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Officials at Fortress Real Developments Inc. told investors in 2013 that land slated for a new condo development in Winnipeg was worth more than three times the value cited in an independent appraisal commissioned by the company, the RCMP alleges.

In a search-warrant application filed in court on Oct. 4, RCMP investigators outlined new information that they had gleaned from an earlier search of Fortress’s head-office location in April, saying it supported their concern that Fortress misled investors about the value of land earmarked for several development projects so it could raise more financing.

The RCMP said it has launched a large-scale fraud investigation into Fortress’s fundraising efforts between 2012 and 2017. No charges have been laid as a result of the investigation, which began in late 2016.

Fortress lawyer Scott Fenton said Friday that the company has not committed any criminal conduct, and that the RCMP has “fundamental misconceptions of the most basic workings" of syndicated mortgages. The RCMP has presented “a substantially misleading narrative to justify its investigative searches," he said in a statement.

“The RCMP are working with the type of confirmation bias and tunnel vision that the courts have long criticized should never take the place of objective fact-finding,” Mr. Fenton said.

Fortress, based in Richmond Hill, Ont., helped real estate developers raise $920-million from 14,000 investors between 2008 and 2017 to finance about 80 construction projects.

The RCMP warrant application filed in October said investigators found a document at Fortress’s office during the search in April showing that an appraiser valued Winnipeg land earmarked for the SkyCity Centre condominium development at $5.92-million in August, 2013.

Another 2013 appraisal from the same company, a document also seized in the April search, said the land was worth $11-million “subject to hypothetical conditions and extraordinary assumptions as outlined in the report,” the RCMP said.

The same year, syndicated mortgage investors were offered an opportunity to invest in the Winnipeg project, and were told the “as is” value of the land was $18-million, the RCMP said. The valuation relied on assumptions about future profits and was not an “as is” valuation, according to the RCMP.

Investors were told that their $10-million syndicated loan − which would rank behind a $5.8-million mortgage in any prospective claim − would be fully secured by the value of the land. By inflating the valuations given to investors, Fortress was able to raise more financing, but investors were placed at risk because their mortgage loans were not secured by the land as they believed, the RCMP allege.

In future rounds of fundraising, Fortress told other investors in 2014 that the Winnipeg land was worth $25-million, and said in 2015 that the value of the property was $37.3-million, the RCMP said.

The October search-warrant application also revealed that Fortress was trying to raise $2-million in new funding for SkyCity Centre earlier this year, and got a new appraisal on the land, valuing it at $7.3-million in 2018. Fortress cancelled the SkyCity project this spring.

RCMP investigators said their search at the offices of Building & Development Mortgages Canada Inc. − a mortgage brokerage firm affiliated with Fortress and located at the same office address − also found new information about the valuation of a project in Keswick, Ont., called The South Shore.

Officers said they found an appraisal completed in 2014, estimating the market value of the Keswick project at $7.93-million. Another valuation of the land, also found in BDMC’s office, showed that another appraiser earmarked the value of the land at $7.4-million in 2016.

BDMC provided investors with an “opinion of value” for the property in 2014, showing a value of $22.6-million, the RCMP said. The RCMP said it was based “on the extraordinary assumption” that a future second phase of the project would also be approved, and both phases would be completed. An investor disclosure statement provided by a mortgage broker to an investor in 2014 said the “as is” value of the land was $22.6-million, the RCMP said.

Mr. Fenton, however, said investors were told about “all of the material risks” in the projects, and received “robust disclosures" from licensed mortgage brokers. Investors were also advised in writing about the assumptions used by “respected” industry valuators, he said, who provided “opinions of value” for the projects, as opposed to “bare ‘as is’ appraisals."

The RCMP sought a second search warrant application in October because it said that it had received an anonymous tip that an employee of BDMC, Charene Bunnett, had hidden a laptop and external hard drive when officers searched BDMC’s offices in April. The RCMP said it was told that Ms. Bunnett took both items home with her each night, and received court approval to stop her car while she was driving and conduct a search.

The search application said the RCMP is investigating the offence of obstructing the police. Ms. Bunnett has not been charged with any offence.

Ms. Bunnett’s lawyer, Frank Addario, said he would not comment on the RCMP’s “untested” allegations because the investigation is not over. “I’m looking forward to the opportunity to tell our side of it,” he said.

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