repayment of
the Victoria Medical SML Loans and all interest received. 50% of the principal amount
recovered on the Victoria Medical SML Loans is proposed to be distributed to the
applicable lnvestors and the remaining sums are proposed to be held by the Trustee
during the Stabilization Period and not used.
The Estate Property includes the interest paid by the Braestone Borrower and the QEWN
Borrower.
The Trustee and its legal counsel are tracking their time by project. For certain tasks that
affect all lnvestors, including general notices and the preparation of this Report and the
related Court materials, the time will be charged to a general account that will, at a later
date, be allocated to the various projects based on appropriate considerations and in
accordance with further Court orders. Time spent on project specific tasks, such as
attending to matters on the Brookdale Project and the Bowmanville Project, are recorded
as pertaining to the project in question. Fees incurred in respect of project specific tasks
will be paid out of Estate Property, but it is contemplated that any realizalions on specific
projects will be used to reimburse such amounts. Given the lack of revenue available to
BDMC, there is no other option to fund the Trustee's activities for the benefit of the
lnvestors.
REPRESENTATION FOR INVESTORS
74. As noted previously, there are approximately 11,000 Investors who participate in
mortgages administered by BDMC. Although lnvestors reside throughout Canada, the
vast majority of lnvestors are located in Ontario. FAAN Mortgage has been engaging with
lnvestors since its appointment as manager of the Administration Business and has
continued to do so after its appointment as Trustee.
75. The Trustee's mandate does not include providing legal advice to BDMC's lnvestors, and
the Trustee has recommended that lnvestors seek independent legal advice with respect
to certain matters when the Trustee has determined that it was appropriate to seek
consent of lnvestors to certain actions to be taken by the Trustee in respect of syndicated
mortgage loans. Similarly, the Trustee understands that RRSP Trustees typically advise
lnvestors who have invested in BDMC syndicated mortgage loans to seek independent
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legal advice with respect to enforcement matters and other significant developments in
respect of projects and loans made in respect of such projects.
76 Given the large number of individual lnvestors, the Trustee is of the view that it is in the
best interests of the lnvestors to appoint Representative Counsel in order to provide the
lnvestors with legal representation to protect their common interests, while keeping
professionalfees for lnvestors as low as possible. lf Representative Counsel is appointed,
various lnvestors will not need to retain their own counsel to assist them in considering
proposals put to them by the Trustee or responses to enforcement steps. lnstead,
Representative Counsel will be available to assist lnvestors with respect to their common
interests in loans administered by BDMC and in assessing all matters in these
proceedings. ln appropriate circumstances, Representative Counselwill be able to provide
feedback to the Trustee in connection with its mandate and, where necessary, lnvestor
consent to certain material actions. Representative Counsel's involvement will result in
more timely and cost-effective decisions, especially given the circumstances that the
Trustee has faced to date,
77 Appointing Representative Counsel will enable the Trustee to put in place an efficient and
effective communication plan, and will assist in ihe implementation of various value-
preserving strategies for lnvestors' interests. ln addition, Representative Counsel will
ensure that those investors who do not opt-out of representation will be adequately
represented in these proceedings.
78. The Trustee is therefore seeking an order that appoints Chaitons LLP ("Chaitons") as
Representative Counsel and grants Representative Counsel a charge on the assets of
BDMC already secured by the Trustee's Charge, as security for the legal fees and
disbursements of Representative Counsel. Chaitons has extensive experience in
proceedings similar to this, including those involving real estate investment firms,
developers and numerous investors, including the MBLAA proceedings in respect of the
entities known as the Tier 1 Trustee Corporations.
79. Chaitons acts for the Court-appointed receiver on the Dunsire Project and therefore will
not represent the lnvestors with respect to the Dunsire Project.
80. The proposed Stabilization Order provides that, subject to prior approval by the Trustee
or order of the Courl, Representative Counsel shall be paid its reasonable fees and
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82
disbursements. Representative Counsel will deliver its invoices to the Trustee, subject to
such redactions to the invoices as are necessary to maintain solicitor-client privilege
between Representative Counsel and the lnvestors, and the Trustee will approve the
invoices and arrange for payment of same from the proceeds of realization on a project.
It is also proposed that Representative Counsel's fees and disbursements may be paid
from any distributions to be made to lnvestors in respect of these proceedings. When
realizations are generated from a specific project, Representative Counselwould receive
payments for the work on that project. Certain amounts may also need to be reserved
from distributions on a given project to address circumstances where no proceeds are
realized sufficient to pay Representative Counsel for its work on a given project. This will
allow for a fair and reasonable allocation of legal representation for the lnvestors. .
While the Trustee is cognizant of the interests of the lnvestors, the Trustee is also
concerned that the costs of Representative Counsel are adequately managed, so that
while discharging its responsibilities, Representative Counsel can add value from the
perspective of Investors. Accordingly, the Trustee has had preliminary discussions with
the proposed Representative Counsel, to ensure that there is a streamlined
communication strategy, and to ensure that there is no duplication of services as currently
provided by the Trustee or its counsel.
83. The following is a summary of the proposed Representative Counsel's mandate
(a) Representative Counsel would act for all lnvestors in respect of these proceedings
regarding their common interests in the loans and other indebtedness
administered by BDMC, including the common interests of lnvestors in any
particular loan or other indebtedness administered by BDMC;
(b) Representative Counsel would act in the best interests of the lnvestors and take
such necessary and appropriate actions as Representative Counsel deems fit from
time to time;
(c) Representative Counsel shall have no obligation to consult with, follow the
instructions of, or provide an opinion to, any individual lnvestor in connection with
the discharge of its duties under the proposed Stabilization Order;
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(d) any lnvestor that does not wish to be represented by Representative Counsel
would be required to provide notice of same in writing to Representative Counsel;
(e) Representative Counselwould be permitted to communicate with the lnvestors by
posting communications on the Trustee's website;
(f) Representative Counselwould be entitled to a charge ("Representative Counsel
Charge") on the Property as security for its fees and disbursements in respect of
these proceedings, both before and after the making of the proposed Order; the
Representative Counsel Charge shall form a charge on the Property ranking
immediately subordinate in priority to the Trustee's Charge;
(g) Representative Counsel would be at liberty to apply to this Court for advice and
directions in respect of its appointment; and
(h) notice of Representative Counsel's appointment would be posted on the Trustee's
website and sent to lnvestors by Representative Counsel (or by the Trustee on
behalf of Representative Counsel) within 7 business days of the receipt by
Representative Counsel of certain contact information for the lnvestors.
The Trustee has discussed the proposed appointment of Representative Counsel with
FSCO and its counsel, who have advised that they are supportive of same.
CONCLUSION AND RECOMMENDATION
The purpose of the Trustee's appointment is to protect the lnvestors. The Trustee was
appointed to administer the loans made by BDMC on behalf of the investing public and to
make prudent decisions that are in the best interests of the lnvestors with respect to the
administration and enforcement of the relevant loans. The Appointment Order also
granted the Trustee's Charge to secure the payment of the Trustee's and its legal
counsel's fees and disbursements as well as other costs of these proceedings.
B6 The Trustee has determined that, in order to discharge its Court-ordered mandate, it
needs to (a) complete a detailed evaluation of the condition of each of the projects and
the associated syndicated mortgage loans made by BDMC, and (b) proactively engage
with stakeholders on a project by project basis. Among other things, the Trustee needs to
develop a strategy to maximize recoveries for lnvestors in difficult circumstances. ln
84.
B5
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87.
88.
89.
furtherance of these matters, the Trustee is seeking the Stabilization Order to clarify and
confirm the scope of the Trustee's Charge and to put some additional restrictions on the
Trustee's rights with respect to the funds charged to give comfort to lnvestors, brokers
and borrowers who have expressed concerns about these matters, including the lnvestors
and brokers who have raised concerns regarding the proceeds of the Victoria Medical
SML Loans and borrowers who have raised concerns regarding funds held in lnterest
Reserve Account.
The Trustee has also determined that it is advisable to appoint Representative Counsel
on behalf of the lnvestors.
The proposed Stabilization Order will facilitate the Trustee in carrying out its mandate for
the benefit of all lnvestors and other stakeholders of BDMC.
ln light of the foregoing, the Trustee respectfully recommends that the Court issue the
Stabilization Order in the form attached to.the Trustee's motion record.
Yann Mwtgagr ilmin*s+rafwr lnp.
FAAN MORTGAGE ADMINISTRATORS INC.,SOLELY IN ITS CAPACIry ASCOURT-APPOINTED TRUSTEE OF
BUSINESS & DEVELOPMENT MORTGAGES CANADA INC.,
AND NOT IN ITS PERSONAL OR ANY OTHER CAPACITY
ALL OF WHICH lS RESPECTFULLY SUBMITTED this 19th day of June, 2018
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Appendix 3:
Second Report of the Trustee dated October 23,2018, without exhibits
92
Court File No. CV-18-596204-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
(coMMERCTAL L|ST)
BETWEEN
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, TENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, C.
29 and SECTION 101 OF THE COURIS OFJUSTICE ACT, R.S.O. 1990 c. G.43
SEGOND REPORT OF THE TRUSTEE
ocToBER 23,2018
FAAN Mortgage Administrators lnc.Court-Appointed Trustee of the Respondent
^J NFAAMt
0RI0lttsr{tfitsTRrT0n5
93
TABLE OF CONTENTS
r NTRODUCTION ............
PURPOSE OF THE SECOND REPORT
SCOPE AND TERMS OF REFERENCE ................
OVERVIEW.
UPDATE ON BDMC,S BUSINESS AND AFFAIRS
SUMMARY OF THE TRUSTEE,S PROJECT ANALYSIS
UPDATE ON ACTIVITIES OF THE TRUSTEE SINCE THE DATE OF THE FIRST REPORT
FUNDING OF THESE PROCEEDINGS AND CASH FLOW PROJECTION
RECOMMEN DATION REGARDING REALIZED PROPERTY
REPRESENTATIVE COU NSEL
CONCLUSION AN D RECOM MENDATION
t2
3
5
9
..... 10
...,. 18
.....34
.....4r
',..,44.....45
94
INDEX OF APPENDICES
Appendix 1
Appendix 2
Appendix 3
Appendix 4
Appendix 5
Appendix 6
Appendix 7
First Report of the Trustee dated June 19, 2018, without exhibits
Appointment Order dated April 20, 2018
lnterim Stabilization Measures Order dated June 26, 2018
Project Status Chart as of October 15, 2018
Variance Analysis forthe period ending September 30, 2018
Cash Flow Projection for the period ending April 30, 2019
Notice to Investors re Appointment of Representative Counsel
95
Court File No. CV-18-590204-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
(coMMERCIAL LIST)
BETWEEN
THE SUPERINTENDENT OF FINANCIAL SERVIGES
Applicant
-and-
BUILDING & DEVELOPMENT MORTGAGES GANADA ING.
Respondent
APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2005, C.
29 and SECTION 101 OF THE COURIS OF JUSTICE ACT\ R.S.O. 1990 c. G.43
SECOND REPORT OF THE TRUSTEE
October 23,2018
INTRODUCTION
On April 20,2018, pursuant to an order ("Appointment Order") of the Honourable Mr.
Justice Hainey of the Ontario Superior Court of Justice (Commercial List) ("Gourt"), FAAN
Mortgage Administrators lnc. ("FAAN Mortgage") was appointed as trustee ("Trustee")
over all of the assets, undertakings and properties of Building & Development Mortgages
Canada lnc. ("BDMC") including, without limitation, all of the assets in the possession or
under the control of BDMC, its counsel, agents and/or assignees but held on behalf of any
other party, including, but not limited to, lenders under syndicated mortgage loans
("lnvestors"), brokers, or borrowers, in each case whether or not such property was or is
held in trust or was or is required to be held in trust (collectively, the "Property"). The
Appointment Order was issued following an application made by the Superintendent of
Financial Services ("superintendent") pursuant to section 37 of the Mortgage
Brokerages, Lenders and Adminisfrafors Act, 2006 (Ontario), as amended ("MBLAA'),
and section 101 of the Courts of Justice Act (Ontario), as amended.
96
2 On June 19,2018, the Trustee submitted its first report in these proceedings ("First
Report"). The First Report provided a comprehensive update on the Trustee's activities
during the first two months of these proceedings. ln particular, the First Report provided
additional background information regarding BDMC and its business, provided updated
information on the status of the projects in which the lnvestors hold syndicated mortgage
loans and provided an outline of the next steps that the Trustee intended to undertake in
respect of the administration of BDMC and its estate. A copy of the First Report, without
appendices, is attached as Appendix"1". A copy of the Appointment Order is attached
as Appendix "2". Capitalized terms not othenrvise defined in this Report have the
meanings ascribed to them in the First Report.
Materials filed with the Court with respect to these proceedings (other than confidential
materials filed under seal), including the First Report, the affidavit of Brendan Forbes, legal
counsel at the Ministry of the Attorney General Civil Law Division, Financial Services
Commission of Ontario ('FSCO') branch, sworn on April 19,2018 ("Forbes Affidavit"),
the Superintendent's application record, the Appointment Order, the lnterim Stabilization
Order and the endorsements issued by the Court, are accessible on the Trustee's website
at: www.faanfnortoaoeadmin.com ("Trustee's Website"). The Trustee intends to maintain
the Trustee's Website for the duration of these proceedings and will be updating it as
appropriate.
PURPOSE OF THE SECOND REPORT
The purpose of this second report ("Second Report") is to provide the Court and
stakeholders with an update on the Trustee's activities since the date of the First Report
and to support the Trustee's request for an Order ("Realized Property Order") that the
Trustee shall:
(a) distribute a further amount equal to 20% of the Realized Property originally
obtained with respect to the Victoria Medical SML Loans, such that, when
combined with the distribution made pursuant to the lnterim Stabilization Order,
70% of such funds shall have been distributed;
(b) distributeT0% of all other Realized Property obtained, whether received before or
afterthe date of the Realized Property Order; and
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5.
(c) be authorized to use any portion of the retained Realized Property to fund the
Required Trustee Activities (as defined herein).
ln support of the Trustee's request for the Realized Property Order, this Second Report
describes the following matters:
(a) Further information regarding BDMC and its business;
(b) An overview of the Trustee's detailed project analysis to date;
(c) An update on the Trustee's activities since the date of the First Report, including
in relation to:
i. Enforcement actions;
ii. Negotiations of early payouts of certain BDMC loans; and
iii. lnvestor communications;
(d) Further information regarding the funding of these proceedings, including receipts
and disbursements and a cash flow projection through to April 30, 2019;
(e) The Trustee's recommendation regarding Realized Property; and
(f) lnformation regarding Representative Counsel's mandate and the Trustee's
engagement with Representative Counsel.
The Trustee intends to report back to the Court by no later than April 30, 2019 with a
further comprehensive update regarding these proceedings. The report to be filed by April
30, ZO19 will give the Court, lnvestors, borrowers, brokers and other stakeholders further
information regarding BDMC and its business and affairs and information regarding the
Trustee's activities during that period. The Trustee anticipates that it will likely be
necessary to prepare shorter project specific reports during the intervening period and will
likely be required to attend before the Court to seek relief or advice and directions from
the Court regarding such project specific issues. For example, the Trustee anticipates
returning to Court in the near term for approval of an early repayment on the Braestone
Project, discussed and defined herein.
SCOPE AND TERMS OF REFERENCE
ln preparing this Second Report, the Trustee has relied upon unaudited financial
information provided by, inter a/ra, BDMC, Fortress, Canadian Development Capital &
6.
7
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B
Mortgage Services lnc. ("GDCM"), the mortgage brokerage who assumed the mortgage
brokerage duties of BDMC, and certain of the individual borrowers who have borrowed
funds from BDMC under various syndicated mortgage loans administered by BDMC'
While the Trustee reviewed various documents provided by BDMC, CDCM, and applicable
borrowers (including, among other things, unaudited internal information, appraisals and
financial projections), the Trustee's review does not constitute an audit or verification of
such information for accuracy, completeness or compliance with Generally Accepted
Assurance Standards ("GAAS'), Generally Accepted Accounting Principles ("GAAP"), or
lnternational Financial Reporting Standards ("lFRS'). Accordingly, the Trustee expresses
no opinion or other form of assurance pursuant to GAAS, GAAP or IFRS, or any other
guidelines, with respect to such information.
Some of the information used and relied upon in preparing this Second Report consists of
financial projections and other information received from various third parties, including
appraisals and project cost information. The Trustee cautions that the projections and
other information used and relied upon are generally based upon assumptions and
estimates about future events and/or market conditions that are not ascertainable or that
could change. As such, the information presented in this Second Report may vary from
the projections and information used to prepare this Second Report and the actual results
may differ both from the results projected therein and herein. Even if the assumptions
relied upon therein or herein materialize, the variations from the projections could be
significant. The Trustee's review of the future oriented information used to prepare this
Second Report did not constitute an audit or review of such information under GMS,
GAAP or IFRS or any other guidelines'
This Second Report has been prepared forthe use of this Court and BDMC's stakeholders
as general information relating to BDMC and to assist the Court with respect to the
Trustee's request for the proposed Realized Property Order. Accordingly, the'reader is
cautioned that this Second Report may not be appropriate for any other purpose. The
Trustee will not assume responsibility or liability for losses incurred by the reader as a
result of the circulation, publication, reproduction or use of this Second Report contrary to
the provisions of this ParagraPh.
9.
4
10. All references to dollars are in Canadian currency unless othenvise noted.
99
OVERVIEW
11
12
The First Report described the need for certain interim stabilization measures, including,
among other things, clarification related to the use of certain funds held in BDMC accounts,
to allow the Trustee to discharge its obligations pursuant to the Appointment Order,
perform BDMC's administrative tasks, and to commence an in-depth review of the real
estate development projects that were funded in part,through the syndicated mortgage
loans that were administered by BDMC.
On June 26,2018, a further order of the Court was made ("lnterim Stabilization Order"),
that, among other things:
(a) appointed Chaitons LLP as representative counsel in respect of the common
interests of all lnvestors in these proceedings unless and until an lnvestor opts out
of such representation ("Representative Counsel");
(b) authorized the Trustee to retain all of the funds held by BDMC on the date of the
Appointment Order, or paid or payable to BDMC or the Trustee thereafter,
including interest where principal is not repaid, other than Realized Property
(defined below) ("Estate Property") and to use the Estate Propefi to fund certain
matters in connection with the administration of BDMC's estate;
(c) required the Trustee to hold, in a separate account, until further order of the Court
(l) all funds held or received by the Trustee as a result of a repayment (in whole or
in part) of principal on any loan or other indebtedness administered by BDMC on
behalf of lnvestors, whether or not (i) secured by any Real Property Charges in the
name of BDMC or an RRSP Trustee, (ii) received before or afier the date of the
Appointment Order, or (iii) paid or payable in trust, plus (ll) all interest paid or
payable to BDMC or the Trustee at the time such repayment (in whole or in part)
of principal is made (collectively, "Realized Property") other than 50% of the
Realized Property consisting of realizations on the Victoria Medical SML Loans;
(d) directed the Trustee to pay 50% of the Realized Property consisting of realizations
on the Victoria Medical SML Loans pro rata to the lnvestors entitled to such funds;
and
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13.
14.
15.
(e) required the Trustee to report to the Court by October 31, 2018 with a
recommendation regarding next steps with respect to the Realized Property,
including any potential distribution of Realized Property to the lnvestors.
A copy of the lnterim Stabilization Order is attached as Appendix "3" hereto
Since the date of the First Report, the Trustee has continued to address the many
significant issues that were facing BDMC and the real estate development projects on the
date the Appointment Order was issued. The Trustee also faces numerous new and
unanticipated issues that arise on an almost daily basis, such as enforcement proceedings
commenced or continued against a significant number of the projects, urgent requests to
execute postponement agreements in connection with new funding arrangements
represented to the Trustee to be needed to allow for the ongoing development of the
projects, and consideration of actions to prevent enforcement proceedings from being
taken against other projects. These matters often require the Trustee's immediate
attention and, in certain cases, a comprehensive response from the Trustee and its legal
counsel.
The Trustee is monitoring every real estate development project, regardless of whether
the project is distressed (as described in more detailin this report)or proceeding generally
as anticipated.
The Trustee has also been conducting an in-depth analysis of each project and the
syndicated mortgage loans made in respect of each project. Among other things, the
Trustee's analysis consists of:
(a) an examination of the development milestones for and progress on each project;
(b) the capital structure, debt obligations and all available documents related thereto;
(c) the relative priorities of the debt obligations;
(d) the potential impact on lnvestor recoveries of specific terms of the relevant BDMC
loan documents, including postponement, "waterfall", and rescission rights;
(e) an analysis of the current value of the project (including by commissioning,
reviewing and analyzing appraisals) compared to projected values and projected
costs if subsequent milestones are achieved;
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(f) the status of the BDMC loan (including whetherthe loan has matured); and
(g) the alternatives available for lnvestors in the circumstances.
16. The Trustee's analysis is well underway and the Trustee can report as follows
(a) 13 of the 45 projects included in the Trustee's mandatel are currently subject to
enforcement proceedings taken by prior ranking mortgagees, resulting in
increased risk to the recoveries of lnvestors who loaned funds to these projects;
(b) one or more BDMC syndicated mortgage loans have matured for 13 projects that
are not facing enforcement action by prior ranking mortgagees,2 and the prospects
of repayment on the majority of these loans is uncertain in the near term;
(c) full repayment of many of the syndicated mortgage loans is at risk; and
(d) repayment, in whole or in part, of the majority of the syndicated mortgage loans is
likely to occur much later than was forecasted by Fortress or others.
17 The Trustee is working with its legal counsel and others to develop further strategies and
recommendations to assist in maximizing recoveries for each project (whether distressed
or not) and, where appropriate, communicating with lnvestors regarding its
recommendations. The Trustee is also communicating with Representative Counsel,
where appropriate, with respect to the status of the projects.
18 Due to the early development status of many of the projects and the complicated capital
structures involved, it is anticipated that it will take several years to complete the
administration of many of the syndicated mortgage loans. As such, the Trustee's analysis
is an ongoing process that will have to be updated from time to time to reflect material
developments over the life of the projects. lt is not yet appropriate for the Trustee to make
final recommendations with respect to many of the projects. The Trustee will continue to
monitor the development of the projects and will present interim recommendations as and
1 ln the First Report, the Trustee had identified 44 projects that had received funds from BDMC. The Trusteehas since determined that two projects were included in the Union Waterfront Project described in theproject status chart attached as Appendix 3 to the First Report: (i) the Union Waterfront Project; and (ii) aproject called Port Place 2, which is related to the Union Waterfront Project but independent of it. Port Place2 is the subject of a separate BDMC loan and is not subject to enforcement proceedings as of the date ofthis Second Report.2 BDMC loans have matured on a total of 24 projects, including projects facing enforcement action by prior
ranking mortgagees and projects where no enforcement action is underway.
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20.
21
22.
when appropriate. Further recommendations and a long-term strategy for each project are
being developed and deployed on a case by case basis, including strategies to enhance
opportunities for repayment prior to project completion.
The Trustee recognizes the hardship faced by many lnvestors who participated in
syndicated mortgage loans administered by BDMC. The Trustee has received certain
communications from lnvestors detailing the hardship they are experiencing as a result of
their investments and has also been advised that Representative Counsel has received
similar communications. The Trustee understands the potentially detrimental impact of
delays in the borrowers repaying the BDMC loans and delays in the Trustee distributing
any repayments received to lnvestors.
Now that the Trustee's analysis of the projects is further advanced and in order to minimize
hardship to lnvestors to the extent possible, the Trustee is seeking this Court's
authorization to distribute a further amount equal to 20% of the Realized Property that was
originally obtained by the Trustee in respect of the Victoria Medical SML Loans andTOo/o
of any other Realized Property, whether held as of the date of this Report or received in
the future.
The Trustee is also seeking this Court's authorization to use the retained Realized
propefi to aid the Trustee in complying with the Appointment Order and in carrying out
its mandate, as the Trustee, in its sole discretion, considers necessary or desirable for the
administration of the estate, including those matters set out in paragraph 17 of the lnterim
Stabilization Order (collectively, the "Required Trustee Activities").
The Trustee understands that these proceedings may have a disproportionate impact on
lnvestors whose projects have generated or will generate Realized Property at earlier
dates than other projects. As such, the Trustee will provide the Court with a
recommendation regarding an appropriate allocation of the costs that will be borne by
specific projects at a later date, which will be based on a formula that includes some
compensation to those lnvestors whose Realized Property is used to fund the Required
Trustee Activities during the pendency of the proceedings'
The allocation formula and compensation recommendation will be developed at the
appropriate time to fairly and equitably allocate the costs of the Required Trustee Activities
among lnvestors in accordance with the relative risks and rewards of the projects selected
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by each lnvestor for his or her investment. The purpose of the allocation formula is to
ensure that lnvestors in particular projects do not bear a disproportionate share of the
costs associated with the Required Trustee Activities, and, as such, lnvestors in certain
projects should receive a further distribution at a later date in accordance with the
allocation formula.
24 Notwithstanding the challenges and the hardships described above, the Trustee believes
that this Court-supervised process provides lnvestors with enhanced protections and
better oppodunities to obtain recoveries in light of the circumstances surrounding Fortress
and BDMC.
UPDATE ON BDMC'S BUSINESS AND AFFAIRS
On April 20,2018, the Court issued the Appointment Order on the application brought by
the Superintendent. The Superintendent's reasons for bringing that application are
summarized in the First Report and comprehensively explained in the Forbes Affidavit.
Among other things, the Superintendent had previously entered into certain settlement
arrangements with BDMC that required BDMC to retain FAAN Mortgage to manage
BDMC's mortgage administration business. FAAN Mortgage was retained for this purpose
pursuant to a Management and Administration Agreement entered into on February 7,
2018 ("MAA"). The Superintendent served its application record after BDMC breached a
number of provisions of the MAA and became involved in a widely publicized RCMP
investigation related to alleged mortgage fraud.
26. Following its appointment, the Trustee's control over and responsibilities in respect of
BDMC and the loans administered by BDMC increased. As described in more detailbelow
under "Funding of These Proceedings", following the Trustee's appointment, BDMC has
received significantly less funding from other sources than was provided prior to the
commencement of these proceedings, while facing substantially higher costs in
addressing a number of material adverse changes in respect of the real estate
development projects.
27 Among other things, the Trustee continues to face many urgent demands to execute
postponements to new lenders to address both liquidity needs and enforcement activities
that have been commenced or threatened by senior lenders. Several borrowers have
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advised the Trustee that the heightened media attention on Fortress has negatively
impacted the ability of borrowers associated with Foftress and BDMC to obtain new loans
and has made existing lenders reluctant to renew their loans or advance additional funds.
Some borrowers have advised that they are also having difficulty obtaining title insurance
due to these events.
28 Since the date of the First Report, several additional enforcement actions have been taken
by senior lenders. Enforcement actions are described in more detail under "Update on the
Activities of the Trustee". The Trustee has taken and will continue to take appropriate
steps in response to these enforcement actions in an effort to protect the lnvestors'
interests to the extent possible.
29 The Trustee also continues to monitor every project, regardless of whether the project is
distressed or proceeding in the ordinary coLrrse, and to address development requests to
permit the projects to progress in a manner that will maximize lnvestor recoveries.
SUMMARY OF THE TRUSTEE'S PROJECT ANALYSIS
30 The Trustee has been undertaking a detailed analysis of each real estate development
project and of the syndicated mortgage loans made in respect of each project. This
analysis has included an examination of the status of each project, the principal
development milestones required to complete that project, and any known impediments
to achieving the milestones, as well as an examination of the capital structure and debt
owing in respect of each project.
To conduct the project analysis, the Trustee has undertaken numerous activities, including
but not limited to the following:
31
(a) Commissioning 42 new, independent appraisals that provide an "as is" current
value of the properties based on appropriate assumptions and current market
conditions ("New Appraisals");
(b) Gathering and providing necessary information to the appraisers required for the
completion of the New Appraisals. Such information typically also forms part of the
Trustee's project review;
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32
33
(c) Performing detailed reviews of drafts of the New Appraisals received and, in many
instances corresponding with the appraisers regarding same;
(d) Corresponding directly with and obtaining information directly from borrowers and
other relevant parties to permit the Trustee to corroborate information obtained
from BDMC and other sources;
(e) Reviewing project budgets and other documentation;
(f) Contacting city planners to obtain updates on the status of the project related
development aPProvals;
(g) Reviewing decisions issued by the Local Planning Appeal Tribunal ("LPAT')
formerly known as the Ontario Municipal Board ('OMB") and similar organizations
regarding development and planning approvals;
(h) Working with a planning consultant to better understand the current development
status of projects, the remaining development milestones for projects, the timing
to achieve those milestones and any potential impediments to achieving those
milestones, in conjunction with an understanding of the various possible exit points
throughout the life of the project; and
(i) Monitoring the status of projects that are currently under construction.
The Trustee has been working with certain borrowers to discuss opportunities to exit
projects and the different points in the development process where an exit is feasible,
including following the issuance of certain development approvals, following completion
of land servicing work, following completion of construction or after substantially all of the
units in the project have been sold. The Trustee has been independently working on
assessing the alternative recoveries to lnvestors at different exit points.
