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Court File No. CV-18-596204-00CL

Ontario SUPERIOR COURT OF JUSTICE

B E T W E E N:

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 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43

MOTION RECORD OF FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee

June 20, 2018 OSLER, HOSKIN & HARCOURT LLP P.O. Box 50, 1 First Canadian Place Toronto, ON M5X 1B8

Jeremy Dacks (LSUC# 41851R) Tel: 416.862-4923

Michael De Lellis (LSUC# 48038U) Tel: 416.862.5997

Patrick Riesterer (LSUC# 60258G) Tel: 416.862.5947

Fax: 416.862-6666

Lawyers for FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee

TO SERVICE LIST:

1

Court File No. CV-18-596204-00CL Ontario

SUPERIOR COURT OF JUSTICE COMMERCIAL LIST

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 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43

SERVICE LIST

TO: OSLER, HOSKIN & HARCOURT LLP 100 King Street West 1 First Canadian Place Suite 6200, P.O. Box 50 Toronto, ON M5X 1B8

Jeremy Dacks Tel. +1.416.862.4923 Michael De Lellis Tel. +1.416.862.5997 Patrick Riesterer Tel. +1.416.862.5947

[email protected] [email protected] [email protected]

Counsel for the Trustee

AND TO:

FAAN MORTGAGE ADMINISTRATORS INC. 20 Adelaide Street East Suite 920 Toronto, ON M5C 2T6

Naveed Manzoor Tel. +1.416.258.6415 Daniel Sobel Tel. +1.647.272.8383 Lana Bezner Tel. +1.416.966.7646

[email protected] [email protected] [email protected]

Trustee

mailto:[email protected]






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AND TO:

AIRD & BERLIS LLP Brookfield Place 181 Bay Street, Suite 1800 Toronto, ON M5J 2T9 Steven L. Graff Tel. +1.416.865.7726 Ian Aversa Tel. +1.416.865.3082 Miranda Spence Tel. +416.865.6414 [email protected] [email protected] [email protected] Counsel for the Superintendent of Financial Services

AND TO:

CHAITONS LLP 5000 Yonge Street, 10th Floor Toronto, Ontario M2N 7E9 Harvey Chaiton Tel. +1.416.218.1129 George Benchetrit Tel. +1.416.218.1141 [email protected] [email protected] Proposed Representative Counsel

AND TO:

HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF ONTARIO AS REPRESENTED BY THE MINISTER OF FINANCE P.O. Box 620 33 King Street West, 6th Floor Oshawa, ON L1H 8E9 Kevin O’Hara Tel: +1.905.433.6934 Fax: +1.905.436.4510 [email protected]

AND TO:

NORTON ROSE FULBRIGHT CANADA LLP Royal Bank Plaza, South Tower 200 Bay Street, Suite 3800, P.O. Box 84 Toronto, Ontario M5J 2Z4 Jennifer Teskey Tel: +1.416.216.2303 Jeremy Devereux Tel: +1.416.216.4073 Fax: +1.416.216.3930 [email protected] [email protected]

AND TO:

FINANCIAL SERVICES COMMISSION OF ONTARIO (“FSCO”) 5160 Yonge Street, 16th Floor Toronto, Ontario M2N 6L9 Mark Bailey Tel: +1.416.250.7250 Brendan Forbes Tel: +1.416.250.7250 Fax: +1.416.590.7070 [email protected] [email protected]

AND TO:

BRAUTI THORNING ZIBARRAS LLP 161 Bay Street, Suite 2900, Toronto, ON M5J 2S1 Jay Naster Tel. +1.416.507.2442 [email protected] Counsel to Building and Development Mortgages Canada Inc., Canadian Development Capital & Mortgage Services Inc. and Ildina Galati











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AND TO:

BUILDING AND DEVELOPMENT MORTGAGES CANADA INC. (“BDMC”) 25 Brodie Drive, Unit 8 Richmond Hill, ON L4B 3K7 Ildina Galati [email protected]

AND TO:

CANADIAN DEVELOPMENT CAPITAL & MORTGAGE SERVICES INC. (“CDCM”) 25 Brodie Drive, Unit 7 Richmond Hill, ON L4B 3K7 Charene Bunnett [email protected]

AND TO:

ROBINS APPLEBY LLP 120 Adelaide Street West Suite 2600 Toronto, ON M5H 1T1 David Taub Tel. +1.416.360.3354 John Fox Tel. +1.416.360.3349 [email protected] [email protected] Counsel to Fortress Real Developments Inc.

AND TO:

FORTRESS REAL DEVELOPMENTS INC. 25 Brodie Drive, Unit 1 Richmond Hill, ON L4B 3K7 [email protected] [email protected]

AND TO:

BLANEY MCMURTRY LLP 2 Queen Street East, Suite 1500 Toronto, Ontario M5C 3G5 David Ullmann Tel. +1.416.596.4289 [email protected]

AND TO:

PAUL BATES BARRISTER 100 Lombard St., Suite 302 Toronto, ON M5C 1M3 Paul Bates [email protected]

AND TO:

MILLER THOMSON LLP 40 King Street West, Suite 5800 Toronto, ON M5H 3S1 Craig Mills Tel. +1.416.595.8596 [email protected] Counsel to Brookhill Holdings Inc.

AND TO:

GOLDMAN, SLOAN, NASH & HARBER LLP 480 University Avenue, Suite 1600 Toronto, ON M5G 1V2 David Nakelsky Tel. +1.416.597.7880 [email protected] Counsel to Wellington House Inc.











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AND TO:

O’CONNOR MACLEOD HANNA LLP 700 Kerr Street Oakville, ON L6K 3W5 Orie Niedzviecki Tel. +1.905.842.8030 [email protected] Counsel to JW Roberts Enterprises Inc.

AND TO:

COMPUTERSHARE TRUST COMPANY OF CANADA 100 University Avenue 12th Floor, South Tower Toronto, ON M5J 2Y1 [email protected]

AND TO:

FFM CAPITAL INC. 35 Silton Road Woodbridge, ON L4L 7Z8 Tony Mazzoli Krish Kochhar [email protected] [email protected]

AND TO:

FDS BROKER SERVICES INC. 160 Traders Blvd, Suite 202 Mississauga, ON L4Z 3K7 Zafar Khawaja [email protected]

AND TO:

ROYAL CANADIAN MOUNTED POLICE Integrated Market Enforcement Team 20 Queen Street West, 15th Floor Toronto, ON M5H 3R3 Sgt. Dominic Milotte [email protected]

AND TO:

TSUNAMI TECHNOLOGY GROUP INC. 215 Traders Blvd. East, Suite 16 Mississauga, ON L4Z 3K5 Don Tanner [email protected]

AND TO:

TWIN HILLS FORD LINCOLN LIMITED 10801 Yonge Street Richmond Hill, ON L4C 3E3

AND TO:

OLYMPIA TRUST COMPANY 200, 125-9 Avenue SE Calgary, AB T2G 0P6 Jonathan Bahnuik Johnny Luong [email protected] [email protected]










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AND TO:

RSM CANADA LTD 11 King Street West Suite 700, PO Box 27 Toronto, Ontario M5H 4C7 Jeffrey Berger [email protected] Court-appointed Receiver of Dunsire (Landsdown) Inc.

AND TO:

DUNSIRE (LANDSDOWN) INC. 203A-465 Phillip Street Waterloo, Ontario N2L 6C7 Shawn Keeper [email protected] Borrower

AND TO:

189 DUNDAS STREET WEST INC. 3830 Bathurst Street, Unit 115 Toronto, ON M3H 6C5 Paul Goldfischer [email protected] Borrower

AND TO:

BEL CALGARY INC. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

LAMB BAUHAUS INC. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

BROOKHILL HOLDINGS INC. 56 The Esplanade, Suite 206 Toronto, ON M5E 1A7 Giuseppe Valela

[email protected] Borrower

AND TO:

SUNRISE ACQUISITIONS (BOND HEAD) INC. 50 West Wilmot Street, Suite 100 Richmond Hill, ON L4B 1M5 Sajjad Hussain

[email protected] Borrower

AND TO:

BRAESTONE DEVELOPMENT CORPORATION 85 Bayfield Street, Suite 500 Barrie, ON L4M 3A7 J. David Bunston James Massey [email protected] Borrower









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AND TO:

FORTRESS BROOKDALE INC. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower

AND TO:

WESTGATE PROPERTIES LTD. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower

AND TO:

EMERALD CASTLE DEVELOPMENTS INC. 361 Connie Crescent, Suite 200 Concord, ON L4K 5R2 Desi Auciello [email protected] Borrower

AND TO:

FORTRESS CHARLOTTE 2014 INC. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore [email protected] Borrower

AND TO:

FORTRESS COLLIER CENTRE LTD. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower

AND TO:

CARLYLE COMMUNITIES (CRESTVIEW) INC. 20 Rivermede Road, Suite 204 Concord, ON Naram Mansour [email protected] Borrower

AND TO:

LAMB EDMONTON CORP. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

AVERTON HOMES (PRESCOTT) INC. 101 Riele Drive, Suite 310 St. Alberta, AB T8N 3X4 Paul Lanni [email protected] Borrower












7

AND TO:

THE HARLOWE INC. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

THICKSON ROAD 407, WHITBY LIMITED 9000 Keele Street, Unit 4 Concord, Ontario L4K 0B3 Mario Bottero [email protected] Borrower

AND TO:

2309918 ONTARIO INC. 30 Wertheim Court, Unit 3, Building A, Richmond Hill, Ontario L4B 1B9 Dino Sciavilla [email protected] Borrower

AND TO:

NOBLETON SOUTH HOLDINGS INC. 56 The Esplanade, Suite 206 Toronto, Ontario M5E 1A7 Domenic Fazari [email protected] Borrower

AND TO:

2301132 ONTARIO INC. 11025 Lakeridge Road Port Perry, Ontario L9L 1V7 Brian Tilley [email protected] Borrower

AND TO:

2309840 ONTARIO INC. 11025 Lakeridge Road Port Perry, Ontario L9L 1V7 Brian Tilley [email protected] Borrower

AND TO:

SOUTH WEST QUEENSVILLE HOLDINGS INC. 56 The Esplanade, Suite 206 Toronto, Ontario M5E 1A7 Giuseppe Valela [email protected] Borrower

AND TO:

WORTHINGTON HOMES (HUMBERTON) INC. 164 Nelson Street Oakville, Ontario L6L 3J2 Daniel Marion [email protected] Borrower









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AND TO:

BEL-EDMONTON INC. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

KING SQUARE LTD. 50 Acadia Avenue, Suite 310 Markham, Ontario L3R 0B3 Wen Yi Wang [email protected] Borrower

AND TO:

KINGRIDGE DEVELOPMENT CORPORATION 235 Speers Road Oakville, Ontario L6K 2E8 Daniel Marion [email protected] Borrower

AND TO:

SMYGINE (LAKEEAST) INC. 6021 Yonge Street, Suite 229 Toronto, Ontario M2M 3W2 Mike Petrovski [email protected] Borrower

AND TO:

DUNSIRE (1041 LAKESHORE) INC. 203A-465 Phillip Street Waterloo, Ontario N2L 6C7 Shawn Keeper [email protected] Borrower

AND TO:

DUNSIRE (1407 LAKESHORE) INC. 203A-465 Phillip Street Waterloo, Ontario N2L 6C7 Shawn Keeper [email protected] Borrower

AND TO:

NOBLETON NORTH HOLDING INC. 368 Four Valley Drive Concord, Ontario L4K 5Z1 Giuseppe Valela [email protected] Borrower

AND TO:

OLD MARKET LANE INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower









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AND TO:

FORTRESS CARLYLE PETER STREET INC. 20 Rivermede Road, Suite 204 Concord, Ontario L4K 3N3 Naram Mansour Jawad Rathore [email protected] Borrower

AND TO:

AVERTON (RUTHERFORD) INC. 101 Riele Drive, Suite 310 St. Alberta, Alberta T8N 3X4 Paul Lanni [email protected] Borrower

AND TO:

KINGRIDGE (OAKVILLE EAST) INC. 1660 North Service Road East, Suite 109B Oakville, Ontario N6H 7G3 Daniel Marion [email protected] Borrower

AND TO:

6566074 MANITOBA LTD. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower

AND TO:

2382917 ONTARIO INC. 500 Hanlon Creek Blvd Guelph, Ontario N1C 0A1 Lee Piccolo [email protected] Borrower

AND TO:

1177 DANFORTH AVENUE LTD. 156 Duncan Mill Road, Suite 23A Toronto, Ontario M3B 3N2 Morris Hansun [email protected] Borrower

AND TO:

L RICHMOND CORP. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

FORTRESS KEMPENFELTBAY DEVELOPMENTS INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower











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AND TO:

LAMB CALGARY INC. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

2221563 ONTARIO INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower

AND TO:

AMADON-WESTWATER PROJECTS LTD. 426B William Street Victoria, British Columbia V9A 3Y9 Max Tomaszewski [email protected] Borrower

AND TO:

HALO TOWNHOMES INC. 229-6021 Yonge Street Toronto, Ontario M2M 3W2 Mike Petrovski Sayf Hassan Konstantine Simionopoulos [email protected] Borrower

AND TO:

FORTRESS TRIPLE CREEK INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower

AND TO:

UNION WATERFRONT INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower

AND TO:

WELLINGTON HOUSE INC. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower








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Email List: [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected];[email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]
























mailto:[email protected];[email protected]


mailto:[email protected];%[email protected]





























INDEX

Tab Document Page No.

1 Notice of Motion dated June 20, 2018 1-8

2 Draft Order for the Approval of Interim Stabilization Measures 9-21and Appointment of Representative Counsel

3 First Report of the Trustee dated June 19, 2018 22-119


Ontario SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST


Applicant

- and -


Respondent

APPLICATION UNDER SECTION 37 OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006,

c. 29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43

NOTICE OF MOTION (Motion for Approval of an Order for the Approval of Interim Stabilization Measures and

Appointment of Representative Counsel)

FAAN Mortgage Administrators Inc. (“FAAN Mortgage”), in its capacity as

Court-appointed trustee (the “Trustee”) of all of the assets, undertakings and properties of

Building & Development Mortgages Canada Inc. (the “Respondent”) pursuant to section 37 of

the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c. 29, as amended

(the “MBLAA”), and section 101 of the Courts of Justice Act, 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

June 26, 2018 at 9:00 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 “Stabilization Order”) substantially in the form attached to the Motion

Record, inter alia:

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(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) appointing Chaitons LLP as representative counsel (“Representative Counsel”) to

represent all Investors in respect of these proceedings, other than Investors in

respect of any syndicated mortgage loan made to Dunsire (Landsdown) Inc., unless

and until written notice is provided to Representative Counsel by a particular

Investor that such Investor does not wish to be represented by Representative

Counsel;

(c) approving certain interim stabilization measures in connection with the

Respondent’s estate, including:

(i) 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 Investors

pro rata based on each such Investor’s respective portion of such Victoria

Medical SML Loans;

(ii) that the Trustee hold in a separate account, until further Order of the Court, all

(I) funds that are currently in the Respondent’s or the Trustee’s possession or

that may come into the Respondent’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 the Respondent on behalf of

Investors (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 Investors in respect of

investments held through RRSPs or other registered accounts or funds, (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 the Respondent 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

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by no later than October 31, 2018 with a recommendation regarding next steps

with respect to the Realized Property, including any potential distribution of

any Realized Property to the Investors; and

(iii) that the Trustee hold in a separate account all funds (other than Realized

Property) that were in the Respondent’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 the Respondent or the Trustee (in trust or otherwise) 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;

and

(d) 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.

2. Such further and other relief as this Court may deem just.

THE GROUNDS FOR THE MOTION ARE:

1. Concurrently with the filing of this notice of motion, the Trustee is filing the First

Report of the Trustee dated June 19, 2018 (the “First Report”) with the Court, and the Trustee’s

activities described therein have been reasonable and responsible in accordance with the

Trustee’s mandate as provided by the Appointment Order. Capitalized terms used but not defined

herein have the meanings given in the First Report;

2. Pursuant to the Order of the Court in respect of the Respondent 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 the Respondent, including, without

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,

Investors, brokers, or borrowers, in each case whether or not such property is held in trust or is

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required to be held in trust, which includes, for greater certainty, any and all real property

charges in favour of the Respondent, including, without limitation, any and all monetary and

non-monetary entitlements in respect to the assets and values thereunder;

3. The purpose of the Trustee’s appointment is to protect the interests of the investing public

who are syndicated mortgage lenders (the “Investors”) who have invested funds in certain real

estate development projects secured by charges (typically third-ranking or lower priority

charges) registered on title to the applicable real property;

4. The circumstances leading to the appointment of the Trustee are summarized in the

affidavit of Brendan Forbes sworn April 19, 2018 and the exhibits thereto (the “Supporting

Affidavit”), which was filed by the Applicant in support of the Trustee’s appointment;

Interim Stabilization Measures

5. 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 Investor inquiries;

6. 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 the Respondent, and (b) proactively engage with competing

stakeholders on a project by project basis in order to develop a strategy to maximize recoveries

for Investors in difficult circumstances;

7. BDMC is functionally insolvent but has a number of regular expenses. The Trustee has

no assurance that further contributions from Fortress or CDCM will be forthcoming;

8. The Trustee has prepared a Cash Flow Projection, on a monthly basis through to October

31, 2018 (the “Stabilization Period”). The Cash Flow Projection has been prepared by the

Trustee using the information provided to it by BDMC’s employees and representatives, based

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on the Trustee’s review of BDMC’s records and third-party estimates. It should be noted that

there are no cash receipts projected during the Stabilization Period;

9. The Trustee controls certain funds as more fully described in the First Report, including

funds received after the date of the Appointment Order;

10. Certain brokers have raised concerns regarding the proceeds received with respect to

repayments of certain loans and the funds held as an “interest reserve” in a separate account of

the Respondent established for that purpose;

11. The Trustee would like the Court’s authorization to distribute certain of the proceeds

received with respect to loans made to one of the projects and to clarify and confirm the scope of

the Trustee’s Charge (as defined in the First Report) and to put some additional restrictions on

the Trustee’s rights with respect to the funds charged to give comfort to Investors, brokers and

borrowers who have expressed concerns;

12. The proposed Stabilization Order provides that (i) the Trustee will distribute 50% of the

principal received on the Victoria Medical SML Loans, (ii) will retain all Realized Property

(consisting of payments of principal and of interest where principal is paid as well) separate and

apart from any other funds until further order of the Court and (iii) will be authorized to use

Estate Property (consisting of all other funds received or held by or on behalf of the Trustee,

including payments of interest where no principal is paid). The Trustee is to report to the Court

by no later than the end of the Stabilization Period with a recommendation regarding next steps

with respect to the Realized Property;

13. The proposed Stabilization Order will facilitate the Trustee in carrying out its mandate

for the benefit of all Investors and other stakeholders of the Respondent;

Representative Counsel

14. The Trustee is of the view that it is in the best interests of the Investors to appoint

Chaitons LLP as Representative Counsel on behalf of the Investors in order to provide the

Investors with legal representation to protect their common interests, while keeping professional

fees for Investors as low as possible;

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15. Representative Counsel shall have no obligation to consult with, follow the instructions

of, or provide an opinion to, any individual Investor in connection with the discharge of its duties

under the proposed Stabilization Order;

16. Any Investor that does not wish to be represented by Representative Counsel would be

permitted to opt out and be required to provide notice of same in writing to Representative

Counsel;

17. Representative Counsel would 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, such Representative

Counsel Charge being a charge on the Property ranking immediately subordinate in priority to

the Trustee’s Charge;

Land Title Documents

18. The Trustee has concluded that certain clarifications are desirable with respect to its

rights to execute and register certain documents required in connection with a registration,

discharge, partial discharge, postponement, subordination, transfer or other dealings with the

Property, including mortgages;

General

19. The provisions of the MBLAA, including section 37 thereof;

20. The Appointment Order;

21. Rules 1.04, 1.05, 2.03, 3.02, 16, 37 and 41 of the Ontario Rules of Civil Procedure,

R.R.O. 1990, Reg. 194, as amended;

22. Sections 101 and 106 of the Ontario Courts of Justice Act, R.S.O. 1990, c. C.43 as

amended;

23. The inherent and equitable jurisdiction of this Honourable Court; and

24. Such further and other grounds as counsel may advise and this Court may permit.

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THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of

this motion:

1. The Appointment Order;

2. The Supporting Affidavit;

3. The First Report; and

4. Such further and other evidence as counsel may advise and this Court may permit.

June 20, 2018 OSLER, HOSKIN & HARCOURT LLP Box 50, 1 First Canadian Place Toronto, ON M5X 1B8 Jeremy Dacks (LSUC# 41851R) Michael De Lellis (LSUC# 48038U) Patrick Riesterer (LSUC# 60258G) Tel: (416) 362-2111 Fax: (416) 862-6666 Lawyers for FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee

TO: SERVICE LIST

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ONTARIO SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

THE HONOURABLE MR.

