East Fifty Five Disclosure Review

A review of documents related to the syndicate mortgage loan that funded in part a residential condominium project in Toronto, ON called East Fifty Five. The analysis shows where fees, risks and terms of the loan are disclosed as well as explanations of who certain parties are and what their role is. Through the life of this loan, Generation 2 & 3 documents were used which progressively improved on disclosure.

OVERVIEW

Project Location: Toronto, ON
Project Type: Residential Condo Building
Developer: Lamb Development Corp.
Borrower: Bel-East Corp.
Fortress Real Developments: Development Consultant
Fortress SPV: Joint Venture Partner
Total Return to lender/investor: Principal: 100%, Interest: 24.4%

The following tables include links to the specific areas of mortgage documents provided to lenders by mortgage brokers where fees, risks, and the terms of contract are located. There is a table for each generation, for example Generation 1 fees, Generation 2 fees and so on. The last set of tables is always Roles, which highlight the areas in the documents where the role of the parties involved are clearly defined.

East Fifty Five – Generation 3 Fee Disclosure

The table below shows where FEES were disclosed in generation 3 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language.

Name of DocumentLocation in DocumentDescription
Form 9D Paragraph 25 Disbursements for legal fees, mortgage brokering and administration
Preliminary Proforma Summary Page 2 “Management Fees”Budgeted funds for management fees
Form 1 Investor/Lender Disclosure Statement Page 4, #2Fees and additional earnings possible
Form 1 Investor/Lender Disclosure Statement Page 4, #3Fees and additional earnings possible
Form 1 Investor/Lender Disclosure Statement Page4, #4Fees and additional earnings possible
Form 1 Investor/Lender Disclosure Statement Page 5, #6Fees and additional earnings possible
Form 1 Investor/Lender Disclosure Statement Page 11, Part D, #1All fees paid from proceeds of funds raised
Form 1 Investor/Lender Disclosure Statement Page 11, Part D, #2List of fees to be paid
Form 1.1 Investor/Lender Disclosure Statement Page 2, #2Fees and additional earnings possible
Form 1.1 Investor/Lender Disclosure Statement Page 3, Part A, #1Where to find use of funds
Form 1.1 Investor/Lender Disclosure Statement Page 5, Part CRefer to schedule for use of funds
Form 1/1.1 Investor/Lender Disclosure Statement – Schedule Schedule BBenefits to brokerage or brokers
Form 1/1.1 Investor/Lender Disclosure Statement – ScheduleSchedule DBorrowers cost of borrowing
Form 1/1.1 Investor/Lender Disclosure Statement – ScheduleSchedule IUse of funds
Memo of Understanding Page 2, #9 & 10 Broker must disclose fees to lender
Loan Agreement Page 3, item “X” Location of project budget
Loan Agreement Schedule “B”
1 0f 3 2 of 3
3 of 3
Project budget

East Fifty Five – Generation 2 Fee Disclosure

Here are the documents where FEES were disclosed in generation 2 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language.

Name of DocumentLocation in DocumentDescription
Form 9D Paragraph 25 Disbursements for legal fees, mortgage brokering and administration
Preliminary Proforma Summary Page 2 “Management Fees”Budgeted funds for management fees
Investor/Lender Disclosure Statement Page 3, # 3 Potential for additional earnings by broker of record
Investor/Lender Disclosure Statement Page 3, #4 Related party has direct interest
Investor/Lender Disclosure StatementPage 3, #10 Fees may be paid in advance to project completion
Investor/Lender Disclosure StatementPage 6, Part D, #2 List of administrator, broker and commission fees paid by the borrower
Memo of Understanding Page 2, #9 & 10 Broker must disclose fees to lender
Loan Agreement Page 3, item “X” Location of project budget
Loan Agreement Schedule “B”
1 0f 3 2 of 3
3 of 3
Project budget
Investor/Lender Disclosure Statement – Schedule Schedule “C” # 2 & 6 Fees paid to Fortress and selling brokerage

East Fifty Five – Generation 3 Risk Disclosure

The table below shows where RISKS were disclosed in generation 3 documents. Click on the location to see the section being referenced.