As part of its analysis, the Trustee is also refining its understanding of the material terms
of the senior loans secured on each of the projects and the other financing sources relied
upon by the applicable borrower, the postponements previously executed by BDMC and
BDMC's relative rights and obligations in respect of the syndicated mortgage loans made
to finance a project. The Trustee has continued to communicate with and seek information
from the borrowers, the senior lenders, Fodress, CDCM and other stakeholders with
respect to these matters.
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34.
35.
36
Over 11,000 individual lnvestors have invested an aggregate amount of approximately
$560 million in syndicated mortgage loans administered by BDMC. These funds have
been advanced in connection with 45 different projects that are in various stages of
development.
A chart setting out specific details regarding the capital structure and development
progress for each ongoing project is provided as Appendix u4" ("Project Analysis
Summary"). The Project Analysis Summary contains particularized information with
respect to each project, but the Trustee cautions that the Project Analysis Summary is
only intended to summarize the results of certain aspects of the Trustee's analysis to the
date of this Second Report. The Trustee continues to refine its analysis on each project
as well as to respond to new developments and information. New developments and new
information can at times have a significant impact on the previous conclusions of the
Trustee's review for that project and its related recommendations. Fufther, certain
confidential information has been excluded from the Project Analysis Summary.
The below table is derived from the Project Analysis Summary and sets out the
development status of the various projects administered by BDMC. For the purposes of
the Project Analysis Summary and the below table:
(a) "Development Stage" projects are projects where various zoning and planning
approvals are being sought.
(b) "Pre-construction Phase" projects are projects where the principal zoning and
planning approvals have been obtained and (in some cases) the marketing and
sale of units are underuvaY.
(c) "Construction Phase" projects are projects where one or more of demolition, site
servicing, excavation or construction have commenced.
(d) "Completed" projects are projects where construction is complete and sales are
advanced, but the BDMC loans have not yet been repaid.
(e) "Exited" projects are projects where the principal assets have been sold, or the
sale of the property has been approved by the Court and a sale is pending or, in
the case of the Victoria Medical Project, the borrower has repaid the BDMC loan.
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BDMCSML Debt
Proiect Status Number of Proiects $000s)
DevelopmentPre-constructionConstructionCompletedExitedTotal
19 209,069109,877177,17032,706
1
45
o
043
$560,28731 465
37
38
39
40.
The remainder of this section addresses three important aspects of the Trustee's review
to date: (a) a discussion of the New Appraisals being prepared to provide estimated
current values of the projects; (b) an overview of the BDMC loan structure; and (c)
information regarding the Trustee's project specific recommendations.
(a) New Appraisals
One important element of the Trustee's analysis is to understand the potential recoveries
to lnvestors if a project is sold in the near term (as a result of senior lender enforcement
actions or otheruvise) compared to the potential recoveries to lnvestors at a later date if
development of the project continues. This analysis must be undertaken in connection
with many decisions, including whether to agree to a further postponement of BDMC's
security.
The projects often consist of several different parcels of land, and it is not uncommon for
each parcel to have different senior and junior secured lenders. As a result, it can be
difficult to determine the property values in respect of a given project because it is not
clear whether all parcels of land would be sold as a single package or whether the parcels
would be sold indePendentlY.
ln making decisions, the Trustee must rely, in part, on appraisals prepared in connection
with the applicable project. As noted in the First Report, many of the appraisals previously
obtained by BDMC suffer from significant shortcomings, including relying on assumptions
regarding (i) the outcome of completion of the applicable project (including the timing of
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42.
43.
41
44.
completion, the cost to complete and the projected sales revenues), (ii) the completion of
certain development milestones and (iii) other matters that may not come to pass.
Since the date of the First Report, the Trustee has obtained 31 New Appraisals. These
New Appraisals have been provided in draft form and the Trustee is working with
appraisers to address assumptions and additional factual matters with a view to receiving
final appraisals. The Trustee has obtained valuable insight regarding the projects by
working through the New Appraisals with the appraisers and continues to speak to the
appraisers regularly regarding a number of matters, including projected future realizations
on the projects.
The Trustee negotiated a bulk discount for the New Appraisals in an effort to reduce costs
and therefore increase recoveries on Realized Property.
While appraisals are an important element of the Trustee's analysis of potential recoveries
for the lnvestors, the Trustee must also consider BDMC's rights and obligations under the
applicable syndicated loan documents, such as the potential requirement to postpone to
other lenders (discussed further below). Many other relevant factual matters need to be
evaluated in connection with the Trustee's analysis of appropriate next steps and potential
recoveries on projects, including budgets, market conditions and prospects of achieving
milestones.
(b) The BDMC Loan Structure
The Trustee has been focused, among other things, on examining the capital structure
and debt obligations applicable to each project. This section summarizes the following
p6ncipal components of the BDMC loan structure: (i) key provisions of the applicable loan
and security package and related factual matters; (ii) certain "waterfall" arrangements; and
(iii) certain "rescission rights". Some additional general information regarding these
matters can be found in the First Report and in the Forbes Affidavit. The following section
describes matters generally. Certain project specific details can be found in the Project
Analysis Summary. The Trustee has prepared analyses of these and other matters for
each project and utilizes the results of those analyses in making recommendations and
decisions where required and appropriate.
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45
46.
47
48
49
(i) Kev provisions of the BDMC loan and securitv packaqe
The BDMC loan documents generally purport to require BDMC to subordinate its security
up to certain specified maximum amounts to facilitate further advances by senior lenders
under existing loans or to facilitate advances under new senior loans to fund the
construction of the applicable project. Among otherthings, the loan documents purportto
require BDMC to postpone its mortgages to (a) a predefined amount of "first-ranking
construction loans" and (b) the difference between the face amount of the BDMC loan and
the amount actually advanced by lnvestors through BDMC (in aggregate, the "specified
maximum amount").
BDMC's syndicated mortgage loans were rarely fully advanced on the initial closing date;
instead, funds were typically advanced in several separate tranches over a period of time.
ln many cases, there is a shortfall between the face amount of the BDMC loan and the
amount that was funded by BDMC prior to the Trustee's appointment. As BDMC is no
longer in a position to advance additional funds to satisfy the full loan commitment set out
in the applicable BDMC loan, the Trustee has received numerous requests to postpone
and subordinate BDMC's security to new lending arrangements to make up for the
shortfall.
Moreover, the Trustee has been advised that some of the projects will need financing in
excess of the specified maximum amounts set out in the applicable BDMC loan agreement
to permit developments to continue. Such funding is often only available if the security
interests granted to BDMC are further postponed and subordinated to the new financing'
The Trustee has entered into new postponement agreements where it appears to be in
the best interests of the applicable lnvestors to do so and in accordance with the applicable
loan documents. New postponements are discussed further under "Update on the
Activities of the Trustee".
BDMC's mortgages often rank third or lower in priority on the projects. The senior
mortgages often secure significant sums advanced to fund the acquisition of the property,
the construction of the project and certain "soft costs" such as obtaining development
approvals. lnvestor monies secured by subordinate BDMC mortgages have typically been
used to fund "soft costs" not funded by senior lenders as well as to service the projects,
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50
51
52
53.
including funding the payment of interest to senior lenders and the payment of propefty
taxes, development fees and similar expenses.
Many of the postponement agreements in effect on the date of the Appointment Order
purport to severely restrict BDMC's rights to enforce on its loans. As a result, BDMC often
has a limited ability to obtain repayment on its loans when the loans mature. lnstead,
BDMC must wait until the project is completed or senior lenders take enforcement action
before any repayment can be anticipated.
Many of the projects are in early stages of development and have therefore not yet
advanced to the point where construction financing is appropriate. ln addition, the projects
are often thinly capitalized and are reliant on new loans from other lenders to meet
development milestones such as obtaining planning approvals. As noted above, BDMC is
customarily asked to further postpone its security in such circumstances.
Even where the projects are more advanced, most of the projects do not appear to have
been attractive to more traditional lenders such as Schedule 1 banks. lnstead, other
lenders in the real estate space have committed substantial sums to projects also funded
by BDMC, but these lenders tend to expect higher returns on their loans and have proven
to be ready to act quickly to enforce their rights if risks to their recoveries materialize.
(ii) Waterfall Arranqements
Many of the loan agreements reference certain repayment "waterfalls" that set out
complex distribution mechanics that, at least in some instances, appear to contemplate
owners of the realestate (including the borrowers and owners of the borrowers) receiving
some of the amounts they invested in the developments before the lnvestors receive all
of the amounts they loaned to the project or a return on those loans. ln some instances,
these payment waterfalls are set out in full in the applicable loan agreements but more
often than not, the waterfalls are only fully set out in certain other agreements that neither
BDMC nor the affected lnvestors are party to, such as shareholder agreements,
development consultant agreements, co-tenancy agreements and related agreements
between Fortress and the applicable borrower or co-owner of the borrower. The Trustee
has received and reviewed certain development consultant and co-tenancy agreements
and understands from its discussions with Fortress and its counsel that similar
arrangements were entered into for a large number of projects.
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54 The Trustee is continuing to investigate the related waterfall arrangements. The
interpretation of these waterfall provisions will likely be an important matter for the Trustee
to consider in the future, and competing interpretations regarding these provisions could
give rise to significant priority disputes even where projects are progressing in the ordinary
course.
(iii) Rescission Riqhts
The Trustee is aware that several lnvestors made their investments through loan
agreements that contain an addendum ("Rescission Addendum") that purports to
provide certain lnvestors a right to rescind their loans and obtain a refund of the amounts
advanced. To date, the Trustee has been provided with a list of 23 projects and 682
lnvestors with loan agreements that include a Rescission Addendum. The Rescission
Addendum provides that BDMC and the borrower are required to provide certain updated
loan documents, disclosure and new appraisals to specified lnvestors and, following the
delivery of these materials, the lnvestor would have 15 days to notify the borrower that the
lnvestor desires to rescind the loan and, following the delivery of that notice, the borrower
would have 60 days to return the sums advanced by the lnvestor ("Rescission Right").
The Trustee understands that, to date, no required updated loan documents or required
additional disclosure has been delivered to any lnvestor. Certain borrowers have advised
that lnvestors cannot seek to exercise the Rescission Right until the updated loan
documents and disclosure are delivered. The Rescission Addendum does not require the
delivery of updated loan documents and disclosure by any specified date. Further, the
Trustee understands that few of the borrowers have any sums available to fund the
exercise of the Rescission Right.
The Trustee is continuing to consider the Rescission Rights. Among other things and as
discussed in more detail below, Rescission Rights will be a consideration in the Trustee's
eventual allocation formula with respect to the costs of the Required Trustee Activities and
the ultimate distribution of Realized Property.
(c) Recommendations
The Trustee is working with its legal counsel and others to develop strategies and
recommendations to assist in improving recoveries for each project and, where
appropriate, communicating with lnvestors regarding its recommendations. The Trustee
55
56
57
58.
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has amassed and analyzed considerable additional information since the date of the First
Report, including draft New Appraisals, and is in a better position to act proactively to
protect lnvestors' interests in these projects. However, there is much work yet to be done.
Among other things, due to the early development status of many of the projects, it is not
yet appropriate for the Trustee to make final recommendations with respect to many of the
projects.
The Trustee has determined that a combination of unfavourable decisions being issued
by the LPAT, development approval delays, construction delays, existing postponement
arrangements and invocations of broad "force majeure" clauses has materially extended
the effective maturity date of the syndicated mortgage loans administered by BDMC such
that many lnvestors should anticipate receiving repayment (if any) much later than initially
predicted. One or more of BDMC's syndicated mortgage loans have matured on 24 of the
45 projects. Of the 13 projects that are subject to ongoing enforcement actions by senior
lenders, 11 projects also have one or more matured BDMC loans. ln addition, 13 projects
that are not facing enforcement action by senior lenders have one or more matured BDMC
loans.
60
61 The Trustee is working proactively to address these matters. ln many instances, the
Trustee has recommended that the lnvestors agree to extend the maturity date of the
loans and enter into postponement arrangements to permit a project to continue to
develop. ln some instances, the Trustee has sought feedback from lnvestors regarding
their preferred course of action as it relates to agreeing to an extension of the term versus
allowing enforcement steps to be taken. The Trustee's recommendations and actions with
respect to some of the foregoing projects is described in more detail under "Update on the
Activities of the Trustee".
UPDATE ON ACTIVITIES OF THE TRUSTEE SINCE THE DATE OF THE FIRST REPORT
62 Since the date of the First Report, the Trustee has continued to engage in six broad types
of activities in addition to conducting in-depth reviews of the projects described above:
(a) communicating with borrowers and lenders;
(b) responding to enforcement actions by senior lenders on distressed projects;
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63
64.
65
(c) negotiating with borrowers regarding potential early payouts on certain BDMC
loans
(d) seeking to recover amounts advanced by lnvestors where standstillarrangements
do not prevent the Trustee from taking action;
(e) responding to requests for postponements and taking other actions to permit the
projects to continue and to prevent enforcement by senior lenders; and
(f) responding to a multitude of lnvestor inquiries, including inquiries initiated by a
group that calls itself the lnvestor Voice'
(a) Borrower and Lender Communications:
The Trustee has sent letters to (or otherwise communicated with) each of the borrowers
on the projects to advise borrowers of its appointment and to request certain information
to assist the Trustee in completing reviews of each project, including a request that all
reporting required under the applicable loan and security packages be sent to the Trustee
in addition to Fortress or any other delegate of BDMC referenced in the loan documents.
The Trustee has also engaged in project specific discussions with representatives of
borrowers and with CDCM, as broker to certain borrowers.
ln addition, the Trustee has sent letters to each of the secured lenders who are known to
the Trustee to have an interest in a project and to every other person with registered
security on title to the applicable project to advise such persons of the Trustee's mandate,
to request that such persons provide the Trustee with information regarding BDMC's
obligations to such person, and to request that the Trustee be provided with notice of any
enforcement or other material action taken by such persons. The Trustee has also
engaged in discussions with representatives of lenders.
(b) Enforcement Matters :
Since the date of the First Report, an increasing number of BDMC's borrowers face
enforcement actions taken by one or more senior lenders resulting from borrower defaults
under senior loans. As of the date of this Second Report, 13 of the 45 projects that have
received funds from syndicated mortgage loans administered by BDMC are subject to
enforcement proceedings by senior lenders. The Trustee is continuing to respond to
enforcement actions in an effort to obtain the best possible result for the lnvestors in the
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67
68.
69
circumstances and to generate as much Realized Property as possible. ln some cases,
the lnvestors' interests are at risk of being, or have already been, severely compromised.
ln such cases, the Trustee is considering alternative approaches to increase the amount
of Real2ed Property that can be generated, including obtaining and analyzing detailed
information regarding the borrower's sources and uses of funds.
It is critical that the Trustee take an active role in any enforcement process, including
engaging with enforcing lenders regarding any proposed enforcement steps and working
with the enforcing lender and other stakeholders to ensure that any enforcement process,
including any sales process to be established, is structured in a manner that protects the
lnvestors to the maximum extent possible. ln addition, the Trustee is seeking an
accounting regarding the borrower's use of funds (including the borrower's use of funds
provided by BDMC) and analyzing transactions. However, the Trustee recognizes that
there may be occasions where the underlying value of the projects (based on updated
appraisals) will not be sufficient to repay all of the lenders who hold security in priority to
BDMC, and, as such, significant costs should not be incurred with respect to those
projects.
When the Trustee is notified that a lender intends to take enforcement action, the Trustee
generally sends a letter to such lenders to remind the lender of the Trustee's mandate and
the existence of these proceedings. The Trustee requests that the enforcing lender keep
the Trustee apprised of developments in respect of the proposed enforcement steps and
requests access to sales process materials and a role in any sales process to be
undertaken for the specific project. The Trustee offers to enter into appropriate
confidentiality agreements in connection with these matters. To date, lenders have
generally responded positively to the Trustee's requests.
ln addition, where appropriate, the Trustee has registered the Appointment Order on title
to projects that are subject to enforcement proceedings that are not supervised by a court
of competent jurisdiction.
Below is a summary of the 13 projects facing material enforcement actions by senior
lenders and the Trustee's efforts in respect of these actions as of the date of this Second
Report follows, as well as an update on the successful refinancing of the Bowmanville
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Project (defined below) and the satisfactory resolution of the related enforcement
processes previously undenaray.
70 Brookdale Proiect: As noted in the First Report, enforcement steps have been taken in
respect of a real estate development project in midtown Toronto ("Brookdale Project"),
with approximately $4.6 million of "mezzanine"3 syndicated mortgage loan debt
administered by BDMC and over $20 million of subordinate syndicated mortgage loan
debt also administered by BDMC. The lnvestors have a 4rh and Sth ranking mortgage
registered on this project. The Brookdale Project is subject to a notice of sale under
mortgage proceeding ("Notice of Sale") brought by Firm Capital Mortgage Fund lnc.
("Firm") in respect of construction financing that has matured. Firm appointed RSM
Canada Limited ("RSM') as its private receiver of the Brookdale Project. On September
21,2018, Firm served a motion record returnable on October 18,2018, seeking a vesting
order to vest the property comprising the Brookdale Project in Empire (Water Wave) lnc.
free and clear of encumbrances, including BDMC's security, senior lender security and a
number of construction liens. ln addition to the activities described in the First Report, the
Trustee has maintained a continuous dialogue with RSM and counsel to Firm regarding
the Brookdale Project, including regarding appropriate terms of the sale process, methods
to maximize recoveries in the sale process and potential purchasers to be contacted. Afier
service of the Court materials seeking approval of the sale, the Trustee engaged in
negotiations with stakeholders in the Brookdale Project and attended before the Court on
October 18,2018 to support the proposed transaction and argue for the best method to
address the ongoing priority disputes. The sale was approved, and a further Court hearing
will be required to address priorities and other matters, as there are significant disputes
regarding priority, releases and entitlement to the proceeds of sale. The Trustee will
continue to work to maximize lnvestor recoveries, including at further Court attendances.
At this time, it is the Trustee's understanding that there may be a distribution under the
mezzanine loan and the syndicated loan. However, the quantum and timing of any such
distribution are unknown.
3 A mezzanine syndicated mortgage loan debt is a BDMC syndicated mortgage loan debt that is in priorityto other BDMC syndicated mortgage loan debt but still subordinate to debt owed to senior lenders. Typically,BDMC mezzanine syndicated mortgage loan agreements contain the same mandatory subordinationprovisions as are found in other BDMC syndicated mortgage loan agreements.
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72.
73.
Charlotte Adelaide Proiect: a real estate development project in downtown Toronto
(,'CHAT Project"), with over $12.3 million of syndicated mortgage loan debt administered
by BDMC and approximately $3.91 million of subordinate syndicated mortgage loan debt
also administered by BDMC. The lnvestors have a2nd and 3'd ranking mortgage registered
on this project. The CHAT Project is subject to a notice of intention to enforce security (a
"244 Notice") under lhe Bankruptcy and lnsolvency Acf ("BlA") issued on July 16,2018
by Diversified Capital lnc. ("Diversified") in respect of senior financing in excess of $9.3
million that has matured. The Trustee has corresponded with Diversified and others since
the issuance of its 244 Notice. lnvestor recoveries on this project remain uncertain.
Colliers Centre Proiect: a real estate development project in Barrie, Ontario ("Colliers
Project") with over $36 million of syndicated mortgage loan debt administered by BDMC
and approximately $16.9 million of subordinate syndicated mortgage loan debt also
administered by BDMC. The lnvestors have 4th and 5th ranking mortgages registered on
this project. The Colliers Project is subject to a Notice of Sale proceeding brought by
Morrison Financial lnc. ("Morrison") in respect of construction financing in excess of $30
million that has matured. As noted in the First Report, the notice period for the sale of the
Colliers Project expired some time ago. The Trustee has been in discussions with
Morrison and its agents regarding the sale process and understands that Morrison is
seeking to bring the process to a conclusion in the near term. The Trustee notes that
despite its efforts, a sale of the property could result in significant losses tothe lnvestors.
Dunsire Proiect: a real estate development project in Guelph, Ontario ("Dunsire Project")
that is subject to a receivership proceeding. On May 25,2018, the receiver, RSM, obtained
an amended and restated vesting order from the Court in respect of the Dunsire Project
to approve a sale transaction and to vest title to the Dunsire Project in a new owner related
to the current owner, free and clear of certain encumbrances, including approximately $1.7
million of subordinate, secured debt owed to BDMC in trust for lnvestors. The Trustee and
its counsel have been engaged in extensive correspondence with RSM regarding the sale
transaction, an accounting of sources and uses of funds, and potential recoveries from
this project. As a result, the Trustee understands that there may be some limited
recoveries to lnvestors who invested in the Dunsire Project, but the syndicated mortgage
loan has been significantly compromised. The Trustee continues to engage with the
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receiver to pursue any avenues of additional recovery based on information to be provided
by RSM and the Trustee's independent analysis.
Glens of Halton Hills / Georqetown Proiect: a real estate development project in
Georgetown, Ontario ("Georgetown Project"), with three syndicated mortgage loan
facilities administered by BDMC: one of approximately $1.7 million, a second of
approximately $g.g million, and a third of approximately $4.4 million. The lnvestors have
3'0, 4th and Sth ranking mortgages registered on this project. As noted in the First Report,
there are a number of different senior lenders with priority mortgages on different parcels
of land comprising the Georgetown Project. Certain senior lenders on certain parcels of
land comprising the Georgetown Project have issued Notices of Sale and 244 Notices in
respect of such parcels of land. On August 24,2018, the borrower filed a notice of intention
to file a proposal under the BIA (an "NOl") and KSV Kofman lnc. ("KSV")was appointed
proposal trustee. By Order dated September 20, 2018, the time for the borrower to file a
proposal under the BIA was extended to November 7, 2018. The Trustee has been
engaged in discussions with the borrower and KSV regarding the Georgetown Project,
including regarding the sales and marketing process proposed and approved by the Court
on October 15, 2018 and the stalking horse sale agreement approved in connection
therewith. The Trustee intends to work with KSV and the borrower in an effort to achieve
a transaction for the Georgetown Project that will result in a recovery for Georgetown
Project lnvestors.
Mississauqa Meadows 1 Proiect: a real estate development project in Mississauga,
Ontario ("MM1 Project"), with approximately $5.2 million of syndicated mortgage loan debt
administered by BDMC. The lnvestors have a 5th ranking mortgage registered on this
project. The MM1 Project is subject to both a 244 Notice and a Notice of Sale issued by
Firm, the l"tranking mortgagee, in respect of senior financing in excess of $4.9 million
that has matured. The Trustee has engaged in correspondence with Firm and others both
prior to and since the issuance of its 244 Notice and Notice of Sale.
Mississauqa Meadows 2 Proiect: a real estate development project in Mississauga,
Ontario ("MM2 Project"), with approximately $3.6 million of syndicated mortgage loan debt
administered by BDMC. The lnvestors have a 3'd ranking mortgage registered on this
project. The MM2 Project is subject to both a Notice of Sale and a 244 Notice issued by
Firm, the 1't ranking mortgagee, in respect of senior financing in excess of $1.4 million
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78
that has matured. The Trustee has engaged in correspondence with Firm and others both
prior to and since the issuance of its 244 Notice and Notice of sale.
Old Market Lane Project: a realestate development project in Woodbridge, Ontario ('OML
project"), with approximately $3.8 million of syndicated mortgage loan debt administered
by BDMC and two additional subordinate syndicated mortgage loan facilities also
administered by BDMC that rank pari passu with one another, in the amounts of
approximately $3.1 million and $6.4 million, respectively. The $3.8 million of syndicated
modgage loan debt includes $2.2 million of syndicated mortgages advanced by lnvestors
outside of a registered account ("Cash lnvestors"). lt is unclear at this time if the Cash
lnvestors postponed to JYR Capital Corporation's ("JYR") mortgage. JYR is one of the
priority lenders. The remaining balance of the $3.8 million syndicated mortgage loan was
advanced by lnvestors through registered accounts ("Registered lnvestors") and their
interests have been postponed to JYR. The OML Project is subject to a Notice of Sale
proceeding brought by JYR in respect of financing in excess of $695,000, and to a 244
Notice issued by Firm, the 1"t ranking mortgagee, in respect of seniorfinancing in excess
of $3.5 million. The Trustee has engaged in correspondence with JYR, Firm and others
both prior to and since the issuance of the Notice of Sale and 244 Notice, respectively.
Triple Creek Proiect: a real eState development project in Rocky View County, Alberta
("TC project"), with over $12.9 million of syndicated mortgage loan debt administered by
BDMC and approximately $2.5 million of accrued interest for which the lnvestors have
been given a separate mortgage that is also administered by BDMC. The lnvestors have
4th and 5th ranking mortgages registered on this project. The TC Project is a large block of
land near Calgary and is subject to a Notice of Sale initiated by Romspen lnvestment
Corporation ("Romspen"), the first priority mortgagee, prior to the issuance of the
Appointment Order in respect of senior financing in excess of $3.2 million that has
matured. Eagles Edge CapitalCorporation ("Eagles"), the second priority mortgagee, has
also commenced enforcement proceedings against the TC Project in connection with
outstanding debt totaling approximately $2.6 million. The Trustee has engaged with
Romspen and Eagles, including engaging with Romspen regarding the sale process, but
understands that the value of the TC Project property is likely too low under current market
conditions and the current designated use for the land for there to be any material
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119
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80
B1
recoveries to the lnvestors who loaned funds to the TC Project. The value is not
anticipated to increase until the designated use of the land is changed.
Union Waterfront Proiect: a real estate development project in St. Catharines, Ontario
("Union Waterfront Project"), with over $7.4 million of syndicated mortgage loan debt
administered by BDMC and approximately $9.4 million of subordinate syndicated
mortgage loan debt also administered by BDMC. The lnvestors have 3'd and 4th ranking
mortgages registered on this project. The Union Waterfront Project is subject to
receivership proceedings initiated by FirstOntario Credit Union in respect of unpaid debt
in excess of $10 million. msi Spergel lnc. was appointed as the court-appointed receiver
by order dated August 3, 2018. The Trustee has been engaged in discussions with msi
Spergel lnc. regarding the receivership and the sales and marketing process for the Union
Waterfront Project. msi Spergel lnc.'s deadline for the submission of offers for the
properties that are the subject of the Union Waterfront Project is November 20,2018.
Whitbv Commercial Proiect: a real estate development project in Whitby, Ontario ("Whitby
project"), with over $14.7 million of syndicated mortgage loan debt administered by
BDMC. The Investors have a 2nd ranking mortgage registered on this project. The Whitby
project is subject to a Notice of Sale proceeding brought by Ken Gold, the 1't mortgagee,
in respect of acquisition financing that has matured. The Trustee is in discussions with the
borrower with respect to a potential refinancing of the Whitby Project and has engaged in
correspondence with Gold since the issuance of the Notice of Sale.
Bowmanville Proiect: a real estate development project in Clarington, Ontario
("Bowmanville Project"), consisting of three separate parcels of land that secure
approximately $5.3 million of syndicated mortgage loan debt administered by BDMC. As
of the date of the First Report, each of the three parcels of property comprising the
Bowmanville Project was subject to separate enforcement proceedings brought by the
three separate first priority mortgagees. The Trustee took a number of steps in an effort
to respond to these enforcement actions and to maximize potential recoveries for the
Investors. These efforts culminated in a refinancing of the Bowmanville Project, with
sufficient new funds to repay the three first priority mortgagees on the property, one of
whom was also the second priority mortgagee on two of the properties. The Trustee
agreed to subordinate BDMC's mortgage to the new first priority lender in accordance with
the BDMC loan documents but also received full payment of its expenses in connection
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82
B3
B4
with responding to the enforcement actions and postponing BDMC's mortgage' BDMC's
mortgage remains in 3'd ranking position. The borrower has advised that it is in the process
of obtaining the required development approvals and working to meet related milestones,
which is projected to increase the value of the Bowmanville Project.
Lake and East Proiect: a real estate development project in Oakville, Ontario ("Lake and
East project"), with over $9.1 million of syndicated mortgage loan debt administered by
BDMC. The lnvestors have a 2nd ranking mortgage registered on this project. The Lake
and East Project is subject to a Notice of Sale proceeding brought by Vector Financial
Services Limited ("Vector"), the l"tmortgagee, in respect of over $3.7 million of senior
financing that has matured. Negotiations of a potential refinancing of the debt owing to
Vector are undenvay and the Trustee is engaged regarding a potential postponement with
respect to such refinancing.
Treehouse Proiect: a real estate development project in Scarborough, Ontario
("Treehouse Project"), with over $5.4 million of syndicated mortgage loan debt
administered by BDMC. The lnvestors have a 2nd ranking mortgage registered on this
project. The Treehouse Project is subject lo a244 Notice and Notice of Sale proceeding
brought by Firm, the 1"t mortgagee, in respect of over $1 .8 million of senior financing that
has matured. BDMC's syndicated mortgage loan to the Treehouse Project has matured
and the Trustee has been requested to postpone BDMC's mortgage to new financing in
the amount of $3.5 million to repay Firm and to fund project costs. The execution of this
postponement would require the maturity date of the BDMC syndicated mortgage loan to
be extended. The Trustee is seeking lnvestor input regarding next steps with respect to
this matter and has sent a notice to the Treehouse Project lnvestors in this regard.