)

TUESDAY, THE 26th DAY

) JUSTICE HAINEY ) OF JUNE, 2018 BETWEEN:


Applicant

- and -


Respondent

APPLICATION UNDER SECTION 37 OF THE

MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c. 29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43

ORDER FOR THE APPROVAL OF INTERIM STABILIZATION MEASURES

AND APPOINTMENT OF REPRESENTATIVE COUNSEL

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 the Mortgage Brokerages, Lenders and Administrators

Act, 2006, S.O. 2006, c. 29, as amended (the “MBLAA”), and section 101 of the Courts of

Justice Act, R.S.O. 1990, c. C.43, as amended, for an Order, inter alia (i) appointing

representative counsel to represent Investors in respect of these proceedings; and (ii) approving

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certain interim stabilization measures in connection with the Respondent’s estate, was heard this

day at 330 University Avenue, Toronto, Ontario;

ON READING the First Report of the Trustee dated June 19, 2018 (the “First Report”),

and on hearing the submissions of counsel for the Trustee, counsel for The Superintendent of

Financial Services, and Chaitons LLP, 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 David

Williams sworn June 20, 2018, filed;

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 April 20,

2018 (the “Appointment Order”) or in the First Report.

REPRESENTATIVE COUNSEL

3. THIS COURT ORDERS that, subject to Paragraph 8 below, Chaitons LLP is hereby

appointed as counsel (“Representative Counsel”) for all Investors in respect of these

proceedings (including, without limitation, all those persons who are Investors as a result of

having investments held through registered retirement savings plans (“RRSPs”) or other

registered accounts or funds with RRSP Trustees (defined below)) regarding their common

interests in the loans and other indebtedness administered by the Respondent, including the

common interests of Investors in any particular loan or other indebtedness administered by the

Respondent, unless and until written notice is provided by a particular Investor to Representative

Counsel that such Investor does not wish to be represented by Representative Counsel.

Notwithstanding the foregoing, Representative Counsel shall not represent Investors in respect of

any syndicated mortgage loan made to Dunsire (Landsdown) Inc.

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4. THIS COURT ORDERS that, in fulfilling its mandate under Paragraph 3,

Representative Counsel shall act in the best interests of the Investors and shall take such

necessary and appropriate steps or actions as Representative Counsel deems fit from time to

time, including, where appropriate, to give such consents on behalf of Investors that may be

necessary or desirable in the circumstances, provided however that Representative Counsel shall

not be obligated to take any step or action where Representative Counsel determines (in

consultation with the Trustee) that the best interests of Investors would not be served by any such

step or action.

5. THIS COURT ORDERS that Representative Counsel shall have no obligation to

consult with, follow the instructions of, or provide an opinion to, any individual Investor in

connection with the discharge of its duties under this Order.

6. THIS COURT ORDERS that the Trustee shall provide to Representative Counsel,

without charge to the Investors, the following information, documents and data (including

personal information), to the extent such information, documents or data is in the Trustee's

possession or control in respect of these proceedings (the “Information”):

(a) the names, last known addresses and last known email addresses (if any) of the

Investors (the “Investor Contact Information”); and

(b) such additional information, documents and data (including personal information)

as may be reasonably requested in writing by Representative Counsel and which

is (i) relevant to the Investors’ participation in these proceedings and (ii)

reasonably necessary for Representative Counsel to fulfill its mandate in these

proceedings, or as ordered by the Court,

provided that the Trustee and its counsel may recover their time and expenses for so

doing at their standard rates. This Order shall be sufficient legal authority for the Trustee

to disclose the Information to Representative Counsel under the Personal Information

Protection and Electronic Documents Act (Canada), other applicable privacy legislation,

or any other applicable law without the knowledge or consent of the individual Investors

or any other person, the Trustee is not required to obtain any consent from any Investor

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or any other person to authorize disclosure of the Information to Representative Counsel,

and the Trustee shall have no liability whatsoever for making such disclosures in

accordance with the terms hereof.

7. THIS COURT ORDERS that notice of the granting of this Order, substantially in the

form attached hereto as Schedule “A”, shall be sent by Representative Counsel (or by the

Trustee on behalf of Representative Counsel) to each Investor by electronic or regular mail at the

address for such Investor provided pursuant to Paragraph 6(a), within seven business days of the

date of receipt by Representative Counsel of the Investor Contact Information, and that the

notice shall also be posted on the Trustee’s website at www.faanmortgageadmin.com.

8. THIS COURT ORDERS that any Investor who does not wish to be represented by

Representative Counsel in these proceedings shall notify the Trustee and Representative

Counsel, in writing, that he, she or it is opting out of representation by delivering a notice by

electronic or regular mail substantially in the form attached as Schedule “B” hereto, and such

Investor shall thereafter not be bound by the actions of Representative Counsel and shall

represent himself, herself or itself or be represented by any counsel that he, she or it may retain

exclusively at his, her or its own expense.

9. THIS COURT ORDERS that Representative Counsel may communicate with any

Investor who has not opted out pursuant to Paragraph 8 hereof by electronic or regular mail at

the addresses provided pursuant to Paragraph 6(a) or such other addresses provided by the

applicable Investor to Representative Counsel.

10. THIS COURT ORDERS that Representative Counsel shall have no liability as a result

of its appointment or the performance of its duties or in carrying out the provisions of this Order

and any subsequent Orders in these proceedings, save and except for any gross negligence or

willful misconduct on its part.

11. THIS COURT ORDERS that, subject to prior approval by the Trustee or further Order

of the Court, Representative Counsel shall be paid its reasonable fees and disbursements, at its

standard rates and charges, and shall be entitled to and is hereby granted a charge (the

“Representative Counsel Charge”) on the Property as security for its fees and disbursements in

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respect of these proceedings, both before and after the making of this Order, and that the

Representative Counsel Charge shall form a charge on the Property ranking immediately

subordinate in priority to the Trustee’s Charge but ranking in priority to all other security

interests, trusts, liens, charges and encumbrances, statutory or otherwise, in favour of any Person.

12. THIS COURT ORDERS that, subject to prior approval by the Trustee or further Order

of the Court, Representative Counsel is entitled to be paid its fees and disbursements from any

distributions to be made to the Investors in these proceedings.

13. THIS COURT ORDERS that all reasonable professional fees and disbursements that

may be incurred by Representative Counsel, whether incurred prior to or after the date of this

Order, will form part of the indebtedness owing to the Investors.

14. THIS COURT ORDERS that Representative Counsel shall be given notice of all

motions in these proceedings, and that the giving of notice to Representative Counsel shall

constitute service on all of the Investors who have not opted out pursuant to Paragraph 8 hereof.

15. THIS COURT ORDERS that Representative Counsel shall be at liberty and is

authorized at any time to apply to this Court for advice and directions in the performance or

variation of its powers and duties.

INTERIM STABILIZATION MEASURES

16. THIS COURT ORDERS that the Trustee shall:

(a) distribute 50% of the principal amount held by the Trustee in respect of each of

the Victoria Medical SML Loans (as defined in the First Report) to the applicable

Investors pro rata based on each such Investor’s respective portion of such

Victoria Medical SML Loans;

(b) hold, until further Order of the Court, in a separate account all (I) funds that are

currently in the Respondent’s or the Trustee’s possession or that may come into

the Respondent’s or the Trustee’s possession, other than such amounts to be

distributed pursuant to paragraph 16(a), in each case as a result of a repayment (in

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whole or in part) of principal on any loan or other indebtedness owing to or

administered by the Respondent on behalf of Investors, 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 Investors 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 (II) all interest paid or payable to the

Respondent or the Trustee at the time such repayment (in whole or in part) of

principal is made (collectively “Realized Property”) and shall report to the Court

by no later than October 31, 2018 with a recommendation regarding next steps

with respect to the Realized Property, including any potential distribution of any

Realized Property to the Investors; and

(c) hold in a separate account all funds (other than Realized Property) that were in the

Respondent’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 the Respondent

or the Trustee (in trust or otherwise) 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 clarified

herein.

For greater certainty, Realized Property and Estate Property shall be included within the

definition of “Property” as set out in the Appointment Order.

17. THIS COURT ORDERS and confirms that, with the exception of Realized Property,

which shall be held as provided for in Paragraph 16(b), the Trustee is hereby empowered and

authorized, but not obligated, to use any Property to aid the Trustee in complying with the

Appointment Order and carrying out its mandate, as the Trustee, in its sole discretion, considers

necessary or desirable for the effective administration of the estate including, without in any way

limiting the generality of the foregoing, to do any of the following:

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(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;

(b) to pay expenses of the Respondent, 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 the Respondent, including, without limitation, in connection with

obtaining new appraisals of any property or, if necessary, taking 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 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; or

(e) to pay general expenses of the Respondent or the Trustee, in that capacity, not

covered by the foregoing,

in each case without interference from any other Person and without regard to any

arrangement in existence as of the date hereof between the Respondent, any borrower,

any Investor or any other Person.

18. THIS COURT ORDERS that, in using any Property in accordance with the

Appointment Order or this Order, the Trustee shall keep detailed records regarding the source

and use for such payments and shall report to the Court from time to time regarding same.

19. THIS COURT ORDERS that the Trustee be and is at liberty, but is not obligated, to

surrender the Respondent’s mortgage administrator license issued under the MBLAA and any

corresponding license in any other jurisdiction at such time as the Trustee may determine, with

the concurrence of the applicable regulatory authorities, that it is no longer necessary or desirable

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for the Respondent to maintain such license(s). In addition, the Trustee is authorized, but not

required, to apply for such other licenses as the Trustee determines are necessary or desirable for

it to hold in connection with its mandate.

LAND TITLE DOCUMENTS

20. In addition to any powers granted to the Trustee in the Appointment Order, the Trustee is

hereby empowered:

(a) to direct the applicable land registry office, registrar, other official or similar

government authority under The Land Titles Act (Ontario), the Land Registration

Reform Act (Ontario), the Land Titles Act (Alberta), or any other comparable

legislation in any province, including for greater certainty the Registrar of Land

Titles of Alberta, (“Real Property Authority”) to register a copy of this Order

and any other Orders in respect of the Property, notwithstanding the requirements

of s. 191 of the Land Titles Act, RSA 2000, c L-4, or the provisions of any other

similar provincial enactment, and notwithstanding that the appeal period in

respect of this Order has not elapsed, which appeal period is, for the purposes of

this paragraph 20, expressly waived, and for such purposes the Trustee shall be

treated as if it were a receiver appointed pursuant to the Bankruptcy and

Insolvency Act, RSC, 1985, c B-3;

(b) to execute, 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, postponement, subordination or similar dealings

in respect of any mortgage or interest in land (each, a “Land Title Document”)

and, for greater certainty, the applicable Real Property Authority is hereby

directed, following (i) registration of this Order or being presented with a certified

true copy of this Order and (ii) being presented with such Land Title Document,

to register such Land Title Document to register, discharge, partially discharge,

transfer, assign, postpone, subordinate or otherwise deal with such mortgage in

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accordance with such Land Title Document without any obligation to inquire into

the propriety of the execution or effect of such Land Title Document.

GENERAL

21. 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.

22. 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

Canada.

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SCHEDULE “A” You are receiving this notice because you have invested in certain syndicated mortgage loan products or other indebtedness administered by Building & Development Mortgages Canada Inc. (“BDMC”). As previously advised, by an Order issued by the Ontario Superior Court of Justice (“Court”) on April 20, 2018 on application by The Superintendent of Financial Services, FAAN Mortgage Administrators Inc. was appointed trustee of BDMC by the Court (the “Trustee”). By Order dated June , 2018 (the “Representation Order”) granted by the Court, Chaitons LLP was appointed as representative counsel (“Representative Counsel”) for all Investors in respect of their interests in the loans and other indebtedness administered by BDMC, including where such loans or other indebtedness is held through RRSPs or other registered accounts or funds, unless and until written notice is provided by a particular Investor to Representative Counsel that such Investor does not wish to be represented by Representative Counsel. A copy of the Representation Order is attached hereto. All capitalized terms not defined above are used as defined in the Representation Order. You have no obligation to pay or otherwise compensate Representative Counsel in respect of its efforts on your behalf, but Representative Counsel’s fees and disbursements will be added to the indebtedness that was administered by BDMC and paid in priority to a distribution to you or to any other Investor, whether or not you or any other Investor opts out of the group. If you do not wish to be represented by Representative Counsel, you may opt-out of the group in accordance with Paragraph 8 of the Representation Order by completing the form attached hereto. If you have any questions concerning this matter, please contact either Representative Counsel at [email protected] or the Trustee at: Email: [email protected] Local Telephone Number: 416-606-3338 Toll-Free Telephone Number: 1-833-495-3338

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SCHEDULE “B”



COMMERCIAL LIST

BETWEEN:


Applicant

- and -


Respondent

OPT-OUT FORM

TO: Chaitons LLP 5000 Yonge Street, 10th Floor Toronto, ON M2N 7E9 Email: [email protected]

I, _______________ am an Investor as defined in the Order dated April 20, 2018 (the “Appointment Order”) granted by the Ontario Superior Court of Justice (Commercial List) in the proceeding commenced under Court File No. CV-18-596204-00CL (the “Trusteeship Proceeding”), in that I invested the sum of $ with respect to the project known as _______________ administered by Building & Development Mortgages Canada Inc. Under Paragraph 8 of the Order dated June , 2018, Investors who do not wish Chaitons LLP to act as their representative counsel may opt out.

I hereby notify you that I wish to exercise my option to opt out of representation by Chaitons LLP under the Order and will be represented as an independent individual party at my own expense to the extent I wish to appear or participate in the

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Trusteeship Proceeding.

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ONTARIO

SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)

BETWEEN


Applicant

- and -


Respondent

APPLICATION UNDER SECTION 37 OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c.

29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43

FIRST REPORT OF THE TRUSTEE

JUNE 19, 2018

FAAN Mortgage Administrators Inc. Court-Appointed Trustee of the Respondent

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TABLE OF CONTENTS

INTRODUCTION ............................................................................................................................... 1

PURPOSE OF THE FIRST REPORT ..................................................................................................... 2

SCOPE AND TERMS OF REFERENCE ................................................................................................ 3

BACKGROUND ................................................................................................................................. 4

ACTIVITIES OF THE TRUSTEE TO DATE ............................................................................................ 9

FUNDING OF THESE PROCEEDINGS AND CASH FLOW PROJECTION ............................................ 15

FUNDS HELD IN BDMC BANK ACCOUNTS ..................................................................................... 18

FUNDS RECEIVED FROM BORROWERS SINCE THE TRUSTEE’S APPOINTMENT ............................ 22

REPRESENTATION FOR INVESTORS ............................................................................................... 29

CONCLUSION AND RECOMMENDATION ...................................................................................... 32

23

INDEX OF APPENDICES

Appendix 1 Appointment Order dated April 20, 2018

Appendix 2 Forbes Affidavit sworn on April 19, 2018, without exhibits

Appendix 3 Project Status Chart as of May 31, 2018

Appendix 4 Cash Flow Projection to October 31, 2018

24



(COMMERCIAL LIST)

BETWEEN


Applicant

- and -


Respondent

APPLICATION UNDER SECTION 37 OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c.


FIRST REPORT OF THE TRUSTEE

JUNE 19, 2018

INTRODUCTION

1. 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 Inc. (“FAAN Mortgage”) was appointed as trustee (“Trustee”)

over all of the assets, undertakings and properties of Building & Development Mortgages

Canada Inc. (“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

(“Investors”), 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 Courts of Justice Act (Ontario), as amended. A copy of the

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Appointment Order is attached as Appendix “1” hereto.

2. 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, 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 otherwise 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.

3. Materials filed with 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”).

PURPOSE OF THE FIRST REPORT

4. 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 Investors 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.

5. In 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 Investors.

6. 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.

7. The Trustee will report back to the Court prior to the expiration of the Stabilization Period

to give the Court, Investors, 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

8. In preparing this Report, the Trustee has relied upon unaudited financial information

provided by, inter alia, BDMC, Fortress (defined below), Canadian Development Capital

& Mortgage Services Inc. (“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

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verification of such information for accuracy, completeness or compliance with Generally

Accepted Assurance Standards (“GAAS”), Generally Accepted Accounting Principles

(“GAAP”), or International Financial Reporting Standards (“IFRS”). 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.

9. 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 otherwise noted.

