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 Document | Location in Document | Description |
|---|---|---|
| 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, #2 | Fees and additional earnings possible |
| Form 1 Investor/Lender Disclosure Statement | Page 4, #3 | Fees and additional earnings possible |
| Form 1 Investor/Lender Disclosure Statement | Page4, #4 | Fees and additional earnings possible |
| Form 1 Investor/Lender Disclosure Statement | Page 5, #6 | Fees and additional earnings possible |
| Form 1 Investor/Lender Disclosure Statement | Page 11, Part D, #1 | All fees paid from proceeds of funds raised |
| Form 1 Investor/Lender Disclosure Statement | Page 11, Part D, #2 | List of fees to be paid |
| Form 1.1 Investor/Lender Disclosure Statement | Page 2, #2 | Fees and additional earnings possible |
| Form 1.1 Investor/Lender Disclosure Statement | Page 3, Part A, #1 | Where to find use of funds |
| Form 1.1 Investor/Lender Disclosure Statement | Page 5, Part C | Refer to schedule for use of funds |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule B | Benefits to brokerage or brokers |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule D | Borrowers cost of borrowing |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule I | Use 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 Document | Location in Document | Description |
| 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 Statement | Page 3, #10 | Fees may be paid in advance to project completion |
| Investor/Lender Disclosure Statement | Page 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 Document | Location in Document | Description |
| Form 9D | Page 7, Section “Warning” | Warning to assess risk before investing |
| Project Fact Sheet | Page 3-5 “material disclosure”-“Conflicts of Management and Others“ | A list of risks and potential for conflicts of interest |
| Participation and Servicing Agreement | Page 1, Defined Term “Force Majeure” | Definition for Force Majeure Clause |
| Form 1 Investor/Lender Disclosure Statement | Page 2 “Caution” | Caution to seriously assess risks |
| Form 1 Investor/Lender Disclosure Statement | Page 5 Section 2, #6 | Description of potential conflicts |
| Form 1 Investor/Lender Disclosure Statement | Page 6 Section 2, #12 | Description of risks |
| Form 1 Investor/Lender Disclosure Statement | Page 12 Part E | Description of attached documents with emphasis to review them |
| Form 1.1 Investor/Lender Disclosure Statement | Page 3 Section 3, Part A, #4 | Previous power of sale proceedings including the developer |
| Form 1.1 Investor/Lender Disclosure Statement | Page 3 Section 3, Part A, #5 | Previous regulatory charges and current civil proceedings |
| Form 1.1 Investor/Lender Disclosure Statement | Page 5 Section 3, Part C | Additional disclosure for review |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule A | Detailed explanation of the relationship between the mortgage brokerage and the borrower/developer |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule F | Directors, Officers, Owners and Partners disclosure |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule G | Details about civil proceedings |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule J | Conflicts 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 Document | Location in Document | Description |
| Form 9D | Page 7, Section “Warning” | Warning to assess risks before investing |
| Project Fact Sheet | Page 3-5 “material disclosure” – “Conflicts of Management and Others“ | A 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 – Schedule | Schedule D | Possibility for partial discharges |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule E | Explanation 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 Document | Location in Document | Description |
| Form 9D | Paragraphs 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 – Schedule | Schedule D | Borrower’s Cost of Borrowing |
| Project Fact Sheet | Page 1 “Valuation” | Opinion of value |
| Project Fact Sheet | Page 2 “Face Value of Syndicate Mortgage” | Maximum Face Value |
| Project Fact Sheet | Page 2 “Loan to Value” | Loan to value |
| Project Fact Sheet | Page 2, “Construction Financing” | Amount of future construction financing |
| Project Fact Sheet | Page 2 “Term” | Maturity and extension dates |