(c) Negotiations regarding early payouts
Since the date of the First Report, the Trustee has been engaged in negotiations with
certain borrowers and with Fortress and CDCM on behalf of certain borrowers regarding
potential early payouts of the applicable loans. As recoveries under certain of the projects
are uncertain, the Trustee has actively engaged in discussions with respect to any such
early payout opportunities. Many of the payout discussions are at early stages, but the
Trustee is seeking to advance these discussions in circumstances where the Trustee
believes an early payoutwould be in the best interest of lnvestors.
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85
86.
87
B8
89.
The Trustee has engaged in negotiations with Braestone Development Corporation
(,,Braestone Borrower") regarding the amounts due to BDMC under the loan agreement
dated December 1 , 2012 in respect of a real estate development project in Moonstone,
Ontario ("Braestone Project"). The Trustee understands that the Braestone Borrower
faces significant environmental issues on certain aspects of the Braestone Project that will
likely result in material delays in the progress of the project and the repayment of the
BDMC loans made to date.
The Trustee has negotiated a settlement agreement with the Braestone Borrowerwhereby
the Braestone Borrower would pay $10 million to BDMC as a full and final satisfaction and
compromise of all the Braestone Borrower's obligations to BDMC under the loan
agreement. The full amount due under the Braestone loan (including interest and certain
deferred lender fees) exceeds $16 million; however, when previously paid interest of
approximately g5.4 million is factored into the analysis, the proposed payout would result
in a full payment of the principal owing on the BDMC loan plus compensation of
approximately 15o/o on that principal amount. The Trustee has recommended that the
setlement agreement proceed and is currently seeking feedback from Braestone
lnvestors. The Trustee anticipates that it will be returning to Court in the near term to seek
the Court's approval of the proposed settlement. Full details of the proposed settlement
will be provided when Court approval is sought.
As discussed in more detail below, if the Trustee is able to obtain the Court's approval of
the proposed settlement with the Braestone Borrower and to close the transactions in the
near term, the Trustee anticipates seeking authorization to return additional Realized
property to the lnvestors. The Trustee may determine that it needs to retain as little as
20% of the Realized Property following receipt of repayments on the Braestone Project.
The Trustee is also in negotiations with The Harlowe lnc. and certain of its representatives
regarding a potential repayment of the syndicated mortgage loan made to The Harlowe
lnc.
ln order to give clarity on the process to lnvestors and borrowers, the Trustee advises that
it intends to follow a similar approval process with respect to The Harlowe lnc. and future
similar repayment opportunities.
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90
91
92
93
94
(d) Seeking Recoveries: the Eden Project
ln addition to projects facing enforcement actions by senior lenders, the Trustee faces
challenges to recoveries on the syndicated mortgage loan made to 2309918 Ontario lnc.
("Eden Borrower"). The Eden Borrower is indebted to BDMC in respect of loans made
for a real estate development project in King City, Ontario, consisting of approximately 28
residential homes ("Eden Project"). These homes have been sold and the senior loans
have been discharged. The mortgages in favour of BDMC have not been discharged and,
to date, no payments of the sums secured by BDMC's mortgages have been repaid. The
lnvestors are owed in excess of $7 million (including accrued interest) in respect of the
Eden Project.
As late as June 2018, Fortress was advising participants who attend certain periodic
update conference calls hosted by Fortress that the syndicated modgage loan secured on
the Eden Project would be repaid in fullwithin a matter of months.
ln early July, 2018, the Trustee was advised by PACE Developments lnc. ("PAGE"), the
developer on the Eden Project, on behalf of the Eden Borrower, that there would be no
recovery to lnvestors on the Eden Project, notwithstanding the communications by
Fortress of full payment expressed weeks earlier. PACE advised that certain cost overruns
not previously accounted for had absorbed the over $7 million payable to lnvestors. ln
light of the very concerning representations made to the Trustee and others, the Trustee
engaged with PACE to obtain the financial information related to the Eden Project to
undertake a detailed review of the sources and uses of funds advanced throughout the
Eden Project.
Since July, 2018, the Trustee faced increasing pressure from representatives of the Eden
Borrower, PACE and CDCM to discharge BDMC's security on all of the homes to permit
buyers to own the properties free and clear of any pre-existing security.
The Eden Borrower and PACE continued to insist that the Trustee discharge BDMC's
security without repayment of any of the amounts owing. When the Trustee refused to do
so, the Eden Borrower threatened to bring legal action against the Trustee and also
appears to have advised certain of the homeowners to seek a remedy against the Trustee.
As a result, on September 12,2018, the Trustee made demand against the Eden Borrower
and PACE. ln addition to demanding repayment of the full amount owed to lnvestors and
95
28
r23
96.
97
professional fees incurred to the date of the letter, the Trustee demanded additional
documents to explain the significant change in the Eden Borrower's financial position over
such a short timeframe.
While pACE has responded to the Trustee's requests for documents, the Trustee is
continuing to investigate the cause of the significant change in forecast recoveries to the
lnvestors while pursuing remedies against the Eden Borrower'
Since the issuance of the demand letter on September 12,2018, the Trustee followed up
in writing seeking advice as to when repayment would be made. As no response has been
received, the Trustee delivered a demand letter and a 244 Notice on October 19, 2018.
98.
(e) Postponements:
ln addition to the enforcement actions described above, the Trustee is often asked to
execute postponements to other financing sources, Postponements are typically
requested where a borrower needs additional funds to develop the project, either in the
form of construction financing or other development financing, or where the borrower is
seeking to refinance an existing loan because that senior loan has matured, is nearing
maturity or is otherwise in default. To date, cedain of the senior lenders have refrained
from commencing enforcement action for a period of time to allow the applicable borrower
time to seek to refinance its debt.
gg. The Trustee has been attending to postponement requests as part of the administration
of the projects. Postponements are often sought by the borrower on an urgent basis' In
many cases, the Trustee has been advised that failure to grant the postponement forthwith
would (i) breach the applicable BDMC loan agreement; and (ii) cause the project to fail
and enforcement steps to occur in the near term'
100. postponements range in complexity from simple postponements that are required by the
terms of the existing BDMC loan and security package to more complex postponements
that involve one or more of (i) increases to the size of the permitted priority amounts initially
contemplated by the existing BDMC loan agreement and security package, (ii) extensions
to the maturity date of the existing BDMC loan facility, or (iii) other changes. ln many
cases, the Trustee has learned that BDMC had previously executed postponement and
standstill agreements that contain provisions that purport to limit BDMC's rights and
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remedies and effectively extend the maturity datea of the BDMC loan facility beyond the
date contemplated by the applicable loan agreement.
101 ln response to these requests, the Trustee, on behalf of BDMC and its lnvestors, has
requested detailed information regarding the applicable project and the proposed use of
funds. ln most instances, the Trustee has concluded that the loan agreement requires
BDMC to postpone to the new loan or that permitting further advances to be made to the
borrower in priority to BDMC's loan(s) is in the best interests of the lnvestors because
such action increases the likelihood of completion of the project and the eventual
repayment to the lnvestors.
102 The Trustee has endeavoured to negotiate the least restrictive postponement possible in
the circumstances and to recover its costs in connection therewith. To date, the Trustee
has succeeded in recovering some of its costs and its legal counsel's costs in connection
with the execution of postponements. As discussed in more detail below, the Trustee has
also communicated with lnvestors and Representative Counsel regarding postponements,
including seeking lnvestor consent where appropriate.
103. The Trustee continues to consider its options with respect to each postponement request,
however, it recognizes that many of the projects will fail if further funding is not advanced
and that recoveries to lnvestors are likely to be detrimentally impacted if the borrower does
not make payments on senior indebtedness or achieve certain development milestones.
Further, in many cases the BDMC loan documentation purports to require that apostponement be granted in the circumstances. ln appropriate circumstances, the Trustee
has therefore agreed to execute such postponements.
(f) lnvestor Communications, Meetings and the lnvestor Voice
104 lnvestor communications remain a significant component of the Trustee's mandate. On
average, the Trustee receives 30-45 calls a day and 20-30 emails a day, with increased
call and email volumes following of the issuance of any material notices or media attention
on the projects, Fortress or the proceedings generally. The Trustee endeavours to
respond to all inquiries in a timely manner. lnvestors contact the Trustee to seek general
4 Many postponement and standstill agreements prohibit BDMC from taking enforcement proceedings untilthe senior lender has taken such actions, which has the effect of extending the maturity date on the loansto the day that a senior lender takes action or the project is completed.
30
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information about the proceedings, the role of the Trustee and Representative Counsel,
as well as specific information regarding the projects that are the subject of their
investments.
105. ln addition to general inquiries, the Trustee also informs the affected lnvestors when
enforcement action is taken against a project or other material developments occur, and,
where appropriate, seeks the consent of lnvestors to material actions to be taken by the
Trustee, such as extensions to the term of a loan or the execution of a postponement that
would have the effect of extending the term of a loan or waiving or amending a material
provision of the applicable loan agreement.
106 lnvestor responses to the Trustee's requests for lnvestor consent remain limited, but the
Trustee has also continuously consulted with Representative Counsel regarding lnvestors'
interests, including prior to relying on deemed consent provisions in the applicable
Participation and Servicing Agreement (as more fully described in the Forbes Affidavit).
Meetinqs with other lnvestors
107 ln addition to corresponding with lnvestors by telephone and email, the Trustee has met
both formally and informally with groups of lnvestors and agents for lnvestors.
108 For example, the Trustee met with a group of lnvestors who contacted the Trustee to
request a meeting on behalf of approximately 30 lnvestors who, as a group, have
advanced loans to 13 projects (the "Known lnvestor Sub-Committee"). Many of these
lnvestors have also invested in other projects individually. The Known lnvestor SuF
Committee advised that it would represent the larger group in discussions with the Trustee
going fonarard.
1 0g. ln advance of the meeting, the Known lnvestor Sub-Committee provided the Trustee with
details of the loans made by the group of lnvestors it represents as well as a list of
questions regarding the associated projects. At the meeting, the Trustee provided
information regarding each of the projects, updates regarding the status of the projects
and the proceedings generally. The Trustee has also agreed to convene periodic meetings
with the Known lnvestor Sub-Committee in the future to keep them apprised of project
developments. The Known Investor Sub-Committee advised that it would disseminate the
information shared with them to the larger group of lnvestors its represents. The Trustee
and the lnvestors found this meeting to be both efficient and productive.
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110
111
112
113
114
lnvestor Voice
On or about July 26, 2018, the Trustee began receiving a form letter dated July 16, 2018
addressed to the Trustee, FSCO and this Court ("lnvestor Form Letter"), which raised a
number of concerns related to the Trustee's mandate, the appointment of Representative
Counsel and the cost of these proceedings generally. To date, the Trustee has received
approximately 130 of these lnvestor Form Letters.
The Trustee has responded to each lnvestor who sent the lnvestor Form Letter to advise
those lnvestors that the Trustee understands and appreciates the concerns expressed,
but that the lnvestor Form Letter contains several important misstatements regarding the
Trustee, its mandate, and BDMC's business. FSCO also sent a letter to lnvestors
expressing its agreement with the statements made in the Trustee's response.
The Trustee's response informed lnvestors that it had received many identical letters and
suggested that it would be helpful for the person who drafted the letter to contact the
Trustee directly to discuss the matters raised in the letter and to have a full and frank
discussion regarding the author's concerns and expectations in the circumstances.
Shortly after the Trustee sent its response to the lnvestor Form Letter, the Trustee was
contacted by the person or group of persons calling themselves the "lnvestor Voice". The
lnvestor Voice advised the Trustee that it was behind the lnvestor Form Letter and asked
the Trustee to meet with a group of 15-20 people who acted as agents for lnvestors, many
of whom were also lnvestors themselves.
The Trustee has been engaging with lnvestor Voice over the last several months, including
through correspondence and by hosting a meeting at the Trustee's counsel's offices on
October 19, 2018. At the meeting, the Trustee and the lnvestor Voice discussed the
lnvestor Voice's concerns and the Trustee believes that the meeting was productive. The
Trustee also provided information regarding certain projects and the proceedings
generally. The Trustee agreed to create a mailing list for the agents who make up the
lnvestor Voice and to send those agents the notices that the Trustee sends to applicable
lnvestors regarding projects as well as general notices sent to all lnvestors.
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115
(g) Other Matters
ln addition to the activities described above, since the Trustee's appointment, the
Trustee's activities have included, among otherthings:
(a) distributing 50% of the recoveries on the Victoria Medical SML pro rata to the
lnvestors entitled to such funds, as required by the lnterim Stabilization Order;
(b) sending letters to all construction lien claimants seeking to assert a priority lien
over any project to advise such claimants of the stay of proceedings set out in the
Appointment Order;
(c) sending letters to certain other plaintiffs in actions naming BDMC as defendant to
advise such persons of the stay of proceedings set out in the Appointment Order;
(d) attending to partial discharges of BDMC's security interests to facilitate sales of
individual units or the development of properties;
(e) continuing to engage with other stakeholders of BDMC and related parties,
including Ms. lldina Galati, BDMC's shareholder, Fortress and its counsel, and
CDCM and its counsel, regarding refinancing efforts, enforcement actions,
regulatory matters and the funding of these proceedings;
(f) continuing to engage with borrowers and with CDCM, as broker to some of the
borrowers, regarding the postponements and enforcement matters noted above
and to obtain detailed updates on the progress on projects and associated financial
reporting;
(g) engaging with FSCO and its legal counsel;
(h) engaging with mortgage brokerage and administration licensing authorities outside
of Ontario to discuss the Trustee's mandate and the Appointment Order and to
address matters related to BDMC's licenses in such jurisdictions, including
regulators in Manitoba, Saskatchewan, Alberta and British Columbia;
(i) obtaining recognition of the Appointment Order under Saskatchewan's The
Enforcement of Canadian Judgmenfs Act, 2002 atthe request of the Financial and
Consumer Affairs Authority of Saskatchewan; and
(j) supervising the day to day business activities of BDMC, including supervising the
payment of payroll, rent and related matters.
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FUNDING OF THESE PROCEEDINGS AND CASH FLOW PROJECTION
116 ln accordance with Appointment Order, the Trustee was required to engage in, and to
continue to engage in, the activities described in the foregoing sections to protect the
interests of lnvestors. These activities are complicated, time consuming and costly and
are being carried out in circumstances where BDMC has no revenue,
117 As noted in the First Report, BDMC is functionally insolvent. BDMC has regular expenses,
including payroll, rent, utilities and other normal business expenses, but it no longer has
any revenue sources. Prior to February 7,2018, BDMC relied upon fees payable when
new loans were established and upon funding from other sources. BDMC will not be
making new loans in the future and funding from other sources has ended. BDMC was
receiving some funding from Fortress after February 7,2018, but that funding has now
ceased as well.
(a) Funding from Fortress and CDCM
i1A. Since many of BDMC's borrowers are Fortress entities or othenvise related to Fortress,
the Trustee remains of the view that the Trustee's and BDMC's costs associated with
administering the syndicated mortgage loans should not be borne solely by the lnvestors,
but rather should be paid for by Fortress and the borrowers. As noted in the First Report,
the Appointment Order provides that the unpaid Trustee's fees, disbursements and costs
(including professional advisory fees incurred) shall be added to the mortgages securing
the amounts advanced bY BDMC.
119 The Trustee has continued to engage in discussions with Fortress and CDCM regarding
the ongoing funding of BDMC's operating expenses and of BDMC's professionalfees (i.e.,
the fees of the Trustee and its counsel). On June 22, 2018, at Fortress's request, the
Trustee renewed its demand that Fortress pay the $224,078.63 owing to the Trustee and
the 9271,684.98 owing to its legal counsel for activities prior to FAAN Mortgage's
appointment as Trustee on account of a certain guarantee and indemnity given by Fortress
to FAAN Mortgage under the MAA (as more particularly described in the First Report)-
Despite the fact that such demand was issued at Fortress's request, Fortress has not paid
any of these amounts to date. The Trustee renewed its demand on October 19,2018. The
Trustee will continue to seek to recover these amounts from Fortress.
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120
121
122
123
When the First Report was issued, the Trustee was hopeful that Fortress and the
borrowers would agree to a mechanism whereby BDMC's and the Trustee's costs,
including professional fees for administering the loans made by BDMC, are not borne
solely by the lnvestors. No agreement on these matters has been reached, and the
Trustee is not optimistic that an agreement will be reached in the future.
Since the date of the First Report, Fortress and CDCM have ceased funding any of
BDMC's ongoing expenses, although CDCM was sharing the costs of rent and certain
utilities for premises it shares with BDMC (BDMC's offices are currently located on the
second floor of a unit shared with CDCM). On September 28. 2018, CDCM advised that it
no longer requires the office space it shares with BDMC. CDCM intends to vacate the
premises on or about October 31,2018, CDCM has been working with the Trustee in that
regard. When it became apparent that neither Fortress nor CDCM would continue pay
any portion of the rent for BDMC's office space and BDMC would be required pay all the
rent for such space, the Trustee determined that BDMC should vacate the premises to
reduce BDMC's expenditures. BDMC will be vacating the premises on or about November
15,2018.
Fortress also ceased funding payroll and a number of other operating expenses on or
about June 18,2018, so the Trustee has had to fund these amounts from Estate Property.
Due to the limited funding available to the Trustee in connection with these proceedings
and impending closure of BDMC's office, the Trustee has determined that it is in the best
interests of BDMC and its estate to reduce the number of employees retained by BDMC.
Accordingly, after the resignation of two of the four BDMC employees, the Trustee chose
not to replace those employees.
Although Fortress, through CDCM, had provided some funding to BDMC to the date of the
First Report, the amount of funding was significantly less than originally hoped and
Fortress has not met its obligations in respect of the professional fees payable to FMN
Mortgage and its legal counsel under the MAA. The Trustee does not know whether any
further contributions by Fortress or CDCM will be forthcoming; nevertheless, the Trustee
continues to engage with Fortress and CDCM to seek funding of certain of BDMC's costs
and recovery of amounts due under the guarantee and indemnity. The Trustee will keep
the Court informed regarding these matters.
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130
124
125
126
Notwithstanding the foregoing, as noted in the First Report, the flow of information from
Fortress and CDCM improved following the issuance of the Appointment Order. To the
Trustee's knowledge, there has been no fufiher direct correspondence sent by GDCM to
the lnvestors since CDCM delivered a retraction of the notice that CDCM sent to lnvestors
in respect of the Brookdale Project on March 26,2018. The Trustee continues to maintain
a cordialworking relationship with Fortress and CDCM and is working with representatives
of both companies in furtherance of its mandate in an attempt to maximize recoveries for
lnvestors.
(b) Need to utilize Realized Property
pursuant to the lnterim Stabilization Order, the Trustee has access to certain limited
amounts constituting Estate Property. BDMC currently has no source of funding otherthan
Estate property. Since the date of the lnterim Stabilization Order, the Trustee has been
using the Estate Property in accordance with the Appointment Order and the lnterim
Stabilization Order to pay BDMC's expenses so that the Trustee can continue to discharge
its mandate for the benefit of the estate and all its stakeholders. The Estate Property will
soon be exhausted, so the Trustee is seeking the Court's authorization to use a portion of
the Realized Property going forward. Absent such authorization, the Trustee will not have
sufficient amounts to fund the Required Trustee Activities during the Cash Flow Period
that must be undertaken to protect lnvestors' interests, and the vast majority of lnvestors
will be at risk of having their interests significantly prejudiced. The Trustee's specific
recommendation to protect lnvestors in the circumstances is set out further below.
lnterest paid by borrowers is Estate Property. However, the majority of the syndicated
mortgage loans administered by BDMC either provide that interest accrues untilthe loan
is paid out or that interest was only payable until an interest reserve was exhausted and
then accrues untilthe loan is paid out
127. Since the issuance of the lnterim Stabilization Order, the Trustee has succeeded in
obtaining Estate Property from certain borrowers in the amounts set out below. These
amounts are in addition to the amounts the Trustee succeeded in obtaining from Fortress
(through CDCM) described above'
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131
128
(a) Approximately $145,000 on account of professional fee reimbursements in
connection with postponements, refinancings and other significant transactions,
which the Trustee has succeeded in negotiating on a case by case basis;
(b) Since the date of the First Report, the Braestone Borrower has paid interest in the
amount of approximately $89,000 pursuant to the loan agreement between BDMC
and the Braestone Borrower. These receipts constitute Estate Property. As noted
above, these funds have been or will be expended in order to fund the Required
Trustee Activities. The Braestone Borrower ceased paying interest on or about
July 1 5, 2018. lf the transaction contemplated by the settlement agreement with
the Braestone Borrower described above can be closed in the near term, interest
payable by the Braestone Borrower in connection with the transaction will
constitute Realized ProPertY.
(c) Since the date of the First Report, no further interest has been paid by Kingridge
(Oakville East) lnc. ("QEWN Borrower")'
The Estate Property described in the previous paragraph has been disbursed to pay
BDMC's operating expenses and professional fees as described herein. The chart below
provides a summary of the variance analysis for collections and costs incurred for the
period ending September 30, 2018. The detailed variance analysis is attached as
Appendix "5".
S
Proiected Actual Variance172 172Collections
Operating costsAppraisalsProfessional feesTotal disbursementsNet cash flow
211350450
179
400
32350
501 011 579 432
(1, 011) A07\ 604
129. The significant variances are explained as follows
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130
Collections5 - the positive variance relates primarily to the collection of interest and the
reimbursement of fees by the Borrowers on the Humberstone and Bowmanville projects
in respect of postponements requested and provided on those projects.
New Appraisals - the positive variance relates to the fact that the New Appraisals have
not yet been finalized and invoices have not yet been received. Accordingly, the amounts
projected for New Appraisals remain unpaid. This is a timing difference.
Professional fees - the positive variance relates to a timing difference.
BDMC continues to maintain six bank accounts at the Toronto-Dominion Bank. A
summary of these accounts is as follows:
Accountname/Reference
Primary Purpose ofaccount (per BDMC) Balance in
First ReportBalance atSept 30-18
PropertyTypeu
Account #1(763 Account)
Account #2(420 Account)
Account #3(455 Account)
Account #4(214 Account)
Account #5(term deposit)
Account #6(GlC account)
Operating account
To hold funds topotentially be paid tothird parties
To hold funds forlnvestors
lnterest ReserveAccount
Regulatory capitalrequired to bemaintained under theMBLAATo hold Victoria MedicalSML Loan repayments
2,519 EstateProperty
418
52,594
486,874
1,461,471
25,777
4,511,218
118
486,874
1,002,680
25,857
EstateProperty
RealizedProperty
EstateProperty
EstateProperty
2,288,702 RealizedPropertY
Total 6,540,453 3,804,649
5 Note that the collections figure does not include approximately $37,000 of fees recovered in respect of
the Danforth Project as those funds were received after September 30' 2018.6 Estate Property and Realized Property are defined and described below.
38
133
131 As of the date of this Second Report, the total Estate Property (excluding the term deposit
that must be retained pursuant to MBLAA) is approximately $810,000.
132. A high level summary of the accounts is provided below. A more detailed discussion of
these accounts is available in the First Report.
Account #1 and #2 - BDMC's primary operating accounts. The 420 Account (Account
#2) is considered a segregated funds account and typically holds amounts payable for
source deductions and other similar amounts as those amounts become due and until
those payments are issued. Funds are advanced from lhe 214 Account (Account #4) to
these accounts to fund operations. Payments are then issued by way of cheque or wire
transfer from these accounts.
Account #3 - Used to hold investor funds. Two types of balances are typically maintained
in this account, (i) funds advanced by lnvestors to BDMC for investment in future
syndicated mortgage loans where such loans have not yet been executed or other
conditions to the advance are incomplete; and (ii) principal repayments received from
borrowers to be ultimately repaid to lnvestors.T The funds repaid in respect of the Victoria
Medical SML Loans were paid into this account and subsequently transferred to the
interest bearing GIC account (Account #6). The funds currently remaining in this account
relate to funds advanced by 7 prospective investors that were not ultimately deployed to
a project and 3 lnvestors that had uncashed cheques from a project that was paid out prior
to the Trustee's appointment. The Trustee is seeking the Court's approvalto return 70%
of these funds to those individuals.
Account #4 - BDMC advised that this account was historically used to hold funds
advanced by lnvestors to specific projects for the benefit of the respective borrowers. All
amounts that were received that were not advanced to the borrower were deposited into
this one bank account.s The Trustee was advised that the funds held in this account were
for the account of certain borrowers, and, in the past, borrowers requested BDMC issue
payments from this account to pay for interest reserves, and other matters, such as
7 Notwithstanding the fact that payments of interest and repayments of principal for all projects wereadvanced into one bank account, the balances are tracked separately by project in BDMC's accountingsoftware, QuickBooks, and the interest amounts were typically transferred from this account to the 214account.I Notwithstanding the fact that funds for all projects were advanced into one bank account, the balancesare tracked separately by project in BDMC's accounting software, QuickBooks.
39
134
interest payments on senior loans and bridge loans as wellas certain development costs'
Since the issuance of the lnterim Stabilization Order the funds maintained in this account
have been used to fund operating costs.
Account #5 - BDMC is required under the MBLAA to have a certain financial guarantee
of g25,000 available, which may include unimpaired working capital. BDMC maintains
$25,777 in satisfaction of this obligation in Account #5'
Account #6 - This is an interest bearing GIC account that currently holds Realized
Property from the Victoria Medical SML loan repayments.
133. The Trustee has prepared a Cash Flow Projection, on a monthly basis for the seven-month
period ending April 30, 2019 ("Cash Flow Period"). The Cash Flow Projection is attached
as Appendix ,'6". The Cash Flow Projection has been prepared by the Trustee using the
information provided to it by BDMC's employees and representatives, based on the
Trustee's review of BDMC's records and third-party estimates. A summary of the Cash
Flow Projection is provided in the following table:
$000sReceipts
DisbursementsStaffing costsRent and utilitiesOffice expenses and lTlnsuranceAudit feesBank chargesOther expenses
Total Operating DisbursementsNew Appraisal feesProfessional feesTotal disbursementsNet cash flow
Opening cashlNet cash flowClosing cash
1828
373525
420
311350400
2,061(2 061 )
1,003(2 061 )(1,058)
Note 1: Comprised of Estate Property, net of the term deposit required under MBLAA
40
135
134 It should be noted that there are no cash receipts projected during the Cash Flow Period.
Historically, BDMC's primary source of revenue was funds raised from lnvestors in the
form of an administration fee of $113.00 per lnvestor per year of the term of the loan.
These funds were collected at the time of the initial advance of the funds from the
lnvestors. As noted in the First Report, there is deferred revenue of approximately
$750,000e on BDMC's balance sheet, but that deferred revenue represents funds that
were collected at the time a loan was established and used by BDMC prior to FAAN
Mortgage's engagement under the MAA.
135. Among other things, the Cash Flow Projection estimates total operating disbursements of
approximately $311,000. Overalloperating costs have been reduced due to the headcount
reduction and planned vacating of BDMC's offices.
1 36. It is anticipated that the New Appraisals will be finalized and paid for in the near term.
Further, it is contemplated that outstanding professional fees of the Trustee and its
counsel accrued and unpaid as at September 30, 2018 will be paid over the Cash Flow
Period.
137. Overallthere is a funding need of approximately $1 million to the end of April, 2019. Given
BDMC has no source of income to fund these proceedings, the Trustee is seeking the
Court's authorization to use the Realized Property in order to continue to carry out its
mandate to protect all lnvestors and to prevent the vast majority of lnvestors form suffering
significant prejudice.
RECOMMENDATION REGARDING REALIZED PROPERTY
138 Based on the Trustee's review of the Cash Flow Projection, the Trustee has determined
that it no longer needs to retain all the Realized Property that it is currently holding and
that it has a first ranking charge over. The Trustee is therefore seeking this Court's
authorization to distribute an additional amount equal to 20% of the Realized Property
previously obtained by the Trustee in respect of the Victoria Medical SML Loans and 70%
of any other Realized Properly, whether held as of the date of this Report or received in
the future.
e As at December 31,2017
41
136
139. The Trustee has consulted with Representative Counsel regarding this recommendation.
The Trustee understands that Representative Counsel supports the general
recommendation that the Trustee retain 30% of all future Realized Property; however, the
Trustee understands that Representative Counsel will advise the Court that lnvestors who
loaned funds through the Victoria Medical SML Loans have requested that all Realized
Property generated from the Victoria Medical SML Loans be distributed to them forthwith'
The Trustee would like to be in a position to return this money to the lnvestors in the
Victoria Medical SML Loans, but the Trustee has determined that it is in the best interests
of all lnvestors to retain 30% of all Realized Property and use a portion of such Realized
property to fund efforts to generate further Realized Property. There are no independent
sources of funding available to fund the Required Trustee Activities that must be
undertaken to protect lnvestors' interests. Should the Trustee fail to continue to act on
behalf of the lnvestors with respect to the remaining projects, the remaining lnvestors will
be at risk of having their interests significantly harmed'
140
141
142
143
The Trustee is therefore seeking this Court's authorization to use the Realized Property
retained following the distributions contemplated by the Realized Property Order to fund
the Required Trustee Activities in order to maximize the Trustee's ability to generate
further Realized ProPertY.