BACKGROUND

12. BDMC is an Ontario corporation with its head office located at 25 Brodie Drive, Unit #8,

Richmond Hill, Ontario. The Trustee understands that BDMC is wholly owned by Ildina

Galati, who is also BDMC’s sole director and officer. BDMC was formerly known by the

name Centro Mortgage Inc. 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 Inc. 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,

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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 acted as lender to the Borrower and administrator for the

Investors. Syndicated mortgage loans are regulated by FSCO and are more fully

described in the Forbes Affidavit.

14. 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.

15. According to the Forbes Affidavit, significant portions of the sums advanced by Investors

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 Investors’ brokers,

FMP Mortgage Investments Inc., FFM Capital Inc. and FSDS Broker Services Inc. (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 2% and 5% of project costs.

16. In some instances, another portion of the funds advanced by Investors was retained by

BDMC to pay interest owing to those same Investors 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 (“Interest Reserve Account”). Depending on the terms of the applicable loan agreement, interest reserve funds were

paid or to be paid to Investors 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 Interest 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 Investors, including paying interest amounts owing to priority

lenders and paying expenses incurred on projects.

17. Although the funds advanced by Investors were secured by mortgages held by BDMC on

the related real property, the Investors typically expressly agreed to subordinate their

mortgages to current or future lenders who agreed to provide construction financing.1 In

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 Investors 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 Investors. The Trustee is still in the process of investigating these complex priority

arrangements and notes that the priority arrangements vary from project to project.

18. Approximately $560 million is currently invested in syndicated mortgage loans

administered by BDMC by over 11,000 individual Investors. 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, 2018:

Project Status

Number of Projects

BDMC SML Debt

($000s) Development 24 260,066 Pre-construction 6 73,042 Construction 12 216,274 Completed 2 10,905 Total 44 $560,287

1 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, including further “mezzanine” debt. The Trustee has been advised by borrowers and others that the agreements require 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.

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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.

19. As described in more detail in the Forbes Affidavit, FSCO had received numerous

complaints from Investors regarding BDMC’s activities and the performance of their

investments in BDMC compared to the promises the Investors 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.

20. 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.

21. 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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CDCM is often the principal 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.

22. 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.

23. 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, FAAN Mortgage was presented with a number of urgent demands for

postponements of security granted to BDMC (in trust for Investors) 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. In addition, FAAN Mortgage

responded to a number of enforcement steps that were taken by senior lenders.

24. 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.

25. 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.

26. 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. In

addition, the Trustee has received demands to turn over certain funds held by BDMC for

borrowers, Investors and others.

27. 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.

ACTIVITIES OF THE TRUSTEE TO DATE

28. 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 Investor inquiries.

29. The Trustee has also been working to obtain recovery for Investors 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.

30. In 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 Investor’s

interests. For example, on the Dunsire Project, it initially appeared that there would be no

recoveries for the Investors, but the Trustee has since learned that some recovery should

be available.

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Enforcement Matters:

31. 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 Investors

in the circumstances, but in some cases, the Investors’ interests have already been

severely compromised and, in other cases, the Investors’ interests are at risk of being

severely compromised. It 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 Investors 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.

32. Brookdale Project: 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 Investors rank in 4th and 5th position

on this project. In 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 Inc. (“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 Investors 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 Investors’ interests in the Brookdale Project, including engaging in extensive

communications with Investors. 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 Investors and the Trustee has contacted the private receiver to offer its

assistance in developing a process to maximize value for all stakeholders, including the

Investors. 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 asserted. The Trustee notes that a sale of the

property could result in significant losses to the Investors.

33. Bowmanville Project: 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. 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 Investors. The Trustee

continues to seek to maximize value for the Investors in loans made by BDMC to the

borrower in connection with the Bowmanville Project and is working cooperatively with

counsel to 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. If the project continues to

advance, the value of the project will likely be enhanced and the potential recoveries to

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Investors should be higher than what would be available if the refinancing was not

completed and the project was sold in its current state.

34. Dunsire Project: a real estate 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

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 Investors. Immediately 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 Investors. 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 Investors due to the purchase price payable for the Dunsire Project and the quantum

of secured debt in priority to BDMC’s loans. In 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

Investors, which will likely result in at least a partial recovery for Investors.

35. Georgetown Project: 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 Investors.

36. Colliers Project: A real estate development project in Barrie, Ontario (“Colliers Project”), 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 Investors.

Postponements:

37. In 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.

38. 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. In 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. In 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.

39. In response to these requests, the Trustee, on behalf of BDMC and its Investors, has

requested detailed information regarding the applicable project and the proposed use of

funds. In 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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the borrower in priority to BDMC’s loan(s) is in the best interests of the Investors as well

as increases the likelihood of completion of the project.

40. 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.

Investor Communications:

41. FAAN Mortgage has been engaging with Investors since its appointment as manager of

the Administration Business and has continued to do so after its appointment as Trustee.

In addition to providing Investors information about the matters described above and,

where appropriate, seeking consent of Investors to material actions to be taken by the

Trustee, the Trustee has provided Investors 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

Investors regarding the Trustee’s appointment and the status of their investments and the

related projects. Investor communications are a critical part of the Trustee’s mandate and

are also very time consuming and labour intensive.

42. In circumstances where FAAN Mortgage has determined that it was appropriate to seek

Investor consent, it has received very few responses and has been required to rely on

certain deemed consent provisions of the applicable Participation and Servicing

Agreement (as more fully described in the Forbes Affidavit).

Other Matters:

43. In 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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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 Investors’ brokerages, including FFM and FDS, who acted as

brokers on behalf of individual Investors;

(d) engaging with other stakeholders of BDMC and related parties, including Ms. Ildina

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 IT

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

44. 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 Investors. These

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activities are time consuming and costly and are being carried out in circumstances where

BDMC has little to no revenue.

45. 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.

46. Since many of BDMC’s borrowers are Fortress entities or otherwise 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 Investors,

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.

47. 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 Investors. 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.

48. 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.

49. In 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

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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.

50. 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.

51. In addition, as noted in the Forbes Affidavit, prior to 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.

52. 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 Investors.

53. The Trustee has prepared a Cash Flow Projection, on a monthly basis through to the

conclusion of the Stabilization Period on October 31, 2018 (“Cash 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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$000s June

(2wks)

July

Aug.

Sept.

Oct.

Total Receipts - - - - - -

Disbursements Staffing costs 16 33 33 46 33 161 Rent and utilities 1 6 7 8 7 29 Office expenses and IT 4 3 4 9 5 25 Bank charges - 1 1 1 1 4 Other expenses 5 10 10 13 10 48 Total Operating Disbursements 26 54 56 76 55 267 New Appraisal fees 35 140 140 35 - 350 Professional fees - 150 150 150 150 600 Total disbursements 61 344 346 261 205 1,217

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 Investors in the

form of an administration fee of $113, per Investor per year of the term of the loan. These

funds were collected at the time of the initial advance of the funds from the Investors.

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.

55. 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

56. 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:

4 As at December 31, 2017.

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Account name/ Reference

Primary Purpose of account (per BDMC)

Balance on April 20, 2018 (appointment)

Current Balance

Property Type5

Account #1 (763 Account)

Operating account 480 2,519 Estate Property


To hold funds to potentially be paid to third parties

71,329 52,594 Estate Property


To hold funds for Investors

469,882 486,874 Realized Property


Interest Reserve Account

1,403,496 1,461,471 Estate Property

Account #5 (term deposit)

Regulatory capital required to be maintained under the MBLAA

25,752 25,777 Estate Property

Account #6 (GIC account)

To hold Victoria Medical SML Loan repayments

- 4,511,218 Realized Property

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 Investors. The balance currently in the account is

comprised primarily of a returned bank draft that was never cashed from 2015. The

5 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 Investors. There

are two types of balances that are held in this account, (i) funds advanced by Investors 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 Investors.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 Interest 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.7 Certain of these funds consist of

interest reserve amounts payable to Investors. Additionally, despite the fact that the 214

Account is called the Interest 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 Investors,

such as interest payments on senior loans and bridge loans as well as certain

development costs. In addition, the Trustee understands that in the past, BDMC received

and complied with instructions to apply funds held in the Interest 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 account, the 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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Since the issuance of the Appointment Order, the Trustee has received a number of

requests from borrowers for disbursements out of the Interest Reserve Account. On or

about May 3, 2018, the Trustee forwarded letters to CDCM, in its capacity as the

borrowers’ broker, addressed to borrowers who appear to have an interest in the Interest

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 Interest 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 Interest Reserve Account and BDMC’s other accounts and considering

the various competing claims on BDMC’s funds and other property. In 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 assessment 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.

57. In addition to the funds maintained in the various bank accounts. BDMC also has 13

cheques totaling $815,000 (“Investor Cheques”) that were received by BDMC in October

2017. The Investor Cheques were received from Sorrenti Law Professional Corporation

(“Sorrenti”), a law firm that administered certain syndicated mortgage loans brokered by

BDMC. The Investor 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 Investors 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

Investor Cheques are now stale dated. The Trustee has written to Sorrenti to advise that

the cheques are stale dated and will therefore not be deposited by BDMC. In addition,

the Trustee has advised the Investors to whom the Investor Cheques relate that they

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should contact Sorrenti regarding the return of their funds. The Trustee is in the process

of returning the Investor Cheques to Sorrenti.

58. 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

59. 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 Investors 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 Investors 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 Borrower’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 Investors’ brokers and certain Investors have expressed concerns

regarding the Trustee’s continued retention of these funds. The Trustee has

responded to these brokers and Investors with a similar message that it delivered

to borrowers with an interest in the Interest 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 Investors who invested in such loans, pro rata based on the amount of each

such Investor’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 Interim 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) Interest 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 Investors. The Trustee continues to hold the funds

that have been paid to BDMC in the Interest Reserve Account.

(c) Interest in the amount of $8,667, received from Kingridge (Oakville East) Inc.

(“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 $100,000 of this amount has not yet been deposited into the Interest Reserve Account and accordingly is not included in the Interest Reserve Account balance in the chart above.

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BDMC, which is then typically distributed to the QEWN Investors. The last monthly

payment was made to BDMC on April 12, 2018, however, it had not yet been

distributed to Investors prior to the Trustee’s appointment and accordingly

continues to be held in the Interest 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. In responding to these urgent matters and in assessing the status of projects generally,

the Trustee has been analyzing BDMC’s rights and Investors’ 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 Investors’ interest in these projects.

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64. One important element of the Trustee’s analysis is the potential recoveries to Investors if

senior lenders attempt to enforce their security in the near term compared to the likely

outcome for Investors 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.

65. In 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.

66. In order to preserve and, to the extent possible, maximize recoveries for the Investors,

and to permit the Trustee to make prudent decisions regarding Investors’ 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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(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 Investors;

(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 Investors and respond to Investor 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 Investors.

67. 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

Investors, 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 Investors pro

rata based on each such Investor’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 (I)

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 Investors (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 Investors 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 (II) 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 Investors; 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 otherwise) 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.

68. 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.

69. 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.

70. 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 proposal with

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 Investors 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 Investors 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 Investors 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 Investors and the remaining sums are proposed to be held by the Trustee

during the Stabilization Period and not used.

72. The Estate Property includes the interest paid by the Braestone Borrower and the QEWN

Borrower.

73. The Trustee and its legal counsel are tracking their time by project. For certain tasks that

affect all Investors, 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 realizations 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

Investors.

REPRESENTATION FOR INVESTORS

74. As noted previously, there are approximately 11,000 Investors who participate in

mortgages administered by BDMC. Although Investors reside throughout Canada, the

vast majority of Investors are located in Ontario. FAAN Mortgage has been engaging with

Investors 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 Investors, and

the Trustee has recommended that Investors seek independent legal advice with respect

to certain matters when the Trustee has determined that it was appropriate to seek

consent of Investors to certain actions to be taken by the Trustee in respect of syndicated

mortgage loans. Similarly, the Trustee understands that RRSP Trustees typically advise

Investors 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 Investors, the Trustee is of the view that it is in the

best interests of the Investors to appoint Representative Counsel in order to provide the

Investors with legal representation to protect their common interests, while keeping

professional fees for Investors as low as possible. If Representative Counsel is appointed,

various Investors 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. Instead,

Representative Counsel will be available to assist Investors with respect to their common

interests in loans administered by BDMC and in assessing all matters in these

proceedings. In appropriate circumstances, Representative Counsel will be able to provide

feedback to the Trustee in connection with its mandate and, where necessary, Investor

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 the implementation of various value-

preserving strategies for Investors' interests. In 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 Investors with respect to the Dunsire Project.

80. The proposed Stabilization Order provides that, subject to prior approval by the Trustee

or order of the Court, Representative Counsel shall be paid its reasonable fees and

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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 Investors, and the Trustee will approve the

invoices and arrange for payment of same from the proceeds of realization on a project.

81. It is also proposed that Representative Counsel’s fees and disbursements may be paid

from any distributions to be made to Investors in respect of these proceedings. When

realizations are generated from a specific project, Representative Counsel would 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 Investors. .

82. While the Trustee is cognizant of the interests of the Investors, 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 Investors in respect of these proceedings

regarding their common interests in the loans and other indebtedness

administered by BDMC, including the common interests of Investors in any

particular loan or other indebtedness administered by BDMC;

(b) Representative Counsel would act in the best interests of the Investors 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 Investor in connection with

the discharge of its duties under the proposed Stabilization Order;

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(d) any Investor 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 Counsel would be permitted to communicate with the Investors by

posting communications on the Trustee’s website;

(f) Representative Counsel would 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 Investors 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 Investors.

84. 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

85. The purpose of the Trustee’s appointment is to protect the Investors. 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 Investors 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.

86. 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 Investors in difficult circumstances. In

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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 Investors, brokers

and borrowers who have expressed concerns about these matters, including the Investors

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 Interest

Reserve Account.

87. The Trustee has also determined that it is advisable to appoint Representative Counsel

on behalf of the Investors.

88. The proposed Stabilization Order will facilitate the Trustee in carrying out its mandate for

the benefit of all Investors and other stakeholders of BDMC.

89. In 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.

ALL OF WHICH IS RESPECTFULLY SUBMITTED this 19th day of June, 2018.

FAAN MORTGAGE ADMINISTRATORS INC., SOLELY IN ITS CAPACITY AS COURT-APPOINTED TRUSTEE OF BUSINESS & DEVELOPMENT MORTGAGES CANADA INC., AND NOT IN ITS PERSONAL OR ANY OTHER CAPACITY

Faan Mortgage Administrators Inc.

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Appendix 1: Appointment Order dated April 20, 2018

58


ONTARIOSUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

THE HONOURABLE MR. ) FRIDAY, THE 20™ DAY)

JUSTICE HAINEY ) OF APRIL, 2018

BETWEEN:


- and -


Applicant

Respondent

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c.


APPOINTMENT ORDER

THIS APPLICATION, made by The Superintendent of Financial Services (the

"Superintendent”), for an Order, inter alia, pursuant to section 37 of the Mortgage Brokerages,

Lenders and Administrators Act, 2006, S.O. 2006, c. 29, as amended (the “MBLAA”), and

section 101 of the Courts of Justice Act, R.S.O. 1990, c, C.43, as amended (the "CJA”), appointing FAAN Mortgage Administrators Inc. (“FAAN Mortgage") as trustee (in such capacity,

the “Trustee”), without security, of all of the assets, undertakings and properties of Building &

Development Mortgages Canada Inc. (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 Mortgage

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 MBLAA and section 101 of

the CJA, FAAN Mortgage is hereby appointed Trustee, without security, of all of the assets,

undertakings and properties of the Respondent, including, without 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

mortgage ("Investors”), 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 Property and any and all

proceeds, receipts and disbursements arising out of or from the Property;

(b) 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

60

trust on behalf of Investors, 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;

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;

to engage consultants, appraisers, agents, experts, 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;

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

Investors;

to settle, extend or compromise any indebtedness owing to the Respondent;

to execute, 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 certainty, the applicable land

registry office, registrar or other official under the Land Registration Reform Act

(Ontario), the Land Titles Act (Alberta), or any other comparable legislation in any

other jurisdiction be and is hereby directed, upon being presented with a certified

61

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true copy of this Order and such Land Title Document, to register, discharge,

partially 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 Property 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;

(j) to market any or all of the Property, including advertising and soliciting offers in

respect of the Property or any part or parts 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 part or parts thereof out of the ordinary course of business, and

in such case notice under subsection 63(4) of the Ontario Personal Property

Security Act or section 31 of the Ontario Mortgages Act, 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 Property

or any part or parts thereof to a purchaser or purchasers thereof, free and clear

of any liens or encumbrances affecting such Property;

(n) 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

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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 property owned or leased by

the Respondent;

(r) 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 Investors as to

how and when such actions or steps are to be taken. For greater certainty, the Trustee shall be

and is empowered to take such actions or steps without seeking instructions from Investors

where the Trustee determines, in its sole discretion, that it is necessary and appropriate to do so

(having regard for the interests of Investors), 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,

63

Ccn«lt«f)fc C^sM, 4 3€/’¥4|aIr^e,- 6 -

governmental bodies or agencies/or other entities having notice of this Order, including, without

limitation, Tsunami Technology ®roup Inc., Fortress Real Developments Inc. (“FRDI”), all of its

direct or indirect affiliates, and (any entity under common control with FRDI (collectively with

FRDI, the "Fortress Entities"), 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^aTofthe"

foregoing, collectively, being "Persons” and each being a "Person”) shall forthwith advise the

Trustee of the existence of any Property in such Person’s possession or control, shall grant

immediate and continued access to the Property to the Trustee, and shall deliver all such

Property to the Trustee upon the Trustee’s request.

5. THIS 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 ("Computershare”), not

release to any Person without further Order of this Court) 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 Investors 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 Investors 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

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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 otherwise 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 purpose 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

destroy 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 or 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 Criminal Code, R.S.C. 1985, c. C-46.

8. 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 TRUSTEE

9. 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 the written consent of the Trustee or with leave of this Court.

65

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 commenced 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 Property

(including, without limitation, pursuant to any arrangement in existence as of the date hereof

between the Respondent and Investors 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 “BIA”), 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 perfection 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, terminate 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 mortgage loans under the

MBLAA, The Mortgage Brokers Act (Manitoba), The Mortgage Brokerages and Mortgage

66

-9-

Administrators Act (Saskatchewan), the Real Estate Act (Alberta), the 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 certainty, all goods and/or services provided by Tsunami Technology

Group Inc. 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 all funds, 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.

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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 BIA, 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(3)(c) of the Canada Personal

Information 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 to 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 all such information. The purchaser of

any Property 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

17. 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 Environmental Protection Act, the Ontario Environmental Protection Act, the Ontario

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-11 -

Water Resources Act, or the Ontario Occupational Health and Safety Act 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

negligence 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 the Wage Earner Protection Program Act. 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

otherwise 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

form a first charge on the Property in priority to all security interests, trusts, liens, charges and

encumbrances, statutory or otherwise, in favour of any Person, but subject to subsections

' 4.06(7), 81.4(4) and 81.6(2) of the BIA.