| Project Fact Sheet | Page 3, “Maximum Future Increases in the 1st Mortgages” | Maximum value of future financing |
| Loan Agreement | Section 3, A-C | About the loan |
| Loan Agreement | Section 4 | Definition of “term” |
| Loan Agreement | Section 16 | Postponement and subordination and partial discharge |
| Confirmation of Lenders Interest | Section 4 | Agreement to postpone and discharge |
| Acknowledgement and Consent Agreement – Lender | Section 2,3,4,5,6,7,8, 11, 18,19 | Terms acknowledged and consented to by the lender |
| Participation and Servicing Agreement | Section 3.2, 3.5 | Hiring 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 Document | Location in Document | Description |
| Form 9D | Paragraphs 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 E | Documents to be provided by broker |
| Investor/Lender Disclosure Statement – Schedule | Schedule B | Loan to value ratio |
| Project Fact Sheet | Page 1 “Valuation” | Opinion of value |
| Project Fact Sheet | Page 2 “Face Value of Syndicate Mortgage” | Maximum Face Value |
| Project Fact Sheet | Page 2 “Loan to Value” | Loan to value |
| Project Fact Sheet | Page 2, “Construction Financing” | Amount of future construction financing |
| Project Fact Sheet | Page 2 “Term” | Maturity and extension dates |
| Project Fact Sheet | Page 3, “Maximum Future Increases in the 1st Mortgages” | Maximum value of future financing |
| Loan Agreement | Section 3, A-C | About the loan |
| Loan Agreement | Section 4 | Definition of “term” |
| Loan Agreement | Section 16 | Postponement and subordination and partial discharge |
| Confirmation of Lenders Interest | Section 4 | Agreement to postpone and discharge |
| Acknowledgement and Consent Agreement – Lender | Section 2,3,4,5,6,7, 8, 11, 18,19 | Terms acknowledged and consented to by the lender |
| Participation and Servicing Agreement | Section 3.2, 3.5 | Hiring 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 Document | Location in Document | Description |
| Memo of Understanding | Paragraphs 2, 3, 4, 10 & last paragraph | Offered by Mortgage brokers, not Fortress, Duties of mortgage broker |
| Acknowledgement and Consent Agreement – Lender | Page 1, Paragraph 1 | Name of borrower |
| Project Fact Sheet | Page 1, “Developer Name”, “Borrower Name” | Developer name, borrower name |
| Project Fact Sheet | Page 5-7, “About the Developer” | About the developer |
| Loan Agreement | Page 1, Paragraph 1 b | Definition of term “Borrower” |
| Loan Agreement | Page 2 Paragraph 1 p. | Definition of term “Lender” |
| Form 1 Investor/Lender Disclosure Statement | Page 1, “Important – New Disclosure Duties” | Duties of mortgage broker |
| Form 1 Investor/Lender Disclosure Statement | Page 4, Section 2, #1 | Declaration by the mortgage broker |
| Form 1 Investor/Lender Disclosure Statement | Page 4, Section 2, #2, 3 & 4 | Declaration by the mortgage broker |
| Form 1 Investor/Lender Disclosure Statement | Page 9, Section 3, Part B, #1 | Name of mortgage administrators |
| Form 1 Investor/Lender Disclosure Statement | Page 11, Section 3, Part C | Name and address of borrower |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule A | Relationship 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 Document | Location in Document | Description |
| Memo of Understanding | Paragraphs 2, 3, 4, 10 & last paragraph | Offered by Mortgage brokers, not Fortress, Duties of mortgage broker |
| Acknowledgement and Consent Agreement – Lender | Page 1, Paragraph 1 | Name of borrower |
| Project Fact Sheet | Page 1, “Developer Name“, “Borrower Name“ | Developer name, borrower name |
| Project Fact Sheet | Page 5-7, “About the Developer” | About the developer |
| Loan Agreement | Page 1, Paragraph 1 b | Definition of term “Borrower” |
| Loan Agreement | Page 2 Paragraph 1 p | Definition of term “Lender” |
| Investor/Lender Disclosure Statement | Page 1, “Important – New Disclosure Duties Effective January 1, 2009” | Duties of mortgage broker |
| Investor/Lender Disclosure Statement | Page 3, # 1, 2, 5 | Declaration by the mortgage broker |
| Investor/Lender Disclosure Statement | Page 5, Part B, #3 | Name of mortgage administrator |
| Investor/Lender Disclosure Statement | Page 6, Part C, #1 | Name and address of borrower |
| Participation and Servicing Agreement | Section 1.1 “Borrower” & “Participants” | Definition of borrower and participants |
An Exculpatory Look at Syndicate Mortgage Investments 