Going fonrrard, the Trustee intends to develop an allocation formula at the appropriate
time to fairly and equitably allocate the cost of the Required Trustee Activities among the
lnvestors in accordance with the relative risks and rewards of the project selected by each
lnvestor. This will ensure that lnvestors receive as much Realized Property as possible in
the circumstances and are compensated (to the extent possible) in a fair and equitable
manner for any additional risk imposed on such lnvestors as a result of these proceedings.
The exact terms of the allocation formula will need to be developed at a later date, when
more Realized Property has been generated and the Trustee is in a better position to
determine an appropriate allocation of the expenses associated with the Required Trustee
Activities among the different projects and the applicable loans made to such projects'
The Trustee will consider a number of factors in connection with any such allocation,
including the length of time a given loan remained outstanding during the proceeding, the
timing of any repayment on a loan in comparison to the maturity date provided for in the
42
t37
applicable loan agreement, key terms of the applicable loan agreernent, any applicable
Rescission Rights, and other relevant factors, The allocation formula will also include
some compensation to those lnvestors whose Realized Property is used to fund the
Required Trustee Activities during the pendency of the proceedings. The purpose of the
allocation formula is to ensure that lnvestors in particular projects do not bear a
disproportionate share of the costs associated with the Required Trustee Activities, and,
as such, lnvestors in certain projects should receive a further distribution at a later date in
accordance with the allocation formula.
144 Among other things, the Trustee notes that the portion of the expenses associated with
the Required Trustee Activities allocated to persons who invested in the Victoria Medical
SML Loans should be small since the Realized Property in respect of the Victoria Medical
SML Loans was received at an early date.
145 Depending on developments with the proposed payout of the Braestone Project
(discussed above) in the coming weeks, it is anticipated that the Trustee will seek an order
from the Court that, among other things, authorizes it to distribute additional Realized
Property in connection with the receipt of the proposed Braestone Project payout. The
Trustee may determine that it needs to retain as little as 20o/o of the Realized Property
following receipt of repayments on the Braestone Project. Further, the Trustee anticipates
that it will seek authorization to distribute further Realized Property when other repayments
are received.
146 However, the Trustee currently predicts that there will be a limited number of projects that
give rise to recoveries in the near term and that recoveries on many of the syndicated
mortgage loans are at risk. Further, as noted above, the Estate Property has been or will
be exhausted in the near term. As such, the Trustee is of the view that it must retain a
portion of the Realized Property and utilize the retained Realized Property to fund activities
intended to maximize the recovery of additional Realized Property in the future.
147. Any Realized Property that is not utilized will continue to be held in an interest bearing
account.
148. The Trustee, its legal counsel and Representative Counsel are incurring expenses in an
effort to generate the maximum amount of Realized Property. The Court granted the
Trustee a first priority charge over all Propedy, including Realized Property, in the
43
138
Appointment Order as security for the payment of the Trustee's and its legal counsel's
professional fees and expenses. The Trustee is recommending that 70% of all Realized
Properly be distributed to lnvestors notwithstanding the Trustee's Charge over such funds
and is seeking to retain only the amount that is required to fund the Required Trustee
Activities in the near term, including the payment of a portion of the Trustee's professional
fees and the fees of its legal counsel. The Trustee, its legal counsel and Representative
Counsel are relying on the charges granted under the Appointment Order and the lnterim
Stabilization Order and the prospects of future Realized Property for the balance of these
professional fees and for the work to be performed in the coming months.
REPRESENTATIVE COUNSEL
14g. Under the lnterim Stabilization Order, Chaitons LLP was appointed Representative
Counsel to represent the common interests of the approximately 11,000 lnvestors who
participate in mortgages administered by BDMC, including the common interests of
lnvestors in any particular syndicated mortgage loan'
150. Following the issuance of the lnterim Stabilization Order, the Trustee provided
Representative Counsel with extensive information regarding the lnvestors, including
contact information for lnvestors and the applicable loan documentation entered into by
each lnvestor, BDMC and the applicable RRSP Trustee.
151 The Trustee notified all lnvestors of Representative Counsel's appointment and provided
lnvestors with Representative Counsel's contact information and details regarding the
process to opt out of representation by Representative Counsel. This information was also
posted on the Trustee's website. A copy of the Notice is attached hereto as Appendix
ttTrt .
152. Todate, 11 lnvestorswithatotal of $608,000investedthroughBDMChaveoptedoutof
representation by Representative Counsel'
153. Representative Counsel has established a toll-free number and dedicated email address
to facilitate lnvestor communications. The Trustee understands that Representative
Counsel receives a large volume of calls and written correspondence and has been
responding in a timely manner to such communications the extent that the inquiries pertain
to legal issues covered by Representative Counsel's mandate.
44
139
154. The Trustee also understands that Representative Counsel has been dealing with a large
number of inquiries from lnvestors regarding their rights and remedies and potential
causes of action against third parties, including potential sources of recovery other than
the borrowers under the various BDMC loans'
155. Among other things, Representative Counsel has advised that they have received many
communications from lnvestors who invested in the Victoria Medical SML Loans. These
lnvestors are very concerned about delays in repayments of the Realized Property
consisting of realizations on the Victoria Medical SML that were received prior to the
issuance of the Appointment Order. Both the Representative Counsel and the Trustee are
cognizant of these concerns and the Trustee has consulted with Representative Counsel
regarding the proposed Realized Property Order to protect lnvestors who invested in the
Victoria Medical SML Loans to the extent possible in the difficult circumstances of these
proceedings.
156. The Trustee has also consulted with Representative Counsel when appropriate, including
regarding (i) lnvestor consent to certain postponement and subordination agreements and
extensions to the maturity date of loans, (ii) enforcement steps taken by senior lenders,
(iii) the response to the lnvestor Voice; (iv) the Eden Borrower's demands for partial
discharges and failure to repay the amounts it owes; (v) other sources of recovery on
projects, including obtaining an accounting of borrowers' uses of lnvestor funds; and (vi)
the Trustee's recommendation regarding Realized Property. The Trustee and its counsel
are in regular contact with Representative Counsel, in particular with respect to significant
decisions that would likely have a material impact on lnvestor recoveries.
CONGLUSION AND RECOMMENDATION
157 The Trustee is working tirelessly to fulfill its mandate to protect the interests of the
lnvestors and enhance the prospects that the lnvestors will recover some or all of the
amounts they advanced through BDMC. Among other things, the Trustee continues to
administer the loans made by BDMC on behalf of the investing public and to make prudent
decisions that are in the best interests of the lnvestors with respect to the administration
and enforcement of the relevant loans.
45
1,40
158. The Interim Stabilization Order permitted the Trustee to utilize Estate Property to fund the
Required Trustee Activities and to report to Courl by October 31, 2018 with its
recommendation regardlng Realized Properly. Based in its efforts to date, the Trustee has
recommended that it be required to retain 30% of all Realized Property and permitted to
utilize such retained Realized Property to fund the Required Trustee Activities and that the
Trustee be ordered to distribute the remainder or Realized Property. The Trustee
anticipates returning to Court to obtain the Court's authorization to distribute further
Realized Property in the near term. At that time, the Trustee anticipates that it will also
seek the approval of its activities to date and its fees and disbursements in connection
wiih those activities.
159. The Trustee will report to the Court at a more appropriate time with a recommendation
regarding a fair and equitable allocation of the recoveries on Realized Property, including
appropriate compensation for lnvestors.
160. The Trustee observes that it is necessary to use the retained Realized Property to
maximize the ability to generate further Realized Property in the future, and that future
Realized Property will benefit all lnvestors through the allocation formula to be developed.
The Trustee believes that this Court-supervised process provides lnvestors with enhanced
protections and the best opportunity in the circumstances to obtain recoveries. The
Trustee will continue to attend to all BDMC matters in an effort to maximize recoveries to
lnvestors.
ALL OF WHICH lS RESPECTFULLY SUBMITTED this 23'd day of October, 2018
tranw Mwtaanv A)rwlnktra*orv ln*.JJ
FAAN MORTGAGE ADMINISTRATORS INC.,
SOLELY IN ITS CAPACITY ASCOURT.APPOINTED TRUSTEE OF
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.,
AND NOT IN ITS PERSONAL OR ANY OTHER CAPACITY
46
L4L
Appendix 4:
Realized Property Order dated October 30, 2018
142
Court File No. CV-l8-596204-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE HONOURABLE MR.
JUSTICE HAiNEY
TUESDAY, THE 30th DAY
OF OCTOBER,2OIS
)))
BETWEEN
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BUILDING&DEVELOPMENTMORTGAGESCANADAINC.
ResPondent
APPLICATION UNDER SECTION 37 OF THE
MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT' 2006' s'o' 2006'
C.29 ANd SECTION 101 OF TIiJiI' COARTS OF JUSTICEACT,R'S'O' 1990 C' C'43
REALIZED PROPERTY ORDER
THIS MOTION, made by FAAN Mortgage Administrators lnc' ("FAAN Mortgage")' in
its capacity as Court-appointed trustee (in such capacity, the "Trustee"), of all of the assets'
undertakings and properties of Building & Development Mortgages Canada Inc' (the
..Respondent") pursuant to section 37 0f the Mortgage Brokerages, Lenders and Administrators
Act, 2006,s.o.2006, c.2g,asamended (the "MBLAA"),and section 101 of the courts of Justice
lcl, R.s.o. i990, c. c.43, as amended, for an order, inter alid, (i) requiring the Trustee to
distribute certain Realized Property, as more fully set out herein; and (ii) authorizing the Trustee
to utilize certain Realized property to fund the Required Trustee Activities (as defined herein), was
heard this day at 330 University Avenue, Toronto, Ontario;
u0c n r
5v,
/guIt 99
cam
<f
r43-2-
ON READING the Second Report of the Trustee dated October 23,2018 (the "Second
Report"), and on hearing the submissions of counsel for the Trustee, Chaitons LLP, in its capacity
as Representative Counsel, counsel for The Superintendent ofFinancial Services, and such other
counsel as were present, no one appearing for any other person on the service list, as appears from
the affidavit of service of Jacob Schmidt swom October 24,2018,fi1ed;
SERVICE
1. THIS COURT ORDERS that the time for service and filing of the notice of motion and
the motion record herein is hereby abridged and validated so that this motion is properly returnable
today and hereby dispenses with further service thereof.
DEFINITIONS
2. THIS COURT ORDERS that any capitalized terms used but not defined herein shall have
the meanings given in the Order of the Court in respect of the Respondent dated June 26,2018
(the "Interim Stabilization Ordey'') or in the Second Report.
REALIZED PROPERTY
3. THIS COURT ORDERS thatthe Trustee shall:
(a) distribute a further amount equal to ZAYo of the Realized Property obtained with
respect to the Victoria Medical SML Loans pro rata to the lnvestors entitled to such
funds, such that, when combined with the distribution made pursuant to the Interim
Stabilization Order, 70% of such funds shall have"been distributed on a pro rata
basis; and
(b) distribute 70% of all other Realized Property obtained pro rata to the Investors
entitled to such funds, whether received before or after the date of this Order.
4. THIS COURT ORDERS that the Trustee is hereby authorized to use all or any portion
of the retained Realized Property to aid the Trustee in complying with the Appointment Order and
in carrying out its mandate, as the Trustee, in its sole discretion, considers necessary or desirable
144-3
for the administration of the estate, including those matters set out in paragraph 17 of the Interim
Stabilization Order (collectivelyo the "Required Trustee Activities").
5. THIS COURT ORDERS that the Trustee shall report to the Court by no later than April
30,2019 regarding the Required Trustee Activities undertaken following the date of this Order.
GENERAL
6. THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,
regulatory or administrative body having jurisdiction in Canada or in the United States to give
effect to this Order and to assist the Trustee and its agents in canying out the terms of this Order.
All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to
make such orders and to provide such assistance to the Trustee, as an officer of this Coutt, as may
be necessary or desirable to give effect to this Order or to assist the Trustee and its agents in
carrying out the terms of this Order.
j. THIS COURT ORDERS that the Trustee be at liberty and is hereby authorized and
empowered to apply to any court, tribunal, regulatory or administrative body, wherever located,
for the recognition of this Order and for assistance in carrying out the terms of this Order, and that
the Trustee is authorized and empowered to act as a representative in respect of the within
proceedings for the purpose of having these proceedings recognized in a jurisdiction outside
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Appendix 5:
Braestone Updates
L47
Building & Development Mortgages Canada lnc.
April 11,2018
Dear Lender:
Re: Syndicated Mortgage Loan ("Loan") to Braestone Development Corporation("Borrower") on the security of a Second Position mortgage on 3009 Line B NorthMoonstone, ON f"Braestone Proiect")
PIease accept this update to your investment in the Braestone Project.
As you are aware, the Project has an upcoming maturity date of July 15,20L8, and the LoanAgreement contains provisions allowing the term to be extended for a further 12 months,with a revised maturity date of fuly 75,20'1.9 f"Maturify Date").
Please see the attached letter from the Borrower engaging the L2 month extension, asoutlined in Section 4 of the Loan Agreement dated December 1, 20IZ ("Second TermExtension"J.
Pursuant to Section 4 of the Loan Agreement, if the Second Term Extension is exercised bythe Borrower, the Borrower shall pay to the Lender an extension fee equal to 1o/o of theprincipal amount of the Loan, payable upon the Maturity Date and an additional Projectcompletion fee equal to 2o/o of the principal amount of the Loan, payable upon SubstantialCompletion of the Project fas described in section L0 of the Loan AgreementJ.
Project Update
Canadian Development Capital & Mortgage Services Inc., on behalf of the Borrower, hasadvised that the first two phases of the Braestone Project are sold out and sales of Phase 3opened in the fall. Delivery of homes from Phase 1 and 2 are ongoing, and construction ofPhase 3 is scheduled to begin later in the spring.
If you have any questions please contact your licensed mortgage agent or BDMC directly
Thank You,
BDMC
Building & Development Mortgages Canada Inc.,by its Manager, FAAN Mortgage Administrators Inc.
25 Brodie Drive, Unit B, Richmond Hili, ON L4B 3K7 / P: 905'508 4B2B I F:905-508-3957 / www bdmc.ca/ Admin License 12304
]IITtrftrTTInM[nliF*qrlrquE{
ffiI48
dolvn bome, up country.
April3, 2018
Building & Development Mortgages Canada lnc.
8-25 Brodie Dr.
Richmond Hill, ON L4B 3K7
Olympia Trust Company2200, I25 9th Ave SE
Calgary, AB T2G 0P6
To whom it may concern
Re: Extension for the existing loan for the Braestone Project
Pursuant to section 4.0 of the original Loan Agreement, we hereby exercise our option toextend the maturity date on the above noted project by twelve {12) months to July 15,
2019.
5in
J. David BunstonBraestone Development Corporation85 Bayfield Street, Suite 500Barrie, Ontario L4M 3A7
T: (70s) 730-s900 F: (705) 730-10s9
85 Bayfield Streot, Suite 500, Baffie, Ontario L4M 3A7 braeston€.ca
149
FAANr0Rt0t0tA$ilmtslRAI0RS
May37,20L8
Dear Lender:
Re: Syndicated Mortgage Loan made to Braestone Development Corporations pursuant tothe Ioan agreement dated December L,2Ol2 ("Loan Agreement") regarding the propertylocated at 3009 Line 8 North Moonstone, ON ("Braestone Proiect")
On April 20,2018, FAAN Mortgage Administrators Inc. ("Trustee") was appointed as trustee overBuilding & Development Mortgages Canada Inc. ["BDMC") under a court order issued pursuanttosection 37 of the Mortgage Brokerages, Lenders and Administrqtors Act, 2006 as amended, andsection L01 of the Courts of Justice Acf, as amended. A notice regarding the Trustee's appointmentwas previously provided.
We are writing to you in our capacity as Trustee regarding the Braestone Project.
On May L5 2018, BDMC received approximately $89,000 which represents the May 15, 20L8interest installment pursuant to the terms of the Loan Agreement. The Trustee is currently holdingthose funds and is unable to make the interest distribution at this time.
The Trustee is working on reviewing a number of issues in connection with loans administeredby BDMC, including the impact of the Court Order on the Trustee's ability to distribute funds. Wemay require a further order of the Court in advance of any distribution of funds.
We intend to update you as soon as our review is complete, including with respect to the timingof a distribution to you.
Yours very truly,
trann' Mw$aga A)rninwtrattrr lnp,
FAAN MORTGAGE ADMINISTRATORS INC.IN ITS CAPACITY AS COURT-APPOINTED TRUSTEE OFBUILDING & DEVELOPMENT MORTGAGES CANADA INC.AND IN NO OTHER CAPACITY
FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adeloide Streel Eost Toronlo, Oniorio, M5C 2T5
r.50
Appendix 6:
Braestone Offer and Braestone Settlement Agreement
nbdf40t
151
DATE:
TO:
OFFER TO SETTLE
ocroBER 17,2018
FAAN MORTGAGE ADMINISTRATORS INC,, SOLELY IN ITSCAPACITY AS COURT.APPOINTED TRUSTEE OF BUILDING &DEVELOPMENT MORTGAGES CANADA INC. AND IN NO OTHERCAPACITY
-and-
OLYMPIA TRUST COMPANY
Braestone Development Corporation (the "Borrower"), hereby presents this offer to settle (the
"Offer") on the teims and conditions set forth in the Settlement Agreement enclosed herelvith, as
ftlll consideration for all obligations owing by the Borrower under that certain Loan Agreement
dated December 1, 2012 (the'ol,oan Agreement") with Building & Development Mortgages
Canada Inc. (formerly Centro Mortgage Inc.), in trust ("BDMC'), as lender. BDMC entered into
the Loan Agreement on behalf of a syndicate of individual lenders, and Olympia Tnrst Company
("Olympia';) acts as trustee for a subset of such lenders who have self-directed accounts with
Olympia.
The Borrower understands that FAAN Mortgage Administrators Inc. ("FAAN Mortgage") was
appointed as trustee of BDMC (the "Trustee") pursuant to an order of the Ontario Superior Court
of Justice (Commercial List) dated April 20,2018 under section 37 of the Mortgoge Brokerages,
Lenders and Administrators Act, 2006, as amended, and section l0l of the Courts of Jt'tstice Act,
as amendecl, to, among other things, administer the loans previously entered into by BDMC, and
any actions involving BDMC with respect to this Offer shall be directed to and executed by the
Trustee.
The Borrower ftlrther understands that, as this Offer represents a cornpromise of debt and a release
of all parties' obligations pursuant to the Loan Agreement and related documents, FAAN
Mortgage and Olympia intend to reach out to the individual lenders forming the syndicate under
the Loan Agreement with respect to this Offer. Therefore, the Borrower hereby agrees that this
Offer, and its signature on the Settlement Agreement enclosed herewith, shall be inevocable by
the Borrower and shall remain open for acceptance by providing counter-signed copies of the
Settlement Agreement enclosed herewith to the Bonower until 5:00 p.m. Toronto time on
l.+lo+emb€r-9re0.H (or such other date as
accept the Offer by each of the Trustee,result in this Offer being revoked. In the
above, the Loan Agreement shall remainand effect in accordance with its terms.
may be agreed by the Bonower in writing). Failure to
on behalf of BDMC, and Olympia, by such date shall
event that thi.s Offer is rejected or revoked as outlined
unaffected and shall continue and survive in full force
The Borrower looks forward to your response.
-L-L52
BRAESTONE DEVELOPMENTCORPORATION
By:
Name:
Title:
iat
-3- 153
SETTLEMENT AGREEMENT(dated as of October 17 . 2018)(the'(Settlement Agreement")
BETWEENBRAESTONE DEVELOPMENT CORPORATION
-and-
FAAN MORTGAGE ADMINISTRATORS INC., SOLELY IN ITS CAPACITY ASCOURT.APPOINTED TRUSTEE OF BUILDING & DEVELOPMENT MORTGAGES
CANADA INC.
-and-
OLYMPIA TRUST COMPANY
WHEREAS Braestone Development Corporation (the "Borrower") is the borrower undera Loan Agreement dated December 1, 2012 (the "Loan Agreement') with Building &Development Mortgages Canada Inc. (formerly Centro Mortgage Inc.), in trust ("BDMC"), as
lender, whereby BDMC issued a loan in an amount up to and including the sum of $15,384,615 tothe Borrower;
AND WHEREAS the sum of $13,350,100 (the "Loan") was actually funded by BDMCpursuant to the Loan Agteement;
AND WHEREAS BDMC entered into the Loan Agreement on behalf of a syndicate ofindividual lenders, and Olympia Trust Company ("Olympia") acts as trustee for a subset of such
lenders who have self-directed accounts with Olympia;
AND WHEREAS on April 20,2018, FAAN Mortgage Administrators Inc. ("FAANMortgage") was appointed as trustee of the assets, properties and undertakings of BDMC (the
"Trustee") pursuant to an order of the Ontario Superior Court of Justice under section 37 of theMortgage Brokerages, Lenders and Administrotors Act, 2006, as amended, and section l0l of theCourts of Justice Act, as amended, to, among other things, administer the loans previously entered
into by BDMC;
AND WHEREAS the Borrower, BDMC and Olympia entered into the Loan Agreementto assist in the initial funding of a development of approximately 229 homes to be constructed at
3009 Line 9 North, Moonstone, Ontario (the "Propert5r", and such development, the "Project");
AND WHEREAS in corurection with the Loan, BDMC and Olympia were granted acharge on title to the Property with Charge No. SC1039835 in the amount of $13,384,000 (the
"Charge");
AND WHEREAS there is currently $13,350,100 outstanding under the Loan;
AND WHEREAS approximately $5,455,870 in interest pursuant to the Loan has beenpaid by the Borrower;
-4-
AND WHEREAS as of the date of this agreement, there is currently $267,002 of accrued
interest payable to BDMC under the Loan;
AND WHEREAS pursuant to Section l0 of the Loan Agreement, the Borrower is required
to pay to BDMC a Project completion fee equal to 15% of the principal amoult of the Loan, by
no^later than 30 days lollowing Substantial Completion of the Project (as defined in the Loan
Agreement);
AND WHEREAS the initial maturity date under the Loan Agreement was January 15,
2018, and such loan was extended in accordance with the terms of the Loan Agreement by the
Borrower in writing to July 15, 2018 and then further extended, again in accordance with the terms
of the Loan Agreement, by the Borrower in writing to July 15,2019 (the "Maturity Date", and
such further extension, the "second Term Extension");
AND WHEREAS pursuant to Section 4 of the Loan Agreement, due to the exercise of the
Second Term Extension, the Borrower is required to pay to BDMC an extension fee equal to lYo
of the principal amount of the Loan on the extended Maturity Date, and an additional Project
compleiion fee equal to 2o/o of the principal amount of the Loan, payable upon Substantial
Completion of the Project (as defined in the Loan Agreement);
AND WHEREAS there has been a dramatic decline in sales of units of Phase I of the
Project since early 2077, and the Borrower has experienced substantial increases in construction
cosis and delays ln environmental approvals, which have created concern about the timing for
Phase 2 of the Project and have impacted Project cash flows;
AND WHEREAS the Borrower requires additional financing in order to complete Phase
2 of the Project and would like to reduce its existing debt in order to facilitate new financing
arrangements;
AND WHEREAS the Borrower has advised that certainunexpected environmental issues
have arisen that threaten the timing of Phase 2 of the Project and could add a further two to seven
years to the Project timeline;
AND WHEREAS the Borrower provided, and the Trustee received, a commitment letter
providing proof of sufficient financing to pay the Settlernent Payrnent (as defined herein);
AND WHERJ,AS the Trusree consulted with individual lenders with respect to the
proposed Settlement Agreement and, following such consultation, determined that it is in the best
interests of the individual lenders to enter into this Settlement Agreement;
AND WHEREAS the parties hereto wish to enter into this Settlement Agreement in fullsatisfaction of the obligations owing by the Borrower to BDMC under the Loan Agreement;
NOW THEREFORE in consideration of the covenants, ageements and releases set forth
herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
l. Each party represents and warrants to the others that to the best of its knowledge, the
recitals to this Settlement Agreement are accurate'
154
-5- 155
2. The parties hereto represent and warrant that the total amount that would be payable toBDMC under the Loan Agreement is $16,020,120 (the "Obligations"), consisting of the followingamounts, and that such amounts represent all of the monetary obligations owed by the Borrowerto BDMC under the Loan Agreement:
(a) Principal owing in the amount of $13,350,100, payable on the Maturity Date;
(b) Interest owing as of October 15, 2018 in the amount of $267,002, plus any
additional interest that would be accrued until the date the loan is repaid;
(c) Project completion fees in the amount of $2,002,515, payable upon SubstantialCompletion of the Project; and
(d) Extension fees, including the additional Project completion fee resulting from the
Second Term Extension, in the amount of $400,503, payable on the Maturity Date.
3. The Borrower hereby agrees to pay to the Trustee, on behalf of BDMC, upon the EffectiveDate of this Agreement, a lump-sum payment in the amount of $10,000,000 (the "SettlementPayment"). The Bonower agrees that it shall waive, and shall not assert, any right of set-off orany other defense to the payment of the Settlement Payment.
4. The Borrower shall, upon the Effective Date of this Agreement, execute and deliver a fulland final release in favour of the Trustee, BDMC, Olympia and their related entities (including theindividual lenders) (collectively, the o'Releasees") in respect of, inter alia, any and all obligationsunder the Loan Agreement and all other documents between the Borrower and BDMC, in a formcustomarily provided to secured lenders and in the form reasonably agreed to by the Releasees (the
"Release").
5. The Borrower hereby represents and warrants to the other parties hereto that, as of the date
hereof:
(a) It is solvent, has the capacity, power and authority to enter into, execute, deliver,
and cany out the terms of this Settlement Agreement, all of which have been dulyauthorized by all proper and necessary action and it has duly executed and deliveredthis letter agreement.
(b) The execution of this Settlement Agreement will not violate or conflict with itsorganizational documents, any mortgage or other documentation it is party torelating to the Project or the Property, or any law, regulation or order or require any
consent or approval that has not been obtained.
(c) This Settlement Agreement is a legal, valid, and binding obligation ofthe Borrower,enforceable against it in accordance with its terms, except as such enforceabilitymay be limited by applicable bankruptcy, insolvency, arrangement, reorganizalion,moratorium, or similar laws affecting the enforcement of creditors' rights generally
and by equitable principles.
6. The Trustee, on behalf of BDMC, acknowledges that the Settlement Payment represents
$3,6l7,l02less than the full amount of the principal and interest owing today and a further
-6-
$2,403,018 (excluding additional accrued to the ultimate date of repayment) that could become
owing under the Loan Agreement. The Trustee, on behalf of BDMC, agrees that, as of the Closing
Date (as defined herein), it shall be deemed to accept the Settlement Payment in full satisfaction
of the Obligations, and shall waive any rights to any further payments that may become payable
to BDMC under the Loan Agreement.
7. The Trustee shall use commercially reasonable efforts to seek approval of the Settlement
Agreement by way of court order substantially in the form agreed between the Borrower, the
Trustee, and Olympia (which shall, for greater certainty, contain a release of all obligations of the
Borrower under the Loan Agreement) (the 'oorder") issued by the Ontario Superior Court ofJustice (Commercial List) (the o'Court"). The parties hereto agree that this Settlement Agreement
shall not be binding on any party until the issuance of the Order. Following the issuance of the
Order (the "Effective Date"), the Borrower shall be required to pay the Settlement Payment and
issue the Release as contemplated in Sections 3 and 4 herein. The Release shall not be effective
until the Closing Date.
8. The obligations of the Trustee, on behalf of BDMC, and Olympia contained in this
Settlement Agreement, including without limitation the obligations set out in Sections 6 and l0hereto (except for the obligation to seek Court approval pursuant to Section 7 hereto, which shall
be effective as of the date that the Trustee and Olympia execute this Settlement Agreement) shall
be subject to the issuance of a certificate to the Borrower by the Trustee in the form to be attached
to the Order (the "Trustee's Certificate") and the filing of the Trustee's Certificate with the Court
following the satisfaction of the conditions precedent set out in Section t herein (the "ClosingDate").
9. The Trustee shall be required to issue the Trustee's Certificate to the Borrower upon the
satisfaction of the following conditions precedent (which conditions rnay be waived by the Trustee
in its sole discretion):
(a) the Order has been granted by the Court and no material objections (in the sole
opinion of the Trustee) were raised by individual lenders or by any other party at
the motion for approval of the Order, or, if any material objection is raised, the
appeal periods in respect of the Order have expired with no appeal being filed or,
if an appeal has been filed, any such appeal or motion for leave to appeal has been
fully disposed of with no further right of appeal or leave to appeal;
(b)
(c)
(d)
the Bonower has paid the Settlement Payment to the Trustee;
the Bonower has provided the Release to the Releasees;
the Borrower has certified that all of the representations and wananties contained
in this Settlement Agteement continue to be true as of the Effective Date; and
the Borrower continues to be, in the reasonable opinion of the Trustee, incompliance with all of the terms of this Settlement Agreement.