20. THIS COURT ORDERS that the Trustee and its legal counsel shall pass their accounts

from time to time, and for this purpose the accounts of the Trustee and its legal counsel are

hereby referred to a judge of the Commercial List of the Ontario Superior Court of Justice.

21. THIS COURT ORDERS that prior to the passing of its accounts, the Trustee shall be at

liberty from time to time to apply reasonable amounts, out of the monies in its hands, against its

69

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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 THE APPOINTMENT

22. THIS COURT ORDERS that the Trustee be at liberty and it is hereby empowered to

borrow by way of a revolving credit or otherwise, 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 further 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

Property 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 otherwise, 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 Certificates ”) for

any amount borrowed by it pursuant to this Order.

25. THIS 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 pari passu basis, unless otherwise

agreed to by the holders of any prior issued Trustee’s Certificates.

SERVICE AND NOTICE

26. THIS COURT ORDERS that the E-Service Protocol of the Commercial List (the

“Protocol”) is approved and adopted by reference herein and, in these proceedings, the service

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- 13 -

of documents made in accordance with the Protocol (which can be found on the Commercial

List website at http://www.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. Subject to 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 further orders that a Case Website shall be established in accordance with the Protocol

with the following URL: www.faanmortgaqeadmin.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 liberty 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

28. 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. THIS COURT ORDERS that nothing in this Order shall prevent the Trustee from acting

as a trustee in bankruptcy of the Respondent.

30. THIS 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 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

71

http://www.ontariocourts.ca/sci/practice/practice-directions/toronto/eservice-commercial/

http://www.ontariocourts.ca/sci/practice/practice-directions/toronto/eservice-commercial/

http://www.faanmortgaqeadmin.com

-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. 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

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

Court 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 m;

ENTERED AT /INSCRITATOHUmw

APR 2 Q 2018

mimi

72

SCHEDULE“A”

TRUSTEE CERTIFICATE

CERTIFICATE NO.______________

AMOUNT $______________________

1. THIS IS TO CERTIFY that FAAN Mortgage Administrators Inc., the Trustee (in such

capacity, the "Trustee") of all of the assets, undertakings and properties of Building &

Development Mortgages Canada Inc. (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 mortgage (“Investors”), 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 Court of Justice (Commercial List) (the "Court") dated the 20th

day of April, 2018 (the "Order”) made in an application having Court file number CV-18-596204-

OOCL, has received as such Trustee from the holder of this certificate (the "Lender”) the

principal sum of $<:*>|, being part of the total principal sum of $'<*> 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 <*>. day of

each month] 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 time.

3. Such principal sum with interest thereon is, by the terms of the Order, together with the

principal sums and interest thereon of ail 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 the Bankruptcy and Insolvency Act, and the right of the

Trustee to indemnify itself out of such Property 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.

5. 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

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to any person other than the holder of this certificate without the prior written consent of the

holder of this certificate.

6. The charge securing this certificate shall operate so as to permit the Trustee to deal with

the Property (as defined in the Order) as authorized by the Order and as authorized by any

further or other order of the Court.

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 personal capacity

Per: ____________________________________Name:Title:

74

the

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75

Appendix 2:

Forbes Affidavit sworn on April 19, 2018, without exhibits

76


ONTARIOSUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

BETWEEN:


Applicant

- and -


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 JUSTICE ACT, R.S.O. 1990 c. C.43

AFFIDAVIT OF BRENDAN FORBES * 1

I, BRENDAN FORBES, of the City of Toronto, in the Province of Ontario, MAKE OATH

AND SAY:

INTRODUCTION1. lam Legal Counsel at the Ministry of the Attorney General Civil Law Division, FSCO

Branch. In this role, I work regularly with senior compliance officers and other staff at

the Financial Services Commission of Ontario (“FSCO”) to, among other things,

prosecute regulatory proceedings relating to the regulated sectors defined in the

Financial Services Commission of Ontario Act, 1997, S.O. 1997, chap. 28 (the “FSCO

Act”). I have held this position from August 2016 until March 2017, and again between

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June 2017 and the present. Prior to this, I was an Articling Student with FSCO from July

2015 to June 2016.

2. The mortgage brokering industry is one of the regulated sectors defined in the FSCO

Act, and includes mortgage agents, mortgage brokers, mortgage brokerages and

mortgage administrators, as defined in the Mortgage Brokerages, Lenders and

Administrators Act, 2006, S.O. 2006, c. 29 (the “MBLAA”).

3. As set out in greater detail below, FSCO investigated the Respondent, Building &

Development Mortgages Canada Inc. ("BDMC”), for potential breaches of the MBLAA

and its associated regulations. Prior to February 1, 2018, BDMC brokered and

administered investments in syndicated mortgage loans (“SML(s)”) sold to the investing

public, principally relating to development projects in which Fortress Real Capital Inc.

(“FRCI”) or Fortress Real Developments Inc. (“FRDI” and, together with FRCI,

"Fortress”) are involved (the “BDMC SML(s)”). Fortress’s involvement is either as

development consultant, or certain related or subsidiary corporations to Fortress are the

owners or co-owners of the development projects. The individual investors who are the

lenders under the the BDMC SMLs are referred to herein as the "Investors”.

4. Over $600 million has been invested in BDMC SMLs by over 11,000 individual Investors,

many of whom have invested significant portions of their savings in these loans. FSCO

has received numerous complaints from Investors regarding BDMC’s activities and the

performance of their investments in BDMC compared to the promises made to them at

the time they invested. As a result of its investigations, FSCO is of the view that there

are serious regulatory issues associated with BDMC SMLs.

5. FSCO’s investigation ultimately resulted in the Superintendent and BDMC entering into a

settlement agreement executed on January 31, 2018 (the “Settlement Agreement”). A

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key condition of the Settlement Agreement was that BDMC enter into and comply with a

management and administration agreement (“MAA”) appointing FAAN Mortgage

Administrators Inc. (“FAAN Mortgage”) as the arm’s length, independent manager of

BDMC’s SML administration business (“BDMC’s Administration Business”). FAAN

Mortgage is a licensed mortgage administrator under the MBLAA.

6. FAAN Mortgage assumed the role of arm’s length, independent manager of BDMC’s

Administration Business on February 7, 2018, but I am advised by FAAN Mortgage that

the transition has not been smooth. BDMC has struggled to comply with certain terms of

the MAA from its inception. Given that books and records relating to the development

projects that are required for BDMC’s Administration Business are either stored on

servers maintained by FRDI or Canadian Development Capital & Mortgage Services Inc.

(“CDCM”), or are in the possession of those parties. Notwithstanding that FRDI and

CDCM have advised FAAN Mortgage that they would transfer all of the books and

records to FAAN Mortgage, to date this has not occurred. As such, FAAN Mortgage has

had difficulty performing its responsibilities as it remains dependent on representatives

of CDCM and others to provide it with the required information. In addition, and on at

least one occasion, CDCM has interfered with FAAN Mortgage’s duties by sending a

notice directly to Investors, and FAAN Mortgage has not been provided with

administrator access to BDMC's email accounts that were in existence as at the date of

FAAN Mortgage’s appointment and thereafter.

7. As set out in more detail below, it is apparent that a number of the SML borrowers are

facing financial distress. Further, I have been advised by FAAN Mortgage that BDMC is

also in financial distress and has been struggling to make a number of important

payments, including payroll, rent and payments due under the MAA.

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8. On April 13, 2018, the RCMP executed search warrants at BDMC’s offices. According to

media reports, five other locations were also searched pursuant to issued search

warrants. The RCMP reportedly advised The Globe and Mail that it was investigating

“syndicated mortgage fraud”. The police searches were widely reported in the media and

have resulted in a significant increase in the distress faced by BDMC. Attached hereto

as Exhibit A is a copy of The Globe and Mail article on the searches dated April 13,

2018. There have been many subsequent media reports.

9. I am advised by FAAN Mortgage that the RCMP investigation has had three immediate

effects on FAAN Mortgage’s management of BDMC’s Administration Business: (i)

Investor inquiries and concerns have increased exponentially; (ii) SML borrowers and

other parties have markedly increased the pressure on FAAN Mortgage to execute

various documents to postpone the Investors’ interests to those of other lenders; and (iii)

FAAN Mortgage has determined that it is not prepared to continue to act without court

protection and direction, as required.

10. In light of the RCMP investigation and FAAN Mortgage’s difficulties in obtaining and

verifying the accuracy of certain information, I am advised by FAAN Mortgage that it is

concerned about compliance with its obligation under s. 10.1 of the Mortgage

Administrator Standards of Practice, O. Reg. 189/08, under the MBLAA (the

"Standards”), which requires a mortgage administrator not to take or omit to take any

action that facilitates dishonesty, fraud, crime or illegal conduct. Section 10.1 of the

Standards provides: "A mortgage administrator shall not act, or do anything or omit to do

anything, in circumstances where the mortgage administrator ought to know that by

acting, doing the thing or omitting to do the thing, the mortgage administrator is being

used by a borrower, lender, investor or any other person to facilitate dishonesty, fraud,

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crime or illegal conduct". Accordingly, as described below, FAAN Mortgage has

terminated the MAA effective upon the granting of the proposed order.

11. FAAN Mortgage has advised that a number of events of default under the MAA (the

"BDMC Events of Default”) have occurred and that FAAN Mortgage has reason to

believe that additional BDMC Events of Default have occurred or will occur in the near

term. FAAN Mortgage advises that it has lost all confidence in BDMC’s ability to comply

with the MAA.

12. If FAAN Mortgage terminates the MAA and the order sought herein is not granted, there

will be no independent third party to perform mortgage administration functions and

protect the Investors’ interests. This situation is untenable and puts the 11,000 individual

Investors and their investments at risk. As such, it is critical that an order appointing

FAAN Mortgage as trustee pursuant to section 37 of the MBLAA be granted forthwith.

FAAN Mortgage has been closely involved with the Investors, BDMC, and BDMC’s

Administration Business to date, and has intimate knowledge of BDMC’s business

structure.

13. I have been involved in the investigation of BDMC by FSCO. The investigation involved

the collection of a large volume of documentation provided by the Respondent and other

parties, and the examination of the principal of BDMC, lldina Galati, and of Fortress,

Vince Petrozza. I also have been involved throughout the attempted implementation of

the Settlement Agreement. Accordingly, I have knowledge of the matters to which I

hereinafter depose. To the extent that I have relied on the information and advice of

others, I have identified the source of such information and advice and verily believe that

information to be true. In particular, where I identify information that has been provided

to me by FAAN Mortgage, that information has been collected and conveyed by one or

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more of the three FAAN Mortgage representatives who are working on the BDMC

mandate, being Naveed Manzoor, Daniel Sobel and Lana Bezner.

THE FINANCIAL SERVICES COMMISSION OF ONTARIO

14. On July 1, 1998, the FSCO Act established FSCO as an arm’s-length agency of the

Ministry of Finance. FSCO regulates pension plans, insurance companies, loan and trust

companies, credit unions, caisses populaires, co-operative corporations and mortgage

brokers and administrators licensed under the MBLAA. The FSCO Act states that one of

FSCO's purposes is “to provide regulatory services that protect the public interest and

enhance public confidence in the regulated sectors".

15. The chief executive of FSCO is the Superintendent of Financial Services (the

“Superintendent”), who is tasked with, among other duties, administering and enforcing

the FSCO Act and every other statute that confers powers on or assigns duties to the

Superintendent, including the MBLAA, and generally supervising the regulated sectors,

including the mortgage brokering industry.

16. The system of regulation created by the MBLAA and its regulations is designed to

ensure that the public receives ethical, competent and knowledgeable services from

those licensed under the MBLAA to carry on the business of dealing, trading or

administering mortgages in the Province of Ontario. In order to carry on the business of

dealing in, trading or administering mortgages in the Province of Ontario, an individual or

entity must be licensed pursuant to the MBLAA.

17. Under the MBLAA and its regulations, once licensed, mortgage brokerages and

administrators must comply with ongoing requirements, including minimum standards of

practice such as the Standards; for example, disclosure of conflicts of interest, notice of

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material events relating to administered mortgages, information regarding the suitability

of the investment for each investor, and disclosure of material risks.

18. All of these requirements are designed to protect the public. Mortgages are often

connected with complex financial transactions, which often involve significant amounts of

borrowed money. As a result, financial transparency in mortgage transactions is

essential.

SYNDICATED MORTGAGE LOANS

19. An SML is a mortgage for which there is more than one lender, or in which more than

one investor has made an investment. As with any mortgage, a charge is registered on

the title to the relevant property.

20. The regulations made under the MBLAA provide that, in the case of SMLs, licensed

mortgage brokers and mortgage administrators owe the duties imposed by the MBLAA

and the regulations thereto in respect of the mortgage to each individual lender or

investor in the SML. ■

21. FSCO is of the view that SMLs are high risk investments. As set out in FSCO consumer

communications posted on FSCO’s website, FSCO is of the view that several of the

techniques that are frequently used to market SMLs to the investing public often belie

the risk of SMLs. For instance, there is NOT a guaranteed high rate of return on SMLs,

SML investors are often subordinated to priority construction financing, and a ‘secured’

investment does not mean that it is guaranteed (i.e. the value of the land against which

the mortgage is registered may be inadequate to fully repay the prior-ranking

mortgagees and the investors’ SML). A copy of a consumer communication in respect of

SMLs posted on FSCO’s website are attached hereto as Exhibit B.

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22. These concerns are among the reasons that led FSCO to investigate the BDMC SMLs,

as described in greater detail below.

THE PARTIES

(a) BDMC

23. BDMC is an Ontario corporation with its head office located at 25 Brodie Drive, Suite #8,

Richmond Hill, Ontario. It is wholly owned by lldina Galati, who is also its sole director

and officer. Up until December 2015, BDMC was known by the name Centro Mortgage

Inc. (“Centro”). In or around January 2016, it changed its name to BDMC. A copy of

BDMC’s corporation profile report is attached hereto as Exhibit C.

24. Prior to February 1, 2018, BDMC held both a mortgage brokerage (licence #10102) and

a mortgage administrator (licence #12304) licence under the MBLAA. Ms. Galati held a

mortgage broker licence (licence #M08003912) under the MBLAA, and acted as the

principal broker for BDMC. ■

25. Pursuant to an order issued by FSCO on February 1, 2018 (the “BDMC Suspension

and Penalty Order”), BDMC’s mortgage brokerage licence was revoked, on consent.

Ms. Galati agreed to surrender her mortgage broker licence effective February 5th, 2018.

26. The circumstances in which the BDMC Suspension and Penalty Order was issued are

described in greater detail below.

27. BDMC continues to hold its mortgage administrator licence. A copy of BDMC’s licence

status is attached hereto as Exhibit D.

28. In addition to Ms. Galati, the following Fortress executives and employees held

mortgage broker and/or mortgage agent licences under the MBLAA, and were

authorized to deal in mortgages on behalf of BDMC:

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(a) Vince Petrozza, Director, Vice-President and Secretary (licence #M08007162);

(b) Ben Myers, Senior Vice President - Marketing Research and Analytics (licence

#M13001264);

(c) Mark Fogliato, Director, Acquisitions & Portfolio Management (licence

#M 14002065);

(d) Paul Demczak, Account Manager, Development Planning & Project Management

(licence #M15002344); and

(e) Michelle Ross, Event Co-ordinator (licence #14002011).

29. Upon the issuance of the BDMC Suspension and Penalty Order, each of these

individuals’ licences were also suspended, with the exception that the licence held by

Mr. Petrozza was revoked (as opposed to suspended) as described below. These

licence suspensions were effected pursuant to section 17(3)(b) of the MBLAA which

states that the licences of each broker and agent authorized to deal in mortgages on

behalf of a brokerage are suspended upon the revocation, suspension or surrender of

the sponsoring brokerage licence.

(b) Fortress

30. FRCI is a Federal corporation with its head office located at 25 Brodie Drive, Suite #1,

Richmond Hill, Ontario. Its sole director and shareholder is Mr. Petrozza. A copy of

FRCI’s corporation profile report is attached hereto as Exhibit E.

31. FRDI is an Ontario corporation with its head office located at 25 Brodie Drive, Suite #1,

Richmond Hill, Ontario. Its officers and directors are Mr. Petrozza and Jawad Rathore

(together, the “Fortress Principals”). FRDI is owned by Mr. Petrozza, who holds a 20%

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interest, and Mr. Rathore, who holds an 80% interest. FRDI’s corporation profile report

is attached hereto as Exhibit F.

32. Fortress and/or the Fortress Principals are involved in a substantial number of the real

estate development projects which underlie the BDMC SMLs (the 'Fortress/BDMC

Project(s)”). In some cases, Fortress acts as the development consultant for the

project. In other cases, the Fortress Principals, wholly or partially, own the special

purpose corporation which acts as the developer for the project and is the borrower

under the relevant BDMC SML (the “Fortress Borrower(s)”). In cases where Fortress

acts solely as a development consultant, the borrowers under BDMC SMLs are not

Fortress Borrowers.

(c) Relationship between BDMC, FRDI and the Fortress Borrowers

33. BDMC plays a number of functions in respect of BDMC SMLs. Up until the issuance of

the BDMC Suspension and Penalty Order, BDMC was the exclusive brokerage on

behalf of the Fortress Borrowers. Since 2013, BDMC has acted as mortgage

administrator for approximately 60% to 70% of the development projects involving

Fortress. The other 30% to 40% of SMLs that relate to Fortress/BDMC projects are

administered by lawyers who operate under the MBLAA’s exemption from licensing

requirements applicable to lawyers.

34. In its capacity as mortgage administrator, BDMC holds title to the mortgages underlying

the BDMC SMLs on behalf of the Investors. BDMC also acts in a fiduciary capacity to

administer and enforce the BDMC SMLs, again on behalf of the Investors.

35. Prior to the issuance of the BDMC Suspension and Penalty Order, BDMC also

performed or assisted in the performance of certain MBLAA-mandated tasks which

would typically be performed by the brokerages who represent the lenders/investors in

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an SML. In the case of the BDMC SMLs, one of three brokerages acted on behalf of

Investors: FMP Mortgage Investments Inc. (“FMP”), FFM Capital Inc. (“FFM”) or FDS

Broker Services Inc. (“FDS” and, collectively with FMP and FFM, the “Investor

Brokerages”). The functions that would typically have been performed by the Investor

Brokerages, but which were in fact performed by BDMC, included, without limitation,

conducting project due diligence reviews and drafting required written disclosures,

including the statutorily mandated FSCO disclosure forms (Form 1 - Investor/Lender

Disclosure Statement for Brokered Transactions ("Form 1”) and Form 1.1 -

Investor/Lender Disclosure Statement for Brokered Transactions: Addendum for

Construction and Development Loans (“Form 1.1")).