Name of DocumentLocation in DocumentDescription
Form 9D Page 7, Section “Warning”Warning to assess risk before investing
Project Fact SheetPage 3-5 “material disclosure”-“Conflicts of Management and OthersA list of risks and potential for conflicts of interest
Participation and Servicing AgreementPage 1, Defined Term “Force Majeure”Definition for Force Majeure Clause
Form 1 Investor/Lender Disclosure StatementPage 2 “Caution”Caution to seriously assess risks
Form 1 Investor/Lender Disclosure StatementPage 5 Section 2, #6Description of potential conflicts
Form 1 Investor/Lender Disclosure StatementPage 6 Section 2, #12Description of risks
Form 1 Investor/Lender Disclosure StatementPage 12 Part EDescription of attached documents with emphasis to review them
Form 1.1 Investor/Lender Disclosure StatementPage 3 Section 3, Part A, #4Previous power of sale proceedings including the developer
Form 1.1 Investor/Lender Disclosure StatementPage 3 Section 3, Part A, #5Previous regulatory charges and current civil proceedings
Form 1.1 Investor/Lender Disclosure StatementPage 5 Section 3, Part CAdditional disclosure for review
Form 1/1.1 Investor/Lender Disclosure Statement – ScheduleSchedule ADetailed explanation of the relationship between the mortgage brokerage and the borrower/developer
Form 1/1.1 Investor/Lender Disclosure Statement – ScheduleSchedule FDirectors, Officers, Owners and Partners disclosure
Form 1/1.1 Investor/Lender Disclosure Statement – ScheduleSchedule GDetails about civil proceedings
Form 1/1.1 Investor/Lender Disclosure Statement – ScheduleSchedule JConflicts of Interest

East Fifty Five – Generation 2 Risk Disclosure

The table below shows where RISKS were disclosed in generation 2 documents. Click on the location to see the section being referenced.

Name of DocumentLocation in DocumentDescription
Form 9D Page 7, Section “Warning”Warning to assess risks before investing
Project Fact SheetPage 3-5 “material disclosure”“Conflicts of Management and OthersA list of risks and potential for conflicts of interest
Form 1 Investor/Lender Disclosure Statement Page 2 “Caution”Caution to seriously assess risks
Form 1/1.1 Investor/Lender Disclosure Statement – ScheduleSchedule DPossibility for partial discharges
Form 1/1.1 Investor/Lender Disclosure Statement – ScheduleSchedule EExplanation of potential conflicts

East Fifty Five – Generation 3 Contract Disclosure

The table below shows where TERMS were disclosed in generation 3 documents. Click on the location to see the section being referenced.

Name of DocumentLocation in DocumentDescription
Form 9DParagraphs 9, 10, 11, 15, 19, 20, 21, 22, 23, 24 Value, LTV, Maturity, Partial discharges, Force Majeure, Interest accrual and more
Mortgage Investment Direction & Indemnity Agreement Page 1 # 4 a-c Tax Implications
Mortgage Investment Direction & Indemnity Agreement Page 1  #5 Indemnity of Olympia Trust
Investor/Lender Disclosure Statement – ScheduleSchedule DBorrower’s Cost of Borrowing
Project Fact SheetPage 1 “Valuation”Opinion of value
Project Fact SheetPage 2 “Face Value of Syndicate Mortgage”Maximum Face Value
Project Fact SheetPage 2 “Loan to Value”Loan to value
Project Fact SheetPage 2, “Construction Financing”Amount of future construction financing
Project Fact SheetPage 2 “Term”Maturity and extension dates
Project Fact SheetPage 3, “Maximum Future Increases in the 1st Mortgages”Maximum value of future financing
Loan AgreementSection 3, A-CAbout the loan
Loan AgreementSection 4Definition of “term”
Loan AgreementSection 16Postponement and subordination and partial discharge
Confirmation of Lenders InterestSection 4Agreement to postpone and discharge
Acknowledgement and Consent Agreement – LenderSection 2,3,4,5,6,7,8, 11, 18,19Terms acknowledged and consented to by the lender
Participation and Servicing AgreementSection 3.2, 3.5Hiring of experts; consent

East Fifty Five – Generation 2 Contract Disclosure

The table below shows where TERMS were disclosed in generation 2 documents. Click on the location to see the section being referenced.