156
(e)
For greater certainty, the rights and obligations of each party as contained in the Loan
Agreement and the security granted to BDMC and Olympia (including without limitation the
Charge) shall remain effective until the Closing Date.
-7- 1,57
10. As of the Closing Date: (i) the Bonower, FAAN Mortgage, BDMC, Olympia and all
individual lenders acknowledge and agree that they shall have no further rights or obligations inconnection with the Loan Agreement and the Loan Agreement shall be terminated with no further
force or effect; (ii) the Trustee, on behalf of BDMC, and Olympia shall cause any and all security
held by BDMC and/or Olympia to be discharged, including the discharge of the Charge from title
to the Property; (iii) the Trustee, on behalf of BDMC, and Olympia shall release any interest itmay have in any insurance policy(ies) relating to the Property; and (iv) the individual lenders shall
be deemed to have released the Borrower from all obligations and security provided in connection
with the Loan Agreement.
I l. Each of the parties hereto shall execute and deliver such additional documents, instruments,
conveyances and assurances and take such further actions as may be required to cany out the
provisions hereof and give effect to the transactions contemplated hereby.
12. The parties agree that the terms of this Settlement Agreement shall be disclosed to the
individual lenders under the Loan and shall be included in the motion materials for approval of the
Settlement.
13. Each party confirms it has received independent legal advice relating to this Settlement
Agreement, and that it has voluntarily entered into this Agreement with the benefit of such advice
for the purpose of making a full and final settlement of amounts outstanding under the Loan
through this Settlement Agreement.
14. This Settlement Agreement constitutes the entire agreernent between the parties withrespect to the subject matter hereof and supersedes all prior negotiations, undertakings,
representations and understandings between the parties. This Settlement Agreement shall further
enure to the benefit of and be binding upon the parties and their respective successors,
representatives and assi gns.
15. This Settlement Agreement may be executed by the parties in counterparts, and may be
executed and delivered by facsimile, PDF or e-mail and all the counterparts and facsimiles shall
together constitute one and the same agreement.
16. This Agreement will be governed and construed in accordance with the laws of the
Province of Ontario and the laws of Canada therein, and any dispute arising from this Agreement
must be adjudicated before the Ontario Superior Court of Justice'
[Remuinder of page intentionally leftblankJ
158IN WITNESS OF WHICH the parties have duly executed this Agreement as of the dateindicated above.
BRAESTONE DEVELOPMENTCORPORATION
Name:
Title: 9a
By
FAAN MORTGAGE ADMINISTRATORSINC., SOLELY IN ITS CAPACITY ASCOURT-APPOINTED TRUSTEE OFBUILDING & DEVELOPMENTMORTGAGES CANADA INC. AND IN NOOTHER CAPACITY
By
').' ./ n,i\;,* 64--*
Name:
Title:Lana Bezner
Managing Director
OLYMPIA TRUST COMPANY
ByName:
Title:
159t
:lN WITNISS OF 1VHICH the parties have duly executed this Agreernent as of the date
indicatecl above.
BRAESTONII DNVELOPMENTCORPORATION
5, Rovall
9t
By:
Title
FAAN MORTGAGE ADMINISTRATORSINC., SOLELY IN ITS CAPACITY ASCOURT.APPOINTED TRTISTEE OIT
BUILDING & DEVELOPMDNTMORTGAGES CANADA INC. AND IN NOO"I'[INR CAPACTTV
By:
Narne:
Title:
OI,YMPIA T COMPANY
By:
Jonathan Bahnuikra nsel
Andrea Gillis, Vice Prssident
150
Appendix 7:
Braestone Consent Request dated October 23,2018
t5r
M0[l0A0trDlilllltTRAt0Rs
NFAA
October 23,2018
Dear Lender
Re: Syndicated Mortgage Loan ("Loan") made to Braestone Development Corporation (the"Borrower") pursuant to the loan agreement dated December \,20L2 ("Loan Agreement")regarding the property located at 3009 Line 9 North Moonstone, ON ("Braestone Proiect"or "Property")
Request for approval regardingthe Sylrdicated Mortgage Loan to Braestone DevelopmentCornoration.
As you are aware, on April 20, 2018, FAAN Mortgage Administrators Inc. I"FAAN Mortgage" orthe "Trustee") was appointed as trustee over the assets, property and undertakings of Building &Development Mortgages Canada Inc. ["BDMC") under a court order ["Appointment Order")issued pursuant to section 37 of the Mortgage Brokerages, Lenders and Administrators Act, 2006and section 101 of the Courts of Justice Act. By order of the Ontario Superior Court of Justice
[Commercial List) ("Court") dated lune 26,20'LB, Chaitons LLP was appointed as representativecounsel to persons who made loans through BDMC ["Representative Counsel"). Notices havepreviously been sent to you regarding the appointment of FAAN Mortgage as Trustee and ofChaitons as Representative Counsel.
We are writing to you in our capacity as Trustee regarding the syndicated mortgage loan made byyou as a syndicated mortgage lender ("SML") to the Borrower in respect of the Braestone Projectpursuant to the Loan Agreement between BDMC and the Borrower ("BDMC Loan"), and thevarious associated documents.
The Borrower has presented the Trustee with an offer for the early repayment of the BDMC Loan.
For the reasons set out below, the Trustee recommends accepting the offer in full satisfaction ofall amounts due or that may become owing to you under the Loan Agreement, and would like torequest your feedback in advance of accepting the offer'
The offer provides for payment by the Borrower of $L0 million ["Offer") in respect of theoutstanding principal balance of $13.35 million. The full amount due under the Braestone loan
fincluding interest and certain deferred lender fees) exceeds $16 million; however, whenpreviously paid interest of approximately $5,4 million ("Paid Interest") is factored into theanalysis, the proposed payout plus the Paid Interest would result in the full repayment of theprincipal owing to the SMLs, plus a furtherLS%o above the outstanding principal. The Offer isconditional upon Court approval and a release of all future obligations of the Borrower withrespect to the Loan Agreement and the BDMC Loan. The Offer also includes the extinguishment ofall further rights and obligations of BDMC and the SMLs under the Loan Agreement and theassociated mortgage on the Property. If approved, payment is expected to be made by theBorrower to the Trustee shortly following Court approval'
FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adeloide Sireel Eosi Toronio, Onlqrio, M5C 2T6
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$0RT0A8tADiIIIIISTftAISRS
NFAA
A copy of the Offer is attached hereto as Schedule "A".
Overview of Current Status of Braestone Proiect
The Borrower has developed Phase 1 of the Braestone Project but is awaiting approvals tocomplete Phase 2. The Borrower has advised that it will be unable to complete the BraestoneProject prior to luly 2019, being the end of the extended term as set out in the Loan Agreement,due to challenging market conditions. Therefore, the Borrower does not expect to be able to paythe BDMC Loan in full on the extended maturity date.
After speaking with the Borrower and reviewing information provided to the Trustee, the Trusteeunderstands that the market challenges affecting the completion of the Braestone Project include,but are not limited to:
ll.
the slowdown in the overall real estate market in the area, which has resulted in slowerthan expected home sales; and
unforeseen environmental issues that have stalled the environmental approvals requiredfor the development of Phase 2 of the Braestone Project. The Trustee understands that thedelay in environmental approvals relate to the following outstanding issues:
a. Species at risk (specifically, brorrrn bats);b. Forestry at risk [specifically, butternut trees);c. Fisheries;d. Approval for a river crossing which accesses Phase 2B; ande. A re-assessment of previously approved wetland boundaries
The Borrower has advised that there are no established guidelines to resolve certain of theseenvironmental issues, which may result in longer than usual delays. The Borrower furtheradvised that it has sought advice from environmental consultants and has been advised that itcould take 2 to 7 years to remedy the lands in order to commence construction of Phase 2,
As a result of the above, the Borrower is seeking to refinance the Braestone Project but has
advised that it must reduce its overall debt in order to do so. Accordingly, the Borrower is seekingto repay the debt owing to the SMLs under the Loan Agreement at a discount. The Borrower has
advised that it is unable to repay the full principal amount of the BDMC Loan; however, given thatBDMC was paid interest when due of approximately $5.4 million [up to and including the July L5,
201.8 interest paymentJ, the Offer would result in full repayment of the principal amountadvanced and a net return of approxim ately 1-50/o on that principal amount.
L
FAAN MORTGAGE ADMINISTRATORS lNC. I 920-20 Adeloide Slreei Eosi Toronto, Ontorio, M5C 2T5
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il0nI0ABt40il{illlsIRAtr0RS
NFAA
The return is calculated as follows:
Principal outstanding (A): $13,350,100
Loan repayment: $10,000,000Interest paid: $ 5,455,870Total payments (B): $15,455,870
Net recovery [B-A): S 2.L05,770
Assessment of the Offer and Recommendation
The Borrower has advised that the Braestone Project will not be complete by the time the Loan
Agreement matures in July 2019, and that the Borrower is unlikely to obtain replacementfinancing sufficient to repay the BDMC Loan in full on the maturity date. Further, given the termsof the Loan Agreement and the expressed need by the Borrower to refinance the Braestone
Projec! BDMC would likely be required to postpone and standstill to additional priority loans untilsuch time that those amounts are repaid [which the Trustee understands would not be until such
time that the Braestone Project is completed). Accordingly, and based on the estimates providedby the Borrower, it is possible that the BDMC Loan may not be repaid until 2025 and at the timethat the loan is ultimately repaid there is a risk that it will not be repaid in full.
As of July '1,5, 20!8, the Borrower ceased paying interest on the BDMC Loan. The Borrower has
advised that it will not make further interest payments in the event the Offer is not accepted and
the Loan Agreement continues in force.
Acceptance of the Offer by the Trustee would result in the SMLs foregoing the following amounts,which would otherwise become due on the BDMC Loan if it were repaid on or about October L5,
201.8:
Remaining principalAccrued interest to October '],,5,201'8
Extension fees [incl. additional deferred lender fee)Project completion/deferred lender fee
Total potential foregone recoveries [before additional accrued interest)
3,350,000267,000400,000
t 003,000$6,020 000
If the BDMC Loan were repaid after October 15,201,8, additional interestwould accrue and be
payable on the date that the BDMC Loan was repaid.
In completing its assessment of the 0ffer, the Trustee engaged a real estate appraiser to provide acurrent as-is appraisal value of the Property. Based on its review of the appraisal and theoutstanding debt ranking in priority to the BDMC Loan that would be required to be repaid priorto the BDMC Loan, the Trustee is of the view that the Offer is reasonable in the circumstances.
FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adelqide Street Eost Toronto, Onlqrio, MsC 2T6
164
FAANH0[l0A0tAtMilfi$I$AT0l$
Given the environmental issues encountered by the Borrower, the uncertainty as to the timing bywhich they will be remedied and the general uncertainty as tothe future of the market, the Trustee
is of the view that, although the Offer potentially provides discounted returns to the SMLs, thereis value in the certainty provided by accepting the Offer and crystalizing the outcome of the BDMC
Loan. Further, as noted above acceptance of the Offer results in an overall net positive return ofapproximately 1,5o/o on the total principal amount advanced'
Next Steus
At this time, you should review this notice and the Offer carefully and arrange to obtainindependent legal advice regarding these matters. If desired, you can consult with Chaitons LLP,
in its capacity as Representative Counsel. Representative Counsel's contact information is below'
Attached as Schedule "B" hereto is an instruction letter to the Trustee that gives you an
opportunity to indicate whether you are in favour of or against the acceptance of the Offer in fullsatisfaction of your investment under the BDMC Loan'
If you have any obiections to the acceptance of the Offer described herein. you shouldreturn the instruction letter to us by mail. email. or fax, within ten (10) da}rs. If you agree
with the Trustee's recommendation to accept the Offer, please also return the instruction letter tous by mail, email, or fax, within ten [10) days to indicate your agreement'
After ten (10) days, the Trustee, in consultation with Representative Counsel, will decide whetherto accept the Offer by an exercise of the discretion granted to the Trustee under the AppointmentOrder. Any acceptance by the Trustee of the Offer would not be binding on the Trustee or the SMLs
until the Offer is approved by the Court. In the event that the Trustee accepts the Offer, copies ofthe Court materials will be served upon you prior to the proposed Court date, which is anticipatedto occur as soon as practicable thereafter'
A prompt response is required in the circumstances.
FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adeloide Street Eqsi Toronto, Onlqrio, M5C 2T6
165
r40RT8A0tADII$lSrIAIgR$
NFAA
Should you have any questions of the Trustee, our contact information is below (if you arecontacting us by phone or email, please reference Braestone Proiect).
Email: Info(oFAANMortgageAdmin.comLocal Telephone Number: 4t6-606-3338Toll-Free Telephone Number: 1-833-495-3338
Should you wish to contact Representative Counsel, their contact information is below fif you arecontacting Representative Counsel by phone or email, please reference Braestone Proiect).
Email: BDMC@chaitons.comToll-Free Telephone Number: 1-888-203-0509
Yours very truly,
Yanru MorQagr l0min*s+ra,tury \rc,.
FAAN MORTGAGE ADMINISTRATORS INC.SOTELYIN ITS CAPACITYAS COURT.APPOINTED TRUSTEE OFBUILDING & DEVELOPMENT MORTGAGES CANADA INC.AND IN NO OTHER CAPACITY
FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adeloide Sireel Eost Toronto, Oniqrio, MsC 2T6
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,Ol NFAA$0fiT0A0tADilililSlRlI0n$
Schedule "8"
Braestone Proiect I nstruction Form
Re: Braestone Proiect Notice & Request for Approval
TO: FAAN Mortgage Administrators lnc. ("Trustee"), in its capacity as Court-appointedtrustee of Building & Development Mortgages Canada lnc. ("BDMC")
RE: Early repayment of the BDMC loan made to Braestone Development Corporation("Borrower")
t, (Lender Name) have received a request for the following:
my authorization to the Trustee:
(i) to accept the S10 million offer ("Offer") made by the Borrower for the early repayment of theloan advanced by BDMC to the Borrower under the Loan Agreement dated December t,2012 ("Loan
Agreement") in substantially the form attached as Schedule "A" to the Notice to Lenders datedOctober 23,2018, which includes a release of BDMC, the Trustee and individual lenders with respectto all rights and obligations under the Loan Agreement and related documents; and
(ii) to negotiate, on my behalf, matters related to the Offer and all agreements reasonablyneeded in connection with same.
((i) and (ii) hereinafter collectively called the "Proposal").
Acceptance of the Proposal:
The undersigned hereby provides the following feedback with respect to all of its interest in the Loan
Agreement as described above (mark one only);
n Yes, I agree with the Trustee's recommendation to accept the Proposal as described above; or
n No, I object to the acceptance of the Proposal as described above.
lf you have additional feedback with respect to the Proposal and the proposed acceptance thereof, please
provide full details regarding the nature of your feedback, question or concern below;
FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adelqide Slreei Eosi Toronto, Oniqrio, M5C 2T6
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FAANil0RI0A0rAl}ifilfi$rntls*s
Certification:
By returning this instruction form and signing below, I certify that (a) I have full power and authority to give
instructions with respect to the Proposal and its effect on my investment under the Loan AgreemenU (b) I
have read this Notice & Request for Approval and the Trustee's Notice to Lenders dated October 23, 2018; (c) I
have obtained such independent legal advice as I believe is necessary in the circumstances; and (d) I hold thefollowing interest in debt administered by BDMC under the Loan Agreement:
Debt in the amount of
Na
Signature
Date
Please return this form using one of the following methods:
i) if by email: info@faanmortgageadmin.com Subject line "Braestone Approval Form"
ii) if by mail to the following address:
Building & Development Mortgages Canada lnc.
25 Brodie Drive, Unit 8
Richmond Hill, ON L4B 3K7
Attention: Braestone Approval Form
iii) if by fax: 905-508-3957, attention Braestone Approval Form
FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adelqide Slreei Eqst Toronlo, Ontorio. MsC 2T6
168
Appendix 8:
Manzoor Fee Affidavit
t69
Court File No. CV-l 8-596204-00CL
ONTARIOSUPERIOR COURT O[' JUSTICE
(COMMERCIAL LIST)
BETWNEN
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BTIILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF TT{EMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O.2006, C. 29
and SECTION 101 OF THE COURTS OF JUSTICEIC4 R.S.O,1990 c, CA3
AFFIDAVIT OX' NAVEED MANZOOR(sworn November 19, 2018)
I, Naveed Manzoor, of the Town of Oakville, in the Plovince of Ontario, MAKE OATHAND SAY:
1. I am a managing director of FAAN Mortgage Administratots Inc., the Court-
Appointed Trustee (the "Trustee"), without security, of all of the assets, undertakings and
properties of the Respondent in these proceedings and as such have knowledge of the matters
170-2-
hereinafter deposed. Where I have indicated that I have obtained facts from other sources, I believe
those facts to be true.l
2, I make this affidavit in support of a motion by the Trustee for, among other things,
approval of the fees and disbursements of the Trustee.
3. In addition to the description of the activities of the Trustee contained in the First
Report, the Second Report and the Third Report, attached hereto as Exhibit'oA" is a copy of each
invoice issued by the Trustee for the period between April20, 2018 and September 30,2018 (the
"Approval Period") setting out the Trustee's fees, reimbursable expenses and applicable taxes for
the relevant period, along with a summary ofthe activities undertaken by the Trustee in connection
with such invoice. I confirm that these accounts accurately reflect the services provided by the
Trustee in this matter for the Approval Period and the fees and disbursements claimed by it for the
Approval Period.
4. Attaohed hereto as Exhibit "B" is a sohedule of the accounts rendered by the Trustee
for the fees and disbursements incuned in connection with the activities summarized in Exhibit A
undertaken in these proceedings during the Approval Period.
5. Attached hereto as Exhibit '(C" is a schedule summarizingthe individuals who have
worked on this matter, including their roles, hours and rates during the Approval Period.
G. Attached hereto as Confidential Exhibit "D" (the o'Confidential Manzoor
Exhibit") are true copies of the dockets rendered by the Trustee for activities undertaken during
the Approval Period. The Trustee is seeking a sealing order with respect to the Confidential
I Capitalized terms used and not otherwise defined in this affidavit have the meanings given to them in the Third
Report of the Trustee dated November 19, 2018.
171,
-J-
Manzoor Exhibit due to the fact that the information contained in the Trustee's detailed dockets
includes privileged and comrnercially sensitive information regarding the projects and BDMC
generally, and the disclosure of that privileged and/or commercially sensitive information could
have a material adverse effect on the recoveries that may ultimately be available to Investors in
these prooeedings.
7. To the best of my knowledge, the total hours, fees and disbursements incuned by
the Trustee for the period between April 20, 2018 and September 30, 2018 are reasonable and
appropriate in the circumstances.
SWORN BEFORE ME at the City ofVancouver; in the Province of BritishColumbia on November 19 18
Taking AlJidavits Naveed
SolicltorftJtil 3000 nderlang
v7B tC3
t72
THIS IS EXHIBIT "A" REFERRED TO IN
THE AFFIDAVIT OF NAVEED MANZOOR
SV/ORN BEFORE ME ON THIS 19TH OFNOVEMBER,2OlS
A TakingAffidavits
' l\'- j.: ::\-.,,r :-.i'
. i.,::\,;... .(\\
i\ !'
I - ]{ATE TODDITOiIES
= _llarlrterand SolicltorgnilFloor, 3600 Lysanrter laneRcnmond, B.C., VZB iCg
804-2474786
L73
Exhibit A
t74
FAANH8n I0A0[.[ 0 ti i il I S I n tI 0 B s'
Invoice00l
Mhy 31, 20tB
RC; F,AAN TruBtee(oTfusteol')Involce fmthe 2018 2018
The,frustee:s activides for the perloti April 20, 20.X8 to Matr1 3L 2018 ("Period'l), iirc.ludq, bilt arenot lirnited to the.follow-lng:
Proiect,Matters
.. Throughout'the ,Pe{iod the Trustee, ds..4lt with:nurneraus plojqct spqc_ific, malter.s .and,corresponded with Osler Hosltln & Hai'csurt LLP tf'O.sler"), thit'ffistedis legal counsel,regarding same as necessary, includlng, o-ut not lirnlted to, the followingl
o Vittorla Metllcal Project - reviewing and execritlng the mortgage dischargedocumerits on or about April 26,2AL8t
,o 6th & l0thPr.oject - reviewlng,requests for partial'dischar,ges,related to the sale ofunits to the.borrowei, in order to $enerate.funds to be used to fund futu.re prqjectcos.ts;
:.o Kernp Project - revieWing and.execUting postponenent documents;
o Bfookdqle Project,-,eKenStvely revieWing.nurylerous eqralls:andrnemos'related to
a p-Qtentlal s:ett]ement agreement in an effort to prevent-enforcement biy the priofitylendeu
.o Averton Rutherford Project - reviewlng the form of partlal discharges and thedocumentatio'n ielated to the reQuested partial dlschargEs;
b Brhestond Project - revlewlngand executlng partlal dischArges;
o Humberstone Project - reviewing project informatiOn related to a request topostpone !o 4ew mezzariine financing;
o Bo.Wrnanviile froject - deali4g with matters related to eriforcOmbnt proceedingscommence..d hy the priority lenderq lncluding the postponement to the new prioritylo4It;:
.o Harlswe Project - reviewing docurnentation relirtgdto alan.e widening request;
FAAN MORTGAGE ADMINISTRAIORS lNC,' I 9'2G20 Adelcilde Slreet'Eosf Toronlo; Onlorlo, Mse'2T6
175
FAANld0flt0rBll0l,llillsIRtT0[s
,o MMl & MMZ Projects - corresponding with Fortress Real bevelopments lnc.("Fortressf') regarding a potihtlal sale. of tho land that ts the subject of thes?proJects; a.dd
o Dunslre Cirelph ProJect - correspo4ding wlth the rdceive4 its ccuncel and Osier. regardlng the sale approvalimotion, in additioh to revlewlrrginformatlon pp-vided
by the reCeJver regarding.the recelvorship proceedlngs and the related saie process.
o P'roviding project specific updateq tq the investor$ upan request and.followtng up wlthCanadian Development Capiteil &, Mortg,qge SeMcqs. hq. '[,1CDCM'IJ and Fontress, onfrequent basis to obtaln Informatisn regardihg,same.
Investor Notices:
r .Drafting, finallzingand distribUting,q not'lce to ailinvestors:'dated April.2:1, 2018, a6yisint.of the Trustoti's appointment;
r . Dnafting; finalizlng'and dtstrlbutlngthe 1fOUo. W!.!g'proiect specific noticesr'
o Coliiers notice dated April30, 2018;
o Brookdale notlse dated April 30, 2i,0t9;
o ceqqggtgwn netlce d4tedMay ?,?0I8;
o Victoria Mbdlcal notices dated May 10,20.18;.
o Capltal Pointe,rtotice datedivlqy LLi20L8;
.o Triple Crepk,nstlce deted May 11, -20-18;
o Bt4gs@ne noticd.dpted May 17, 2018;
o Remp nodcerdhted May ?.1,ZALBi
o Brookdale noticerdated May25, 2018;,
o Bowmanville notice dated May 28,2018; and
o Lake & East notice dated May 30, 20181
General Matteirs
. Attendlng,at Court on April 20,20t8 in respect df the mdtion appointing FAAN MortgageAdminisuators Inc; as Trustee qf BDMC;
'FMN MORTGAGE ADI\4[NI$IBATOR$,lNq: | '9r&29'Adelqfde:slreet Egst ioronto, Ontq.rb, M.sc 2T6
176
t-/ffi51r Attending at BDM.G premises at25 Brodie Dr:, dally throughoiit the Period;
l l,ogging andrespondlng to numer0us investoii' call3 and ernails duri4g the Period;
with the'prlnclpals of Fnrtress on a perlodic basls regardingthe $tatus:qf vari.ousincludi4g poteniial qaleand.fepayme$t opportunitles being untlertakpn,by those
I MeetlngprojectS,'parties;
r, Draftingand reviewinga list of FrequentlyAgked Qgestions; to address,cgr.nmon qqestibngraised by inrrcstors:following the appoirrtmen't:of ,FAAN Mortgage Administratots lric. asTfustee, ahd posting sarne on the Trusteerswebsite;
r Attehding calls with FFM and FDS, two olthe brokerages that brokered loans forBDMC;
. Attending periodiC calls with Olympia Trust Company, regarding various matters relatedto the BDMC loans;
r Attending perlodlc calls wlth Computerihare Trust Company, regarditrg varlous mattersrelated tothe BDMC loans;
o. Reviewing mattexs rqla.ted to the BDMC bank accounts; -the. funds in eaqh account and theboold<eeping related to sarhe, and cqngidering.matters. related to the use of funds ln thebank.,aceounts and the'contJnued fundingof BDMGis adminlsffatlon business ('fFundl.ng:Matters");
. Attending calls with Osler regarding the Fundlng-Ms61g1r,
r. Attending pefiodtC lnvestor meeflng$ dt:the BDMC preniiseq;
r Revlewing and firializing a letler to ce-itaiu bqFoWefs:having funds ih one of the BDMC
baskaccounts, oil or aboubMqy, 4; 2Ot8;
r Revlewing conference call minutes:ftomconference calls hosted by Fortress on lanuary 24,2018; February ?Q, 2018,and April 25,zAtB to update.b.fekers on the status of the various.projects
o: Correspofidlngwith BDMGs insurhricG,'brdlterlegSrding BDMC$'ihsurdnce policy-;
. Correspondlirgurith Financial Services Commission cif Ontario and its legal eounsel;
r Correspontling with BDMCTs IT provider',regarding, various BDMC fl related ,matters,inclu{iqgthe eslablishment of a dedilated BDMC server;
.. Correspondingwlth provincieJ ltgenping sroupq regapdng,matters..pertainl4g'to the,BDMClicenses,in other provinces; includingAlberta and Saskatchewan;
FAAN MORTGAGE ADMINISTRATORS lNC. | 92G20 Adeloidc $heel Eost Toronlo, Ontsrio, MSC 2T6
\77
FAANi,l{RIBA$[A0MtilIS'tnAI0Rs
. Cqrresponding with repreqentativ€s of CDCM regard.lng books and records required byBDMci
. Overseeing the reconciliation of the BDMC Investor r€cords to ensure that the BDMC
records:accurately reflect the correct Investbr lnformatioh, hcludin$ the number 0flnvestors in each project and the amount i.nvested by eaph Investor;
r Oversqeing. the .review and updatlirg of, the BDMC electrsniq 'pgcor{s to ensure that alltnvestor.closlngpackages were scannpd pd readily available in €lectronlc format;
r Drafting and reviewing the Trustee's first rOpoit to Court and corresponding with Osleran d Chaitons IiLP, rep resentativ€ -ceuns el, t'e gard I n g sam e;
.. 'Reviewingrand commenting on the initial draft of the interim stabilization orderj
r Payrtrgoperating:'expenses includiag among otherthings, rent and payroll;
.. Managingthe,BDMC employees, responding.to their qgestions'and providing direction as
hecessary;
r Managing the.Trusteels website, iniluding arrangirtg for the postin! of mateflal! relaled to
the'appointment Ef the Tnusteei
r Attendjtr,gnurnergus calls with Fortress;
. Attendlng meetings; calls and exghaqgi.ng hurleFousemails with Osler regarding theseproceedings; and
r Dealingwith'all othbrmeetings, correspondehce, etc. pertalningto this mafter'
&f
Total fees per attached time summaryHSTToIal
$
$
zLL,482.5A27,482,32
238,884.82
FAAN MQRTGAG,E AD14INISIRATORS lNC, | ?20i20 Adeldlde slroet Eo$l ToroRto; o-ntorip, M5G2T6
1.7 8
FAAN Mort$age, Adminidtrators. I nc;Building & Development Mortgages Ganada lnc.Time,$ummary-For the Ferlod
Lana BeznsrDanlel'Sobel.NagmiLiebermanNick Niktikakls
20:18;to 31 2018
Dlrector
ManagingManagerManager
DilectorDirector
Rate52
435436300300
154.e563,20
f2s,30
67,4A3:.2827,492,0A37,990.00
802.00
962.03Average hourly rate
179
NFAAM0nA0filllll
A0tTIllRS
0II
Is
,Re: FAAN Mqrtgage Adminlstrators Inc:lh its,,cqpscity as
("Trusteet') o-f 'Buildlng,& DeveloB-mont Mortgages Canada
Iirvoice 002,
fune 30,3018
Gourt appointed Trusteelnc, ('rBDMcf')
Involoe for the'perlod. tnne 1to lune 30,,201.8
TheTrusteefs,actlvlttes for the perlod June L, lotg ro fune 30, 20'L8 ['Period"); tirclude; but.arOnorlimtted tq lhe followingi
Profect Matters
. Throrighout the Perlod,the Trustee,dealt with numero,rls plqject speiifle matters and
oorresponiied with 0sler Hoskin & Harcourt LLP ["Osier') the Trusteels legal counsel,regarding saill€ as:rrecessar.y,'lncluding but not limited t0, the following:
o Humbefslqne Project - reviQwln$ and executlng a postponement agreement topostpone to new ri,rezzanine ilhancingl
o Bradforrd/Bond Head Project - revlewJng a postponement f,equest fOr a loan tofacilitate' the repayBent of' the existlng bridge lo4ns 4nd execUtiRg the-
postponementwtth respdct to samei
o Brookdale Froject - corrdspond{ng with RSM Canada Lirnite4 the privately
appointed recsiver of the Brookdale ProJect CiBrookdal€ Receiver"), on a periodicbasis, rqgardtng the. sale Broce$s to be. gommenced bly'the Brookdale. Receiver,
lncludlng providing,the Bfookdale ReQeiver wlth the Trusteels'vjews oh the sale
process, ln,addition to reviewing the sale process materials provided to the Trusteeby the Btooltdale ReceiVor;
o Bowmanville.Project - dealingvrrith matterS related td enftircenient proceedings
commensed by the piiqrit,{ lenders; includingthe postponement to the new prlorityloan;'
o Unlon Waterfront - dealtng with matters related to the enforcement proceedings
commenced bY the PriorltY lender;
o Braestqne ProJect - rgviewlng and executing parHal diqcharges;
.o Georgetown - dealing with matters related to the enforcqhent proceedin$s
commenced by gne:of'the priority lenders;
FAAN MORTGAGE ADMINISTRATQRSINC. I t20-?o Adeloldg s.ft:eet EosfiToronlq, onlqrio; Msc 2T6
r_80
r./ FAAN-Tv Fof,,t,,i'ti'r-l
o Peter Rlchmond ProJect - reviewing., docurnentatioh and: corrbspondtng withFortress,Real Developments !nc, ("Fbrtress") regarding a request by the borrowerfor securlqy related to ftinds it advanced to the proJect and a request for acorpspqndin g postponement'from BDM C regarding se me;
Establishing a praces$ for t}e detalled prsject reviews to be:completed by the Trustee ofall Projects adminlstered b:r BDMC;
Commencing the detailed proJect,reviews, whtch !11clu{e, the review of loan agreements,participation and servlcing agreements,; lender aeknowledgcment and corisents,developrnent consultant.agreements, budgets, cost congultant repofts, capital stacks andvai'lous, other' do ctimeilts pef tal n in g to each o f th e, proJectg;
r Corresponding wtth ahd solicitlng Quotgs'ftbm threet apprais4l firmqpossfbleengflgement:by the Ttustee toprepare "as 15" appraisals for each
Cofi n ectlgn with loans admi nlste,red by BD M C;,, and
r Provldlng proJect specific update.s to the investors upon requqst and following up withCanadian Development Gapital & Mortgage Services.lnc. I"CDCMJ and Fortress on a
frsquent basls to obtaln infornratibn regarding.same;
'lnvestor'N6,tlces,
r Reviewlng a draft notice to all inve$tors, advising of the appointnrent of Chaitons LLP as
representative:toun seli
. Drafting, finalizing and distributing the following project specific notices:
o Braestqng nqtice dated lune 1, 20I8i
-o Capital Pointe nofice dated lgng !,,20LFi
o Dunsire'Ggelphnotiee datedJune 14, 20L8;
o The Kemp.notice dated fune 21,2018
o URion Waterftontnotiee dated |une 21, 20L8t
o Geqrgetotyn noticq dated.funq p7, 20L8;
o Humberstone notice dated ]ung 27,20L8;
o Wellington House notice dated lan:eT7,20tr8; and
o Brookdale notice' dated fune.28,:2018.