36. BDMC also obtained valuations of the properties underlying the Fortress/BDMC Projects

(the “Development Property(ies)”) for the purposes of providing disclosure to the

Investors concerning the value of the properties and the resulting loan to value ("LTV”)

ratios, including disclosures on the applicable Forms 1 and 1.1.

(d) The Investor Brokerages

37. The Investor Brokerages broker BDMC SMLs on behalf of the Investors. In this capacity,

they market BDMC SMLs as investment opportunities to members of the public. The

Investor Brokerages typically contact Investors through mortgage brokers or agents

authorized to deal or trade in mortgages on behalf of the Investor Brokerages, and/or

through unlicensed persons or entities operating under referral arrangements with an

Investor Brokerage. These salespeople market and, ultimately, sell the SML

investment(s) to the Investor. Linder the MBLAA, Investor Brokerages have a statutory

duty to ensure compliance with certain point of sale requirements, which are prescribed

under O. Reg. 153/15, the Mortgage Brokerages: Standards of Practice.

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38. Prior to early 2013, the functions currently performed by the Investor Brokerages were

performed by BDMC. In early 2013, certain personnel formerly associated with BDMC

created the Investor Brokerages at the direction of Ms. Galati, and transferred the

relevant functions from BDMC to the Investor Brokerages. FSCO staff understand that,

in so directing, Ms. Galati intended to provide some degree of separation as between the

brokerage for the Fortress Borrower and the brokerage for the Investor. Most of the

shareholders and principal brokers of the Investor Brokerages, as described in more

detail below, formerly worked for BDMC. The specific details concerning the three

Investor Brokerages are set out below.

(i) FFM

39. FFM is an Ontario corporation with its registered head office located at 81 Zenway

Boulevard, Suite 4, Vaughan, Ontario. Its directors are Yvonne Ferguson, Krish

Kochhar, and Tony Mazzoli. Mr. Mazzoli is a former employee of BDMC. Ms. Ferguson

is its sole officer. Mr. Mazzoli and Mr. Kochhar are FFM’s shareholders. A copy of

FFM’s corporation profile report is attached hereto as Exhibit G.

40. FFM holds a mortgage brokerage licence (licence #12391) under the MBLAA. Prior to

the issuance of the Suspension and Penalty Orders (defined and described below),

Rosalia Spadafora (licence #M8007218) was the principal broker of FFM. Ms.

Spadafora’s mortgage broker’s licence was revoked on consent under the Suspension

and Penalty Orders. The current principal broker of FFM is Yvonne Ferguson.

41. According to the 2016 Annual Information Return (“AIR”) filed by FFM, FFM brokered 39

SMLs totaling $33,212,701 during the one-year period covered by the AIR. A copy of

the FFM AIR is attached hereto as Exhibit H.

LEGALJ:48998041.412

88

00 FMP

42. FMP is an Ontario corporation with its registered head office located at 930 The East

Mall, Toronto, Ontario. Its sole director is Tonino Amendola, and its officers were Mr.

Amendola and David Hysen. Mr. Amendola is also FMP’s sole shareholder. Both Mr.

Amendola and Mr. Hysen are former employees of BDMC. A copy of FMP’s corporation

profile report is attached hereto as Exhibit I.

43. FMP holds a mortgage brokerage licence (licence #12373 under the MBLAA). Prior to

the issuance of the Suspension and Penalty Orders, Michael Daramola (licence

#M08003647) was the principal broker of FMP, and was formerly one of its officers. Mr.

Daramola’s mortgage broker’s licence was revoked on consent under the Suspension

and Penalty Orders. The current principal broker of FMP listed within FSCO’s system is

David Hysen. However, I have been informed by FAAN Mortgage that Mr. Hysen had

resigned this position. '

44. According to the 2016 AIR filed by FMP, FMP brokered 1097 SMLs totaling $52,553,868

during the one year period covered by the AIR. A copy of the FMP AIR is attached

hereto as Exhibit J.

(iii) FDS

45. FDS is an Ontario corporation with its registered head office located at 1604 Spring

Road, Mississauga, Ontario. Its sole director, officer and shareholder is Zafar Khawaja,

who is a former employee of BDMC. A copy of FDS’ corporation profile report is

attached hereto as Exhibit K.

46. FDS holds a mortgage brokerage licence under the MBLAA (licence #12367) under the

MBLAA. Prior to the issuance of the Suspension and Penalty Orders, Glenn May-

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Anderson (Licence #M08008875) was the principal broker of FDS, and was formerly one

of its officers. The current principal broker of FDS is Zafar Khawaja.

47. According to the 2016 AIR filed by FDS, FDS brokered 1502 SMLs totaling $67,509,565

during the one year period covered by the AIR. A copy of the FDS AIR is attached

hereto as Exhibit L.

(e) Trust Companies

48. Many Investors deployed funds held in various types of registered savings vehicles

under the Income Tax Act (the “ITA”) to make investments in BDMC SMLs. In order to

do so, a financial institution who is prepared to facilitate the SML transactions and enjoys

the required status under the ITA must hold the registered account. Until August 2017,

Olympia Trust Company (“Olympia”), a trust company based and licensed in the

Province of Alberta (but not licensed in the Province of Ontario), handled the vast

majority of BDMC SML transactions involving registered accounts. As of August 2017,

Olympia announced that it would’no longer accept new SML business from Ontario

lenders. I am advised by FAAN Mortgage that, since that date, Computershare Trust

Company of Canada (“Computershare”) has facilitated the investments in BDMC SMLs

by Investors who wish to invest funds held in registered accounts.

(f) Canadian Development Capital & Mortgage Services Inc.

49. CDCM is a Federal corporation with its registered head office located at 25 Brodie Drive,

Suites #2 and #8, Richmond Hill, Ontario. Its sole director is Julie Galati, who is Ms.

Galati’s mother.

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50. CDCM holds a mortgage brokerage licence (licence #12979) under the MBLAA. Julie

Galati (licence #M08007025) is the principal broker of CDCM. A copy of Ms. Galati’s

licence status is attached hereto as Exhibit M.

51. Following the execution of the Settlement Agreement, CDCM has been brokering BDMC

SMLs on behalf of the Fortress Borrowers and other borrowers. CDCM has assumed

the role that was previously carried out by BDMC as borrower’s broker, and many of

BDMC’s former employees are now employed by CDCM.

THE LOAN STRUCTURE

52. The BDMC SMLs are governed by a number of key agreements. Although specific

terms vary from project to project, the loan structure described below is generally

applicable to BDMC SMLs for all Fortress/BDMC Projects where BDMC has acted as a

mortgage administrator.

(a) Development Consultant Agreement

53. A development consultant agreement (“DCA(s)”) is entered into as between Fortress

(identified as the “Development Consultant” in the DCA) and the relevant Fortress

Borrower or other borrower. Each DCA references an SML which is referred to as the

“loan” in the DCA. A copy of a sample DCA is attached hereto as Exhibit N.

54. A recital within the DCA indicates that Fortress "arranged for the Loan” and "will be

providing consulting services as contemplated in the Loan Agreement. As a general

matter, the terms of the DCA relate almost exclusively to Fortress’s role in respect of the

applicable BDMC SML. There are virtually no provisions which relate to real estate

development consulting services apart from Fortress’s involvement with the BDMC

SMLs.

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91

55. A number of the DCAs provided to FSCO staff all contain an acknowledgment by the

relevant Fortress Borrower or other borrower which states that BDMC’s "supervisory and

monitoring obligations" are delegated to Fortress, and that the Fortress Borrower or

other borrower acknowledges that “it will be dealing with Fortress in all of these matters

as agent' for BDMC. The provision contemplates that Fortress will complete a “review of

the initial due diligence materials” provided by the Fortress Borrower or other borrower

and that other reports to be received by BDMC under the applicable Loan Agreement

(defined below) will be delivered to Fortress. Similar provisions are found in some of the

Loan Agreements.

56. The DCAs also provide that Fortress may arrange additional loan amounts to

accommodate increased project size, cost overruns or excess equity requirements

insisted on by the priority construction lender.

57. The DCAs provide that Fortress shall be entitled to 50% of the project profit, subject to

potential deductions relating to interest paid under the BDMC SMLs and certain other

upfront fees. Additionally, the profit share payment is reduced according to a prescribed

formula in the event that the full amount of the BDMC SML is not advanced.

58. The development consulting fee (the "DC Fee”) is defined in the DCAs as a lump sum

amount which generally appears to be equal to approximately 35% of the principal

amount of the BDMC SML. The DCA states that the DC Fee “shall be paid in part to

salespersons for commissions relating to raising investors funds, in part to Fortress (to

cover, inter alia, all professional costs and fees to be paid by Fortress) and as well, to

pay certain payments owing to investors herein." The DCAs contemplate that the

applicable percentage (i.e. typically 35%) of each loan advance shall be deducted from

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the loan advance to pay the DC Fee, which "shall be payable concurrently with each

advance."

59. While the DCA is not entirely clear, FSCO staff understand that the DC Fee is used to

fund the payment of fees and commissions to intermediaries involved in the BDMC SML

transactions, including such amounts payable to the brokerages and individual agents,

brokers and unlicensed persons involved in the sale and brokering of BDMC SMLs. The

amount of the DC Fee paid to Fortress is the residue amount left over after these

payments are made, but is not specifically defined in the DCA. Based on information

provided to FSCO staff by Mr. Petrozza, the Fortress portion of the DC Fee typically

amounts to 2% to 5% of total project costs. CDCM staff have communicated to FAAN

Mortgage that the Fortress portion of the DC Fee may be as high as 12%.

60. The DCAs also provide for priority of payment assigned to certain obligations or parties,

which are paid out of the revenues generated by the project; The priority schedule for

the distribution of funds is referred to as the “Waterfall” in the DCA. Notably, it appears

that the Waterfall provides that the repayment of the principal amount of the BDMC SML

(less the amount of the DC Fee) ranks pari passu with the repayment of “cash equity

advances" made by the Fortress Borrower or other borrower. Further, the repayment of

the remaining amount of the BDMC SML principal attributable to the DC Fee purportedly

ranks below the repayment of the equity advances made by the Fortress Borrower or

other borrower.

61. The Investors are not parties to the DCAs, although the terms of the documents appear > •

to affect the Investors' interests, including with respect to the priority of their claims to the

proceeds from the Fortress/BDMC Projects under the Waterfall provisions, and the fact

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that BDMC’s supervisory and monitoring functions are delegated to Fortress. Despite

this fact, a copy of the relevant DCA is not provided to the Investors.

62. The substance of the Waterfall provision of the DCA is generally disclosed to the

Investors, but, in my experience, the Waterfall provision is drafted in a highly ambiguous

manner, definitions of material defined terms used in the Waterfall are not provided to

Investors and the text of the disclosure appears not to meet the clarity requirements set

out in section 33 of Ontario Regulation 188/08 (“Reg. 188/08”). In my view, it is highly

unlikely that Investors understand the legal effect of the Waterfall provision or its impact

on their recoveries under an SML.

(b) Loan Agreement

63. BDMC (in certain cases under its former name, Centro) entered into a separate loan

agreement with each relevant Fortress Borrower or other borrower (each, a “Loan

Agreement”). The parties to each Loan Agreement are BDMC (or Centro),1 in trust, as

“Lender”, and the applicable Fortress Borrower or other borrower, as “Borrower”.

Although the persons for whom BDMC is acting in trust are not specifically identified in

the Loan Agreements, FSCO staff understand that this provision is intended to refer to

the individual Investors under the BDMC SMLs. The Investors are not parties to the

Loan Agreements, although a copy of the applicable Loan Agreement is typically

included in the materials disclosed to the Investors. A copy of a sample Loan Agreement

is attached hereto as Exhibit O.

64. The specific provisions of the Loan Agreements vary from project to project; however,

the following provisions are generally included:

1 In some cases BDMC took over the administration of the loans from another party, so BDMC is the

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(a) the term of the BDMC SML is at least two years;

(b) the term may be extended at the relevant Fortress Borrower’s or other borrower’s

option, for one year or more;

(c) a force majeure provision that allows the Fortress Borrower or other borrower to

extend the term of the loan for an additional two years following the occurrence

of a broad range of events beyond the narrow “acts of God” which force majeure

provisions usually cover, including, without limitation, delays in obtaining permits

or in ability to obtain supplies or services;* 2

(d) the principal, interest, and all other amounts owing under the Loan Agreement

are required to be repaid at the end of the term, or on demand if there is an

unremedied default (but subject to the Waterfall provision discussed above and

the subordination provisions described below);

(e) there is no requirement to make payments against the principal prior to the end

of the term;

(f) interest payments will be paid out of a reserve fund created by a holdback from

the initial loan advance (if any), or will accrue but will not be repaid until the end

of the term;

(g) the loan is to be secured by a mortgage on the applicable Development Property

(the “SML Charge"), which typically begins as a second-ranking or third-ranking

mortgage registered behind charges in favour of other lenders and may be

lender pursuant to an assignment of the relevant loan documents. This distinction is not important for present purposes.2 In some cases the force majeure or adverse development condition is contained in the PSA (defined below).

LEGALJ:48998041.419

95

further subordinated thereafter as a result of the postponement and

subordination provisions described immediately below. Copies of an example of

an SML Charge and parcel register for the applicable Development Property are

attached hereto as Exhibit P;

(h) BDMC is required to postpone and subordinate the SML Charge to “First-

Ranking Construction Loan Security”, as defined in the Loan Agreement. The

definition of “First-Ranking Construction Loan Security” is broadly drafted to

include security for any “construction loans”, which term is frequently not defined

or is defined using very broad language. In practice, BDMC regularly postponed

and subordinated SML Charges in favour of loans advanced by non-financial

institution lenders, to pay for, among other things, a wide variety of soft costs and

fees that may not typically be included in the industry-standard definition of

“construction financing”;

(i) BDMC is also required to postpone and subordinate the SML Charge to various

"Bridge Lenders” and “Replacement Lenders” if BDMC is unable to raise

sufficient funds from Investors to fully fund the loan;

(j) BDMC is required to discharge the SML Charge where all or any part of the

Development Property is being sold, including where there will not be sufficient

funding to repay the SML in full; and

(k) BDMC is required to discharge the SML Charge in respect of any part of the

Development Property which is not material to the development and/or the

market value of the Development Property, or which is required by any municipal

or governmental authority, in each case without requirement for payment or

prepayment of any part of the BDMC SML.

20LEGAL_1:48998041.4

96

(c) Participation and Servicing Agreement

65. BDMC (in certain cases under its former name, Centro) entered into a participation and

servicing agreement (each, a "PSA”) with each Investor, pursuant to which the Investor

agreed to participate in the applicable BDMC SML. Each PSA relates to a specific

BDMC SML, in relation to a specific Fortress/BDMC Project, and sets out the terms and

conditions under which BDMC will administer the applicable BDMC SML.

66. Although the specific provisions of each PSA vary, the following provisions are generally

included:

(a) BDMC is exclusively responsible for implementing, processing, administering and

servicing the BDMC SML on behalf of the Investor and other participants,

including obtaining and administering the security documents. BDMC is required

to exercise these functions in accordance with normal lending practice and with

the same degree of care and skill as a prudent lending institution would exercise

for its own account; ■

(b) BDMC is required to consult with the Investor prior to agreeing to any renewal or

any material amendment, modification or waiver (each, a “Change") of any of the

terms of the Loan Agreement, the security documents (i.e. the SML Charge), or

any agreement or document relating thereto. However, if BDMC requests the

Investor’s consent to any such action, the Investor shall be deemed to have

consented to the proposed Change unless it responds to BDMC within ten

business days of the mailing, delivery or emailing of BDMC’s request for consent.

Further, if BDMC receives the written consent or agreement to the proposed

Change from Investors holding at least 50.1% of the amount of the applicable

BDMC SML, the remaining Investors are deemed to consent to such Change.

LEGAL_1:48998041.421

97

The documents obtained during the course of FSCO’s examination disclose

cases where BDMC sent out requests for consent that did not give Investors an

option to refuse to grant consent or any clear method to express such a refusal;

and

(c) Investors are prohibited from directly or indirectly contacting the relevant Fortress

Borrower or other borrower, or any other person, with respect to the servicing of

the BDMC SML or the enforcement of the SML Charge, without the consent of

BDMC.

A copy of a sample PSA is attached hereto as Exhibit Q.

67. Taken together, and in light of BDMC’s obligation under the Loan Agreement to

postpone and subordinate the SML Charges to broadly-defined “construction loans” and

other financing sources, the PSAs give BDMC very broad authority to effect changes to

the BDMC SMLs and related SML Charges, that could have the effect of prejudicing the

Investors’ potential recovery under the BDMC SMLs.

(d) Confirmation of Lender’s Interest

68. In addition to the PSA, each of the Investor, BDMC, and the relevant Fortress Borrower

would execute a Confirmation of Lender’s Interest (each, a "Confirmation”). Pursuant

to the Confirmation, BDMC (in certain cases under its former name, Centro),

(a) confirms that it is holding the Investor’s interest in the BDMC SML, in trust;

(b) covenants to provide the Investor with notice of any material default by the

relevant Fortress Borrower or other borrower; and

LEGAL J :48998041.422

98

(c) agrees to enforce the BDMC SML “as would a prudent lender, having regard to

the quantum of the Loan and nature of the development against which the Loan

security is registered'.

69. In addition, the Investor covenants and agrees:

(a) to postpone and subordinate its interest in the BDMC SML in favour of one or

more construction loans in favour of arm’s-length lenders, including bridge

lenders and lenders under mezzanine financing, in an aggregate principal

amount not to exceed a prescribed sum;

(b) to postpone and subordinate its interest in the BDMC SML in favour of each

financial and non-financial encumbrance which is reasonable for a development

such as the relevant Fortress/BDMC Project, and which individually does not

materially adversely affect the market value of the Development Property; and

(c) to discharge its interest in the BDMC SML in respect of any part of the

Development Property which is not material to the development and/or the

market value of the Development Property, or which is required by any municipal

or governmental authority, without requirement for payment or prepayment of any

part of the BDMC SML.

A copy of a sample Confirmation is attached hereto as Exhibit R.

(e) Acknowledgement and Consent Agreement - Lender

70. As referenced above, in order for the Investor to invest in a BDMC SML using funds held

in a registered account (including an RRSP, RESP, or TFSA account), the registered

account has to be held at a financial institution which would administer the investment in

LEGAL_1:48998041A23

99

the BDMC SML. In cases where the registered account was held by Olympia (which was

the case for almost all registered accounts prior to August 2017), Olympia required the

Investor to execute an Acknowledgement and Consent Agreement - Lender (each, a

“LAC”). Each of the Investor, BDMC (or its predecessor, Centro), Olympia, and Fortress,

were parties to each LAC. A copy of a sample LAC is attached hereto as Exhibit S.