Name of DocumentLocation in DocumentDescription
Form 9DParagraphs 9, 10, 11, 19, 20, 21, 22, 23, 24 Value, LTV, Maturity, Partial discharges, Force Majeure, Interest accrual and more
Mortgage Investment Direction & Indemnity Agreement Page 1 # 4 a-c Tax Implications
Mortgage Investment Direction & Indemnity Agreement Page 1  #5 Indemnity of Olympia Trust
Investor/Lender Disclosure Statement Part EDocuments to be provided by broker
Investor/Lender Disclosure Statement – ScheduleSchedule BLoan to value ratio
Project Fact SheetPage 1 “Valuation”Opinion of value
Project Fact SheetPage 2 “Face Value of Syndicate Mortgage”Maximum Face Value
Project Fact SheetPage 2 “Loan to Value”Loan to value
Project Fact SheetPage 2, “Construction Financing”Amount of future construction financing
Project Fact SheetPage 2 “Term”Maturity and extension dates
Project Fact SheetPage 3, “Maximum Future Increases in the 1st Mortgages”Maximum value of future financing
Loan AgreementSection 3, A-CAbout the loan
Loan AgreementSection 4Definition of “term”
Loan AgreementSection 16Postponement and subordination and partial discharge
Confirmation of Lenders InterestSection 4Agreement to postpone and discharge
Acknowledgement and Consent Agreement – LenderSection 2,3,4,5,6,7, 8, 11, 18,19Terms acknowledged and consented to by the lender
Participation and Servicing AgreementSection 3.2, 3.5Hiring of experts; consent

East Fifty Five – Generation 3 Role Disclosure

The table below shows where the ROLES of each party in the contract are disclosed in generation 3 documents. Click on the location to see the section being referenced.

Name of DocumentLocation in DocumentDescription
Memo of UnderstandingParagraphs 2, 3, 4, 10 & last paragraph Offered by Mortgage brokers, not Fortress, Duties of mortgage broker
Acknowledgement and Consent Agreement – LenderPage 1, Paragraph 1Name of borrower
Project Fact SheetPage 1, “Developer Name”, “Borrower Name”Developer name, borrower name
Project Fact SheetPage 5-7, “About the Developer” About the developer
Loan AgreementPage 1, Paragraph 1 b Definition of term “Borrower”
Loan AgreementPage 2 Paragraph 1 p.Definition of term “Lender”
Form 1 Investor/Lender Disclosure StatementPage 1, “Important – New Disclosure Duties”Duties of mortgage broker
Form 1 Investor/Lender Disclosure StatementPage 4, Section 2, #1Declaration by the mortgage broker
Form 1 Investor/Lender Disclosure StatementPage 4, Section 2, #2, 3 & 4 Declaration by the mortgage broker
Form 1 Investor/Lender Disclosure StatementPage 9, Section 3, Part B, #1Name of mortgage administrators
Form 1 Investor/Lender Disclosure StatementPage 11, Section 3, Part CName and address of borrower
Form 1/1.1 Investor/Lender Disclosure Statement – ScheduleSchedule ARelationship between the Mortgage Brokerage and the Borrower/Developer

East Fifty Five – Generation 2 Role Disclosure

The table below shows where the ROLES of each party in the contract are disclosed in generation 2 documents. Click on the location to see the section being referenced.

Name of DocumentLocation in DocumentDescription
Memo of UnderstandingParagraphs 2, 3, 4, 10 & last paragraph Offered by Mortgage brokers, not Fortress, Duties of mortgage broker
Acknowledgement and Consent Agreement – LenderPage 1, Paragraph 1Name of borrower
Project Fact SheetPage 1, “Developer Name“, “Borrower NameDeveloper name, borrower name
Project Fact SheetPage 5-7, “About the Developer” About the developer
Loan AgreementPage 1, Paragraph 1 bDefinition of term “Borrower”
Loan AgreementPage 2 Paragraph 1 pDefinition of term “Lender”
Investor/Lender Disclosure StatementPage 1, “Important – New Disclosure Duties Effective January 1, 2009”Duties of mortgage broker
Investor/Lender Disclosure StatementPage 3, # 1, 2, 5Declaration by the mortgage broker
Investor/Lender Disclosure StatementPage 5, Part B, #3 Name of mortgage administrator
Investor/Lender Disclosure StatementPage 6, Part C, #1Name and address of borrower
Participation and Servicing AgreementSection 1.1 “Borrower” & “Participants”Definition of borrower and participants

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