a
I
regardin$ theirof the prbiectS in
FAAN MORTGAGE ADI\^INISTRAIORS lNe, | 92&20 Adelolde Streel Eosl'Toi6nlbi'.Onlorlo;.[45c 2T6
181
l{0
T0
FAAFr0HistAIlHtilIs'ItI f
sI
General Matters
o. Attendlng at BDMC premlses at 25 Brodle Dr., daily throug-hout the Period;
o Logging and responding to numerous investor calls and emails du.ring the Period;
r Meetlng with the ptfncipals of Fortress on a periodic basis regarding'the status of variousproJects, including potentlal sale and repayment opportunities being undsrtiken by t[oseparties;
r Atte:nd{ng c-alls with FFM and FDS, two of the brokerages thatbrokered loans for BDMC;
r Attending a conference call on f une 4,ZA1.3 convened by'Fortress to update brokers on thestatus of:thd'various'projectsi and revidwing the mlnutes'regardlng sarne;
. ReVieWing and fitrallzing the TruSteefs flrst report td Couf;t dated June 19, 2018 in reipectofthe motion returnable lune 26,20L8 ("fune 26tb Motionf'), and corfespondingwith Oslerand Chaitons LLP, proppsed representatlve counsel, :regqpdln$:sorlei
e Reviewing.and co..mmedting on,the drAft notice of motion aqd the draft Csu:rt order inrespect of the Iune 26th Motion;
r Attending at Courb,on June 26' 2018;
I DraftingaRd feviewing a llstsf FrequetrtlyAsked Questiotrsi to add.resSComrhoh questions
rais ed' by iirvestors followln g the June 2 6th Motion;
r Correspondtngwtth Olympia'Trust egnlpany on a perlodic basis regardingvaribus matters
relatdd to th€,BDMC' loaris;
i: Correspondlng;v,rith Gorfiputershare Trust Companyioh a.peflodic:bAsis regafdingvaribusmatter$ related to the B-DMC.loans;
r Attepdi,ng pe.risdlc investor meeflngs at the BDMC prem.lses an.d at the Trusteeis oifiee;
. Correspondingwith Financial Services Commission of:O$arlo and lts legal counseli
. eorfesponding with'BDMCfs- IT provlder regarding,vudout BDMC IT "related matters,
includlngthe establishmbnt of a dedicated BDMC ierverl
r Corr€spond,ing with reprdsentatlves of CDCM regarding books and recoFds required by
BDMC;
FAAN:MORTGAGE,ADMINI$IRATORS rNC. | 92G20 Adeloldb Street E6st Toronlo, orilorio; MSc 2T6
TB2
FAANFfl 0 f, I 0 I B,tA0NililStRtI0f,S
. Oversee,ing the ,rdConciliation of the' BDMC Investor fecords to ensure that the BDMCrecgrds alsurately reflect the correct Investor infoi.rnation; includtng the number ofIiivestors in each projictand the amo.u$t invested byeaih Investor;
r: OverseGing the ieviEW and updatlng of tbe BDMC electronic reeerdg. to enqure that allavailao-le, lnvestor closing pack4ges were scanned hnd readily available in electqonlcfoqnat;
r Payirig operatinge{,penses lncluding alnong other things; rent and payroll;
.. Managtng the BD.MC employees, respondlhg to their ques;tlons:and providlng direction as
necessary;
o Attendi:ng nuinefous calls wlth Fortre-ss;
I Attending meeilngs, calls and exchanging nurherous emails with Osler regarding'theseproceedings;
e: Managlngthe,T.rgstee's webslte, IUcludlngarranging for the posti.Wof'ntatefials frorn theIune.26th Mstionir4nd
r Dealingwith all'other meetings; correspondencg etc. pertainingto this tnatt€r;
Total fees per attached'tirne sunnmary 140,512,5018,266,63HST
Total 15 779,t3
$
$
FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adeloide Slreel Essl Toronlo, Onforio, MSC zTa
r.83
FAAN Morlgage Admlnistrators lnc.Bull{lng & Doiielopment Mortgages Canada lnc'Time.SummaryForthe Feiiod June 1.. 2018;to .lune 30, 2018
Naveed Manzoor'Lana BeznerDqnlelSobelNaomi'LiebermanNick Nikjlkakls
ManagManagManagerManager
DlrectorDlieclor
Hourg Total
435 ,1i0,75 48,176'.25435 39.95 17,378,25300 74.98 22,494,OO
300 139.5b 41,850.00
,@360.68Average hourly rate
L84
FAANlitBI0astA0NrNlslR'lT0[$
Invoice 003
Iuly tl,20nt
Re: Gour.t :appo-inted TrusteeInc. ("BDMC")
TheTrustee-'sactivitiesfortheperlodluly!2018tofuly31i2018(lPerlodi')'fnclude'butarehotllmited to the followi,4gt
:Prolect Matters
:f Throughout the Perlod the Trustee dealt with numerouq..prgie$ lpeciffc rnatters end
cqmesionded wlth 0sler Hoskjn & Hareourt ILP ('osler'f) and Chaitoils' LLP,
r*p.**ntrtiv€ counsel, fegarditrg same as necossaryi including but not llmited to, the
following;
o Vtctorta Me-illcal ProjeCt - reviewing the dtstribution schedule for the partial
dtstributisn to'investors and facllitatlngpayment of same;
o Eden/Klng,Cit1r- meeti-ng.with Pace Developments ln its qapacif as representative
of thi Ede;borrower,regardingthe .determination by the borroweirthat it is unable
to repay 111e BDMC lqan,"and iequesting and revlewlng:documentation related tot}e Eden Prd-jequ
o. Union Waierffont: r€vJdw regetvershlp appllcatiqn inat€rials and dealin$ withma-tters legarding.same; including discus$ions wlth the receiver;
o Danforth - reviewlng matters related to the rgques.ted postponement to'allow the
proiect to move foriard Wlth constructlori flnartcing ahd discussions with Osler
regarding sanre;,
I peter Ric-tuirqnd ProJgct - continuing to rqvlew documentatiqn and corresponding
with fortross,Real Developfrents Inc. ('Fortress"J ahd Osler regardi.ng a request by
the,bor.rswer for qecurity:retated ts.funds.ltradvanged ta the pr:oject.and a request
for a csrresponding postponernent ftom B'DMC i'egarding Same;
o South Shore Project.-,revieWtngdocuhentatlon'on.eonsffuction liens reglstered on
the project and.discussisnswdfr the.borrowerrs representative regarding expected
resolutlon of safne;
o Harlowe ptoject -,reviewirig a settldntent offer and performing a levieW'of the
proJect to determlne the appropriateness of satne:
FIAN M9RTGA9E AqMiNisTBAToRs t.Nc, | ?2G2p Adeloldq Streel Eo.ql Tqronlo'opforlon Msc 2T6
185
t-/f,ffiNAll,tlll,llSIRll'0'RS
o Braestone Proje.c! - revleWing a settlemenlt'offgr and perfor-mlng a'review of the:projectto deteflnihethe appropriatenesis of samo. As well, re9ieWingaUd executlngpa rtial discharge*,and
o Brookd4le ProJect -,ehgagi-ig with the Brqokdele receiver, i'is counsel and Oslerregardl ng matrcrs related'to the Brookdale'sale process;
r Establishing a.process for the. detailed prdject reviews to be.q,ompleled by the Trustee efall projects adrnlnis:tqred by BDMG.;
. Performing detalied project reviews, including but not limited.to, [he review of loanagreements, partlcipqtion and servicing agredmeuts, lendef qsktrowledgement andconsents, developinent'consultant agreeinents, budgets, capltal stacks,and viirlous otherdocuments pertaining to each of{he proiects;
r Cqrrespondlng With tvvo appralsal ffnns regarding the negotlatlon of'tlieir engagementIetters,and etrg4gihg them to comi)lete the "as'is" appralsitls for each of the proJects. wtthloans administered by BDMC;
r Working:wlth the BDMC employ,ess and the appraisers.to obtain the,information required'by the a-ppr.aiqers for ttre preparatig4 of Q.re,appraisEl$;,and
r Prpvidlng prgjecl,$pecific updatgs tg the investors upon request atrd following up withCanadlan Developrnertt Capita[ & Mortgage :seivlces,lnc. ("CDCM|IJ 'and F.oftress on afrqquent basis to obtain information rregardlng satTl€;
IliVestor Notices
r Reviewtng a dfaft noHce to all investors, advising of the appointrnent of Chaitons LLP qs
fepresentative counsel;
. Drafting finalizingrand distributing the following proJect speciflc noticesi
o Victaria Medical,nqtices dated luly t7,2AL8;.
'o. Bowmanville notice dated luly 18,201.8i
o Gapital Poirrte notice dated luly 18,2018;
o Oid Market Lane nstiee datedluly L8; 2018; an.d
o U-nion Waterfront noticedated lullt 26, 2018,
pg11r1 pIQffTGAGE ADMINISIRATORS iNC. | ?2e20 Adelqide Slreet Fort Toronto,.Onldrio,.'M5C- 2T6
186
FAANHBABMI
nl{
lgl0tISIRtr0ns
'Gerieral Matters
r Atrgridlng at BDMC premlses at 25 Brodle Dr., dailythrOqghout the Peiiod;
r Logging and responding to numerous investoi calls dnd emails during the Period;
r Meeting wtth the principals of Fortress on a perlodic basis rogarding the statgs. of varigusproJects, incluStng p.oJential,sale and r€payment opp"orturities belngundertakenby those
partiesl
,. Attendtng calls with FFM and FDS, two of the brokerages that,brokered loans for BDMC;
., Correspondlng wtth Oly-rnpia Trust Company ou a periodic basis regprding varlous matters
relatod to the'BDIvlC loans;
. Corresponding'wlth Computershare Trust Company on a periodic n'aSlS regairdin$ vafititts
matte* re-lated to the BDMC loans;
., Attending peiiodic investor ms,etirjgs,a.t the EDIvIC premises andra! the Trustee's office;
rOorrespondtpgwithfinaircial$ervicesGommissionofontaris'andltslegalgpunt,el;
o Correspondtng with BDMCTs IT provider regaiding varlous BDMC IT related matters;
., Cori'espoRding with repfesentatives'of CDCM regarding informafion rdQubsts fOi varlous'
proiects:and riga.rdlngihe bosks and records reguired by''BDMc;
. Reviewing."n6 ,linalizing a list of Fre^qu9nt!V^{1ked Questions, ts address' comrroh
ques$ons raised byinveslbrs followingthe JUne 26u' Motlon;
.. Managlqg the Trustee's websltq; includi4-g,arrEnging:for the posting o.f the. Frequenily
As.ked Questiorls dat€d luly L7,,2A.18 on tliewebsite;
o Reviewing and',finalizing a letter to be distributed to prlority len$ers on proiects
administdied'by:BDMC, tJadyisepf the TrusteeiSnppointmentand that the Trustee should
be informed oi anlr enf.i,ro"metrt proceedlngs cdmmenCed: of to b-e cdmmenced by the
lenderi
r Reviewing,notices received from numerous investors; inltiated by the'ilnvestorVoice" arid
torre3ponding with Osler regardi4g'same;
.r Revtewlng a response to the Invest0r Voice letter and distributlSrg,s-qrne;
r Overseeing the leview and updating of the BDMC electronic records to qnsure that all
available inyestor closing packages were scanned.and readtly available in electronic
formatiFAAN MORTGAGE ADMNiSIRA{OR$ lNC. | 92G20 Adelside slreet,Eosl Torolrle,.onlorlq,.M$c.2T6
187
FAANH0fiI$r0fAlilili{tsl'ni1'0ns
. Wqrking with BDMG to establish a process to prepare:interest calculation.surhmart's inordef to'csnfifih:the total interost paid on'eac! loan qrid the accrued interest orglng on each
loan admlnlstered by BDMCi
r Paying operatlng:expensesincluding arnong other thlngs, ient.and payroll;
r Managirlg the B'DMC employees, responding to their questtons,and.providi4g dlrection as.
necessary;
r Correqponding with Chaitpns LLP, represehtative cqunsel, on a perlqdlc basis regardingthese proceedlngs;
' Attendlng numerous calls with Forness;
r Attending moetings; calls and exchanging numdrou$ einails with Osl0r regarding tlieseproceedinrgs; and
r Dealing with alt other:meetlngs, correspon{ence, etc. pertaining to this matter,
d
Total fees per attached time summaryH$TTotal
$ 136,615,95
--.. - 17,76Q,Q7:$ t54,376,02
FAAN MORTGAGE ADMINFnATORS lNg, I t2C29 ldeloloe Slreel Eqst Tsronls, onlsila, MSG 2T6
188
FAAN Mortgage Admlnlsffatorc lrio.Bulldlhg & Development Mortgages Canadq lnc.Tlme..SummaryFor: the Perlod July 1, 2018 to,July 31 , 2018
Lana Beznerpanlel:Sobel$helby DraperNaomiLiebermanNlck Nlktlkakis
Managing.PireotorMenaglng DlreetorManagerManagerManager
Rate Hours TotalI
96.408.92
97.6683.84
149.50
435435300300300
41,934,003j8E0.20
11;295,0025,152,0044,850"00
398.16 136,615.95
Averag-e hou.rly rate 343.12
189
FAANti0Rl0tuiA0'MillrsfRrI0Rs
Invoice 004
August31,,2018
,Re: FAAN,.Mortgage Adminlstrators Inc. in its eapaclty as,Court appointed Trustee("Trusteo") qfbuilding & Dsvelopmont ltlofigages Canada Inc.'1"BDMeu)Invoice forthe perlodAugust.l to 3L12018
The Trustee's activltles for the poriod August 1, 201.8 tp August 31, Z0tg ("Peitod'), include, butare not'limited to the following:
Profect Matters
. Throughout thq,Feriod the Tfustee,dealt with.numerous project speclfie matters andctbrrbspohd,ed with Osler'Hoskin & Harcourt LLP [i'Osler"), the Trustee's counsel, andChaitqns LLP; representative counsel, es necessary regarding same, including but nOtItmited to, the folloWing:
o Danforth - r€viewlng matters related to the requested pogtponement to allow theprofectto move'forward With:cons*uction flnanclng ahd discusslonswith Osler andthe appr4lser of the Danforth project rqgardlng samei
o Peter Richmond Proiect - continuing to rgviqw documentation and cprrespondingwlth Forfess Real DeveloprnenB hlc" ("FortressoJ and Osler regarding a reqriest by.
tle bor.rower fpr securiff rplated'to funds it advaneed to the proJect and a, r€Questfor.a correspgnding postB.dnemel-lt from BDMC regardlng game;
o Harlowe Pro,ect - reviewing a.settlement offer and perfotming a review of theprolect to determine'the appropriateness of same;
o Braei.stoqe Project - reviewlng a settlement offer and perforrning a revlew of theproJ ect to deterrnine the a,ppropriaten Bss of sarhe; As w6ll, revteWl$ g and executin g
partial dlecharges;
o Brookdale ProJect -mattgrC related to the Brookdale sale process;
'o Union Wateffrbnt Project - dealtng with' matterS ielated to the reteivershipproceedingc including ealls wlth the court.appointed recelver r€garding the
feeeFerqbiF BrOccecllngs:genepally aqd the,planned. g;als prpqes.E
o Geofgetown Projeet - dealing with matters,retated tq the reffnancing of the proiect' and the noiice ef.intention:to rnake,a proposal.ffled by the bsrroweri
a South Shsre Project -revJewing docurnentation,on consFuetion liens registered on
FAAN MORISAGE ADMINTSTBATO.RS tNC. | 92S.20 AdOloide StreoJ EOsl Tolonlo, Onlorlo, M5C'2T6
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the.projectqnd.discussions wlth the b,orror,v€rfs rdpresbntadve rdgardi4g expectedresolution of same;
r Perfqrming dltailed proJect reyieWs for all proJects: administered'by BDMC, including, butrlot ltmited to,reviewlhg loart agreemrents, partlclpation and serviclng agreemeilts, Ienderacknowledgement,and consente, development csnsulthnt:agreements, budgets, capltalstacks, waterfalls gnd varlous o-tlier docurtrents pexta-ining,to eqch of the projects;
I Meeting and attendlng galfs with a planning consultant on a pdriodlc basis regarding thedeyelopment status of : each proiect, 'the 'remaitling milestones and any potenfial;inrpediments to achieving those milqstones that may arlse; and incorporatlng same lntothe project specific analyses;
r Corfespondirrg with the appratsal firms engaged to complete th€ "as is" appraisals for eachof the prolects witlt loans administered by B'DMC;
r Working with the BDMC, employees to compile tnformatlon required by the appraisers forthe preparation of the appraisals and responding tgthe:.appraisens' inquiries and requestsfo r ad dl ti onal itl formation regarding sa me; and:
'c Providing project specific updatd.$ to the, invbstois upon request:and following up withCanadian Development Capital & Mortgage .sewlces Inc. (tgp6y"J and Fortress on a,
frequent basis tobbtaiu inforrnation regarding same,
'tnvestdr Notlces
o Drafttng, flnaliztng'and distributing the following project specifib nodces:
'o CHAT notice dated August 1, ?018;
o Georgetown notice dated Atrgust1,2018;
o Danforth notice dated Auggst 2; 2018;
,o Union Waterfront notice dated August 10; 20tr-8;
o Old Market Lans [otices dated,August 1,7 aud 20,2018; and
e The Kemp Rotice dated Auggst 90, 2018.
Gbneral Matteirs
r Attending at BDMC premises at 25 Brodie Dr., dAll11 thrbughout the Ferto{;
o Logging and resiroilding to numeiFous lnvestor calls and ernalls durlng the Feriod;
FAAN MQRIGAGE ADMINISTRATORS lNC. I 9,2G20 Adelolde Slr€el Eoit ToronlolOrllorio,.MSC 2T6
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. Meeting with 'the princlpals' of Fortress on a periodic basis regardihg the sthtus of VariousproJects, including poiential salB apd repayment opportunitles betng undertaken by thos.e
Partles;
o Attending calls with FF'M and FDS, two bf the brokerages thal brokered loans fp-r BDMC;
r Corrospondtngwith Olympia TrustGompanyon a periodichasls reg.ardingvarlous mattersrelated 1q glie; B-DMG loans;
r Cqrre^sponding'with. Computelsbare Trust Company pn a penlodic basis regarditrg varlous.matters'relatedrto the BDMC loats;
r, Attending pefiOdlc'tnvestbi rheetingsat the BDMC prerhises and'at'the Trustee's'offlce;
r. CorrespondlngWithFinancial Seiviee$ Commission of 0nta'!16'and its legal counsel;
.. Corresponding:wlth'BDMCrs IT ptovlder r€gardlrtgvarl0ug BDMC IT telated matters;
. Correspondlngwlth provlncial licensinggroups rergardingmatters pertelning'to the BDMC
lisencos in other prqvfnce€, inclrrding Alberta and'Saskatchewan;
.. Correspogding with rqpresentqtlrles of CDCM regarding.informatlon vequests forv-ariousprojeets and regardlng'the books and records.reqqired by BDMC;
o Attonding a conference call.on,August 14, 2018 cohvened b5r t'orfress to updatebrokers on
the statul,of the various projects, and:revtewing the ,rninutes'regarding sanlei
. Respondlng:to additionalcorresgoRdence f-romthelnvestorvoice and conveRing:calis and
exchan gin g emails tvith Osler rqgarding: sam e;
r gveiseeing the review and updatirlg of the BDMC electrohic_rqcQrds'tp ensure that 1[avallable. investor closing paikages vuere scanned .,and readily available in electronic
formaU
.l Re.viewingand flnqllzlrgo letterto:allborrowets datedAuguit20,'2019, requegting'among
othef thtrigs, various:dolumdhtation,related tothe re3pectlVe:p'r.oiectS; Which is required
to be provided by the borrowers to BDMC pursuant to the terms'of the loan agrsemehts;
r Overseeing the process established to prepare interest calculation surnmaries'to conflrm
the total interest paid on each loan and the accrued intelest owing on each lban
administered by BDMC;
r Paying operating expenses includingamong otler thlngs, rent and payroll;
t#
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r Managng the, BDMC emplciyees, respondirrg to their questlons and providiqg dlrection as
neces$ery;
r Attending numerous calls wlth Fortress;
r Correspondlng rylgS Chaitqns:L[P on:a periodic basls,regardlng these proceedlngs;
o Attending meetings, calls and exchanging numerous emails wlth 0sler regarding theseproceedingsi and
. Deailng.with,ail other meetlngs, correspondence, etc, pertaining to this mattor,
$ 123,481.50Total fbbs per attached time summaryHST
Total :$52,60
0
FAAN MORTGAGE ADMIN|STRATORS,INC, I ?2&..20 Adeloide slieei Eo3tToronlo, onloilo, Msc 2T6
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FMN Mortgage Admlnlstrators lnc.Buildlng & Developmght Mortgages Canada lnc,
Tlme SummaryFoi the Feriod 1, 2018 to Auoust 3.|. 2018
Lane Bezner.$helby DiapdrNaomlLleberrnanNi.ck Niktlkakis
Rolerector
Managing DlrectorMa46gerManagerManager
Rate Hours otal4354353003oo300
86.20784464.,14
11
37,497.0023i532.0019.242.Oo
00
338,7{Average hourly rate
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Septernber 30, 2018
Re: FAAN Mortgage Admlnlstrators Ih€, in its caBaclty as Gourt. appointed Trustec('!Trusteet') of'Buildtng & Development.Mortgages Ganada.Ini". ('1gpy6t';Invoics for the pertod,september '1'to Senternber 30,2018
The Trustee's activltles for the perlpd September t, 2018 to September 30, 2018 ['rPeriod"),include, but are not limited to the following:
Froiect Matters
r Throughout the Peqiod the Trustee dealt with numerous proJect specific matters andcorresponded wit}l Osler Hoskln & Harcou.rt LI,P (l'Qsler"J, the Truptqe's ceunsel, andChaitons. LLP, representatlve coUnsel; as neees'sary fegarding same, including but notli,rnited to, the follow.ing:
.o Danforth Projcct -,matters related to the requested pQstppnem.en$
o Feter Richmiind,ProJect - aontlnulrig'to review documentatioh and correspondtngwith Fortress' Real Developrnerrts Inc' ('Fortress't1q.nat Osler regafding a request by the borrower for s.ecurity related to funds itadvanced to the, proJeet .and a request fdr a:correcpqnding posqpanement fromBDMG,regarding same;
o Eden/King Gily Projeql -reqlestlng and rqviewing,do-cumentation related tq theEden project, cdrres.ponding wlth Oslerregarding correspondencb received from
eounsel to theborrower, reviewlng.demand letter.issued to counsel to the borrowerregardlng the repaymen! of the BDMC loan;
o llarlowe,FrOJecG - iidViewtng;;a settletng[t offer.and pefforrhing a review of theprojectto :determlne the'approprlate.ness of'earne;
o Braestone Project - reviewing a.settlement qffer and performing a review of theproJecttodeteruilnetheappropriatenessofsame, Aswell,reviewingbndexecutlngpartial discharges;
:o Erookdale Proiecl -mqtlers related to the Brookdale sale process, includrng ,therevlew of motipn tnaterials in respect of the sale, approval motion returnableOctober 18,2018;
o Bauhaus P.roject * reviewing a postponement request and correspondlng withCanadian Development Capltal & Mortgage Services Inc. ('CDeMl and
FAAN MORTGAGE ADMINISIRATORS lNC. | 92G.20 Adelside Slreel Eosl Toronlo, Ontorlo, MSC 2T6
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Cottrputershare regarding same;
o Mississariga Meadows 1 and 2 Proieqts - rnatters related to the enforcernent,proceedings commenc.ed by the prlorlty lender$., lhcluding cbntinued discussionswlth the bbrrowerregardinga potential sale:transactlon for the properties;
o Treehouse ProJect - reviewing a postponement request and corresponding withOsler regarding same;
.o Georgetown Froject - dealing with matters related to the notice ofintenrion to makes,proP a$al Sed by the,' borroweri
o Whitby'Project.- reviewing.mhtters.related to reffnaneing of priorlty lendef;
r Performing detailed proiec!.reviews for all projects administered by. BDMC, includlng, butnot linnited to, dlscussions,With'a planning ConSirltant regarding the pioiects, revlewlngloan agreements, pqrticipation and serviclng agreements, lender acknoWledgement and
conserits, developinent cbnsultant agieements; b-udgets, capilal stacks and various qtler' documents perlaiuing to.each of:the projects;
. Working w:ith the BDMC employees io.compile infbrmatiou.required by the appraisers fortho prefaration of theappraisals and re{pqnding to the appraisers' inquirios and requestsfor additisnal information'regardin g same;
r CorrecBondlngwlth the appral3al flrms engaged to compl'ete the "as is"'appralsalsfor each
of the projects-.wlth loaas.administe.red by BDMCI
r R€viewing draft appralsals ln conneetion wlth proJect revlews and corresponding wlth the'
appraisers regaiding'sarhe;
r Attendlhg calls with certain borrowers regardilig, among other thin$S, the status of theirproJeets,
-uP.cor.nlng nnllestpnes and:timing.to, completionl,and
o Prqviding proJect speclfic updates to the investors,ulon'request and following up withCDCM and Foftres$ on a frequehtbaSis to.obtain infofmation regarding same?
lnvestor Notlcgs
r Drafting fhalizing and distributing:ft6 r611owing project speeific notlces:
o Gapltal Pointe'notice dated Septen'lber 5, 2018;'
o wfiltby nofice:dq'ted'sepgem-ber 7, 2078;
o Georgetown notices'dated September 12 and 26, 2i,0L8:
fAAN MORTGAGE ADM|NISIRATORS iNC. | 9tu20 Adplqide Slieet Essf,Torontq, ohtcirio, Msc 2T6
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:o Colliers notice dated September,21,2018;
o Hunibqrslohe [otlce clated'september 26, 2018;
o Old Market Lhn€ nodCe dated Seplember 26,2018i
o Misslssauga MeadoWs t htitlce dated Septemp-er 28,20.18;'and
o Mississauga Meadows 2 notice dated Septernber 28,2018.