THE SETTLEMENT AGREEMENT AND MAA

71. In or around December 2015, FSCO began an investigation into Fortress, BDMC, and

the Investor Brokerages, arising from, among other things, certain concerns it had

identified regarding the administration of the BDMC SMLs.

72. On or about August 15, 2016, counsel to FRDI, on FRDI’s behalf, retained FAAN

Advisors Group Inc. (“FAAN Advisors”) to assist, among other things, with liaising with

regulatory bodies, including FSCO. FAAN Advisors is an affiliate of FAAN Mortgage.

73. FSCO’s investigation ultimately resulted in the Superintendent and BDMC entering into a

the Settlement Agreement. A copy of the Settlement Agreement is attached hereto as

Confidential Exhibit A.

74. In accordance with the Settlement Agreement, among other things:

(a) BDMC agreed to the revocation of its mortgage brokerage licence, while its

mortgage administrator’s licence was not revoked;

(b) BDMC agreed to pay administrative penalties in the amount of $400,000;

(c) FSCO issued the BDMC Suspension and Penalty Order, which formalized the

above licence revocation and penalty. In addition, it issued seven other orders,

24LEGAL 1:48998041.4

100

on consent, also dated February 1, 2018 (collectively with the BDMC Suspension

Order, the “Suspension and Penalty Orders”), as follows:

(i) requiring each of FFM, FMP, and FDS to pay an administrative penalty in

the amount of $235,000 (i.e. totaling $705,000); and

(ii) revoking the mortgage broker licences of Mr. Petrozza, Ms. Spadafora

(i.e. the principal broker of FFM), Mr. Daramola (i.e. the principal broker of

FMP), and Mr. May-Anderson (i.e. the principal broker of FDS). Copies of

the Suspension and Penalty Orders are collectively attached hereto as

Exhibit T;

(d) BDMC agreed to execute the MAA appointing FAAN Mortgage, as an

independent, arm’s-length party, to manage and direct BDMC’s Administration

Business; and

(e) BDMC agreed that, upon the termination of the MAA for any reason other than

the completion of the BDMC SMLs, it would consent to an order of this Court

under section 37 of the MBLAA appointing a receiver, receiver and manager,

trustee and/or liquidator of the property in the possession or under the control of

BDMC, including the BDMC SMLs.

75. 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.

76. On or about February 7, 2018, BDMC and FAAN Mortgage executed the MAA. A copy

of the MAA is attached hereto as Confidential Exhibit B.

LEGAL_I 48998041.425

101

77. On the same day, the engagement of FAAN Advisors was terminated. A copy of the

termination agreement is attached hereto as Confidential Exhibit C.

78. As a result of having entered into the Settlement Agreement, BDMC is no longer

permitted to operate as a mortgage brokerage. Since the date of the Settlement

Agreement, FSCO staff has been advised that CDCM has been brokering BDMC SMLs

on behalf of the Fortress Borrowers and other borrowers, having assumed the role that

was previously carried out by BDMC as borrower’s brokerage. Many former BDMC staff

are now employed by CDCM.

FAAN MORTGAGE’S EXPERIENCE UNDER THE MAA

79. Following the execution of the MAA, and in accordance with its terms, FAAN Mortgage

began providing the services that comprise BDMC’s Administration Business.

80. I am advised by FAAN Mortgage that it spent the initial weeks following its engagement

attending to urgent matters in an effort to normalize BDMC’s business and

administration operations, including addressing enforcement actions by senior lenders

on Fortress/BDMC Projects and responding to a great deal of pent-up Investor

frustration concerning the status of their loans and progress of the various

Fortress/BDMC Projects.

81. FAAN Mortgage began administering approximately 66 BDMC SMLs, in relation to

approximately 45 Fortress/BDMC Projects. Attached hereto as Exhibit U is a table

identifying the BDMC SMLs and briefly describing the outstanding enforcement actions

that have been taken to date in respect of the related Fortress/BDMC Projects by other

parties.

LEGAL 1:48998041.426

102

82. Since its appointment, I am advised by FAAN Mortgage that it has received hundreds of

calls and emails from concerned Investors who require clarification and/or information

concerning the BDMC SMLs in which they are invested, and the underlying

Fortress/BDMC Projects. FAAN Mortgage has been communicating regularly with

Investors to, among other things, provide updates on Fortress/BDMC Projects (to the

extent that information is made available to FAAN Mortgage by CDCM on behalf of the

Fortress Borrowers, or other borrowers) and respond to questions generally regarding

their investments. FAAN Mortgage also established a website

(www.faanmortgageadmin.com), an information email address

([email protected]) and a toll free number to communicate with Investors.

A copy of the letter provided by FAAN Mortgage as Manager of BDMC advising

Investors of its role and contact information is attached hereto as Exhibit V.

83. Regrettably, the MAA has proven to be unworkable. BDMC did not retain a full

complement of staff, contrary to the provisions of the MAA. Many key staff members

moved to CDCM, where they were not under the supervision of FAAN Mortgage. One

critical staff member has not been paid.

84. FAAN Mortgage has not been granted full and unfettered access to BDMC’s documents,

servers or records. I am advised by FAAN Mortgage that requests for documents and

information must go through CDCM and Mr. Petrozza, where they have often been met

with resistance and demands for explanations to justify the information requests. FAAN

Mortgage has been required to explain that it needs to review the documents to form an

independent view of whether certain documents should be executed or other steps taken

(including, without limitation, providing notices to Investors) so that FAAN Mortgage can

perform its duties to the Investors and comply with the Standards.

LEGAL_1:48998041.427

103

http://www.faanmortgageadmin.com


85. CDCM has also attempted to influence FAAN Mortgage’s communications with

Investors. CDCM controls the servers and software that are used to send Investor

communications, and maintains a record of all BDMC Investors and their contact

information. On more than one occasion, Investor notices have been delayed while

CDCM attempts to negotiate the content of the notice with FAAN Mortgage.

86. In addition, I am advised by FAAN Mortgage that on or about March 21, 2018, CDCM or

its representatives deprived FAAN Mortgage of access to Investor information

maintained by CDCM. I am advised by FAAN Mortgage that CDCM took this action as a

result of FAAN Mortgage, in accordance with its duties under the MAA, having advised

Olympia that Olympia should only be taking direction from a FAAN Mortgage

representative in respect of BDMC’s affairs.

87. On or about March 26, 2018, CDCM sent communications directly to Investors to seek

their consent to certain matters related to a Fortress/BDMC Project, effectively assuming

BDMC’s Administration Business and usurping FAAN Mortgage’s role. FAAN Mortgage

had expressly advised CDCM not to send any such communications, but was ignored.

CDCM subsequently retracted the communication at FAAN Mortgage’s request. A copy

of the notice sent by CDCM is attached as Exhibit W.

88. I am further advised by FAAN Mortgage that CDCM and FRDI staff have instructed

FAAN Mortgage on certain occasions that neither FAAN Mortgage nor its counsel should

contact borrowers or lenders directly (unless expressly authorized to do so), because

any such action could have a detrimental impact on the negotiations with such parties or

that certain information is confidential and should not be disclosed. FAAN Mortgage has

been advised that such unauthorized contact might be grounds for litigation being

commenced against FAAN Mortgage by a third party.

LEGAL J .48998041.428

104

89. Notwithstanding the lack of information or ability to consult with key stakeholders, I am

advised by FAAN Mortgage that it has been under significant and, in some cases,

inappropriate, pressure from parties involved in the various Fortress/BDMC Projects,

including, among others, co-developers and senior lenders, to sign various documents in

order to facilitate refinancings, sales and other matters. FAAN Mortgage is provided with

a very short period to review such documents. FAAN Mortgage frequently faces

complaints regarding the length of time it takes FAAN Mortgage to execute documents,

including in circumstances where FAAN Mortgage’s requests for further information have

been delayed and/or FAAN Mortgage has advised that it wishes to consult with its legal

counsel and that legal counsel needs time to review documents.

90. I am advised by FAAN Mortgage that it has been working to complete its due diligence

as fast as possible and to respond to the various requests made on it in accordance with

its duties under the MAA and the Standards, but the events of April 13, 2018, described

below, have caused FAAN Mortgage to have heightened concern regarding BDMC’s

business, particularly given FAAN Mortgage’s difficulties, in getting information to date in

a timely manner.

RCMP EXECUTION OF SEARCH WARRANTS ON APRIL 13, 2018

91. On April 13, 2018, at approximately 9:30 a.m., several RCMP officers arrived at BDMC’s

premises. The officers presented Lana Bezner, an employee of FAAN Mortgage who

was on site to manage BDMC’s Administration Business, with a copy of a search

warrant dated April 10, 2018, permitting officers to search and retrieve documents from

the BDMC premises (the "Search Warrant”). A copy of the Search Warrant is attached

hereto as Confidential Exhibit D.

LEGAL_J :48998041429

105

92. Media reports indicated that the RCMP executed five other search warrants at five other

locations also on April 13, 2018.

93. In light of the Search Warrant, FAAN Mortgage has been placed in an extremely difficult

position. I am advised by FAAN Mortgage that it is receiving large volumes of inquiries

from Investors, who are concerned that their investments are at risk. Further, FAAN

Mortgage is continuously receiving requests, in some cases accompanied by threats of

litigation, to execute documents to postpone the SML Charges to mortgages to be

granted to other lenders and to take other substantive steps to continue to operate

BDMC's Administration Business. Flowever, FAAN Mortgage continues to be operating

without access to sufficient data and with limited opportunities to speak to relevant

stakeholders, which delays FAAN Mortgage’s ability to complete proper diligence to

satisfy itself that it is appropriate to accede to any given request.

94. Accordingly, FAAN Mortgage is of the view that it cannot take any steps to continue to

operate BDMC’s Administration Business without the supervision, direction and

protection of this Court.

EVENTS OF DEFAULT UNDER MAA

95. BDMC failed to adhere to a number of its obligations under the MAA. Among other

things, BDMC has failed to meet its funding requirements. Funding of FAAN Mortgage is

an important component of the MAA for FSCO. As such, the MAA included an obligation

on BDMC to fund and maintain a reserve fund to pay FAAN Mortgage’s costs for a

period of time. FRDI and certain of its affiliates (collectively the “Contributing Entities”)

provided a guarantee and indemnity to FAAN Mortgage in respect of BDMC’s funding

obligations under the MAA.

LEGAL_l:4899804l 430

106

96. As a result of BDMC’s failure to comply with the MAA, FAAN Mortgage has issued

default and other notices to BDMC, which are set out below.

97. On March 28, 2018, FAAN Mortgage issued to BDMC a notice of default in respect of

CDCM’s communications with Investors described above (the “March 28 Notice of

Default”). Also as described above, CDCM subsequently advised Investors that it was

withdrawing the notice. A copy of the March 28 Notice of Default is attached hereto as

Exhibit X.

98. On April 3, 2018, FAAN Mortgage issued to a notice of default (the "April 3 Notice of

Default”) in respect of BDMC’s failure to make required payments to the reserve fund

(as established under the MAA), and to pay FAAN Mortgage’s invoices when due,

constituting BDMC Events of Default pursuant to sections 8.3(a)(iv) and (ii) of the MAA.

A copy of the April 3 Notice of Default is attached hereto as Exhibit Y.

99. On April 3, 2018, FAAN Mortgage issued a demand to pay to FRDI and the Contributing

Entities. A copy of the demand is attached hereto as Exhibit Z.

100. In addition, on April 3, 2018, FAAN Mortgage issued to BDMC a "Notice of Withdrawal

from Reserve Fund” in accordance with section 9.3(d) of the MAA (the “Notice of

Withdrawal”), a copy of which is attached hereto as Exhibit AA. As set out in the

Notice of Withdrawal, FAAN Mortgage advised BDMC that the reserve fund established

pursuant to section 9.3 of the MAA (the “Reserve Fund”) had reached a balance of $0,

and required BDMC to deposit $100,000 into the Reserve Fund immediately. FAAN

Mortgage further advised that if an additional $100,000 was not deposited within five

days of the date of the Notice of Withdrawal (i.e. by April 8, 2018), this would constitute a

further BDMC Event of Default under section 8.3(a)(iii) of the MAA.

LEGAL_1:48998041.431

107

101. BDMC did not cure the defaults identified in the April 3 Default Notice within the

prescribed five day period following delivery of the notices, as required pursuant to

section 8.3(b) of the MAA, and failed to deposit the $100,000 into the Reserve Fund as

required.

102. On April 19, 2018, FAAN Mortgage issued to BDMC an additional notice of default and

termination (the “April 19 Notice of Default”) advising of the following defaults:

(a) BDMC has not cured the BDMC Events of Default specified in the April 3 Notice

of Default in respect of FAAN Mortgage’s outstanding invoices and reimbursable

expenses;

(b) Several additional BDMC Events of Default have occurred since April 3, 2018,

including:

(i) BDMC is in default of its obligations to fund the reserve fund to a

minimum of $300,000 by April 15, 2018, as required by section 9.3(b) of

the MAA;

(ii) BDMC is in default of its obligations to pay into the reserve fund a

minimum of $100,000 to replenish the Reserve Fund Balance to

$100,000 within five days of the Notice of Withdrawal from Reserve Fund

dated April 3, 2018, as required by section 9.3(d) of the MAA;

(iii) BDMC is insolvent;

(iv) FRDI and the Contributing Entities have failed to make the payments

required under such agreement, including the payments demanded on

April 3, 2018; and

LEGAL_l:48998041.432

108

(v) FAAN Mortgage has reason to believe that additional BDMC Events of

Default have occurred or will occur in the near term and has lost all

confidence in BDMC’s ability to comply with the MAA.

103. The April 19 Termination Notice provides that the MAA will be terminated pursuant to

section 8.3(b) of the MAA effective as of the date an order is issued appointing a trustee

over BDMC pursuant to section 37 of the MBLAA and that FAAN Mortgage reserved all

of its rights under the MAA and other related agreements, including the right to terminate

the MAA immediately should FAAN Mortgage determine, in its sole discretion, that

circumstances so warrant.

A copy of the April 19 Termination Notice is attached hereto as Exhibit BB.

104. As set out above, BDMC has already consented to the appointment of a trustee upon

the termination of the MAA, and the existing defaults in the MAA entitle FAAN Mortgage

to terminate the MAA, which it gave notice of on April 19, 2018, effective on the issuance

of an order of this court under section 37 of the MBLAA . The events of April 13, 2018,

together with the pressure being applied to FAAN Mortgage by various parties, heighten

the need to obtain the relief requested in this application.

THE TRUSTEE MUST BE APPOINTED URGENTLY

105. FAAN Mortgage has advised that it has lost all confidence in BDMC’s ability to comply

with the MAA, is not willing to continue its mandate under the MAA in the circumstances

and requires the protection and direction of a court order if it is to continue to manage

BDMC’s Administration Business.

106. If FAAN Mortgage terminates the MAA and the order sought herein is not granted, there

will be no independent third party to perform mortgage administration functions and

33LEGAL_1:48998041.4

109

protect the Investors' interests. This situation is untenable and puts the 11,000 individual

Investors and their investments at risk. As such, it is critical that an order appointing a

trustee pursuant to section 37 of the MBLAA be granted forthwith.

107. FAAN Mortgage’s involvement with the Investors, BDMC and BDMC’s Administration

Business and its intimate knowledge of the business structure makes FAAN Mortgage

uniquely positioned to fulfill a mandate to the protect the interests of the Investors.

Further, a court order can alleviate a number of the issues that FAAN Mortgage has

encountered in attempting to fulfill its mandate.

108. In light of the concerns identified herein with regard to:

(a) the provisions of the agreements that underpin the structure of the BDMC SMLs,

which grant broad powers to BDMC and/or Fortress, to the potential prejudice of

the Investors;

(b) the need to continue to operate BDMC’s Administration Business, in light of the

current status of the various Fortress/BDMC Projects; and

(c) the existence of the RCMP investigation,

FSCO is of the view that the immediate appointment of the trustee is necessary to

adequately protect the Investors’ interests, and that such an appointment is therefore in

the public interest.

109. As more fully described below, the order sought will give FAAN Mortgage the required

protection and better equip FAAN Mortgage to attempt to stabilize BDMC’s

Administration Business, including by facilitating unfettered access to servers,

documents, and electronic data systems as well as providing a clear mandate and path

. LEGAL_1 ;48998041 A34

110

for FAAN Mortgage to engage with relevant borrower and lender stakeholders without

interference, in each case as initially contemplated under the MAA.

THE ORDER SOUGHT

110. The proposed form of Order (the "Proposed Order”) is based on the model receivership

order used in this Court, with certain modifications to reflect the particular circumstances

of the proposed appointment.

111. The Proposed Order will allow FAAN Mortgage, in its capacity as trustee of BDMC (in

such capacity, the "Trustee”) to receive, preserve, protect and maintain control of all of

BDMC’s property, 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, brokers, or borrowers, in each

case whether or not such property is held in trust or is required to be held in trust,

including the SML Charges (collectively, the “Property”), and to administer the BDMC

SMLs on behalf of Investors. In this regard, the Proposal Trustee will be empowered to

execute documents in place of BDMC, including documents in connection with

registrations in the applicable land registry office.

112. The Proposed Order will allow the Trustee to sell the Property and to restructure the

Property, with Court approval. This will permit the Trustee to deal with the Property in a

manner that it believes is in the best interests of the Investors, subject to the protections

inherent in requiring Court approval of such steps.

113. The Proposed Order will ensure that all of the registered funds that were raised from

Investors and are being administered by Olympia or Computershare, will be protected.

LEGAL_1:48998G41.435

111

114. The Proposed Order includes a stay of proceedings, as is commonly found in insolvency

proceedings, which will have the effect of ensuring that all creditors are treated equally,

without affording any undue advantage to any party.

115. The Proposed Order will ensure the continuation of services by requiring all persons who

supply goods and/or services to BDMC to continue to do so in accordance with normal

payment practices.

116. Perhaps most crucially in the circumstances, the Proposed Order will empower the

Trustee to gain unfettered access to BDMC’s information, documents, and electronic

data systems, and to deal directly with the various parties involved, including the

Fortress Borrowers and other borrowers under the BDMC SMLs, and the Investors.

Currently, as set out above, CDMC, Fortress, and/or the Fortress Principals have at

times interfered with FAAN Mortgage’s efforts to access this information and

communicate with these parties, to the detriment of FAAN Mortgage’s ability to manage

and direct BDMC’s Administration Business.

CONCLUSION

117. Based on the foregoing, FSCO staff are of the opinion that FAAN Mortgage should be

appointed as Trustee.

118. I make this affidavit in support of the Superintendent’s application pursuant to section 37

of the MBLAA and section 101 of the Courts of Justice Act for an order appointing FAAN

Mortgage as trustee over the property, assets and undertakings of BDMC, and for no

improper purpose.

