Investors have launched a proposed class action against a high-profile Toronto-area condo development firm, with projects across Canada, that raises millions from mom-and-pop investors through risky pooled mortgage products—many of which are advertised as safe and “secure.”
The suit, filed earlier this month in Ontario Superior Court, claims $27.5 million in damages, as well as the return of any profits, in relation to a troubled condo project in Barrie, Ont., which was marketed to investors by Fortress Real Developments, Fortress Real Capital and their various affiliates. It also accuses the Financial Services Commission of Ontario (FSCO) of failing to properly regulate the sector, dubbed by critics as a wild west of lending. “They were aware of the issues we’re complaining about in the suit for many years, but have done nothing to protect the public,” says Kevin Sherkin, the lawyer acting on behalf of two investors who hope to become representative plaintiffs if the suit is certified as a class action.
The allegations, which have yet to be proven in court, accuse Fortress and its principals—CEO Jawad Rathore and COO Vince Petrozza—of misleading investors by suggesting they were putting money into a relatively safe product, called a syndicated mortgage, that offered exposure to Canada’s booming condominium market and promised eight per cent annual returns, plus more if the projects performed well. The suit focuses on a condo project in Barrie called the Collier Centre that was forced into bankruptcy protection last year.
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