General'Matters
r Attending'at BDMC premises at ?5 Brodie Dr., daily througlrout the'Period;
. Logging and res-ponding to ntrffi€rousinvestor calls:emails during the Ferisd;
r Meeting with the principals of FortresF on a periodic basis regardingthe'status of varlousproJects; includirig potential sale and repayment oitportunlties belngrrridertaken by thos€parties;
r Responding to calls and emails from:brokers regardingvarious'proJects;
I Correspondilgwith Olympia TrustCompany.on a petiodic:basis rogarding varlous mattersrelated to the B:DMC'loans;
r Gorresponding with Computershare Trust Gompany gn a p.ei.iodic basis regardingvariousmqtters related to the.BDMCloans;
r Attending periodic'investor rneetings at the,BDMC.premises and at the,Trusteets offlce;
o Correspondingwith Financial Services Commlssion of Ontario and its legal counsel;
e Corr€spqndingwith BDMC's IT provlder regardlngvarious BDMC IT related matters;
r Correspondtngwith representatlveq of CDCM regarding lnfonnatipn requesls for variousproJects and rq$ardhg the bookS and records required by'BDMC;
. Corresporidlng with BDMCIs insiirancO brokef regatding the renewal, of the BDMC
lnsurance,,:and compiling info rmation req ulred by the insurer wjth' respect to same;
r Corresponding with provincial llbensing'gro-ups,'regarding matters pertaining to the BDMClicenses in other provinces;
o Ovoiseetng the review and updating of the remaining BDMC electronic .reeords andassistingthe BDMC employees wlth the follow uF regardingsame;
FAAN MORIGAGE ADMINISTRATORS ING;. | .920,20 Adeloide,Slreel Eosl Toronto, Onlorio, M5C]2T6'
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a Overseeing thd process established to prepare interqst calculatlbn summaries to conflrmthe total interest pald on each loan and the accrued interest owing on each loanadministered by BDMC;
Paylng operating expenses inc-luding among other thi4gs, vsnl and payroli;
Managlng the BDMC employees, respondingto their questions and provldlng.directipn as
necessaty.;
a
o
) Malntatning the Trusteels,webslte;
e Gorrespondingwith Ghaitons LLP on'a,periodicbasis regardlng thdse proceedings;
. Attendtng meetfngs, calls and exchanging numerous'emails with Osler regardirtg theseproceedingsl and
r DeallngWtth all qther mee.tings,'aorrespondqnce, etc- pertaining.to thi-b matter,
Total fees perattached time summar|HSTtotal
$, L22;4r5.75.15,914,05
$ r3-e,32?:90
FAAN MoRTGAGE ADMINISTBATORS lNC,'l t2q-2o,AdeloidE Slieet Eosf,fo1sn1q, ontsilo, MSC:2T6
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FAAN Mortgage Administrators lnc,Bulldjng & Development Morlgages Canada !nc.Tlme.$ummaryFor the Period September 1, 2018 to September 30, 2018
Fersonnel Role' Hourty'Rate ($) Hours Arnount{$)NaVeed ManzoorLanq BeznerDanlel$obelShelby DraperNaomiLiebermanNick Niktlkakls
Totaf
Averagg hourly rate
Managing DirectorManaglng DlreotorI1{anaging DirectorManager[i/lanagerManager
436 12;60 5,491.00 .
435 91.35 99,797.2543F 4,50 1,957.50300 22;19 6,648,00300 87.:14 26,142,.00300' 141.50; - 42;1$p.q0
@340.75
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THIS IS EXHIBITOOB'' REFERRED TO IN
THE AFFIDAVIT OF NAVEED MANZOOR
SWORN BEFORE ME ON THIS 1 Y OF NOVEMBER,2018
A Taking Affidavits
766
200
EXHIBIT B
SUMMARY OX'ACCOqNTS
For Billing Perlod Ending Fees Taxes Total
April 20 - May 31, 2018 $211,402.50 $2'1,482.32 $238,884,82
June 30, 2018 $140,512.50 $18,266.63 $158,779, I 3
July 31, 2018 $136,615.95 $17,760.07 $154,376.02
August 31, 2018 $ 123,481.50 $16,052,60 $139,534, l0
September 30, 2018 9122,415.75 $15,914.05 $138,329.80
Total $734,428.20 $95,475,67 $829,903.87
20L
THIS IS EXHIBIT "C'REFERRED TO IN
THE AFFIDAVIT OF NAVEED MANZOOR
SWORN BEFORE ME ON THIS 1 Y OF NOVEMBER, 2018
Taking AffidavitsA
iIAIE IIODD,JONE8ftnlebrand sollclbr
2nd Floor, 3800 LYsander laneRlchmond, B.c., V7B lcg
804-247./'-766
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HGIIBIT C
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FAAN Mortgage Administrators lnc.Building & Development Mortgages Canada lnc.
Time SummaryFor the Period April 20, 2018 to SePtember 30,2018
PersonnelNaveed ManzoorLana BeznerDanielSobelShelby DraperNaomiLiebermanNick Niktikakls
Total
Average hourly rate
RoleManaging DirectorManaging DirectorManaging DirectorManagerManagerManager
Hours Amount27.30 55,375.50
539.65 234,747.75116.57 50,707.95138.25 41,475.00436.40 130,920.00737.34 221,242.00w
350.48
Rate435435435300300300
204
THIS IS CONFIDENTIAL EXHIBIT "D" REFERRED TO IN
THE AFFIDAVru OF NAVEED MANZOOR
SWORN BEFORE ME ON THIS 19TH DAY OF NOVEMBER, 2OI8
A for Taking Affidavits
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205
Exhibit D
TIIIS EXHIBIT IS REDACTED IN ITS ENTIRETIAI{D IS SUBJECT TO A REQUEST X'OR A SAALING ORDER
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Appendix 9:
De Lellis Fee Affidavit
208
Court File No. CV-18-596204-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
(CoMMERCIAL LrST)
BETWEEN
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION I-INDER SECTION 37 OF TIMMORTGAGE BROKERAGES, LENDERS AND ADMINISTMTORS ACT, 2006, S,0.2006, C.29
and SECTION 101 OF THE COURTS OF JUSTICE ICI R.S.O. 1990 c. C.43
AF'F'IDAVIT OF MICHAEL DE LELLIS(sworn November 19, 20L8)
I, Michael De Lellis, of the Town of Oakville, in the Province of Ontario, MAKE OATH ANDSAY:
l. I am a barrister and solicitor qualified to practice law in the Province of Ontario
and am a partrer with Osler, Hoskin & Harcourt LLP ("Osler'), counsel for FAAN Mortgage
Administrators Inc., in its capacity as Court-Appointed Trustee (the "Trustee"), without security,
of all of the assets, undertakings and properties of the Respondent in these proceedings and as such
209
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have knowledge of the matters hereinafter deposed. Where I have indicated that I have obtained
facts from other sources, I believe those facts to be true.l
2. I make this affidavit in support of a motion by the Trustee for, among other things,
approval of the fees and disbursements of the Trustee and its counsel.
3. Attached hereto as Exhibit "A" is a copy of each invoice issued by Osler for the
period between Apirl2I,2018 and September 30,2018 (the "Approval Period") setting out
Osler's fees, reimbursable expenses and applicable taxes for the relevant period, along with a
summary of the activities undertaken by Osler in connection with such invoice. I confirm that
these accounts accurately reflect the services provided by Osler in this matter for the Approval
Period and the fees and disbursements claimed by it for the Approval Period.
4. Attached hereto as Exhibit "B" is a schedule of the accounts rendered by Osler to
the Trustee for the fees and disbursements incurred by Osler in connection with the activities
summarizeil in Exhibit A undertaken in these proceedings during the Approval Period.
5. Attached hereto as Exhibit "C" is a schedule summarizing the respective years of
call and billing rates of each of the professionals at Osler that rendered services to the Trustee, the
hours worked by each such individual and a blended hourly rate for fees incurred during the
Approval Period.
6. Attached hereto as Confidential Exhibit "D" (the "Confidential De Lellis
Exhibit") are true copies of the full accounts rendered by Osler to the Trustee for activities
undertaken during the Approval Period. The Trustee is seeking a sealing order with respect to the
I Capitalized terms used and not otherwise defined in this affidavit have the meanings given to them in the Third
Report of the Trustee dated November 19, 20 I 8.
210
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Confidential De Lellis Exhibit due to the fact that the information contained in Osler's detailed
invoices includes privileged and commercially sensitive information regarding the projects and
BDMC generally, and the disclosure of that privileged and/or commercially sensitive information
could have a material adverse effect on the recoveries that may ultimately be available to Investors
in these proceedings.
7 . To the best of my knowledge, the rates charged by Osler throughout the course of
these proceedings are comparable to the rates charged by other law firms in the Toronto market
for the provision of similar services. I believe that the total hours, fees and disbursements incurred
by Osler for the period between April 21,2018 and September 30,2018 are reasonable and
appropriate in the circumstances.
SWORN BEFORE ME at the City of Toronto,in-the Province of Ontario on November 19,2018
for Taking ffidavitsiurid(\(J/!
Michael
2LL
THIS IS EXHIBIT 6(A'' REFERRED TO IN
THE AFFIDAVIT OF MICHAEL DE LELLIS
SWORN BEFORE ME ON THIS 19TH DAY OF NOVEMBER, 2018
forTaking Affidavits
gntutQn*-,t-.-.A
2L2
Exhibit A
213OSLER, HOSKIN & HARCOURT LLPI First Canadian PlacePO BOX 50
Toronto ON M5X lB8CANADA416.352.211 I nrain4 I 6.862.6666 facsim i le
FAAN Mortgage Administrators Inc.
20 Adelaide Street East
Suite 920
Toronto, ON MsC 2T9
CANADA
Attention: Naveed Manzoor
Oslun
GSTAIST No.: 127983217 RT0001'
Invoice No.:Date:Client No.:
Contact:Direct DialE-mail:
12749369
May 28,2018
232833
Michael De Lellis(41.6)862-s997
MDelellis@osler.com
For professional services rendered for Building & Development Mortgages Canada Inc'
Administrat or (F # 1,189997) -
OURFEEHEREINREIMBURSABLE EXPENSES
HST @ 13%
53,173.50
772.41
7,012.98
TOTAL (CAD): 60,958.89
PAYMENTDUE ONRECEIPT
We nre committed to protecting the enaironment. Please prooide your email ntlelress to Ptrlllfients@oslet.cofi to teceioe
inaoices nntl reminder st ntements electronically.6r)><REMITTANCE ADVICE
Canadian Dollar EFT and Wire Payments:
TD Canada Trust751 3rd Street S.W.
Calgary, Alberta T2P 4K8
Transit No: 80629-0004
Account No: 5219313
SWIFTCode: TDOMCATTTOR
Entail payntafi rlet ails t o P nlm ents@os ler.cortt'
refetenciltg ittooice nnnbet(s) being paid,
Cheoue Pavrt'rents:
Osler, Hoskin & Harcourt LLPFINANCE &ACCOLJNTING(RECEIPTS)
1 First Canadian Place
PO BOX 50
Toronto. Ontario M5X 188
Canada
Please retun ranittatce advice(s) tttithclrcque,
Amount: 60,9s8.89 cAD
Invoice No.:Client No.:
72149369
232833
osler.com
21,4
Invoice dated May 28. 2018
For services rendered for FAAN Mortgage Administrators Inc. in its capacity as Court-appointed
trustee of Building & Development Mortgages Canada lnc. for the period between April 21, 2018
and April 30, 2018:
. Bowmanville: Engaged regarding Bowmanville enforcement proceedings, including
foreclosure and power of sale; attending to construction lien matters.
. Brookdale: Engaged regarding potential settlement of outstanding litigation and
postponement to new {inancing arrangements; attending to construction lien matters.
o Kemp: Attending to postponement and subordination request.
. pivot: Negotiating and otherwise attending to partial discharges to facilitate sales and
repayment of senior loans.
o General: Engaged with the Trustee extensively regarding multiple matters, including
projects not referred to above, the scope of appointrnent order, case strategy, cost
iecoveries and contributions from third parties, and sources and uses for funds of lenders
under syndicated mortgage loans advanced through BDMC (such individual lenders, the,,Investors"); attending to land registry and extra-provincial registration matters; attending
to various project matters including reviewing loan agreements and packages, considering
and responding to postponement requests, partial discharge requests and enforcement
proceedings; engaged regarding lnvestornotices and Investor communications; responding
io Investor inquiries; and conducting legal research with respect to various matters.
215OSLER, HOSKIN & HARCOURT LLPI First Canadian PlacePO BOX 50Toronto ON M5X lB8CANADA416.362.21I I nrain4 16 -862.6666 facsimi le
FAAN Mortgage Administrators Inc.
20 Adelaide Street East
Suite 920
Toronto, ON MsC 2T9
CANADA
Attention: Naveed Manzoor
ost ER
Invoice No.Date:Client No.:
Contact:Direct Dial:E-mail:
L2766637
june 28, 2018
232833
Michael De Lellis(476) 862-s997
MDeLellis@osler.com
GSTAIST No.: 121983217 RT0001
For professional services rendered for Building & DeveloPment Mortgages Canada Inc'
Administrat or (F #1.1'89997).
OURFEE HEREIN
REIMBURSABLE EXPENSES *
HST @13%
1.64,41,0.00
1,,159.65
21,,487.00
TOTAL (CAD): 1820s6.65* brcludes non-taxable expenses of285.00 CAD
PAYMENT DUE ON RECEIPT OF INVOICE
Wenrecomtnittedtoyrotectingtheenaironment. Pleaseprouideyouremailntldresstopnyments@osler.conttorecehte
inooices nnd reminder st nt efients electronically.S)}{REMITTANCE ADVICE
Canadian Dollar EFT and Wire Payments:
TD Canada Trust751 3rd Street S.W.
Calgary. Alberta T2P 4K8
Transit No: 80629-0004
Account No:5219313SWIFTCode: TDOMCATTTOR
Email payntett details to ttnlnnrts@osler.cottt.rcferencing inztoice unnbe4s) being paid.
Cheoue Pavments:
Osler, Hoskin & Harcourt LLP
FINANCE & ACCOUNTING(RECETmS)1 First Canadian Place
PO BOX 50
Toronto, Ontario M5X 1BB
Canada
Please retanr renitttnrce acloice(s) withclteqte.
Amount: 182056.65 CAD
Invoice No.:
ClientNo.:72166637
232833
oslel'.com
2t6
Invoice dated June 28. 2018
For services rendered for FAAN Mortgage Administrators Inc. in its capacity as Court-appointed
trustee of Building & Development Mortgages Canada Inc. for the period between May 1, 2018
and May 31,2018:
. Bowmanville: Ongoing engagement regarding Bowmanville enforcement proceedings;
reviewing and considering potential refinancing, including projected recoveries on
alternative scenarios and attending to documentation.
. Brookdale: Engaged regarding ongoing litigation issues and potential settlement of same;
attending to construction lien matters; attending to Court matters; considering available
alternatives to enhance Investor recoveries and taking steps to pursue same.
' . Dunsire: Reviewing receivership and sales process materials; considering strategy to
improve investor recoveries; engaged with the receiver and its counsel regarding Investor
recoveries.
. Pivot: Negotiating and otherwise attending to partial discharges to facilitate further sales
and repayment of senior loans.
. General: Engaged with the Trustee extensively regarding multiple matters, including
projects not referred to above, case strategy, and cost recoveries and conkibutions from
iruia parties; preparing various letters to borrowers and other lenders, including demand
letteri and stay letters; engaged regarding interest reserve accounts and other frrnds held by
BDMC; preparing for interim stabilization measures motion; preparing proposed interim
stabilization order and related motion materials; engaged regarding preparation of the
Trustee's First Report; attending to various project matters, including reviewing loan
agreements and Investor packages; reviewing and engaging in negotiations with respect to
postponement requests and partial discharge requests; engaged extensively regarding
enforcement prociedings taken against multiple projects; attending to land registry and
regulatory issues; engaged regarding notices to borrowers, brokers and Investors regarding
key issues and responding to Investor inquiries'
2t7OSLE& HoSKIN & HARCOURT LLPI First Canadian PlacePO BOX 50
Toronto ON M5X lB8CANADA416.362.21II main4 16.862.6666 facsimi le
FAAN Mortgage Administrators Inc.
20 Adelaide Street East
Suite 920
Toronto, ON M5C2T9CANADA
Attention: Naveed Manzoor
OslrR
Invoice No.Date:Client No.:
Contact:Direct Dial:E-mail:
12776432
July 31, 2018
232833
Michael De Lellis(41.6) 862-s997
MDelellis@osler.com
GSTA{ST No.: 121983217 RT0001
For professional services rendered for Building & DeveloPment Mortgages Canada Inc.
Administrat or (F #1,1,89997).
OURFEEHEREINREIMBURSABLE EXPENSES
]HSi @12%
154160.00
940.96
20,423.12
TOTAL (CAD): 777,524.08
PAYMENTDUE ONRECEIPT
We are committeil to protecting the enaironment. Please proaitle your email ncldress to WJnents@gstelgSLto teceiae
inooices tmd reminiler stntements electronically.6'><REMITTANCE ADVICE
Canadian Dollar EFT and Wire Payments:
TD Canada Trust751 3rd Street S.W.
Calgary, Alberta T2P 4K8
Transit No: 80529-0004
Account No: 5219313
SWIFT Code: TDOMCATTTOR
Email p aynrent details t o pnyn ent s@osler.cotn-
referntcing inaoice nnnber(s) being paid.
Checue Parrments:
Osler, Hoskin & Harcourt LLPFINANCE & ACCOUNTING(RECEIPTS)
1 First Canadian Place
PO BOX 50
Toronto, Ontario MsX 188
Canada
Please refimr rentittance adoice(s) zuith
cheqte.
Amount: 177,524.08 CAD
Invoice No.Client No.:
12176432
232833
osler.com
21,8
Invoice dated Julli 3 1. 20 1 8
For services rendered for FAAN Mortgage Administrators Inc. in its capacity as Court-appointed
trustee of Building & Development Mortgages Canada Inc. for the period between June i, 2018
and June 30,2018:
o Bowmanville: Continued engagement regarding Bowmanville enforcement proceedings
and potential refinancing.
r Brookdale: Continued engagement on construction lien matters and potential settlement
and refinancing discussions; reviewing applicable motion materials, budgets and projected
recoveries; analyzing priority issues'
. Dunsire: Continuing review and engagement regarding receivership and sales process;
ongoing efforts to improve investor recoveries.
. Bradford Bond Head: Reviewing loan documentation; reviewing and negotiating
postponement agreement to new financing arrangements to pennit ongoing development
of the project.
o Peter Street: Engaged in negotiations regarding postponement request; reviewing and
considering various project specific matters and potential Investor recoveries in connection
with same.
o pivot: Reviewing, corresponding, and attending to unit sales and partial discharges to
facilitate repayment of senior loans.
o General: Engaged with the Trustee extensively regarding multiple matters, including
projects not refered to above, case strategy, cost contributions from third parties, demand
letters, interest reserve accounts, interim stabilization measures, and regulatory issues;
engaged with Chaitons LLP with respect to proposed Representative Counsel appointment;
continuing preparation and finalization ofproposed Interim Stabilization Order and related
motion materials, including Trustee's First Report; engaged in in depth review of projects
and preparation of project-by-project status updates; attending at Court with respect to
motion for approval of Interim Stabilization Order; attending to various project matters,
including reviewing loan agreements and Investor packages, considering and preparing
notices to borrowers, brokers and Investors, reviewing and negotiating postponement
requests and partial discharge requests; responding to various enforcement proceedings;
responding to Investor inquiries.
2t9OSLE& HOSKIN & HARCOURT LLP
1 First Canadian PlacePO BOX 50Toronto ON M5X 188CANADA416.362.2111 main416.862.6666 facsirnile
FAAN Mortgage Administrators Inc.
20 Adelaide Street East
Suite 920
Toronto, ON MsC 2T9
CANADA
Attention: Naveed Manzoor
OslrnInvoice No.:Date:
ClientNo.:
Contact:Direct Dial:E-mail:
72186824
August 27, 2018
232833
Michael De Lellis(41.6) 862-5997
MDeLellis@osler.com
GST/HST No.: 121983217 RT000L
For professional services rendered for Building & Development Mortgages Canada Inc.
Adrninistrat or (F # 11,89997).
OURFEE HEREIN
REIMBURSABLE EXPENSES *
HiST @13%
75,176.50
696.00
9,878.06
TOTAL (CAD) 85,690.56* brcludes non-taxable expenses of349.00 CAD
PAYMENT DUE IJPON RECEIPT
We are committed to protecting the enoironment. Please proaide your email aililress to Wymgnl;@9flg-.mryto receiae
inuoices antl remintler stntements electronically'ffiREMIfiANCEADVICE
Canadian Dollar EFT and Wire Payments:
TD Canada Trust751 3rd Street S.W.
Calgary, Alberta T2P 4K8
Transit No:80629-0004
Account No: 521.9313
SWIFT Code: TDOMCATTTOR
Email paynant details to pavnmts@osln.com.rcferercing inooice nunber(s) bebry paid.
Cheoue Pavments:
Osler, Hoskin & Harcourt LLPFINANCE & ACCOUNTING(RECEI['TS)
1 First Canadian Place
PO BOX 50
Toronto, Ontario M5X 188
Canada
Please rchrn rernittsnce ailoice(s) withcheque.
Amount: 85,690.56 CAD
Invoice No.:
ClientNo.:12\86824
232833
osler.com
224
lnvoice dated Aueust 27" 2018
For services rendered for FAAN Mortgage Administrators Inc. in its capacity as Court-appointed
trustee of Building & Development Mortgages Canada lnc. for the period between July 1, 2018
and July 31,2018:
. Brookdale: Engaged extensively with respect to sales process and stmtegy; researching
case law on priority issues and related matters; considering projected recoveries, analyzing
priorify issues, construction liens and related matters.
. Danforth: Engaged in negotiations regarding postponement to new financing to permit
further development of the project; conducting diligence and negotiating agreements in
connection with same.
r Peter Street: Continuing to attend to postponement request and consideration of various
issues in connection with same.
. Eden: Engaged regarding cost ovemrns and projected recoveries in respect of same;
multiple discussions and correspondence with relevant parties; analyzing potential
remedies.
o Braestone: Engaged regarding outstanding debt and potential offer for early repayment ofsyndicated mortgage loan debt.
. Harlowe: Engaged regarding outstanding debt and potential offer to repay syndicated
mortgage loan debt.
r Pivot: Reviewing, corresponding, and attending to unit sales and partial discharges to
facilitate repayment of outstanding debt.
. General: Engaged with the Trustee extensively regarding multiple matters, including
projects not referred to above, potential fee recoveries from borrowers, land registry
-utt".., privacy issues, rescission rights and regulatory issues; conducting in-depth review
of all projects; reviewing waterfall arrangements with respect to certain projects; assisting
with ritention of appraisers and related legal documentation; engaged with Chaitons LLP
with respect to various project matters; attending to various project matters including
reviewing relevant loan agreements and packages, postponement requests and partial
discharge requests; attending to various communications with stakeholders, including
responses to Investor inquiries; responding to multiple enforcement proceedings and
actions; conducting legal research with respect to various matters, including priorities,
remedies and other actions to enhance Investor recoveries'
22rOSLE& HOSKIN & HARCOURT LLPI First Canadian PlacePO BOX 50Toronto ON M5X 188CANADA416.362.2111 main416.862.6666 facsimile
FAAN Mortgage Administrators Inc.
20 Adelaide Street East
Suite 920
Toronto, ON MsC 2T9
CANADA
Attention: Naveed Manzoor
ost-ER
Invoice No.:Date:Client No.:
Contact:Direct Dial:E-mail:
12196872
September 26,2018232833
Michael De Lellis(4L6) 862-s997
MDelellis@osler.com
GST/HST No.: 121983217RT0001.
For professional services rendered for Building & Development Mortgages Canada Inc.
Adrninis trat o r (F # 11899 97).
OURFEE HEREIN
REIMBLIRSABLE EXPENSES
}{ST @13%
127,1.88.50
506.47
L6,600.35
TOTAL (CAD): 't44,295.32
PAYMENT DUE LIPON RECEIPT
We are committed to protecting the environment. Please proaide your email acldress to ptluenlt@qslq-eorlto receiae
inooices ancl remincler statements electronically.6DREMITTANCE ADVICE
Canadian Dollar EFT and Wire Payments:
TD Canada Trust751 3rd Streei S.W.
Calgary, Alberta T2P 4K8
Transit No: 80629-0004
Account No: 5219313
SWIFT Code: TDOMCATTTOR
Etnail paymant details to pgyUents@94e1's9ru'
referercitrg itrztoice nunber(s) being paid'
Cheoue Pavments:
Osler, Hoskin & Harcourt LLPFINANCE & ACCOUNTING(RECEIPTS)
1 First Canadian Place
PO BOXsOToronto, Ontario M5X 1B8
Canada
Please rehLnr remittance adaice(s) u.tith
cheque.
Amount: 1,44,295.32C4D
Invoice No.:
Client No.:72196872
232833
osler.com
222
Invoice dated September 26. 2018
For services rendered for FAAN Mortgage Administrators Inc. in its capacity as Court-appointed
trustee of Building & Development Mortgages Canada Inc. for the period between August 1, 2018
and August 31,2018:
. Brookdale: Engaged extensively with respect to sales process and strategy to preserve
value for investors; researching case law on priority issues and related matters; considering
projected recoveries; analyzing priority issues; developing sftategy.
. Danforth: Continued engagement regarding requested postponement to new financing to
permit fuither development of the project; negotiating agreements in connection with same;
engaged regarding obtaining Investor consent'
r Georgetown: Reviewing loan documentation and conducting diligence with respect to
postponement request; considering risks to investors'
o Peter Street: Continuing to attend to postponement request matters, including new lender
security, and consideration of various issues and risks to Investors in connection with same.
. Eden: Engaged with respect to Investor losses and avenues to recover funds; engaged
regarding demand for PaYment.
o Braestone: Engaged regarding outstanding debt and potential payout of syndicated
mortgage loan debt.
. Harlowe: Engaged regarding outstanding debt and potential payout of syndicated mortgage
loan debt.
o Pivot: Continuing to attend to unit sales and partial discharges.
o Solterra: Reviewing proposed plan of subdivision consent and postponement documents
required in resPect of same.
. General: Engaged with the Trustee extensively regarding multiple matters, including
projects not referred to above, litigation and construction lien stay letters, land registry
^uit"rr, privacy issues, rescission rights and regulatory issues; continuing to conduct in-
depth ."ui"* of *n projects; continuing to analyze waterfall arrangements for certain
projects; engaged with Chaitons LLP with respect to various project matters; attending to
various matters in an effort to advance projects and enhance Investor recoveries, including
reviewing loan agreements and packages, reviewing and negotiating various postponement
requests, partial discharge requests and similar requests; engaged regarding enforcement
proceedings; responding to stakeholder inquiries and attending to other communications,
including responses to Investor Form Letter, Investor inquiries and Investor Voice matters'
223OSLE& HOSKIN & HARCOURT LLPI First Canadian PiacePO BOX 50Toronto ON M5X 1B8CANADA416.362.2111 main416.862.6666 facsimile
FAAN Mortgage Administrators Inc.
20 Adelaide Street East
Suite 920
Toronto, ON MsC 2T9
CANADA
Attention: Naveed Manzoor
OSLER
Invoice No.Date:
ClientNo.:
Contact:Direct Dial:E-mail:
12206781.
October 19, 2018
232833
Michael De Lellis(41,6) 862-5e97
MDelellis@osler.com
GSTAIST No.: 721983217 RT0001
For professional services rendered for Building & Development Mortgages Canada Inc.
Administrat or (F S 1189997).
OUR FEE HEREIN
REIMBURSABLE EXPENSES "HST@ 13%
206,1,62.00
2,212.89
27,086.',1.4
TOTAL (CAD): 235,451..03* Includes non-taxable expenses of 20.00 CAD
PAYMENT DUE UPON RECEIPT
We are committecl to protecting the enaironment. Please prooide your emnil aildress to pAyruUs@gsleLgm to recehte
inooices antl reminder statements electronically.#REMT.ITANCE ADVICE
Canadian Dollar EFT and Wire Payments:
TD Canada Trust751 3rd Street S.W.