LEGALl :48998041.436

112

SWORNToronto

E at the City of of April, 2018.

Cpmmiss/prner for taking affidavits

))))))))

BRENDAN FORBES

LEGALJ;48998041.437

113

Appendix 3:

Project Status Chart as of May 31, 2018

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mpl

eted

Cons

truc

tion

is co

mpl

ete,

uni

ts re

mai

n un

sold

.

NO

.PR

OJE

CT N

AME

BORR

OW

ER N

AME

PRO

JECT

ADD

RESS

Nat

ure

of P

roje

ct (C

ondo

, Tow

n, C

omm

erci

al,

hom

es)

# of

uni

tsSt

atus

Com

men

tary

der

vied

from

info

rmat

ion

prov

ided

by

Fort

ress

, CDC

M, n

ews r

epor

ts o

r oth

er

sour

ces

118

9 Du

ndas

189

Dund

as S

tree

t Wes

t Inc

.18

9 Du

ndas

St W

, Miss

issau

ga, O

N10

(ten

), 4-

stor

ey, s

tack

ed, b

ack-

to-b

ack

tow

nhou

se b

lock

s10

Deve

lopm

ent

Deve

lopm

ent a

ppro

vals

need

ed.

A fo

rmal

pla

nnin

g su

bmiss

ion

is te

ntat

ivel

y pl

anne

d fo

r end

of

2018

. The

re is

cur

rent

ly n

o SM

L on

this

proj

ect.

26t

h an

d Te

nth

Bel C

alga

ry In

c.63

3-10

th A

ve S

W, C

alga

ry, A

BCo

ndom

iniu

m23

0Co

mpl

eted

Com

plet

ed c

ondo

min

ium

, with

uni

ts re

mai

ning

for s

ale.

3Ba

uhau

sLa

mb

Bauh

aus I

nc.

284

King

Str

eet E

, Tor

onto

, ON

Cond

o an

d 19

05 sf

of r

etai

l spa

ce o

n gr

ound

flo

or20

5Pr

e-co

nstr

uctio

n

Deve

lopm

ent a

ppro

vals

need

ed. A

n ap

peal

was

file

d w

ith th

e O

ntar

io M

unic

ipal

Boa

rd ("

OM

B") i

n N

ovem

ber,

2017

with

resp

ect t

o th

e co

nstr

uctio

n of

the

prop

osed

30-

stor

ey b

uild

ing.

It is

an

ticip

ated

a h

earin

g da

te w

ill b

e sc

hedu

led

12-1

8 m

onth

s fol

low

ing

filin

g of

the

appe

al.

4Bo

wm

anvi

lleBr

ookh

ill H

oldi

ngs I

nc.

299

Nas

h Ro

ad &

253

8, 2

494

Regi

onal

Roa

d 57

; Cl

arin

gton

, ON

190

hom

es, s

plit

betw

een

tow

ns (8

4) a

nd si

ngle

-de

tach

ed h

omes

190

Deve

lopm

ent

Borr

ower

in d

efau

lt on

var

ious

seni

or lo

ans,

but

enf

orce

men

t pro

ceed

ings

in a

beya

nce

whi

le

refin

anci

ng is

neg

otia

ted.

Dev

elop

men

t app

rova

ls ne

eded

. Loc

al to

wns

hip

need

s to

appr

ove

an

upda

ted

seco

ndar

y pl

an, t

arge

ted

for t

he su

mm

er o

f 201

9. B

orro

wer

's fo

rmal

subd

ivisi

on p

lan

will

no

t be

subm

itted

unt

il af

ter t

he se

cond

ary

plan

is a

ppro

ved,

like

ly in

Q2

2020

.

5Br

adfo

rd B

ond

Head

Sunr

ise A

cqui

sitio

ns (B

ond

Head

) Inc

.28

75 H

ighw

ay 2

7, T

owns

hip

of W

est G

will

imbu

ry,

ON

Deta

ched

hou

sing

(sub

divi

sion)

and

To

wnh

omes

50 d

etac

hed

and

44

tow

nhou

ses

Deve

lopm

ent

Deve

lopm

ent a

ppro

vals

need

ed. D

raft

Plan

of S

ubdi

visio

n an

d Zo

ning

By-

law

Am

endm

ent

appl

icat

ions

hav

e be

en d

eem

ed c

ompl

ete

by th

e lo

cal m

unic

ipal

ity .

It is

poss

ible

that

a

reco

mm

enda

tion

will

be

brou

ght f

orw

ard

to c

ounc

il in

Q4-

2018

/Q1-

2019

.

6Br

aest

one

Brae

ston

e De

velo

pmen

t Cor

pora

tion

3009

Lin

e 8

Nor

th, M

oons

tone

, ON

Hom

es22

9Co

nstr

uctio

nDe

liver

y of

hom

es fr

om P

hase

s 1 a

nd 2

is o

ngoi

ng. P

hase

2 fa

ces e

nviro

nmen

tal c

halle

nges

and

co

st o

verr

uns.

7Br

ookd

ale

Fort

ress

Bro

okda

le In

c.37

5 &

377

Fai

rlaw

n Av

e, 1

678-

1704

Ave

nue

Rd, 4

12

Broo

kdal

e Av

e, T

oron

to, O

NCo

ndom

iniu

m80

Cons

truc

tion

Borr

ower

in d

efau

lt on

all

proj

ect l

oans

. Con

stru

ctio

n at

Bro

okda

le h

as h

alte

d an

d th

e pr

ojec

t is

subj

ect t

o a

pow

er o

f sal

e en

forc

emen

t pro

ceed

ing.

8Ca

pita

l Poi

nte

Wes

tgat

e Pr

oper

ties L

td.

1971

Alb

ert S

t, Re

gina

, SK

Cond

omin

ium

183

Cons

truc

tion

Cons

truc

tion

has c

ease

d an

d th

e bo

rrow

er is

app

ealin

g an

ord

er re

quiri

ng it

to re

clai

m th

e sit

e.

The

borr

ower

is c

onsid

erin

g its

opt

ions

rega

rdin

g th

is pr

ojec

t. Gi

ven

the

stat

us o

f the

cur

rent

co

ndo

mar

ket i

n Re

gina

, the

bor

row

er is

con

sider

ing

rent

al u

nits

or s

enio

rs re

siden

ce a

s opt

ions

fo

r the

pro

ject

.

9Ca

stle

mor

e (C

ache

t)Em

eral

d Ca

stle

Dev

elop

men

ts In

c.10

431

Gore

Roa

d, B

ram

pton

, ON

49-a

cre

low

-rise

dev

elop

men

t, w

ill in

clud

e a

mix

of si

ngle

-det

ache

d an

d se

mi-d

etac

hed

hom

es.

unkn

own

Deve

lopm

ent

Deve

lopm

ent a

ppro

vals

need

ed. T

he O

ffici

al P

lan

Amen

dmen

t app

licat

ion

has b

een

appe

aled

to

the

OM

B as

the

mun

icip

ality

has

not

mad

e a

deci

sion

on th

e ap

plic

atio

n. A

n O

MB

pre-

hear

ing

is an

ticip

ated

to ta

ke p

lace

in e

arly

201

9.

10Ch

arlo

tte

Adel

aide

Tow

erFo

rtre

ss C

harlo

tte

2014

Inc.

477

Rich

mon

d St

W, T

oron

to, O

NCo

ndom

iniu

mun

know

nDe

velo

pmen

tDe

velo

pmen

t app

rova

ls ne

eded

. An

OM

B he

arin

g w

as h

eld

in N

ovem

ber 2

017.

A d

ecisi

on b

y th

e O

MB

is an

ticip

ated

late

r in

2018

.

11Co

llier

Cen

ter

Fort

ress

Col

lier C

entr

e Lt

d.55

Mul

cast

er S

t, Ba

rrie

, ON

Com

mer

cial

reta

il w

hich

may

be c

onve

rted

to

resid

entia

lun

know

nCo

nstr

uctio

n

The

Borr

ower

is in

def

ault

of c

erta

in se

nior

loan

s and

may

face

enf

orce

men

t in

the

near

term

. The

bo

row

er is

wor

king

on

alte

rnat

ives

for t

his p

rope

rty

in a

n ef

fort

to p

reve

nt th

e en

forc

emen

t pr

ocee

ding

s. A

ssum

ing

the

proj

ect p

roce

eds,

the

plan

is to

con

vert

the

com

mer

cial

tow

er in

to a

re

siden

tial t

ower

.

12Cr

estv

iew

Com

mon

sCa

rlyle

Com

mun

ities

(Cre

stvi

ew) I

nc.

1640

Cre

stvi

ew A

ve, M

ississ

auga

, ON

Tow

nhou

ses

20Pr

e-co

nstr

uctio

nTh

e bo

rrow

er h

as a

dvise

d th

at a

few

mor

e un

its n

eed

to b

e so

ld b

efor

e co

nditi

ons p

rece

dent

to

cons

truc

tion

finan

cing

will

be

sats

ified

and

fund

s can

be

adva

nced

.

13Ed

en (K

ing

City

)23

0991

8 O

ntar

io In

c.23

0, 2

30A,

240

, 250

Dew

St,

King

City

, ON

16 S

emi-d

etac

hed

hom

es a

nd 1

2 sin

gle-

deta

ched

hom

es28

Cons

truc

tion

Cons

truc

tion

of h

omes

has

bee

n co

mpl

eted

. Fin

ishin

g al

l ext

erio

r, la

ndsc

apin

g an

d st

reet

re

quire

men

ts is

in p

roce

ss.

14N

oble

ton

Sout

hN

oble

ton

Sout

h Ho

ldin

gs In

c.92

Dia

na D

r, N

oble

ton,

ON

Sing

le d

etac

hed

hom

es96

Deve

lopm

ent

Deve

lopm

ent a

ppro

vals

need

ed. C

onsu

ltatio

n w

ith re

gion

al a

nd p

rovi

ncia

l gov

ernm

ents

con

tinue

, af

ter w

hich

tim

e a

form

al p

lann

ing

appl

icat

ion

to th

e m

unic

ipal

ity w

ill b

e su

bmitt

ed.

15Gl

ens o

f Hal

ton

Hills

(G

eorg

etow

n)23

0113

2 O

ntar

io In

c. &

230

9840

Ont

ario

Inc.

1375

8 &

137

64 H

wy

7, 2

2 &

24

Dayf

oot D

r, 8

Lind

say

Ct, G

eorg

etow

n, O

NTo

wnh

ouse

s and

Con

dom

iniu

m

Firs

t par

cel (

off L

inds

ayCo

urt)

plan

is fo

r 109

to

wns

; 2nd

pro

pert

y (D

ayfo

ot) 4

stor

ey 3

5 un

it Co

ndo

Pre-

cons

truc

tion

The

Borr

ower

is in

def

ault

of c

erta

in se

nior

loan

s and

may

face

enf

orce

men

t in

the

near

term

. Bo

rrow

er h

as b

een

wor

king

to se

cure

fina

ncin

g to

repa

y th

e se

nior

loan

s and

pre

vent

the

enfo

rcem

ent p

roce

edin

gs, a

dra

ft co

mm

itmen

t let

ter h

as b

een

rece

ived

in th

at re

gard

.

16Hi

ghla

nds o

f Yor

k Re

gion

Sout

h W

est Q

ueen

svill

e Ho

ldin

gs In

c.19

935,

198

51, 1

9879

2nd

Con

cess

ion

Que

ensv

ille,

O

NSi

ngle

det

ache

d ho

mes

102

Deve

lopm

ent

Deve

lopm

ent a

ppro

vals

need

ed. T

he re

port

s and

stud

ies p

acka

ge n

eede

d fo

r the

Dra

ft Pl

an o

f Su

bdiv

ision

and

Zon

ing

By-la

w A

men

dmen

t app

licat

ions

nea

ring

com

plet

ion.

Sub

miss

ion

of

plan

ning

app

licat

ions

to th

e M

unic

ipal

ity a

ntic

ipat

ed in

late

201

8.

17Hu

mbe

rsto

neW

orth

ingt

on H

omes

(Hum

bers

tone

) Inc

.3

Halto

n Hi

lls D

r, Ha

lton

Hills

, ON

Tow

nhou

ses

102

Deve

lopm

ent

Deve

lopm

ent a

ppro

vals

need

ed. O

MB

appe

al w

as fi

led,

app

eal w

as d

ismiss

ed. T

he m

unic

ipal

ity

had

prev

ious

ly g

rant

ed D

raft

Plan

of S

ubdi

visio

n an

d Zo

ning

By-

law

Am

endm

ent a

ppro

val b

y Co

unci

l in

July

201

7.

1 of

3

115

115

Deriv

ed fr

om B

DMC

reco

rds,

info

rmat

ion

prov

ided

by

Fort

ress

and

CDC

M a

nd n

ews r

epor

ts a

s of M

ay 3

1, 2

018

The

Trus

tee

has n

ot a

udite

d, re

view

ed o

r oth

erw

ise a

ttem

pted

to v

erify

the

accu

racy

or c

ompl

eten

ess o

f the

info

rmat

ion

cont

aine

d he

rein

Build

ing

& D

evel

opm

ent M

ortg

ages

Can

ada

Inc.

Sum

mar

y of

Pro

ject

Sta

tus a

s at M

ay 3

1, 2

018

(Una

udite

d)

LEGE

ND:

De

velo

pmen

tRe

zoni

ng a

nd d

evel

opm

ent a

ppro

vals

are

bein

g so

ught

prio

r to

the

laun

ch o

f sal

es a

nd m

arke

ting

or le

ase

up.

Pre-

cons

truc

tion

Rezo

ning

and

dev

elop

men

t app

rova

ls ar

e su

bmitt

ed/f

ully

app

rove

d an

d th

e m

arke

ting,

sale

s and

/or l

easin

g pr

ogra

m h

as c

omm

ence

d.Co

nstr

uctio

nDe

mol

ition

or c

lear

ing

of o

n-sit

e st

ruct

ures

/impr

ovem

ents

com

plet

e, c

onst

ruct

ion

has s

tart

ed v

ia si

te se

rvic

ing,

exc

avat

ion,

reno

vatio

n or

har

d co

nstr

uctio

n.Co

mpl

eted

Cons

truc

tion

is co

mpl

ete,

uni

ts re

mai

n un

sold

.

NO

.PR

OJE

CT N

AME

BORR

OW

ER N

AME

PRO

JECT

ADD

RESS

Nat

ure

of P

roje

ct (C

ondo

, Tow

n, C

omm

erci

al,

hom

es)

# of

uni

tsSt

atus

Com

men

tary

der

vied

from

info

rmat

ion

prov

ided

by

Fort

ress

, CDC

M, n

ews r

epor

ts o

r oth

er

sour

ces

18Ja

sper

Hou

seBe

l-Edm

onto

n In

c.10

160/

68 1

06th

St N

W, E

dmon

ton,

AB

Cond

o or

igin

ally

now

con

sider

ing

conv

ersio

n to

a

rent

al b

uild

ing

unkn

own

Deve

lopm

ent

No

signi

fican

t mov

emen

t on

this

proj

ect.

The

bor

row

er is

look

ing

to c

onve

rt th

is pr

ojec

t to

a re

ntal

bui

ldin

g du

e to

the

curr

ent m

arke

t con

ditio

ns in

Alb

erta

.

19Ki

ng S

quar

eKi

ng S

quar

e Lt

d.93

90 W

oodb

ine

Ave,

Mar

kham

, ON

Com

mer

cial

, ret

ail a

nd c

onve

ntio

n ce

ntre

co

mpl

ex (f

irst p

hase

of 3

, For

tres

s onl

y in

pha

se

1)un

know

nCo

nstr

uctio

nCo

nstr

uctio

n is

ongo

ing.

Ten

ants

are

sche

dule

d to

mov

e in

late

sum

mer

201

8. A

n ex

it is

plan

ned

for t

he sy

ndic

ate

with

in th

e ne

xt 1

2 m

onth

s.

20Ki

ngrid

ge S

quar

e (S

peer

s)Ki

ngrid

ge D

evel

opm

ent C

orpo

ratio

n23

5 Sp

eers

Rd,

Oak

ville

, ON

Offi

ce/c

omm

erci

al c

ondo

min

ium

dev

elop

men

t un

know

nCo

mpl

eted

Com

plet

ed a

nd re

gist

ered

com

mer

cial

pro

ject

, with

uni

ts re

mai

ning

for s

ale.

65%

of t

he sy

ndic

ate

has a

lread

y be

en e

xite

d.

21La

ke &

Eas

tSy

mgi

ne (L

akeE

ast)

Inc.

2266

Lak

esho

re R

d W

& 8

3 Ea

st S

t, O

akvi

lle, O

NCo

ndom

iniu

m11

4De

velo

pmen

t

Deve

lopm

ent a

ppro

vals

need

ed. T

he re

desig

n to

alig

n th

e pr

opos

al w

ith th

e lo

cal O

ffici

al P

lan

is cl

ose

to c

ompl

etio

n an

d w

ill b

e su

bmitt

ed sh

ortly

. The

bui

ldin

g is

now

10

stor

eys w

ith a

sella

ble

area

that

is si

mila

r to

the

prev

ious

tow

er d

esig

n.

22M

ississ

auga

Mea

dow

s 1Fo

rtre

ss L

akes

hore

201

7 In

c.10

41 L

akes

hore

Ave

E, M

ississ

auga

, ON

Tow

nhou

ses

62De

velo

pmen

tTh

e sit

e is

fully

exc

avat

ed a

nd h

as b

een

dew

ater

ed in

ant

icip

atio

n of

con

stru

ctio

n co

ntin

uatio

n la

ter t

his y

ear.

The

site

plan

, bui

ldin

g ex

terio

r and

inte

rior a

re b

eing

revi

sed

to im

prov

e ef

ficie

ncy,

bu

dget

com

plia

nce

and

mar

keta

bilit

y. A

ntic

ipat

e br

ingi

ng th

e pr

ojec

t to

mar

ket i

n Q

3/Q

4.

23M

ississ

auga

Mea

dow

s 2Du

nsire

(140

7 La

kesh

ore)

Inc.

1407

Lak

esho

re A

ve E

, Miss

issau

ga, O

NTo

wnh

ouse

s25

Deve

lopm

ent

We

are

advi

sed

that

For

tres

s is i

n th

e pr

oces

s of t

akin

g ov

er th

is pr

ojec

t. Th

e pl

an is

to le

vera

ge th

e w

ork

done

on

Miss

issau

ga M

eado

ws I

.

24Es

tate

s of N

oble

ton

(Nob

leto

n N

orth

)N

oble

ton

Nor

th H

oldi

ng In

c.13

735

Hwy

27, N

oble

ton,

ON

Sing

le d

etac

hed

hom

es15

0De

velo

pmen

tAp

prov

als r

ecei

ved.