Calgary, Alberta T2P 4K8Transit No: 80629-0004
Account No: 5219373
SWIFTCode: TDOMCATTTOR
Enail paymai details to paynents@osler.com'
referancing inztoice nnnber(s) behtg paid.
Cheoue Pavments:
Osler, Hoskin & Harcourt LLPFINANCE & ACCOUNTING(RECEIPTS)
1 First Canadian Place
PO BOX 50Toronto, Ontario M5X 188
Canada
Please rettrnt remittance adoice(s) zoith
cheqtte.
Amount: 235,461.03C4D
Invoice No.:Client No.:
12206787
232833
osler.com
224
Invoice dated October 19. 2018
For services rendered for FAAN Mortgage Administrators Inc. in its capacity as Court-appointed
trustee of Building & Development Mortgages Canada Inc. for the period between September l,2018 and September 30, 2018:
. Brookdale: Continued engagement with respect to sales process; analyzing construction
lien issues; considering projected recoveries and strategy to preserve value for Investors;
reviewing and considering next steps with respect to asset purchase agreement, vesting
order and related motion materials.
. Danforth: Ongoing negotiations with respect to request to extend maturity date and
postpone to refinancing transaction.
r Georgetown: Engaged regarding borrower's notice of intention to file a proposal; engaged
with Proposal Trustee and borrower's counsel regarding multiple matters, including sales
process; reviewing motion materials and attending Court.
o Peter Street: Ongoing engagement regarding postponement request; reviewing and
considering BDMC agency arrangsments and related matters with other lenders; engaged
in negotiations regarding outstanding issues with respect to various properties and
proposed'new charge; reviewing Planning Act considerations; drafting allocation ofproceeds agreement.
o Eden: Continuing to engage regarding status of BDMC loan and Investor recoveries.
. Halo: Reviewing loan documentation; considering postponement request in light of expired
loan agreement and potential strategies to maximize recoveries to Investors; conducting
diligence and engaged in negotiations regarding potential refinancing.
o Braestone: Engaged regarding outstanding debt and potential payout of syndicated
mortgage loair debt, including documentation of offer and seeking Investor consent.
. Harlowe: Engaged regarding outstanding debt and potential payout of syndicated mortgage
loan debt, including documentation of offer'
o Prescott: Reviewing, corresponding, and attending to registration matters with respect to
partial discharges.
. Solterra: Reviewing proposed plan of subdivision consent and postponement documents;
reviewing partial discharge requests.
. General: Engaged with the Trustee extensively regarding multiple matters, includingprojects not referred to above, land registry matters, rescission rights and regulatory issues;
continuing to conduct in-depth review of all projects; engaged regarding waterfallarrangements; engaged with Chaitons LLP with respect to various project matters;
attending to various project matters, including ongoing loan administration functions such
as notices to borrowers, brokers and Investors, responding to postponement and partial
discharge requests, and addressing enforcement proceedings; hosting meetings withInvestor and Investor groups (including Investor Voice); responding to Investor inquiries;preparing materials for October court motion with respect to proposed Realized Property
Order, including Second RePort.
225
THIS IS EXHIBIT "B" REFERRED TO IN
THE AFFIDAVIT OF MICHAEL DE LELLIS
SWORN BEFORE ME ON THIS 19TH DAY OF NOVEMBER, 2018
for Taking
J Usr\ry- eri $-:r'erq-r'
226
EXHIBIT B
Date of AccountFor Billing Period
EndingFees
Expenses /Disbursements
Taxes Total
May 28, 2018 Apil2L - 30, 2018 $53,173.50 $772.4t $7,012.98 $60,958.89
June 28,2018 May 31,2018 $164,410.00 $ l,159.65 $21,487.00 $ 187,056.65
July 31, 2018 June 29, 2018 $ 156,160.00 $940.96 $20,423.12 $177,524.08
August 27,2018 July 31, 2018 $7s,176.s0 $696.00 $9,818.06 $85,690.56
September 26,2018 August 31, 2018 $127,188.50 $506.47 $16,600.35 $144,295.32
October 19,2018 September 30, 2018 $206,162.00 $2,2r2.89 $27,086.14 $23s,461.03
Total s782,270.50 $6,288.38 $102,427.65 $890,986.53
227
THIS IS EXHIBIT "C" REFERRED TO IN
THE AFFIDAVIT OF MICHAEL DE LELLIS
THIS 19TH DAY OF NOVEMBER,2018SWORN BEFORE
A for Taking Affidavits
c)u-*r'"ru- qfu,[$./\-,
228
EXHIBIT C
Blended Rate(excluding expenses / disbursernents and HST)$782,270.50 = 1130.60: $69r.91
Name Year Call(if applicable)
Billine rate Hours Worked
Code, Jacqueline 1998 2018: $865 10.30
Dacks, Jeremy 1999 2018: $865 129.40
De Lellis, Michael 2003 2018: $860 253.60
Erickson, Justine 20t6 2018: $465 165.20
Gillott, Roger 1996 2018: $865 2.50
Herceg, Suzanne 2018 S440 3.40
Kardash, Adam 1994 2018: $910 1.30
Leung, Kevin 2016 2018: $465 3.60
Nielsen, Ryan 2009 2018: $685 21.50
Riesterer, Patrick 20tl 2018: $650 416.10
Roberts, Nancy r996 2018: $930 31 .50
Rua, Maria 2018: $325 0.80
Storm, Lorna 2018: $2i0 17.10
Whitlock, Riley 2014 2018: $560 13.70
Total Hours: 1130.60
229
THIS IS CONFIDENTIAL EXHIBIT "D" REFERRED TO IN
THE AFFIDAVIT OF MICHAEL DE LELLIS
SWORN BEFORE ME ON THIS 19TH DAY OF NOVEMBER,2Ol8
A Affidavits
fiCiSaa-:-'-
230
Exhibit D
THIS EXHIBIT IS REDACTED IN ITS ENTIRETYAND IS SUBJECT TO A REQUEST FOR A SEALING ORDER
FICNC\
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and- BUILDING & DEVELOPMENT MORTGAGES CANADA INC
Respondent
Court File No. CV-l8-596204-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
Proceeding commenced at Toronto
AFFIDAVIT OF MICIIAEL DE LELLIS(sworn November 19, 2018)
OSLER, HOSKIN & HARCOURT LLP1 First Canadian Place, P,O. Box 50Toronto, ON M5X lB8Phone: 416-362-2111Fax: 416-862-6666
Michael De LellisJeremy DacksPatrick Riesterer
(LSO# 48038U)(LSO# 41851R)(LSO# 60258G)
Lawyers for FAAN Mortgage AdministratorsInc., in its capacity as Court-Appointed Trustee
TAB 3
232
Court File No.: CV-18-596204-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE HONOURABLE MR. WEDNESDAY, THE 28TH
JUSTICE HAINEY DAY OF NOVEMBER, 2018
BETWEEN:
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006,
c.29 and SECTION 101 OF TIJE COURTS OF JaSTICE ACTi R.S.O. 1990 c. C.43
BRAESTONE SETTLEMENT APPROVAL ORDER
THIS MOTION, made by FAAN Mortgage Administrators Inc. ("FAAN Mortgage"),
in its capacity as Court-appointed trustee (in such capacity, the "Trustee"), of all of the assets,
undertakings and properties of Building & Development Mortgages Canada Inc. (the
"Respondent") pursuant to section 37 of Ihe Mortgage Brokerages, Lenders and Administrators
Act, 2006, S.O. 2006, c. 29, as amended (the "MBLAA"), and section 101 of the Cottrts of
Jr.tstice lcf, R.S.O. 1990, c. C.43, as amended, for an Order, inter alia, (i) approving and
ratifying the Settlement Agreement dated as of October 77, 2078 (the "Braestone Settlement
)
)
)
I'\L{c6$-{
o
.,'L- 233
l'q-{6I-{
o
Agreement") among Braestone Development Corporation ("Braestone"), the Trustee and
Olympia Trust Company ("OTC"); (ii) ordering Braestone to pay $10 million to the Trustee
pursuant to the Braestone Settlement Agreement; (iii) ordering Braestone, the Trustee and OTC
to comply with the Braestone Settlement Agreernent; (iv) authorizing the Trustee to make a
further distribution of Realized Property to Investors; and (v) approving the Trustee's activities,
and the fees and disbursements of the Trustee and its Legal Counsel, was heard this day at 330
University Avenue, Toronto, Ontario;
ON READING the Third Report of the Trustee dated November 19,2018 (the "Third
Report"), the affidavit of Naveed Manzoor sworn November 19,2018 and attached as Appendix
..8,,to the Third Report (the "Manzoor Affidavit") and the affidavit of Michael De Lellis sworn
November 19,2018 and attached as Appendix"g" to the Third Report (the "De Lellis Affidavit"
and, collectively, with the Manzoor Affidavit, the "Fee Affidavits"), and on hearing the
submissions of counsel for the Trustee, Chaitons LLP, in its capacity as Representative Counsel,
counsel for The Superintendent of Financial Services, counsel to Braestone and such other
counsel as were present, no one appearing for any other person on the service list, as appears
from the affidavit of service of Justine Erickson sworn November O, 2018, filed;
SERVICE AND INTERPRETATION
l. THIS COURT ORDERS that the time for service of the Notice of Motion, the Motion
Record and the Third Report is hereby abridged and validated so that this Motion is properly
retumable today and hereby dispenses with further service thereof.
2. THIS COURT ORDERS that all capitalized terms used but not defined herein shall
have the meanings given to them in the Third Report and the Braestone Settlement Agreement'
3. THIS COURT ORDERS that (i) the Braestone Settlement Agreement be and is hereby
approved in its entirety, with such minor amendments as the Trustee and the other parties to the
Braestone Settlement Agreement may agree upon to permit the completion of the transaction
contemplated thereby; (ii) Braestone is hereby directed to pay $10 million forthwith to the
Trustee in accordance with the tenns of the Braestone Settlement Agreement (such funds the
"Braestone Realized Property"); and (iii) the execution of the Braestone Settlement Agreement
APPROVAL OF THE BRAESTONE SETTLEMENT AGREEMENT
a--l- 234
I'\|.{
c6$-{
o
by the Trustee and OTC is hereby ratified and approved, and the Trustee and OTC are hereby
authorized and directed to comply with all of their obligatiotts under the Braestone Settlement
Agreement.
4. THIS COURT ORDERS AND DECLARES that upon the delivery of a Trustee's
certificate to Braestone substantially in the form attached as Schedule "A" hereto (the "Trustee's
Certificate"), all of Braestone's obligations to Building & Development Mortgages Canada Inc'
("BDMC"), OTC, and the individual lenders (the "Braestone Individual Lenders") under the
Loan Agreement dated as of December l, 2012 between BDMC and Braestone (the "Loan
Agreement"), the Security and the Loan Documents (each as defined in the Loan Agreement)
(collectively, the "Braestone Loan Obligations") and all security interests granted to BDMC,
OTC or the Braestone Individual Lenders in and to the assets of Braestone to secure the
Braestone Loan Obligations and related registrations on title (the "Loan Encumbrances") are
hereby released, extinguished, expunged, discharged and deleted and that none of the Trustee,
BDMC, OTC or any Braestone Individual Lender shall have any claim against Braestone in
respect of the Braestone Loan Obligations or the Loan Encumbrances; provided, however, that
Braestone shall not be released from any obligations under the Braestone Settlement Agreement.
5. THIS COURT ORDERS AND DECLARES that upon the delivery of the Trustee's
Certificate, the Braestone Realized Property is and shall be deemed to be "Realized Property" as
defined in the Order of this Court dated June 26, 201 8 (the "Interim Stabilization Order") and
that all of the Braestone Individual Lenders' rights and claims under the Loan Agreement, the
Security and the Loan Documents shall attach to the Braestone Realized Property and shall have
the same nature and priority as they had prior to the consummation of the Braestone Settlement
Agreement, including pursuant to the Appointment Order and the Interim Stabilization Order'
6. THIS COURT ORDERS that upon the registration in the Land Registry Office for the
Registry Division of Simcoe (#51) of an Application for Vesting Order in the form prescribed by
the applicable Land Registry Office and attaching a copy of this Order and the executed
Trustee's Certificate, the Land Registrar is hereby directed to delete and expunge from title to the
real property identified in Schedule "B" hereto (the "Real Property") all of the Loan
Encumbrances listed in Schedule "C" hereto.
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7. THIS COURT ORDERS that upon the delivery of the Trustee's Certificate, the release
agreement in the form attached as Schedule "D" hereto ("Release Agreement") to be given to
the Trustee, BDMC, OTC, and each Braestone Individual Lender who loaned funds through
BDMC or OTC to Braestone pursuant to the Loan Agreement and all related Loan Documents,
each of their respective officers, directors, agents, employees, and each of their respective
successors and assigns (collectively, the "Releasees") by Braestone on behalf of itself, its
affiliates, and their respective shareholders, agents, directors, officers, employees, and each of
their respective successors and assigns (collectively, the "Releasors") shall be binding and
effective on the Releasors in favour of the Releasees.
8. THIS COURT ORDERS AND DIRECTS the Trustee to file with the Court a copy of
the Trustee's Certificate, as soon as practicable after delivery thereof.
REALIZED PROPERTY
9. THIS COURT ORDERS that upon the delivery of the Trustee's Certificate, the Trustee
shall make a further distribution to Investors in an amount equal to l0% of the Realized Property
held on the date of the Appointment Order, including the Realized Property obtained with
respect to the Victoria Medical SML Loans pro rata to the Investors entitled to such funds, such
that, when combined with the distributions made pursuant to the Interim Stabilization Order and
the Order of this Court dated October 30, 20t8 ("Realized Property Order"), 80oA of such
funds shall have been distributed on a pro ratabasis to the Investors entitled to such funds.
10. TIIIS COURT ORDERS that upon the delivery of the Trustee's Certificate, paragraph
3(b) of the Realized Property Order is hereby amended to provide that the Trustee shall distribute
80% of all other Realized Property obtained, including the Braestone Realized Property, pro rata
to the Investors entitled to such funds, whether received before or after the date of this Order.
TRUSTEE'S ACTIVITIES, FEES AND DISBURSEMENTS
I 1. TIIIS COURT ORDERS that the First Report, the Second Report and the Third Report
and all of the actions, conduct and activities of the Trustee as set out in therein, are hereby
approved.
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12. THIS COURT ORDERS that the fees and disbursements of the Trustee and its counsel,
as set out in the Third Report and the Fee Affidavits, are hereby approved, as follows:
(a) The following fees and disbursements of the Trustee for the period from April 20,
2018 to September 30,2018 are approved: fees of $734,428.20 (plus applicable
taxes of $95,475.67 for an aggregate amount of $829,903.87); and
(b) The following fees and disbursements of Osler, Hoskin & Harcourt LLP, counsel
to the Trustee, for the period from April 20,2018 to September 30, 2018 are
approved: fees of 9782,210.50 and disbursements of $6,288.38 (plus applicable
taxes of $1 02,421 .65 for an aggregate amount of $890,986'53).
SEALING
13. THIS COURT ORDERS that the Confidential Manzoor Exhibit and the Confidential
De Lellis Exhibit shall be sealed, kept confidential and not form part of the public record, but
rather shall be placed, separate and apart from all other contents of the Court file, in a sealed
envelope attached to a notice that sets out the title of these proceedings and a statement that the
contents are subject to a sealing order and shall only be opened upon fuither Order of the Court.
AID AND RECOGNITION OF FOREIGN COURTS
14. THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,
regulatory or administrative body having jurisdiction in Canada or in the United States to give
effect to this Order and to assist the Trustee and its agents in carrying out the terms of this Order.
All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to
make such orders and to provide such assistance to the Trustee, as an officer of this Court, as
may be necessary or desirable to give effect to this Order or to assist the Trustee and its agents in
carrying out the terms of this Order.
15. THIS COURT ORDERS that the Trustee be at liberty and is hereby authorized and
empowered to apply to any court, tribunal, regulatory or administrative body, wherever located,
for the recognition of this Order and for assistance in carrying out the terms of this Order, and
that the Trustee is authorized and empowered to act as a representative in respect of the within
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proceedings for the purpose of having these proceedings recognized in a jurisdiction outside
Canada.
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Schedule 3(A" -Form of Trusteets Certificate
Court File No.: CV-l8-596204-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE SUPERINTENDENT OF FINANCIAL SERVICES
Applicant
-and-
BUILDING & DEVELOPMENT MORTGAGES CANADA INC.
Respondent
APPLICATION UNDER SECTION 37 OF THEMO RTGAGE BROKERAGES, LENDERS AND ADMINISTR,ATORS ACT, 2 OO 6, S.O. 2006,
c.29 andSECTION 101 OF TIdF] COaRTS OF JUSTICE ACT' R.S.O. 1990 c. C.43
TRUSTEE'S CERTIFICATE
RECITALS
A. Pursuant to an Order of the Honourable Justice Hainey of the Ontario Superior Court of
Justice fCommercial List] (the "Court") dated April 20, 2018, FAAN Mortgage Administrators
Inc. was appointed as the trustee (the "Trustee") of the undertaking, property and assets of
Building & Development Mortgages Canada Inc. ("BDMC").
B. Pursuant to an Order of the Court dated IDATE] (the "Braestone Settlement Approval
Order"), the Court approved and ratified the Settlement Agreement made as of Octobet 17,2018
(the "Braestone Settlement Agreement") among Braestone Development Corporation
("Braestone"), the Trustee and Olyrnpia Trust Company ("OTC") and ordered that all of
8 239
Braestone's obligations to BDMC, OTC, and the individual lenders ("Braestone Individual
Lenders") under the Loan Agreement, the Security and the Loan Documents (each as defined in
the Loan Agreement) (collectively, the "Braestone Loan Obligations") and all security interests
granted to BDMC, OTC or the Braestone Individual Lenders in and to the assets of Braestone to
secure the Braestone Loan Obligations (the "Loan Encumbrances") are hereby released,
extinguished, expunged and discharged and that none of the Trustee, BDMC, OTC or any
Braestone Individual Lender shall have any claim against Braestone in respect of the Braestone
Loan Obligations or the Loan Encumbrances; provided, however, that Braestone shall not be
released from any obligations under the Braestone Settlement Agreement; and that the release of
the Braestone Loan Obligations and the Loan Encumbrances is to be effective upon the delivery
by the Trustee to Braestone of a certificate confirming (i) the payment of $10 million to the
Trustee by Braestone; (ii) that the conditions precedent to the Braestone Settlement Agreement
as set out in section 9 of the Braestone Settlement Agreement have been satisfied or waived by
the Trustee; and (iii) the settlement has been completed to the satisfaction of the Trustee.
C. Unless otherwise indicated herein, terms with initial capitals have the meanings set out in
the Braestone Settlement Approval Order.
THE TRUSTEE CERTIFIES the following:
Braestone has paid and the Trustee has received $10 million pursuant to the Braestone
Settlement Agreement;
Braestone has provided the Release Agreement to the Releasees;
Braestone has certified that all of the representations and warranties contained in this
Braestone Settlement Agreement continue to be true as of the Effective Date;
Braestone continues to be, in the reasonable opinion of the Trustee, in compliance withall of the terms of the Braestone Settlement Agreement;
5 The other conditions set out in the Braestone Settlement Agreement have been satisfied
or waived by the Trustee; and
6. The settlement has been completed to the satisfaction of the Trustee.
1
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4
This Certificate was delivered by the Trustee at
-- ITIMEI on IDArE].
9 240
FAAN Mortgage Administrators Inc., solelyin its capacify as Court-appointed Trustee ofthe undertaking, property and assets ofBuilding & Development Mortgages Canadafnc., and in no other capacity
Per
Name:
Title:
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10 241,
Schedule "B') - Real Property
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PIN DESCRIPTION REGISTERED OWNER
s8s32-02r4 (LT) LOT 10, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
BRAESTONEDEVELOPMENTCORPORATION
58532-0215 (LT) LOT 11, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8s32-02r6 (LT) LOT 12, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8532-02n (LT) LOT 13, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8s32-0218 (LT) LOT 14, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8s32-0219 (LT) LOT 15, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8s32-0220 (LT) LOT 16, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8s32-0221 (LT) LOT 17, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8532-0222 (LT) LOT 18, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8s32-0223 (LT) LOT 19, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8s32-0224 (LT) LOT 20, PLAN 51M1 1 13; TOWNSHIPOF ORO-MEDONTE
s8s32-022s (LT) LOT 27, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8532-0226 (LT) LOT 22, PLAN 51M1 I l3; TOWNSHIPOF ORO-MEDONTE
s8s32-0227 (LT) LOT 23, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8532-0228 (LT) LOT 24, PLAN 5lMl113; TOWNSHIPOF ORO.MEDONTE
s8s32-0236 (LT) LOT 32, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
58s32-0244 (LT) LOT 40, PLAN 51M1 1 13, SAVING AND
11 242
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PIN DESCRIPTION REGISTERED OWNER
RESERVING FROM THE E IILLT2CON 9, ALL MINES AND MINERALS,WHETHER SOLID, LIQUID ORGASEOUS, WHICH MAY BE FOUNDTO EXIST WITHIN, UPON OR UNDERSUCH LANDS T/VV FULL POWER TOWORK THE SAME AND FOR THISPURPOSE TO ENTER UPON, USE ANDOCCUPY THE SAID LANDS OR SOMUCH THEREOF AND TO SUCHEXTENT AS MAY BE NECESSARYFOR THE EFFECTUAL WORKINGAND EXTRACTING OF THE SAIDMINERALS, AS DESCRIBED INORO17078; TOWNSHIP OF ORO-MEDONTE
58s32-0253 (LT) LOT 49, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
58s32-02s5 (LT) LOT 51, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8s32-02s6 (LT) LOT 52, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8s32-02s7 (LT) LOT 53, PLAN 51M1113; TOWNSHIPOF ORO.MEDONTE
s8s32-02s8 (LT) LOT 54, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8532-02s9 (LT) LOT 55, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
58s32-0260 (LT) LOT 56, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8s32-0261 (LT) LOT 57, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE
s8fi2-A262 (LT) LOT 58, PLAN 5lMl113; TOWNSHIPOF ORO-MEDONTE
s8s32-027s (LT) PCL2-1SEC 51-ORO-9; LT 3 CON 9ORO BEING THE E 112 &W ll2;LT 2
CON 9 ORO BEING THE E 112 &W 112;
PT 1, 51R21804, EXCEPT PT 1,
51R28741& EXCEPT PLAN 51MIO7O &
12 243
PIN DESCRIPTION REGISTERED OWNER
51M1113; SAVING AND RESERVINGFROM THE E 1I2LT2 CON 9, ALLMINES AND MINERALS, WHETHERSOLID, LIQUID OR GASEOUS, WHICHMAY BE FOUND TO EXIST WITHIN,UPON OR UNDER SUCH LANDS T/WFULL POWER TO WORK THE SAMEAND FOR THIS PURPOSE TO ENTERUPON, USE AND OCCUPY THE SAIDLANDS OR SO MUCH THEREOF ANDTO SUCH EXTENT AS MAY BENECESSARY FOR THE EFFECTUALWORKING AND EXTRACTING OFTHE SAID MINERALS, ASDESCRIBED IN OROL7078; ORO-MEDONTE TOWNSHIP OF ORO-MEDONTE; SUBJECT TO ANEASEMENT IN GROSS OVER PT EIITLOT 2 CON 9 ORO BEING PT 1 ON PLstR40262 AS IN 5C1266952
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13
Schedule $C') - Loan Encumbrances
244
Resistration No. Date Tvpe of Instrumentsc1039835 2013 02 07 Charee/Mortsasesc1228105 2015 07 20 Transfer Of Charee
sc103984s 2013/02107 Transfer Of Charee
scr043202 2013103101 Transfer Of Charee
sc1047816 2013t03128 Transfer Of Charee
sc1053414 2013104129 Transfer Of Charee
sc1055391 2013105108 Notice
sc1055397 201310s108 Transfer Of Charee
sc1058805 2013t05128 Transfer Of Charee
sc1064131 2013106120 Notice
sc1065073 2013106125 Transfer Of Charee
sc1069850 20131071ls Transfer Of Charge
sc1079799 20t3108123 Transfer Of Charge
sc1087288 2013109124 Transfer Of Charge
scl092496 20t31t0116 Notice
scl101397 2013lll/26 Transfer Of Charge
sc|to7522 2013lt2/20 Transfer Of Charge
scl113714 2014102/03 Transfer Of Charee
sc1125391 2014104116 Transfer Of Charee
sc1128168 2014105101 Transfer Of Charee
sc1159897 2014109115 Postponement Of Interest
sc1228105 20r5107120 Transfer Of Charee
sct23t5l2 20t5107130 Postponement Of Interest
sc129s590 2016/04113 Postponement Of Interest
scr33t 143 20r6108112 Application To Change Name-Instrument
sc1339671 2016109106 Postponement Of Interest
sct42I440 2017106119 Postponement Of Interest
F'\aL{cdF.{
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14 245
I
Schedule '(D" - Release Agreement
[Date]
TO: FAAN Mortgage Administrators Inc. (the "Trustee")
AND TO: Olympia Trust Company ("OTC")
Re: Release granted in connection with repayment and settlement of the Obligationspursuant to Braestone Settlement Agreement
Dear Sirs/Mesdames
Reference is made to the Loan Agreement dated as of December l, 2012 (the "LoanAgreement") between Braestone Development Corporation ("Braestone") and Building &Developrnent Mortgages Canada Inc. ("BDMC") and the related Security and Loan Documents.All capitalized terms used in this agreement (the "Release Agreement") shall, unless otherwisedefined herein, have the same meanings given to them in the Loan Agreement or the SettlementAgreement dated as of [date] among Braestone, the Trustee and OTC (the "SettlementAgreement").
Braestone hereby certifies that all of the representations and warranties contained in theSettlement Agreement are true and accurate as of the date hereof and that it is incompliance with all covenants, terms and provisions of the Settlement Agreement.
Braestone has paid the Trustee $10,000,000 pursuant to the Settlement Agreement and
waives any right of set-off or any other defence.
In consideration of the acceptance of $10,000,000 in full and final satisfaction ofObligations payable to BDMC by Braestone under the Loan Agreement in excess of516,020,120 and for other good and valuable consideration, the receipt and sufficiency ofwhich is hereby acknowledged, Braestone (on behalf of itself, its affiliates, and theirrespective shareholders, agents, directors, officers, employees, and each of theirrespective successors and assigns) (collectively, the "Releasors")) hereby releases,
discharges and acquits the Trustee, BDMC, OTC, and each lender or investor who loaned
funds through BDMC or OTC to Braestone pursuant to the Loan Agreement and allrelated Loan Documents, each of their respective officers, directors, agents, employees,
and each of their respective successors and assigns (collectiveiy, the "Releasees") fromany and all claims, demands, rights, liabilities, and causes of action, whether in law or inequity, whether known or unknown, that any Releasor, at any time had or has, or thatthey or their respective successors or assigns hereafter have or may have against the
Releasees directly or indirectly arising out of or in any way related to the LoanAgreement, the Loan Documents, the proceedings initiated by the Order of the OntarioSuperior Court of Justice (Commercial List) dated April 20,2018, or any transactionshereunder or thereunder.
2.
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15
This Release Agreement shall be effective immediately upon the delivery of the Trustee'sCertificate and may be relied upon by any of the Releasees, whether or not such Releasee is a
party to this Release Agreement or the Settlement Agreement.
This Release Agreement may be executed in any number of counterparts and by the differentparties hereto in separate counterparts, and may be executed and delivered by facsimile or .pdffile transmitted by email, and all such counterparts, .pdf files and facsimiles when so executed
and delivered shall be deerned to be an original and all of which when taken together shallconstitute but one and the same Release Agreement.
This Release Agreement shall be construed in accordance with and governed by the laws of the
Province of Ontario.
Yours truly,
BRAESTONE DEVELOPMENTCORPORATION
By:
Name:
Title:
Accepted and agreed to by:
FAAN MORTGAGEADMINISTRATORS INC., solely in itscapacity as Court-appointed Trustee ofBuilding & Development Mortgages CanadaInc. and in no other capacity.
By:
Name:
Title:
246
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Mic
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Law
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TIIE SUPERINTEI\DENT OF FINAIICIAL SERVICBS
Applicant
BUILDING & DEVELOPMBNT MORTGAGES CANADA INC.
RespondentCourt File No. CV-l8-596204-00CL
ONTARIOSUPERIOR COURT OF' JUSTICE
(COMMERCTAL LrST)
Proceedings commenced at Toronto
MOTION RECORD OF FAAII MortgageAdministrators Inc., in its capacity
as Court-appointed Trustee
OSLER, HOSKIN & HARCOURT LLPP.O. Box 50, 1 First Canadian PlaceToronto, ON M5X 1B8
Michael De Lellis (LSUC# 48038U)Jeremy Dacks (LSUC# 41851R)Patrick Riesterer (LSUC# 60258G)
Tel: 416.362.2111Fax: 416.862-6666
Lawyers for FAAN Mortgage Administrators Inc.,in its capacity as Court-appointed Trustee ofBuilding & Development Mortgages Canada lnc.
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