Bac

kgro

und

repo

rts a

nd st

udie

s ong

oing

, pot

entia

l dra

ft pl

an o

f sub

divi

sion

subm

issio

n to

the

mun

icip

ality

is a

ntic

ipat

ed la

te 2

018/

early

201

9.

25N

orth

Lam

b Ed

mon

ton

Corp

.10

305/

21 1

06th

St N

W, E

dmon

ton,

AB

Cond

o or

igin

ally

now

con

sider

ing

conv

ersio

n to

a

rent

al b

uild

ing

unkn

own

Deve

lopm

ent

Due

to m

arke

t con

ditio

ns in

Alb

erta

the

borr

ower

is lo

okin

g to

cha

nge

the

proj

ect f

rom

con

dos t

o re

ntal

apa

rtm

ents

.

26O

ld M

arke

t Lan

eO

ld M

arke

t Lan

e In

c.17

7, 1

85, 1

97 W

oodb

ridge

Ave

, Woo

dbrid

ge, O

N85

con

dos +

3, 2

-sto

rey

tow

ns88

Deve

lopm

ent

OM

B ap

prov

ed c

ondo

min

ium

pro

ject

. Sal

es a

nd m

arke

ting

prog

ram

exp

ecte

d to

laun

ch in

Q3

of

this

year

.

27Pe

ter R

ichm

ond

Land

As

sem

bly

Fort

ress

Car

lyle

Pet

er S

t. In

c.

477

Rich

mon

d St

W, T

oron

to, O

NCo

ndom

iniu

m34

5De

velo

pmen

tDe

velo

pmen

t app

rova

ls ne

eded

. Zon

ing

By-la

w A

men

dmen

t app

licat

ion

was

pre

viou

sly a

ppea

led

to th

e O

MB.

A fo

rmal

upd

ate

on th

e st

atus

of t

he O

MB

appe

al is

ant

icip

ated

late

r in

2018

.

28Pi

vot (

Ruth

erfo

rd)

Aver

ton

(Rut

herf

ord)

Inc.

1304

Rut

herf

ord

Rd S

W, E

dmon

ton,

AB

Tow

nhou

ses

136

Cons

truc

tion

Ther

e ar

e 30

uni

ts c

urre

ntly

und

er c

onst

ruct

ion

and

26%

of t

otal

uni

ts h

avin

g be

en so

ld. C

losin

gs

bega

n to

take

pla

ce in

Q2,

201

8.

29Pr

esco

ttAv

erto

n Ho

mes

(Pre

scot

t) In

c.32

Res

iden

tial l

ots i

n Sp

ruce

Gro

ve, A

BSi

ngle

det

ache

d ho

mes

32Co

nstr

uctio

nAp

prox

imat

ely

60%

of t

he u

nits

for t

his p

roje

ct a

re so

ld. T

here

are

two

spec

hom

es c

urre

ntly

und

er

cons

truc

tion

30Q

EWN

– O

akvi

lle E

ast

King

ridge

(Oak

ville

Eas

t) In

c.16

70 N

orth

Ser

vice

Rd,

Oak

ville

, ON

unkn

own

Deve

lopm

ent

Floo

r pla

ns a

nd e

xter

ior e

leva

tions

hav

e be

en fi

naliz

ed. I

t is e

xpec

ted

that

the

sale

and

mar

ketin

g pr

ogra

m w

ill la

unch

soon

.

31Sk

yCity

Win

nipe

g65

6607

4 M

anito

ba L

td.

245

Grah

am A

ve, W

inni

peg,

MB

45 -

stor

ey C

ondo

380

resid

entia

l uni

ts, a

25

,000

sf g

roun

d flo

or

groc

ery

stor

e, 6

0,00

0 sf

of

offi

ce sp

ace,

and

co

vere

d pa

rkin

g

Pre-

cons

truc

tion

The

Proj

ect i

s sig

nific

antly

beh

ind

sche

dule

. Dep

osits

hav

e be

en re

turn

ed to

con

do b

uyer

s. T

he

borr

ower

is c

onsid

erin

g its

opt

ions

for t

his p

roje

ct.

32So

lterr

a (F

usio

n)23

8291

7 O

ntar

io In

c.10

23 V

icto

ria R

d, G

uelp

h, O

NM

aste

r pla

nned

resid

entia

l com

mun

ity

44 se

mi-d

etac

hed

and

26 si

ngle

-det

ache

d ho

mes

; 205

lots

, with

a

mix

of s

emi-d

etac

hed

and

singl

e-de

tach

ed

hom

es

Cons

truc

tion

Cons

truc

tion

is in

ear

ly p

hase

s.

33Th

e Gr

eenw

ood

1177

Dan

fort

h Av

enue

Ltd

.11

77 D

anfo

rth

Ave,

Tor

onto

, ON

9-st

orey

con

dom

iniu

m92

Pre-

cons

truc

tion

Dem

oliti

on is

com

plet

e an

d ex

cava

tion/

shor

ing

will

com

men

ce sh

ortly

.

34Th

e Ha

rlow

eTh

e Ha

rlow

e In

c.60

4-61

8 Ri

chm

ond

St W

, Tor

onto

, ON

Cond

o To

wer

218

units

Cons

truc

tion

Cons

truc

tion

on T

he H

arlo

we

is on

goin

g an

d th

e ex

terio

r win

dow

s and

bric

k ar

e no

w b

eing

in

stal

led.

Occ

upan

cy fo

r the

dev

elop

men

t is s

ched

uled

to b

egin

in Q

3-20

18.

2 of

3

116

116

Deriv

ed fr

om B

DMC

reco

rds,

info

rmat

ion

prov

ided

by

Fort

ress

and

CDC

M a

nd n

ews r

epor

ts a

s of M

ay 3

1, 2

018

The

Trus

tee

has n

ot a

udite

d, re

view

ed o

r oth

erw

ise a

ttem

pted

to v

erify

the

accu

racy

or c

ompl

eten

ess o

f the

info

rmat

ion

cont

aine

d he

rein

Build

ing

& D

evel

opm

ent M

ortg

ages

Can

ada

Inc.

Sum

mar

y of

Pro

ject

Sta

tus a

s at M

ay 3

1, 2

018

(Una

udite

d)

LEGE

ND:

De

velo

pmen

tRe

zoni

ng a

nd d

evel

opm

ent a

ppro

vals

are

bein

g so

ught

prio

r to

the

laun

ch o

f sal

es a

nd m

arke

ting

or le

ase

up.

Pre-

cons

truc

tion

Rezo

ning

and

dev

elop

men

t app

rova

ls ar

e su

bmitt

ed/f

ully

app

rove

d an

d th

e m

arke

ting,

sale

s and

/or l

easin

g pr

ogra

m h

as c

omm

ence

d.Co

nstr

uctio

nDe

mol

ition

or c

lear

ing

of o

n-sit

e st

ruct

ures

/impr

ovem

ents

com

plet

e, c

onst

ruct

ion

has s

tart

ed v

ia si

te se

rvic

ing,

exc

avat

ion,

reno

vatio

n or

har

d co

nstr

uctio

n.Co

mpl

eted

Cons

truc

tion

is co

mpl

ete,

uni

ts re

mai

n un

sold

.

NO

.PR

OJE

CT N

AME

BORR

OW

ER N

AME

PRO

JECT

ADD

RESS

Nat

ure

of P

roje

ct (C

ondo

, Tow

n, C

omm

erci

al,

hom

es)

# of

uni

tsSt

atus

Com

men

tary

der

vied

from

info

rmat

ion

prov

ided

by

Fort

ress

, CDC

M, n

ews r

epor

ts o

r oth

er

sour

ces

35Th

e Ja

mes

L Ri

chm

ond

Corp

.45

2-45

8 Ri

chm

ond

St W

, Tor

onto

, ON

High

-rise

dev

elop

men

tth

in to

wer

of 1

8 st

orey

s De

velo

pmen

t

Deve

lopm

ent a

ppro

vals

obta

ined

. De

cisio

n m

ade

on M

arch

21,

201

8 by

the

OM

B ap

prov

ing

the

Zoni

ng B

y-la

w a

pplic

atio

n, su

bjec

t to

min

or a

men

dmen

ts, f

or a

17-

stor

ey st

ruct

ure.

The

app

rova

l is

for a

smal

ler s

truc

ture

than

was

ant

icip

ated

.

36Th

e Ke

mp

Fort

ress

Kem

penf

eltb

ay D

evel

opm

ents

Inc.

51, 5

3, 5

5, &

75

Brad

ford

St,

Barr

ie, O

N (A

ctua

l Site

: 18

Lak

esho

re D

r)M

ixed

-use

dev

elop

men

t N

/ADe

velo

pmen

tAp

prov

als r

ecei

ved,

how

ever

bor

row

er w

ants

to m

odify

cur

rent

app

rova

ls. W

e ar

e ad

vise

d th

at

the

pros

pect

ive

purc

hase

r has

ext

ende

d th

e co

nditi

onal

sale

of t

his s

ite to

Q3-

2018

.

37Th

e O

rcha

rdLa

mb

Calg

ary

Inc.

602,

606

, 610

, 620

, 624

, 626

, 628

12t

h Av

e SE

, Ca

lgar

y, A

BRe

ntal

Apa

rtm

ent D

evel

opm

ent

N/A

Deve

lopm

ent

Deve

lopm

ent a

ppro

vals

need

ed.

Borr

ower

is lo

okin

g to

con

vert

this

proj

ect f

rom

con

do u

nits

to a

re

ntal

apa

rtm

ent d

evel

opm

ent

38Th

e So

uth

Shor

e22

2156

3 O

ntar

io In

c.23

0-24

0 Ca

mer

on C

res,

Kes

wic

k, O

NCo

ndom

iniu

m88

Uni

ts a

nd 6

7 un

itsCo

nstr

uctio

nW

e ar

e ad

vise

d th

at a

bove

gro

und

cons

truc

tion

is an

ticip

ated

to c

omm

ence

shor

tly.

39Th

e W

ade

(Vic

toria

Med

ical

)Am

adon

-Wes

twat

er P

roje

cts L

td.

1105

Pan

dora

Ave

, 111

0 Jo

hnso

n St

, 112

0 Jo

hnso

n St

, Vic

toria

, BC

Cond

omin

ium

con

vers

ion

of a

n ex

istin

g of

fice

build

ing

in V

icto

ria, B

ritish

Col

umbi

a

102

resid

entia

l co

ndom

iniu

m u

nits

w

ith a

ppro

xim

atel

y 24

,000

squa

re fe

et o

f gr

ound

floo

r re

tail/

com

mer

cial

spac

e

Cons

truc

tion

The

cons

truc

tion

loan

was

adv

ance

d on

this

proj

ect a

nd th

e sy

ndic

ated

mor

tgag

e lo

ans w

ere

repa

id in

full.

The

Tru

stee

is h

oldi

ng th

e fu

nds r

ecei

ved.

40Tr

eeho

use

Halo

Tow

nhom

es In

c.25

35 G

erra

rd S

t E, S

carb

orou

gh, O

NSt

acke

d To

wnh

ouse

Dev

elop

men

t

The

proj

ect i

s pla

nned

as

a 3

7 un

it st

acke

d to

wnh

ouse

de

velo

pmen

t in

the

Birc

h Cl

iff c

omm

unity

in

Toro

nto’

s eas

t end

nea

r W

arde

n an

d Ge

rrar

d.

Deve

lopm

ent

Deve

lopm

ent a

ppro

vals

need

ed. T

he si

te is

fully

zone

d an

d Si

te P

lan

appr

oval

is e

xpec

ted

by Q

3 20

18.

41Tr

iple

Cre

ekFo

rtre

ss T

riple

Cre

ek In

c.So

uth

of H

wy

8, R

ange

Rd

40, R

ocky

Vie

w C

ount

y,

AB

A pa

rcel

of 1

55 a

cres

that

will

be

serv

iced

and

zo

ned

for r

esid

entia

l use

. 115

acr

es to

be

assig

ned

for s

ingl

e fa

mily

lots

, 35

acre

s for

mul

ti-fa

mily

lots

and

the

rem

aini

ng fi

ve w

ill b

e us

ed

for c

omm

erci

al d

evel

opm

ent

N/A

Deve

lopm

ent

The

Borr

ower

is in

def

ault

of c

erta

in se

nior

loan

s and

may

face

enf

orce

men

t in

the

near

term

. De

velo

pmen

t app

rova

ls ne

eded

. Giv

en th

e cu

rren

t pro

pert

y va

lues

in su

burb

an C

alga

ry, l

imite

d ac

tivity

is o

ngoi

ng w

ith th

is pr

ojec

t at t

his t

ime.

The

bor

row

er is

look

ing

at it

s opt

ions

for

deve

lopm

ent o

f thi

s lan

d.

42U

nion

Wat

erfr

ont

Uni

on W

ater

fron

t Inc

.1

Hoga

ns A

lley,

11

Mai

n St

, 12

Lake

port

Rd,

16

Lock

St

, 20

Lock

St,

22A

Lock

St,

St. C

atha

rines

, ON

14-s

tore

y m

ixed

-use

bui

ldin

g

157

units

, and

ove

r23

,000

squa

re fe

et o

f co

mm

erci

al fl

oor s

pace

an

d a

tota

l of 2

58

unde

rgro

und

park

ing

spac

es

Deve

lopm

ent

The

borr

ower

is in

def

ault

of c

erta

in se

nior

loan

s and

may

face

enf

orce

men

t in

the

near

term

. Ap

prov

als n

eede

d. T

he b

orro

wer

is w

orki

ng o

n op

tions

to p

reve

nt th

e en

forc

emen

t pro

ceed

ings

in

ord

er to

see

the

proj

ect c

ontin

ue.

43W

ellin

gton

Hou

seW

ellin

gton

Hou

se In

c.42

2-42

4 W

ellin

gton

St W

, Tor

onto

, ON

High

-rise

dev

elop

men

t; p

roje

ct w

ill c

onsis

t of a

20

to 2

5-st

orey

tow

er

with

app

roxi

mat

ely

100

to 1

20 re

siden

tial u

nits

, w

ith o

ne b

edro

om to

tw

o-be

droo

m p

lus d

en

suite

s ran

ging

from

ap

prox

imat

ely

470

to

1,89

0 sf

.

Pre-

cons

truc

tion

Deve

lopm

ent a

ppro

vals

need

ed. T

he Z

onin

g By

-law

Am

endm

ent h

as b

een

appe

aled

to th

e O

MB

and

a he

arin

g da

te h

as b

een

sche

dule

d fo

r Oct

29,

201

8. A

dec

ision

is a

ntic

ipat

ed b

y Q

1-20

19 w

ith

cons

truc

tion

plan

ned

to c

omm

ence

by

Q2/

Q3-

2019

.

44W

hitb

y Co

mm

erci

al P

ark

Thic

kson

Roa

d 40

7, W

hitb

y Li

mite

d53

60, 5

400,

567

5 Th

icks

on R

d N

, Whi

tby,

ON

Rose

wat

er D

evel

opm

ents

and

For

tres

s Rea

l De

velo

pmen

ts a

re p

lann

ing

a m

ultiu

se

com

mer

cial

cam

pus i

n no

rth

Whi

tby.

The

net

11

7 ac

res w

ill b

e m

oved

thro

ugh

the

appr

oval

pr

oces

s to

full

com

mer

cial

zoni

ng.

Indu

stria

l: U

p to

1,40

0,00

0 sq

. ft.

Serv

ice

Com

mer

cial

: Up

to 2

00,0

00 sq

. ft.

Offi

ce S

pace

: Up

to

350,

000

sq. f

t.

Deve

lopm

ent

Deve

lopm

ent a

ppro

vals

need

ed. M

unic

ipal

ity h

as a

ppro

ved

its S

econ

dary

Pla

n an

d is

now

subj

ect

to a

ppro

val b

y th

e Re

gion

. Onc

e ap

prov

ed, a

Zon

ing

By-la

w A

men

dmen

t app

licat

ion

will

be

subm

itted

to th

e M

unic

ipal

ity. S

ubm

issio

n is

antic

ipat

ed la

te 2

018.

45W

hite

Ced

ar E

stat

esDu

nsire

(Lan

dsow

n) In

c.24

, 26,

28

& 3

2 La

nsdo

wn

Dr, G

uelp

h, O

NLo

w-R

ise si

ngle

fam

ily h

ome

in G

uelp

h27

Hom

esDe

velo

pmen

tPr

ojec

t is s

ubje

ct to

rece

iver

ship

pro

ceed

ings

. A c

ourt

ord

er w

as g

rant

ed o

n M

ay 2

5, 2

018

appr

ovin

g th

e sa

le o

f the

land

to a

par

ty th

at is

not

at a

rm's

leng

th fr

om th

e bo

rrow

er.

3 of

3

117

Appendix 4:

Cash Flow Projection to October 31, 2018

118

Building Development & Mortgages Canada Inc.Cash Flow Projection for the Period Ending October 31, 2018(Unaudited; $C)

NoteJune

(2 weeks) July August September October TotalStaff 1 16,400 33,000 33,000 46,000 33,000 161,400 Rent 2 - 4,520 4,520 4,520 4,520 18,080 Utilities 2 500 500 1,000 1,250 1,000 4,250 Maintenance 2 750 1,000 1,000 2,000 1,000 5,750 IT fees 1,400 1,400 1,400 2,100 1,400 7,700 Office expenses 3 3,060 1,981 2,827 6,427 4,081 18,376 Other expenses 5,000 10,000 10,000 12,500 10,000 47,500 Interest & bank charges - 800 800 1,000 800 3,400 Operating costs 27,110 53,201 54,547 75,797 55,801 266,456 Appraisals 4 35,000 140,000 140,000 35,000 - 350,000 Professional fees - 150,000 150,000 150,000 150,000 600,000

62,110 343,201 344,547 260,797 205,801 1,216,456

Notes1. Represents gross BDMC employee and contractor costs.2. Contemplates the payment of these costs in full by BDMC; however, a portion of these amounts are to be reimbursed by CDCM.3. Includes photocopier, telephone and accounting system subscription costs.4. Based on estimates obtained from two appraisal firms.

119

THE SUPERINTENDENT OF FINANCIAL SERVICES - and - BUILDING & DEVELOPMENT MORTGAGES CANADA INC.

Applicant Respondent Court File No. CV-18-596204-00CL


COMMERCIAL LIST

Proceedings commenced at Toronto

MOTION RECORD OF FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee

OSLER, HOSKIN & HARCOURT LLP P.O. Box 50, 1 First Canadian Place Toronto, ON M5X 1B8

Jeremy Dacks (LSUC# 41851R) Michael De Lellis (LSUC# 48038U) Patrick Riesterer (LSUC# 60258G) Tel: (416) 362-2111 Fax: (416) 862-6666 Lawyers for FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee